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Microsoft PowerPoint - Final roadshow presentation - 010405 ver3

VIEWS: 109 PAGES: 33

									Investor Roadshows – CoJ03

April 2005
Contents

 Parties to the transaction

 Update on CoJ
      Organisational and sector update
      Financial profile

 Summary of the offering

 Investor relations

 Price guidance

 Timetable
Parties to the transaction

City of         Parks Tau                 Sibongile Mazibuko         Mankodi Moitse
Johannesburg
                MMC: Finance & Economic   Acting City Manager        Acting Executive Director:
                Development                                          Finance & Economic Development
                                          011 407 7581
                (011) 358 3661            sibongilem@joburg.org.za   011 358 3141
                parkst@joburg.org.za                                 Mankodi@joburg.org.za

City of         Jason Ngobeni             William Mathamela
Johannesburg
                Treasurer                 Head of Dealing

                011 242 1043              011 242 1042
                jasonn@joburg.org.za      wmathamela@joburg.org.za


Lead Managers   ACMB:                     Barclays:                  Vunani Capital
                Riaan Kemp / Rob Moody    Haydn Hammond / Quinton    Chris Gerber
                                          Zunga
                011 350 8391                                         011 263 9523
                                          011 772 7224
Organisational and sector update
Joburg 2030 Strategy

  The Joburg 2030 strategy was set after the December 2000 local elections

  The main aim was to ensure economic development and a better quality life

  Implementation has incorporated a number of flagship projects including:
       Safety and security;
       Skills;
       Economic development;
       Sectoral development;
       SMME development; and
       Investment and trade facilitation

  CoJ believes the implementation of this strategy is on track and would like to
  complement it with sound financing
Revenue management
 The Establishment of the Revenue Shared Services Centre (RSSC) is making good
 progress

 CoJ in 2003 established a Credit Control and Debt Collection Policy to ensure all billing
 arrears are collected efficiently and promptly
      An in house legal team has been established to handle outstanding claims in conjunction with a
     panel of external attorneys and debt collectors

 The debtors write-offs policy is to write-off where:
       All legal recourses to recover debt have been exhausted; or
       The debt has become too expensive/uneconomical to recover

 CoJ will be reviewing third party proposals on the sale of the debtors book in the
 next financial year

 As all bad debts have been provided-for the impact of this sale would be positive on the
 financial position of the CoJ
Revenue management - continued

  A number of new revenue projects have been implemented in the last year
         Query resolution
         Clearances
         Refunds
         Credit control
         Collection rate continuing to improve
Regional Electricity Distributors

  The establishment of Regional Electricity Distributors (‘REDs’) has begun with
  Cape Town (RED1), as a pilot

  CoJ’s electricity utility will form part of RED4

  The RED’s are expected to increase efficiencies in the whole electricity
  distribution industry

  Municipalities will be appropriately compensated

  This compensation broadly could take the form of :
      Cash payments; or
      Interest on loans; or
      Dividends; or
      A combination

  CoJ is closely participating in the process
RSC levies

  The Minister of Finance has indicated that RSC levies will be phased out and
  replaced

  CoJ has made representations that the intended replacement should have the
  same economic growth linkages as the RSC levies

  We believe our view is being considered but at this stage we have not been
  informed of the replacement
Reducing water losses

  Major water losses are incurred through physical and commercial losses in metered and
  non-metered areas

  Un-accounted for Water (‘UFW’) which in the 2004-5 period represented 34% of bulk
  purchases was down from 36% for the preceding financial year

  We expect it to go down to 31% in 2005/2006 with further investment into infrastructure

  ‘Operation Gcin’amanzi’ which is designed to address water supply, demand,
  conservation, wastage, ownership of consumption and non-payment of water services in
  Soweto and other parts of the City has been piloted in Phiri

  The results are positive and a larger roll-out is expected
Reducing power outages

  Reducing power outages will have a direct incremental effect to revenues

  However the transmission network in many areas is in a very poor state of repair and
  recent audits have identified transformers that require refurbishment

  Current reports highlight the need to spend at least ZAR 125m per annum on the
  refurbishment and extension of the transmission networks

  Progress has been made in the previous 2 years and COJ plans to spend ZAR128m on
  power systems in the 2005/2006 financial year

  CoJ is committed to spending the required amount to rectify this issue
Financial update
Financial reporting and audit opinion

