Presentation on theme: "RFT NO.: TCTA/PFT/FMA/2013/25"— Presentation transcript:
1RFT NO.: TCTA/PFT/FMA/2013/25 Appointment of service provider to conduct annual audits of financial models – Briefing session4 November 2013Unyielding commitment toREJUVENATION REVIVAL RENAISSANCE TRANSFORMATION
2Agenda Opening and welcome G MNISI Background & scope of services N GosaniTendering process G MNISI3.1 Disqualification criteria3.2 Submission requirements3.3 Technical Evaluation Criteria3.4 Financial and Preference Evaluation CriteriaSubmission of tender G MNISICommunication G MNISIQuestion & Answers G MNISIClosure G MNISI
3Purpose of the Presentation To give the potential tenderers an opportunity to seek clarity on any issue that may have presented challenges in responding to the RFTTo give a summary of TCTA’s projects with the view to assist tenderers complete their bids in an informed mannerTo invite those services providers with appropriate skill, experience and software to submit bids for the purpose of providing financial models audit services to TCTA
5Background on TCTA TCTA is a Special Purpose Vehicle Responds to directives/mandates from the Minister of Water and Environmental Affairs to fund and implement bulk raw water infrastructure on behalf of DWABoard is appointed by Minister of Water and Environmental AffairsEstablished under the Water ActSchedule 2 Public Entity w.r.t. PFMALimited recourse approachNo balance sheetBreak-even of revenue to costs over a specified periodFully debt funded – no equityRing-fenced projects – tariffs related to a specific project – no cross-application of revenueNon profit-taking organisationRecover actual costs – overhead and capex, no profit/loss or reservesRisk averse approach – risk is transferred to parties best suited to manage itRevenue stream terminates once debt is repaid on a projectTariffs are TCTA’s main source of revenue
6Water Supply Value Chain National Raw Water Resource InfrastructureDWATCTAWater BoardsDistribution of waterMunicipalityEnd UserTreat raw water to potable level66
7TCTA funding and implementation model Water DeliveryPayment of TariffsTCTAFund and implement infrastructureCollection of IncomeUndertake to honour obligations of TCTAImplementation agreementDWASupply bulk raw water to usersOperate & maintain infrastructurePayment for water including CUC due to TCTAWater supply agreementUsers7
8Projects in operations TCTA ProjectsLHWP-IR 20 billionExplicit Government GuaranteedFundRisk managementOperation & Maintenance of assets2025BWPR 1.4 billionIncome stream from BWPImplied government guaranteeImplement2028KWSAP+ R 1.9 billionJan 2011Apr 2014Income stream from KWSAPImplied guarantee20 years after constructionVRESAPR 3.3 billionIncome stream from VRESAPImplied government guaranteeProjects in operationsConstructionPeriod:CommencedCompletedPeak of debtRevenue RecourseMandate ActivitiesRepayment of debt
9Projects under construction TCTA Projects (cont.…)MMTS-2+ R 1.6 billionIncome stream of MMTS2Implied guaranteeImplementFundRisk management20 years after constructionORWRDP-2N/A – fiscal funding, no debtDam: CompletedBDS: (To be advised)Funded from the fiscusModel audit not the scope for nowN/AAMDShort term solution funded from the fiscusModel audit not on scope for nowMCWAPPh 1 – R 2.5 billionPh 2 – R 15 billionPh 1 – 2012/ PhPh 1 – 2014/ PhIncome stream of MCWAPImplied guaranteeFeb 2011(Apr 2014) Jan 2015Projects under constructionConstructionPeriod:CommencedCompletedPeak of debtRevenue RecourseMandate ActivitiesRepayment of debt
11Interested and affected stakeholders TCTATariffs will generate sufficient revenue streams to meet contractual obligations and sustain TCTACorrect tariff set so as not to misinform stakeholdersBanks and bondholdersRepayment of loan obligations within contract termsSARBSupport inflation targetingNational TreasuryProtection of sovereign against unnecessary risk - Bankable projectRelieve government from financing commercial infrastructure from the fiscusEnsure affordability of tariffs to usersResponsible utilisation of state guaranteesDWAInflationary increases in raw water as start of water chain input costAffordability and predictability to end-usersUncomplicated annual tariff consultations – inflationary increasesWater demand management incentive (pay on actual use)No cross subsidisation between projects – transparency of costsCompliance with Water Pricing Strategy
