Wastewater Reclamation in the City of Ekurhuleni

7 7 7 7 Marc@BSAMarc@BSAMarc@BSAMarc@BSA

1

City of Ekurhuleni snapshot

BACKGROUND DATA

Source: 2011 census

3 178 470 million residential population

1 015 645 million households

Houses 5.4% of the country’s population

EMM contributed 21.43% to Gauteng’s GDP of R 1.41tn in 2015

48.47% Economically Active Population

28.8% unemployment rate

1

Gross Domestic Product

Gross Domestic Product (GDP) - Ekurhuleni, Gauteng and National Total, 2005-2015[Annual Percentage Change, Constant 2010 Prices]

City of Johannesburg

42%

City of Tshwane

25%

Sedibeng6%

West Rand5%

Ekurhuleni22%

Gross Domestic Product (GDP)

Gauteng Province, 2014

Ekurhuleni Gauteng National TotalEkurhuleni as % of

province Ekurhuleni as % of

national

2005 127.7 575.5 1639.3 22.20% 7.80%

2006 142.3 641.5 1839.4 22.20% 7.70%

2007 159.4 723.2 2109.5 22.00% 7.60%

2008 179.4 818 2369.1 21.90% 7.60%

2009 188.6 864.7 2507.7 21.80% 7.50%

2010 208.4 955.9 2748 21.80% 7.60%

2011 227.4 1050.9 3023.7 21.60% 7.50%

2012 242.9 1122.4 3254 21.60% 7.50%

2013 262.3 1221 3549.2 21.50% 7.40%

2014 289.4 1332.3 3812.6 21.70% 7.60%

2015 301.3 1405.8 4013.6 21.40% 7.50%

Ekurhuleni Gauteng National Total

2005 5.50% 5.00% 5.10%

2006 7.10% 5.90% 5.30%

2007 6.00% 5.90% 5.40%

2008 2.50% 3.80% 3.20%

2009 -2.40% -1.50% -1.50%

2010 4.20% 3.30% 3.00%

2011 3.50% 3.60% 3.30%

2012 2.40% 2.50% 2.20%

2013 1.50% 2.60% 2.30%

2014 2.10% 1.90% 1.60%

2015 0.30% 1.50% 1.20%

Average Annual Growth 2005-2015+

2.70% 2.92% 2.58%

2

Critical industries to CoE economy

• Priority investment should support those economic sectors that drive local development and those sectors that itsupports.

• The basis for finding the economic drivers in the municipality is a basic/non-basic analysis.

• Basic/Non-Basic ratios are calculated in order to determine the drives of an economy. The ratio is expressed as theemployment in a sector in the local economy divided by the total employment in the local economy.

• This is in turn divided by the same ratio for the district, provincial or national economy. A ratio greater than one,implies that there is relatively more employment in this sector than in the corresponding economy it is compared to.

• It therefore generates more than what can locally be consumed and the sector is thus a net exporting sector. Thisimplies that it generates income for the local economy. The opposite is then true for ratios smaller than one.

Agriculture Mining Manufacturing Utilities Construction Trade LogisticsBusiness

services

Community

services

Government

services

Ekurhuleni 0.28 0.34 1.61 0.99 1.13 1.06 0.99 0.91 0.66 0.90

City of

Tshwane0.11 0.14 0.85 0.92 1.30 0.91 0.91 1.07 0.68 1.74

City of

Johannesburg0.15 0.27 0.93 0.95 1.20 1.12 0.92 1.39 0.74 0.90

Current Funding MixCurrent Funding MixCurrent Funding MixCurrent Funding Mix

• Grants at c. 36% of funding or c. R2.3 billion in 2017/18

– Noted significant reliance on grants to fund Capex

• Municipal bonds at c. 50.71% of funding or R3.2 billion in 2017/18

– Expected to remain part of funding sources

• Revenue c. 13.29% of funding or R850 million

– Its contribution to the Capital budget is expected to increase

Total outstanding LT debt, (instruments, average cost, tenure, most recent transactions / current ,etc)

Loan

Number

Commencement

Date

Original Loan

Amount Tenor Interest Redemption dateRedemption Profile

Financial Instituion

where Zero Coupon

is held

Market Value of

Investment as at

31 Dec 2017

Closing Bal-31 Dec

17

Loan 1 2009/05/22 1,100,000,000.00 10 10.78% 2018/12/24 Annuity 161,532,278.63

Loan 2(a) 2010/02/19 400,000,000.00 15 11.68% 2025/02/14 Annuity 281,422,468.24

Loan 2(b) 2010/03/30 200,000,000.00 15 11.68% 2025/04/01 Annuity 140,351,028.12

Loan 2 ( c) 2010/04/30 200,000,000.00 15 11.68% 2025/05/01 Annuity 140,311,062.81

EMM01 2010/07/28 815,000,000.00 10 10.56% 2020/07/28 Bullet Sinking Fund 1 540,052,607.00 815,000,000.00

EMM02 2011/03/11 800,000,000.00 10 10.72% 2021/03/11 Bullet Sinking Fund 2 442,793,379.14 800,000,000.00

EMM03 2012/05/04 800,000,000.00 12 10.05% 2024/05/04 Bullet Sinking Fund 3 437,537,495.06 800,000,000.00

