1. Asset Management Workshop November 2010 #424282v1

2. SANRAL Mandate Corporate Governance Budgeting Funding Financial Reporting Revaluing assets Open Road Tolling (not discussed) AGENDA

3. The SANRAL mandate

4. Established in April 1998 by an Act of Parliament as an independent operating company to operate South Africa’s national road network Established in terms of the National Roads Act of 1998 as a public company with a share capital within the requirements of the South African Companies Act Governed by a board of directors (8 members) of whom 7 must be appointed by the Minister of Transport Eighth member of the board is the CEO by virtue of office Who Is SANRAL Responsible for strategic planning with regard to South African national road system Finance, plan, construct, provide, operate and maintain roads in neighbouring countries upon request from the Minister of Transport and in agreement with the respective countries Commercial principles, but not profit driven

5. Vision: To be recognised as a world leader in the provision of a superior primary road network in Southern Africa. Mission: As the custodian of a public good we are committed to the advancement of the Southern African community through:-  a highly motivated and professional team;  state-of-the-art technology;  proficient service providers; and  promoting the ‘user pay’ principle. Vision and Mission

6. E-xcellence P-roactiveness P-articipativeness I-ntegrity C-are EP 2 IC SANRAL’s Core Values

7. Minister (Regulator) Governance and Control Planning, Design, Construction, Operation, Management, Control, Maintenance & Rehabilitation of National Roads Chief Executive Officer Board MOT Day to Day Business and Operations Management SANRAL Staff SANRAL RELATIONSHIP TO MINISTER and DOT

8. Regulation  The South African National Roads Agency Limited and National Roads Act, No 7 of 1998  Public Finance Management Act, No 1 of 1999  External Auditor: Office of the Auditor-General  Internal Audit: Outsourced to Pricewaterhouse Coopers & BI Group (SAB&T)  Bankruptcy remote – may not be placed under judicial management or in liquidation except if authorised by an Act of Parliament  Exempt from Income Tax but toll portfolio is a vendor in terms of the VAT

9.  Responsible for proclaimed national roads: Toll and Non- Toll Network  Obligated by legislation to keep separate accounts for Toll and Non-Toll activities  Design, fund, maintain, operate and rehabilitate national roads  Manage approximately R18.5bn of annual spend  Manage toll road concessionaires  Levy tolls for the purposes of funding the Toll Road Network – with annual adjustments subject to the approval of the Minister of Transport  Provide safely engineered, well maintained roads What Do We Do?

10. Road user is our client – SANRAL objective is to provide a safe well engineered road to the user – movement of people, services and goods Value of time – Time is valuable, both commercial and private To enable the economy to grow – creating wealth and job opportunities, saving on road user costs – sufficient infrastructure is required The Bigger Picture

11. In order to provide above, there are different focus areas: –As minimum, roads must be well maintained: Routine road maintenance (crack sealing, pothole repair, grass cutting, road signs and markings, guardrails, etc) Periodic maintenance – reseals and overlays Rehabilitation Available funding optimized using tools such as pavement management systems, HDM4 –Capacity improvements (combine with rehabs): Additional lanes Paved shoulders Climbing lanes The Bigger Picture

13. NATIONAL ROAD NETWORK (km) Description Non TollState TollBOTTotal Dual Carriageway 6105204431 573 4-Lane Undivided 11299240550 2-Lane Single 12 429101360514 047 Total 13 0501 8321 28816 170 % of SANRAL Network 81%11%8%

14. Corporate Governance

15.  Board and Top Management – Control and Direction  Enterprise-wide Risk Management Risk Management Cluster Board Ultimately Accountable  Measures against Fraud and Corruption: Zero Tolerance Fraud Hotline (Whistle blowing) Tip-Offs Committee Forensic Investigations Governance

16. Transparent and consistent procurement process International standards for terms and conditions: FIDIC Promotion of SMME’s and BEE Segregation of duties as per SCM policy –Evaluation, recommendation, award Procurement Process