   CoJ consolidated its financial statements for the first time in 2003/4

   This has set the platform for international reporting standards

   In addition to this CoJ is determined to get a clean audit opinion

   The audit opinion mainly focused on:
         Building a strong financial control environment
         Creating a comprehensive asset register
         Confirming completeness of revenue

   CoJ is implementing operation Clean Audit Opinion and substantial progress
   has been made to date
                                                                                                              Feb '05
                                                                                                              Jan '05
                                                                                                              Dec '04
                                                                                                              Nov '04
                                                                                                              Oct '04
                                                                                                              Sep '04
                                                                                                              Aug '04
                                                                                                              Jul '04
                                                                                                              Jun '04
Collection Rates: 12 month moving average




                                                                                                              May '04
                                                                                                              Apr '04
                                                                                                              Mar '04
                                                                                                              Feb '04
                                                                                                              Jan '04
                                                                                                              Dec '03
                                                                                                              Nov '03
                                                                                                              Oct '03
                                                                                                              Sept '03
                                                                                                              Aug '03
                                                                                                              Jul '03
                                                                                                              Jun '03
                                                                                                              May '03
                                                                                                              Apr '03
above 90%
                                                                                                              Mar '03
                                                                                                              Feb '03
                                                                                                              Jan '03




                                            110.0

                                                    105.0

                                                            100.0

                                                                    95.0

                                                                           90.0

                                                                                  85.0

                                                                                         80.0

                                                                                                75.0

                                                                                                       70.0
Liquidity position: The basis for the short term
rating upgrade

 ZAR Million

  1,200.00

  1,000.00

    800.00

    600.00

    400.00

    200.00

      0.00
               Feb-04   M ar -04   A pr -04   M ay-04   Jun-04   Jul -04   A ug-04   Sep-04   Oct -04   Nov-04   Dec -04   Jan-05
Forecasted Capex needs

  CoJ's historic and forecasted Capex:

  2400


  2000                                                                                      2,100               2,100
                                                                                                      2,000


  1600
                                                                                  1,502
                                                                        1,346
  1200            1,280
                                                               1,105
         949
   800

                           592                        632
   400
                                    309      295

     0
         1995/6


                  1996/7


                           1997/8


                                    1998/9


                                             1999/0


                                                      2000/1


                                                               2001/2


                                                                         2002/3


                                                                                   2003/4


                                                                                             2004/5


                                                                                                       2005/6


                                                                                                                2006/7
Credit rating

   CoJ's current and historic credit ratings are as follows:

          1999:
           1999:                                 Fitch BBB+
                                                  Fitch BBB+         F2+
                                                                      F2+

         2003:
          2003:                                 Fitch
                                                 Fitch         A-
                                                                A-   F2+
                                                                      F2+

         2003
          2003                                  CA Ratings A
                                                 CA Ratings A        A2+
                                                                      A2+

         2004 (re-affirmed):
          2004 (re-affirmed):                   Fitch
                                                 Fitch         A-
                                                                A-   F2+
                                                                      F2+

         2004 (re-affirmed)
          2004 (re-affirmed)                    CA Ratings A
                                                 CA Ratings A        A2+
                                                                      A2+

          2005 (re-affirmed & upgrade)
           2005 (re-affirmed & upgrade)          CA Ratings A
                                                  CA Ratings A       A1
                                                                      A1
Summary of the offering
Summary of the offering

 Issuer:               City of Johannesburg Metropolitan Municipality

 Issue size:           ZAR 700 million

 Maturity:             8 years

 Interest payments:    Semi-annual interest payments

 Redemption:           2013

 Status of the bond:   Unsecured and unsubordinated bonds

 Type of placement:    Public

 Listing:              Bond Exchange of South Africa

 Yield:                R157 + credit spread
 Coupon:               TBA
Summary of the offering (continued)

 Issuer:             City of Johannesburg Metropolitan Municipality

 Allotment           Book build (Strict Dutch auction)

 Documentation:      -Programme memorandum
                     -Pricing supplement
                     -Rating Report

 Secondary market    Market facilitation on a best endeavors basis
 support:

 Use of proceeds:    -City   Power
                     -Johannesburg Water
                     -Johannesburg Road Agency
                     -Johannesburg Development Agency
Investor relations
Ongoing disclosures

  After the close and listing of the issue, CoJ will maintain on-going disclosures to
  investors, including:
        Annual results presentations
        Circulation of credit rating updates
       Timely disclosure of any material changes to the City’s financial position,
      management or operations
CoJ bond-holders relationship contacts