EMM04 2013/05/16 800,000,000.00 15 9.16% 2028/05/16 Annuity 559,999,999.96

EMM05 2014/04/17 785,000,000.00 15 10.67% 2029/04/17 Annuity 601,833,333.38

EMM06 2015/06/23 750,000,000.00 10 10.25% 2025/06/23 Annuity 562,500,000.00

EMM07 2017/07/10 500,000,000.00 10 10.52% 2027/07/10 Annuity 500,000,000.00

EMM07P 2017/07/17 800,000,000.00 15 11.32% 2032/07/17 Annuity 800,000,000.00

7,950,000,000.00 1,420,383,481.20 6,162,950,171.13

Policy Framework• The Gauteng City Region includes a cluster of cities,

towns and urban nodes

• It incorporates the Gauteng province in its entirety,with its three large metropolitan municipalities and a

range of smaller urban centres across and beyond theprovince to create an almost continuous urban

agglomeration

While it has no official border, and does not benefit from thesupport of dedicated administrative or political agents, It

represents a coherent economic and geographic spacewithin which regional competitiveness may be harnessed

CoE is favourably located in the Economic Activity and

Employment Area of the Gauteng Province

4

Tshwane

Johannesburg

Emfuleni

Mogale City

Sasolburg

Witbank

Secunda

stenberg

Po roomksdorp

tchefstKler

RuEkurhuleni Middelburg

Performance overview

Maintained Blue Drop

Score of >95%maintained in 2015/16Aaa.Za rated by Moodys

Debt to Revenue: (Total Debt /(Operating Revenue - Operating Grants) – 23% in

2016/17

2,170 2,123

1,409

0

1,000

2,000

3,000

2014/15 2015/16 2016/17

ZARmn Surplus

25,00029,000

31,000

0

10,000

20,000

30,000

40,000

2014/15 2015/16 2016/17

ZARmn Functional Revenue

2612

4,093 3,961

0

1,000

2,000

3,000

4,000

5,000

2014/15 2015/16 2016/17

ZARmn

Capital Infrastructure investment

Clean audit

2013/2014 &

2014/2015

Unqualified

audit with

findings

2015/16

3

Unqualified

audit with

findings

2016/17

Project description: Waste Water Reclamation

• Rationale for project / programme• In developing the 2015 WC/WDM Strategy the CoE

identified that more than the usual technical interventions were required to meet future water requirements in the City.

• The strategy identified the need to explore alternative water resources to have an 80:20 resource mix (80% Rand Water : 20% Alternative Supply) in order to ensure security of water supply.

• Alternative water resources identified by the strategy are:

• Rainwater and storm water harvesting

• Treated effluent reuse (wastewater reclamation)

• Ground water use

• Acid mine drainage reuse

472

424

391

250

275

300

325

350

375

400

425

450

475

500

2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Wa

ter

De

ma

nd

(m

illi

on

m3

/an

nu

m)

Projected Demand - High Growth Scenario (2.8%)

Projected Demand - Low Growth Scenario (1.88%)

Actual Demand

Vaal Recon Strategy WDM target

Project description• Project / Programme description

• From the 19 ERWAT Operated WWTW, the pre-feasibility study has identified reclamation from Olifantsfontein WWTW in the North and Waterval WWTW in the South of CoE

• The two plants will produce +/- 100 Ml/d of treated effluent for industrial use

• The project includes the construction and operation of:

• Wastewater reclamation plant

• Water treated to potable water standard

• Bulk pipeline and reticulation network

• Reservoirs, towers and pump stations

Project description• Estimated costs

• Estimated costs based on conservative figures and assumptions

Direct reclamation Indirect reclamation

Capital cost R 1,331,367,644 R 1,338,667,644

Operational cost 3.13 R/kl 4.71 R/kl

Finance cost 5.85 R/kl 5.89 R/kl

TOTAL operations cost 8.99 R/kl 10.60 R/kl

Cost of capital 3.8% 0.0%

Payback period (yrs) 17 yrs >25 yrs

-1,000,000,000

-500,000,000

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

20

19

20

21

20

23

20

25

20

27

20

29

20

31

20

33

20

35

20

37

20

39

20

41

Sc

he

me

Ba

lan

ce

Direct Reuse

Indirect Reuse

Olifantsfontein WWRW

Waterval WWRW

ItemWithout secondary

reticulationWith secondary reticulation

Waterval – Total and includes for Leg 1 & 2 : 68.2 Ml/d

Total Estimated Capital Cost R 1,3 bn R 2,03 bn

Cost of Capital 13.9 % 0 %

Payback period 10 years 21 years

Operational Cost R 8.56/kl R 11.89/kl

Olifantsfontein – 17.2 Ml/d

Total Estimated Capital Cost R 261 million R 359 million

Cost of Capital 22.4 % 10.1 %

Payback period 6 years 13 years

Operational Cost R 7.17/kl R 8.97/kl

Project description• Proposed institutional structure / implementing arrangements

• A PPP mechanism is currently being considered (pending Council approval) to ensure technological and financial risk transfer, value for money and affordability

• Status of preparation and timeline• Pre-feasibility study has been concluded (December 2017)

• Reuse of +/-100Ml/d of treated effluent feasible (10% of current water demand)

• Item for Council approval for accounting officer to explore PPP option is awaiting HOD signature

• Treated effluent reuse included in the draft revised by-law (currently with Legal for comments)

Funding strategy

• Sources of finance

• The project is currently earmarked to be funded through a Project Finance structure, pending Council approval

• Funding is not secured as yet

• In order to finalise the preparation, project preparation funding will be required for the project officer (if external) and the transactional advisor who will get the project to procurement and contracting stages.

Financial Implications

• Revenue streams

• The wastewater will be treated and sold to the CoE at an agreed tariff.

• The PPP agreement will include the requirement for maintenance and upgrades by the implementing party.

• Cash flows from the project will be used to service the debt.

Potential roles for DFIs

• Should the project follow the PPP route, an SPV shall be established

• Various funders would be welcomed to participate in funding the project.

Key questions

• What are typical terms of funding from DFI’s?

• What are typical funding tenors, interest rates, conditions etc?