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Delta State IT IN


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									                           GCR                            GLOBAL CREDIT RATING CO.
                                                          Local Expertise * Global Presence

                                                                                          Delta State.
                           Marc Joffe            joffe@globalratings.net
                           Adebisi Ajiboye       bisi@globalratings.net                                                                                Nigerian State Government Analysis
                           Security class              Rating Scale                 Currency                        Rating                  Expiry Date                    Rating Watch
                           Short term                   National                    Naira Naira                      Al                   07/2006 07/2006                       Yes
                           Long term                    National                                                      A

                           Delta State, one of 36 Nigerian states, has a population of about 3.7 million people and a population growth rate of around
                           2.8%. The state produces around 30% of Nigeria's total oil output, and accordingly, is responsible for the generation of a
                           significant proportion of the country's foreign currency inflows.

                           Rating rationale
                           The rating is supported by the following key factors:
                               • Delta State's strategic importance as the largest oil producing state in Nigeria.
                               • In addition, the State's economy has large potential for development due to its varied natural resources, while the
                                    State Government is focussing on the development of the economy and sources of internally generated revenue.
                               • The State has historically funded the bulk of its capex requirements internally, while the high level of capex to total
                                    income was favourably considered. In addition, the discretionary nature of this expenditure serves to enhance the
                                    financial flexibility of the State.
                               • . Gross gearing remains at manageable levels.
                               • . The reduced proportionate spend on staffing was positively considered.
                           The rating is constrained by the following key factors:
                               • The State's considerable dependence on federally allocated revenue, with internally generated revenue accounting
                                    for a low 11 % of total income. In this regard, the State is exposed to potential changes in the Federation Account.
                               • Furthermore, as the majority of the State's revenue is essentially derived from oil production, it is exposed to
                                    fluctuations in the international oil price, leading to low predictability of federal allocations.
                               • Liquidity levels at year end F04 were significantly weaker than in the prior year, with days cash on hand falling to
                                    a low 15 days (F03: 52 days), while the "take-on" ofN17bn of debt from the old Bendel State has increased

                           Financial structure
                           Total debt increased for a fifth consecutive year, by 21 % to N29.2bn in F04, and comprised of short term debt ofN8.1bn
                           (28%) and long term debt ofN21.1bn (72%). Included in total debt is an amount ofNl7.6bn (F03: NI7.2bn) that is classified
                           as external or foreign debt. Also included in total borrowings are internal loans of N8.1bn (F03: N3.6bn), which comprises
                           domestically raised borrowings from various banks, and is effectively utilised as bridging finance pending the receipt of
                           federally allocated revenue. Total debt to total income decreased to 34% in F04, from 38% in F03. Net debt to total income
                           was largely unchanged at 31.5%. Cash and cash investments decreased significantly, by 57% to N1.8bn in F04, covering
                           short term debt only 0.22x (F03: 1.18x). Furthermore, days cash on hand fell to just 15 days, well below the level of 52
                           days reported previously. However, the state maintains adequate credit facilities, and borrows in the money markets to
                           fund cyclical cash deficits, which mitigates liquidity risk to a degree. Delta State funds the bulk of its capital expenditure
                           via operating surpluses.

                           Potential risks
                              • Delta State's economy is dominated by two primary activities, namely agriculture and oil production. As
                                   approximately 70% of the workforce is involved in small scale farming activities, adverse climatic conditions could
                                   threaten the livelihood of the majority of the population and place the State under significant financial strain.
                              • The State's revenues are significantly exposed to fluctuations in the international oil price, which could have a
                                   negative impact on its income base in the event of a severe downturn. The recent spike in the international oil price
                                   should, however, benefit the State in the medium term.
                              • The political situation has deteriorated since 2005, and would appear to have impacted negatively on the image of
                                   Delta State (with a perceived low level of confidence of businesses in the State).

                                   This document is confidential and issued for the information of clients only. It is subject to copyright and may not be reproduced in
                                   whole or in part without the written permission of Global Credit Rating Co. ("GCR "). The credit ratings and other opinions
                                   contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to
                                   purchase, sell or hold any securities. No warranty, express or implied. as to the accuracy, timeliness, completeness, merchantability
                                   or fitness for any particular purpose of any such rating or other opinion or information is given or made by GCR in any form or
                                   manner whatsoever.

Background                                                        Political and legislative framework
Delta State, which was formed out of the defunct Bendel
State in 1991, is divided into 25 local government areas,         After gaining independence ITom Britain in 1960,
which operate under 3 senatorial districts. The state has         Nigeria was ruled for twenty-eight of the following
a total area of approximately l8,000km2, of which                 forty-five years by a succession of military
nearly 6,000km2 is mangrove swamp, situated along the             governments. However, in May of 1999, the
state's l60km long coastline. The capital, Asaba, is              democratically elected government of President
situated along the Niger River which forms the south              Olusegun Obasanjo assumed power, and was re-elected
eastern border.                                                   to a second term in May 2003.