12Interested and affected stakeholders SALGAInflationary increasesFair tariff structuresMunicipalitiesLimited to inflationary increases, including raw water componentsDWA expects TCTA to support this objectiveMunicipality and Council pressure to keep increases lowWater sector and end usersTariff stability and predictabilityAffordable waterInflationary increases acceptableNo cross subsidisation between projects – transparency of costsFitch RatingsCredit rating of all TCTA projects except LHWP
13Tariff Principles Tariff categories for off-budget schemes: Capital Unit Charges (to repay debt)Bulk Operating and Royalties Charge (to repay royalties and bulk O&M)Water Use Charges (statutory charges as per pricing strategy)Operations and Maintenance Charges (State schemes portion)Betterment and Refurbishment Charges (if applicable)Input data supplied to TCTA as follows:BER:long-term economic forecasts (inflation, real interest rates)DWA:water demand forecasts (high and low scenarios)system yieldsfuture schemes timing and projected costs13
14Tariff Principles (cont.…) TCTA recovers the following tariffs:Raw water tariff as capital unit charge to repay debtBulk Operating and Royalties charge to cover royalties and bulk O&MFull cost recovery from water sold to end-users or take-or-pay where requiredBased on water sold out of system and not on water delivered into the system from the specific projectsupports water demand management initiativesreduces demand riskConstant tariff in real terms which increases with:CPI annuallyTriggers as per the Income AgreementRepayment of debt within reasonable period (eg 20 years)Affordable structure to the end-userTariff setting takes account of tariff, funding and risk management principles in combined approach
15Other considerations National Water Pricing Strategy Administered prices – inflation targetingStakeholder consultation outcomesAffordability to end-usersphasing-in of large adjustmentsallowance for capitalisation of interest in early years
16Tariff Setting Balancing Effect EnduseraffordabilityDebtoutstandingConsiderations to support end user affordability:Under recovering in early yearsEnd-user pays on actual use if bankableConstant tariff in real terms approach – CPI targetingPhasing-in of large tariff adjustments over 2-3 yearsTake account of future augmentation – future affordabilityNo reserves built into tariffsActual cost transfer – TCTA not profit takingConsiderations to support debt management:+20 year repayment periodPeak of debt in relation to value of asset (limit interest capitalisation)Risk transfer to end-user – trigger adjustments if input assumptions changeWater sector debt profile – debt overlap with future schemesInterest rates mostly fixedUtilisation of explicit Government guarantees and impact on National Treasury16
17Tariff Setting Process – May to August Input dataDemand, system yield, economic fundamentals, cost and timing of future augmentation schemesLong-term projectionsDWA compiles long-term demand projections based on coordinated approach with DWA – various departments involved, Water Boards’ Planning and Budgeting departments, Large industrial users, Muni’s etc.Sensitivity AnalysisInflation, real interest rate, timing of future augmentation schemes and repayment periodsStress TestingLower inflation, changes in yield of system, higher real interest rate, zero growth in demand etcStakeholder validationDemand projections, system yield, economic fundamentals, cost and timing of future augmentation schemesConsultation with National Treasury and SARBOn administered pricesConsultation with DWA management structureRand Water Services ForumOther Major stakeholder forumsPlanning processSensitivity Analysis & Stress TestingConsultationParticipation
19Scope of service The annual audits will include, inter alia, Correct capture of assumptions, i.e.:General input assumptions; demand projections, CPI, real interest rates, admin costs, funding requirements and LT cost plans;Funding input; calcs relating to loans, bonds, interest, fees, capital requirements, capi, CPI uplift on CPI-linked instruments;Loans on models correspond with loan agreementsConfirm the accuracy of the following outputs:Net debt curveTariffGross borrowingsGraphs, etc.
20Scope of service (cont.…) Assess the accuracy of the financial models:Initial audits only – review the logic and accuracy of computations;For subsequent audits – map out changes in logic and construction of the model from the previous audited version, and review where changes have been detected;Deliver an initial report of findings and recommendations relating to the accuracy, integrity, highlighting issue for TCTA’s attention;Review changes made by TCTA following initial report;Deliver final opinion letter (report) by the 15th of September, annually;First year only, report to be delivered by 31 March 2014.