 William Mathamela

 Head of Dealing: Treasury


 Tel: 011 242 1040

 Fax 011 242 1055
 Email: wmathamela@joburg.org.za
Price guidance
Assumptions
Base pricing on the following data:
  COJ01 credit spread
  Investec Bank yield curve as longer dated bond as well as close to similar credit
  rating
  INCA yield curve as longer dated bond as well as similar business risk
  Apply Moody EDF ratios for the differential
Price vs possible comparables
Investec Bank                                   2008       2009        2010   2011      2012    2013   2014   2015
IV02 (A+) 2008 Sub Debt R194                     135
IV01 (A+) 2012 Sub Debt R153                                                              173
Investec Curve                                              141         146     152      157     163    169    174
COJ03 (A-) on Investec Curve                                             -8     144      149     155    160    166
COJ03 (A-) on Investec Curve and net EDF application on differential             -8       38      11    -11    -
                                                                                144      196     174    158    174
INCA
IN03 (AA-) 2011 R153                                                             80
IN04 (AA-) 2015 R157                                                                                            105
INCA Curve                                                               72      72       80      89     97    105
COJ03 (A-) on INCA Curve                                                 66     138      147     155    163    171
COJ03 (A-) on INCA Curve and net EDF application on differential                 85      131     158    182    192
                                                                                157      211     246    278    297

Average of COJ03 (A-) on Investec and INCA Curve                                150      204     210    218    235
 Assumptions and considerations:
     Accepts true market pricing (Risk vs. Reward)
     Issue size not taken into account
     Market demand and supply not considered
                                                           * All rates as at 31 March 2005
Price Guidance

 Use Average as Base Case (Credit Spread equals 210 basis Points)

 High current demand and Low Supply might push credit spreads lower

 Initial issue size for COJ03 will be relatively small and might also lower the expected
 credit spreads



THEREFORE, RECOMMENDED PRICE GUIDANCE RANGE FOR CREDIT SPREAD 175
                       TO 210 BASIS POINTS
Recommendation

 COJ03 will be an eight year maturity, with a credit spread linked to the R157 with a ten
 year maturity

 R157 trading at 8.61%

 Eight year Government yield curve at approximately 8.45%

 A credit spread of between 175 to 210 basis points equates to between 160 and 195
 basis points above the R157



THEREFORE, RECOMMENDED PRICE GUIDANCE ABOVE THE R157 SHOULD BE
  170 TO 200 BASIS POINTS, TO INCLUDE A SLIGHT NEW ISSUANCE PREMIUM




    * All rates as at 31 March 2005
Timetable
Issue timetable


7 April 2005         Preliminary DMTN programme memorandum

21 April (at 9am)    Book opens
21 April (at 12pm)   Book closes
21 April (at 2pm)    Council meeting
21 April [T]         Allocation
21 April             Benchmarking to R157
26 April [T+3]       Settlement and Issue
26 April             Listing on BESA
Book-building and allocation

  The bookbuild will be conducted by Barclays on 21 April from 9am to 12pm

  Bookbuilding and allocation process:
       Price guidance up to the day of the issue
       Strict Dutch auction on the day of the issue

  Council meeting at 2pm on 21 April

  Subscription/Allocation methodology
       subscription ZAR 1 million
Book-building hotline

 Haydn Hammond                     Alan Woodcock

 Barclays                          Barclays


 Tel: 011 772 7224                 Tel: 011 772 7220

 Email: haydn.hammond@barcap.com   Email: alan.woodcock @barcap.com
  Important notice
This presentation has been prepared by the City of Johannesburg Metropolitan Municipality (“COJ”). This publication is provided to you fo
information purposes.

Neither the advisors to COJ nor any their officers or employees thereof accepts any liability whatsoever for any direct or consequential loss
arising from any use of this publication or its contents. Any securities recommendations made herein may not be suitable for all investors
Any modelling or backtesting data contained in this document is not intended to be a statement as to future performance.

The information contained in this document is not intended to constitute legal, accounting or tax advice. Therefore, no responsibility will be
accepted by the advisors for the treatment by any court of law, tax or other authorities with regard to the outcome of any transaction
resulting from the use of this document, and investors should seek their own advice as to the suitability of any investments described herein
for their own financial or tax circumstances.

This communication is being made available in the Republic of South Africa to persons who have professional experience in, and whom
COJ believes to be sufficiently knowledgeable to understand, matters relating to investments. The investments to which this relates will be
entered into only with such persons.

Copyright in this report is owned by COJ. No part of this report may be reproduced in any manner without the prior written permission o
COJ.

								
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