TRANS-CALEDON TUNNEL AUTHORITY (TCTA) - TCTA: Impact of Audit Qualification on TCTA's Financial Performance, Liquidity and Debt.

TCTA: Impact of Audit Qualification on TCTA's Financial Performance, Liquidity and Debt.

                                                                                                                       
Trans-Caledon Tunnel Authority (TCTA)

               
WSP4 (LHWP)    ZAG000020009
WSP5 (LHWP)    ZAG000020017

As established by Notice No. 2631 in Government Gazette No. 10545 of 12 December 1986 and revised by Notice
No. 277 in Government Gazette No. 21017 of 24 March 2000 (the Notice of Establishment).
A Schedule 2 Public Finance Management Act No. 1 of 1999 (PFMA) entity.

IMPACT OF AUDIT QUALIFICATION ON TCTA’S FINANCIAL PERFORMANCE, LIQUIDITY AND DEBT:

TCTA’s SENS announcements of 4 March 2020 (titled: Release of Annual Financial Statements and Qualified Audit
Opinion) has reference.

TCTA presents the following summary and the associated presentation (which can be found on TCTA’s website at:
https://tcta.sharepoint.com/:b:/g/EXvlK7Gzj_ZFmCQ6pnLZnmgB3BMbPWF09d__4l-2kC5SKQ?e=kzGJhs) on the
financial performance of its projects in light of the audit qualification for the information of noteholders:

                                                            High Level Summary:
Revenue Trends 2019/20 (based on 10 months of data):

• Tariff Revenue is likely to be higher than budget for the 1VRS, VRESAP, MMTS-2 and KWSAP projects due to
  higher than budget water volumes.
• Tariff revenue for MCWAP will be on budget, due to the tariffing model (tariff is based on contract, not actual
  volumes).
• Tariff revenue may be lower than budget for BWP based on past performance (the reconciliation of actual to budget
  volumes for the financial year only occurs in April).

Accounts Receivables:

• Weighted average Debtor’s Days are significantly lower across projects.
• Receivables are either zero or within trade terms for all projects.

Liquidity Position:

• Most projects have healthy liquidity positions – only VRESAP’s liquidity was affected by the AFS issue due to the
  timing of Commercial Paper maturities and a large debt service payment in late February and early March.



           1
            VRS: Vaal River System Water Resources Development Projects (Incorporating the Lesotho Highlands Water
           Project (LHWP) & Acid Mine Drainage (AMD))
           BWP: Berg Water Project
           VRESAP: Vaal River Eastern System Augmentation Project
           MMTS-2: Mopoi-Mgeni Transfer Scheme – Phase 2
           KWSAP: Komati Water Scheme Augmentation Project
           MCWAP: Mokolo-Crocodile Water Augmentation Project

 
 • Those risks were managed by agreement with DWS to restructure the 2019/20 and 2020/21 tariff payments (in
   terms of the provisions of the VRESAP Implementation Agreement).
 • Most of the projects will not need any funding 2019/20 or 2020/21.
    o BWP could require some liquidity support in early to mid 2020/21.
    o VRESAP could require liquidity support late in 2020/21.
    o VRS will require significant funding in 2021/22 due to the WSP5 maturity in May 2021.


            TCTA Project Cash Balances relative to Projected Expenditures (millions of Rands)
                          Cash Balances at 4 March 2020     Days Expenditure Covered    Estimated Date of Cash Depletion
        Project
                                (millions of Rands)         by Current Cash Balances        assuming no cash inflows
        VRESAP                              48                           56                         29 Apr 20
        LHWP                             3,197                          177                         28 Aug 20
        BWP                                 89                          194                         14 Sep 20
        MMTS-2                             440                          330                         28 Jan 21
        KWSAP                              190                Over 365 days                         12 Mar 21
        MCWAP-1                            692                Over 365 days                      After Mar 21


Debt and Borrowing Limits:

 • All project debt is expected to remain within the applicable borrowing limits
 • Debt is sustainable in that projected tariff revenue is sufficient to pay costs and amortise debt

Loan Covenants and Audit Qualification:

 • 53% of debt is either directly or indirectly affected by Audit Qualification as an Event of Default or Potential Event
   of Default.

            Debt affected by Audit Qualification as an Event of Default (EoD) millions of Rands
                                                                                                             TCTA
    Description                                VRS       BWP       VRESAP     MMTS-2      KWSAP    MCWAP-1               as % Total
                                                                                                             Total
  Covenants that make Audit Qualification
                                             3 750         50      2 331      493           -          -      6 624    30.49%
                                   an EoD
   Covenants in which Audit Qualification
                                                 -        477      1 007      894       1 239      1 345      4 962    22.84%
            can indirectly lead to an EoD
    Debt where Audit Qualification cannot
                                             9 550          -        275      311           -          -     10 136    46.66%
                           lead to an EoD

                                   Total    13 300        527      3 613    1 698       1 239      1 345     21 722   100.00%


 • TCTA has requested waivers from the affected lenders and will update Noteholders and other stakeholders
   promptly of developments regarding these discussions.

Please see the presentation at:
https://tcta.sharepoint.com/:b:/g/EXvlK7Gzj_ZFmCQ6pnLZnmgB3BMbPWF09d__4l-2kC5SKQ?e=kzGJhs for the
detailed, project by project, presentation.


5 March 2020

Darshana Jeeva, TCTA Sponsor +27 12 683 1311, djeeva@tcta.co.za
Media Queries - Wanda Mkutshulwa, Head of Communications +27 12 683 1378, wmkutshulwa@tcta.co.za




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Date: 05-03-2020 02:20:00
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