21Key projects information LHWPI&IIBWPVRESAPKWSAPMMTS-2MCWAPI&IINo. of off-takersNumerous12Project phasePhase I: operationalPhase II: structuringOperationalDam: fully constructed, conveyance system: planning phasePhase I: constructionPhase II: project structuringNo. of phasesNo. of loans, sub-loans & fin. instrumentsVarious BondsLT loansCPP3x LT loans5x LT loansRCF4x LT loansEstimated unique formulae200040011001200600Debt curves3CPI-upliftCPI-linked bondNoneCPI uplift on 1 of the sub-loans
23Model features Excel based – standardised template Model information Input (update funding, macro-economic data, demand projections, etc.)Cash flow (calculations)Loan calculationsChart inputChartsTariffs - goal seek function to arrive at a tariffProvision for phasing in during construction to minimise capitalisation of interestProvision for different off-takers and funders
25Disqualification criteria Failure to meet the minimum technical score of 65 out of a possible 100 points.No proof of access to auditing toolIf currently TCTA’s external auditor
26Submission Requirements Tenderers must submit the full list of documents and information required by TCTA for the purpose of evaluation of the tender offer.The documentation and information required must be numbered in accordance with the numbering set out in this RFT.
27Evaluation criteria Two envelope system: Technical evaluation: Preference and price90/10 preference point system will be usedTechnical evaluation:Company track record, in the last 5 years on financial model auditing and access to financial model audit software tools. The information shall contain:Name of company for whom the work was donePeriod of ContractDescription of the financial model auditedAudit tool usedContactable referenceProof of access to a financial model auditing software tool (either current software license in company name or signed letter from licence holder granting access)Company track record on financial model auditing and access to financial model audit software tools
28Evaluation criteria (cont.) CVsProject LeaderFinancial Model AuditorFinancial Model Auditor (HDI)Financial proposal:Tenderers are required to provide a total fixed price over the contract period, broken down per project and per year, for undertaking the scope of services as per the template contained in Appendix D of the RFTAllocation of points:Preference points will be allocated in terms of the preferential procurement evaluation criteria in section 7.2 of the RFT.
29Technical Evaluation criteria TCTA will evaluate each Technical submission in terms of the method of evaluation stated in the RFT.The purpose of the technical evaluation is to determinate which tenders qualify for the next phase (financial and preference evaluation).The technical component will be out of 100 points. In order to qualify for the next phase a minimum score of 65 out of a possible 100 points needs to be achieved.
30Tender submission List of Returnable schedule CVs of:- Annexure A: Covenant of Integrity AffidavitAnnexure B:Bribery and Corruption DeclarationAnnexure C:Enterprise Information AffidavitAnnexure D:Enterprise informationAnnexure E: Sample refence letter on past projects auditedSection 3Track Record:-Name of company for whom the work was donePeriod of ContractDescription of the financial model auditedAudit tool usedContactable referenceProof of access to a financial model auditing software tool (either current software license in company name or signed letter from licence holder granting access)Appendix B: Standard Bidding Documents:-SBD 4SDB 6SBD 8SBD 9Tax Clearance Certificate.Company Registration Documents & cancelled cheque.BBBEE Scorecard and Certificate.CV TemplateSection 4CVs of:-Project LeaderFinancial Model AuditorFinancial Model Auditor (HDI) TemplateWith certified copies of graduate, post graduate and modelling certificates attachedAnnexure H:Financial Proposal Template
31Tender submissionClosing date and time for submissions: 29 November 2013 at 14h00Delivery Address: TCTA offices, Ground Floor Stinkhout Wing, Tuinhof Building, 265 West Street, CenturionDelivery method : Proposals must be hand delivered at TCTA’s Centurion offices and addressed to the Receiving Officer, and marked RFT: TCTA/PFT/FMA/2013/25 on or before the closing date and time.ENVELOPE A-Technical InformationCopies to be submitted: 1 Original (clearly marked “original” and 5 copiesENVELOPE B-Financial InformationCopies to be submitted: 1 signed hardcopy and 1 CD-ROM
32CommunicationOnly written communication addressed to Receiving Officer at will be considered.TCTA will assume that every individual communicating with it on behalf of a tenderer or a potential tenderer is duly authorized unless otherwise indicated.Please use tender number on all correspondence.Written questions ed to will be responded to within 48 hours.Any addendum to the RFT necessary will be published in the TCTA website until 3 days before the tender closing date