17. Budgeting for national roads

18. Cost Of Maintenance Delay – Sanral Repair Cost = X / km Good Fair Poor Very Poor 3-5 Years Repair Cost = 6X / km 5-8 Years Repair Cost = 18X / km (Ratio 1:6) (Ratio 1:18)

19. Cost Of Maintenance Delay – Road User (2008r) Good Poor

20. Asset Preservation - Data Roughness Rut Depth Macro Texture Cracking Ravelling Video Surface Friction Structural Strength Centralised Database Traffic Bridge DGPS Unit Costs

21. SANRAL Budgeting Procedure Instrumental Data CBA Priority List PMS RDME RUE Bridge Inspections BMS BDME RUE CBA Priority List Traffic Super Project List Budget Optimisation EasternSouthernNorthernWestern Programming Pavement Management System Bridge Management System

24. Funding

25.  In terms of the SANRAL Act the it is obliged to operate its toll roads separately from its other national roads  SANRAL maintains separate accounting records for Toll and Non-Toll related operations  There is no cross subsidisation between the Toll and Non- Toll businesses  Toll roads are deemed to be self-funding and for financial analysis are deemed to amortise over a period of 30 years Toll and Non-Toll

26.  Monies appropriated through grants by Parliament (Non-Toll)  Debt Capital Markets for toll roads (Toll)  Toll road funding is supported by toll revenue income (Loan Supportable by Revenue Principle)  Raised in ZAR SANRAL Funding

27.  Transparent, intelligent procurement  Use of technology: - Intelligent Transport Systems (ITS) - Electronic Toll Collection (ETC) - Asset Management Systems  Environmental sensitivity  Promote entrepreneurship and support SMMEs  Public Private Partnerships (PPP) How Do We Deliver ?

28. J-curve

29. Moody’s National Scale Issuer Ratings: (Non-guaranteed notes) Long-Term: Aa2.za Short-Term: P-1.za Global Scale Issuer Ratings: Long-Term: A3 Short-Term: P2 Rating

30. Initial R6 billion guaranteed funding (SZ bonds) R1 billion N1 loan – separate guarantee R10 billion – non guaranteed funding (NRA bonds) R31.91 billion guaranteed funding (HWAY bonds & others) BORROWING CAPACITY Total Borrowing capacity = R48.91 billion Total Guarantee = R38.91 billion {R31.91 billion (H Way) & R6 billion (SZ)}

31. TOTAL DEBT

32. BONDCOU- PON MATURITYCOUPON DATESISSUE AMT (million) TYPE NRA0134.2531 October 201330 April 31 October1 560CPI NRA01411.2530 April 201430 April 31 October140Fixed NRA01812.2530 November 201831 May 30 November2 556Fixed NRA02212.2531 October 202230 April 31 October2 200Fixed NRA0235.0031 May 202331 May 30 November515CPI NRA02812.2530 November 202831 May 30 November2 671Fixed HWAY209.7531 July 202031 January 31 July5 762Fixed HWAY235.5007 December 202330 June 31 December 521CPI HWAY349.2531 July 203431 January 31 July1 779Fixed HWAY245.5007 December 202430 June 31 December 211CPI HWAY359.2531 July 203531 January 31 July647Fixed THE SANRAL SUITE (Aug 2010) Spire Awards: BEST BORROWER 2008 & 2009 BEST ISSUER 2009 (HWAY20)

33. Current Concessions  N4 East, Maputo Development Corridor – 420km  N3 Cedara, Heidelberg – 512km  N4 West, Platinum Highway – 484km Proposed Concessions  N1/N2 Winelands Toll Highway (Tenders closed 1 Nov 10)  N2 Wild Coast Toll Highway (ROD received)  R300 Ring Road Current & Proposed Concessions

34. Financial Reporting

35. Statutory Reporting (Financial Statements) International Financial Reporting Standards Special approval from NT due to publicly traded debt & international funding sources Financial Reporting

36. Management Reporting Non-toll and Toll separate Forecasts done on monthly basis per project on mySAP (ERP) Non-toll balanced to zero for budget Toll allowed to budget for deficit due to finance charges and ‘J-curve’ effect Financial Reporting

