Public Finance Management Act, 1999 (Act No. 1 of 1999)NoticesBorrowing Powers of Water Boards listed under Schedule 3 Part B of the Act - Rand WaterNotice No. 628 of 2021 |
Notice No. 628
16 July 2021
GG 44866
National Treasury
I, TITO TITUS MBOWENI, MINISTER OF FINANCE, acting in terms of Section 66(3)(b) of the Public Finance Management Act, 1999 (Act No 1 of 1999), hereby authorise the accounting authority of Rand Water to borrow money up to the limits and extend bank guarantees as stipulated below:
RAND WATER: BORROWING AUTHORISATION AND RELATED LIMIT |
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FINANCIAL YEAR |
UNCONDITIONAL INTERESTING-BEARING DEBT/ BORROWINGS AMOUNT |
CONDITIONAL INTEREST-BEARING DEBT/BORROWINGS AMOUNT |
TOTAL INTEREST- BEARING DEBT/ BORROWINGS AMOUNT |
Ending 30 June 2022 Ending 30 June 2023 Ending 30 June 2024 |
R7.605 billion R8.566 billion R8.296 billion |
R961 million R961million R961million |
R8.566 billion R9.527 billion R9.257 billion |
FINANCIAL YEAR |
BANK GUARANTEE |
Ending 30 June 2022 |
R849 million |
Ending 30 June 2023 |
R849 million |
Ending 30 June 2024 |
R849 million |
The proposed borrowing limits reflect the maximum interest-bearing borrowings that Rand Water may have at any point in each respective financial period. This means that for as long as Rand Water has interest-bearing borrowings on its statement of financial position (or balance sheet), it will need to adhere to the limits above. A new authorisation will be considered upon expiry, provided Rand Water has outstanding interest-bearing borrowings recorded on its financial statements. Rand Water is required to submit a utilisation request to the National Treasury to the Deputy Director-General: Asset and Liability Management (DDG: ALM) Division before sourcing borrowings for Rand Water’s growth projects. In addition, any borrowings related to the hydro-power project is subject to a utilisation request.
The bank guarantee amount reflects the maximum bank guarantee(s) Rand Water provide in favour of Eskom in relation to the Electricity Supply Agreement between the two parties. The cumulative amount of the bank guarantee should not in any of the 3 financial years exceed R849 million.
The borrowing authorisation and related limit is approved with the following compliance requirements:
| 1. | A minimum cash interest cover (CIC) ratio of 3 times, calculated as follows: cash generated from operations (after changes in working capital) divided by cash finance costs (from the cash flow statement); |
| 2. | A minimum debt service cover ratio (DSCR) of 1 time, calculated as follows: cash generated from operations (after changes in working capital) divided by total debt service costs (debt capital repayments plus gross interest paid – from the cash flow statement); |
| 3. | A gearing limit of 50% calculated as follows: interest-bearing borrowings divided by total equity; |
| 4. | Rand Water submits quarterly progress reports to the Asset and Liability Management Division on the above-mentioned requirements as well as the Borrowing Programme and Funding Plan, including utilisation of the borrowing limit within 30 days after the end of each quarter; and |
| 5. | Rand Water submits bi-annual reports to the Asset and Liability Management Division on the progress of major capital expenditure projects and the project plans for the upcoming 6 months. |
The bank guarantee authorisation has the following compliance requirement:
| a. | Rand Water is required to have a non-cash secured bank guarantee and must always maintain liquid investments or assets equivalent to R849 million in relation to the financial years highlighted above. |
TT Mboweni, MP
Minister of Finance
Date: 28/06/2021