37. Going Concern: technically insolvent –Established with nominal asset value –Incorporated roads at zero cost –Toll roads > J-curve effect –Deferred Income: Non-current liability ito IAS20 Completeness of assets –SANRAL Act > ownership –Registration of property cumbersome Reporting Challenges

38. Revaluing our assets

39. Investment Property –1500 properties –Normal valuation (NPV) method –R1.1 billion (2009) Road Reserve Land –126 153.9 ha –Corridor method > Legal opinion –Using comparable sales of ‘across the fence’ properties –Adjusted for services & access Asset Revaluation

40. Road Reserve Improvement –16 170km, 3 000 bridges & culverts –R 144.8 billion –Standards for road building given specific traffic and topography –Pavement & Bridge condition Asset Revaluation (continued) Depreciated replacement cost

41. Toll roads: Loan Supportable by revenue (LSR) methodology –Recoverable amount over a rolling 30 year period Non-toll: Depreciated replacement –Non-cash generating unit, therefore no guidance in IFRS –IPSAS 21: value in use for non-CGU = depreciated replacement cost Impairment

42. Property verification project –ITIS (maps, RDS, status of each property) –Identification & Verification, then transfer –Valuation of all properties Condition of roads & bridges –Condition survey every 2 years –Bridge inspection every 3 years –Detailled loaded into ITIS Comprehensive Asset register

43. Open Road Tolling (ORT)

44. Project Extent: PLANNED LANE ADDITIONS: 185 km (2010) FUTURE UPGRADES: (223 KM) PLANNED NEW ROUTES: 158 km FINAL SCHEME: 561 KM

45. Open Road Tolling

46. SANRAL principles for ORT  One tag standard  One account – may include various vehicles  Central clearing Full interoperability

47. ORT - General  SANRAL model:  TCH & VPC – National SANRAL initiative:  Central clearing with all current and future concessions  Clearing with CTROM (current toll plazas)  Integration of Natis and AARTO  Utilising special enforcement unit to do violation processing & enforcement

48. ORT Building Blocks  Consist of following:  Toll tag  Kiosks/Mobile Kiosks  Satellite Centres  Technical Shelters and Gantries (Toll Point)  Communications Backbone  Central Operations Centre (ORT Back Office, TCH, VPC, ITS  Disaster Recovery Centre  Toll Signage  User Services

49. ORT – Customer Service Centres

50. Customer Centre Coverage @ 12 min reach

51. Technical Shelters & Gantries

52. Communications Backbone  SANRAL Provides:  Fibre Optic Backbone  Combination of existing ITS fibre and fibre to be installed in median  Contractor:  Backup/emergency coms

53. ORT – Central Operations Centre  ORT Back Office  Transaction Clearing House (TCH)  Violations Processing Centre (VPC)  New ITS ops centre

54. ORT – Back Office  Receives Transactions from RSS  Apply discounts  Do manual NPR if ANPR failed for non e-Tag transactions  Optimise completeness and compliancy of transaction, before forwarding to the TCH

55. ORT - TCH  Receive transactions from the ORT operator  TCH links transaction to an account  Does financial clearing  If not successful – forward to VPC  Do account management – call centre  Manage tag logistics – issues the tag to all ETC projects/Retail outlets

56. ORT – Violation Processing  Potential violator identified if:  No tag or account  Insufficient funds in account  Vehicle not identifiable  Transaction forwarded to VPC:  Send invoice  Not successful - final invoice  Not successful – Infringement notice

57. Violation Enforcement  Enforcement Unit (traffic officers together with ORT contractor) is set up to do violation enforcement  Not only toll – all traffic violations  Also attending to other requirements – management of incidents

58. Freeway ITS network Figure 10.1: GFIP Phase 1 SANRAL ITS Network – Implemented (210 km) JRA ITS Expansion

59. Cape Town FMS Operations

60. Inge Muldermulderi@nra.co.zamulderi@nra.co.za www.nra.co.za Fraud hotline 0800 204 558