Demographic composition and economic structure                    Under the federal system, there are 3 tiers of
                                                                  government, namely the Federal, State and Local
The total population of the state is estimated at around          governments. Since 1999, a fiscal decentralisation
3.7 million in 2004, growing at a rate of approximately           model, aimed at gradually empowering the lower tiers
2.8% per annum mirroring the national average. The                of government has been in place. Each tier is
majority of Deltans live in urban areas, and the                  responsible for the provision of various government
population density of the state estimated in 2004 at              services and has the authority to collect and retain
207.3 personslkrn2, is noticeably higher than the                 revenues under their respective jurisdictions. The major
national average of 123 personslkrn2. The population              sources of revenue currently available to the Federal and
under the age of 16 makes up 47% of the total                     State Governments, as well as their respective
population of the state.                                          obligations, are reflected in the table below.
                                                                      Federal Government               State Government
The adult literacy rate at 61.3% (down from 65% in                                             Duties
2002), compares favourably to the national average of             •   Housing                      • Creation of Local
55%.                                                              •   Currency & External             Government
                                                                      Affairs                      • Legislature
Healthcare remains a major issue facing the State                 •   Legislature                  • Education
Government, particularly in rural areas. As at 2003,              •   Security                     • Housing
Delta State operated 37 public hospitals, compared to 26          •   Electricity Supply           • Water & Electricity
in 1998. Currently, Delta has an infant mortality rate of         •   Infrastructure Expansion        Supply
48 deaths per 1,000 live births, compared to 114 deaths               & Maintenance                • Road Construction &
per 1,000 live births in 2001. Notwithstanding the                •   Distribution to State and       Maintenance
improvement, this is considered to be very high by                    Local Governments            • Health
international standards, with Britain reflecting a figure                                 Revenue Sources
of below 5. The average life expectancy is 55 years,              •   Company Tax                  • Federal Account
approximating the national average. A contributing                •   Oil Sales                    • Personnal Income Tax*
factor to the poor health statistics is the fact that less        •   VAT                          • VAT Allocation
than 70% of the population have access to potable water.          •   Mineral Royalties &          • Derivation Income
                                                                      Rents                        • Licences and Fees*
A major economic activity of the State is oil as Delta            •   Duties
State produces around 30% of Nigeria's total oil output
(of around 2.2 million barrels per day), making it the            *Collected by States. Other revenues are collected and
                                                                  held in trust by the Federal Government.
country's second largest producer behind Akwa Ibom
State. Around 80% of the Delta State's oil reserves are           15% of V AT is retained by the Federal Government,
onshore, while 20% are offshore. As such, the bulk of             whilst State and Local Governments are apportioned the
the State's revenue is derived from the oil and gas sector.       remaining 50% and 35% respectively. In addition, the 9
                                                                  oil-producing States receive derivation income, calculated
Delta's topography and climate make it ideal for many             according to oil production levels. In this regard it is noted
types of agriculture. Cassava, yam and maize are the              that the new Onshore/Offshore Abrogation Act will result
main food crops produced, while oil palm and rubber are           in a major change in the derivation income apportioned to
the predominant cash crops. Although growth in the                States with offshore oil revenues. The new law should
Delta economy has been dominated by nonagricultural               materially increase Delta State's total derivation income, in
sectors, as much as 70% of the population make a living           spite of the fact that the majority of its oil production is
fi:om agriculture (90% of whom are engaged in                     onshore.
subsistence farming, with the remaining 10% engaged in
large-scale commercial farming activities). Although the           Federal revenue ( excluding VAT and oil sales revenue) is
government is encouraging growth and modernisation in              currently distributed as follows:
this sector, through subsidies and various incentive              • 48.5% is retained by the Federal Government; . 24% is
programs, the planned agric spending in 2005 at N1.4bn                 distributed to the States;
was just 2% of the N69bn capital expenditure budgeted             • 20% is allocated to Local Governments; and
for the period.                                                   •                 .

    •    7.5% is retained by the Central Government as            Income and expenditure
         special funds (0.5% of this is held in the federal       A five year financial synopsis is reflected at the back of this
         stabilisation account).                                  report and brief comment follows hereafter. The financial
                                                                  statements are prepared using the cash basis of accounting.
Following a Supreme Court ruling nullifying the                   Cognisance is taken of the fact that the notes to the balance
aforementioned distributions in 2002, new revenue                 sheet for 2003 and 2004 have not been supplied by
allocation is currently before the National Assembly for          management, preventing detailed analysis of fund
final approval. If approved, the Federal Government               movements and the accuracy thereof. In addition, the 2004
would receive 46.63%, whilst the State and Local                  financial statements remain subject to audit.
Governments would receive 33% and 20.37%                                                       Budget        Actual     Variance
respectively.                                                                  Nm
                                                                                                  F04          F04         %
                                                                   Internally generated
Legal considerations                                                                             8,020        9,223       15.0
The legal framework regarding some aspects of                      Total federal allocations    49,184       75,316       53.1
government is somewhat underdeveloped, although                    VAT                           2,298        2,466       7.3
considerable inroads have been made over the past few
years. The key legal issues that impact on the credit             Total income                  59,502      87,005        46.2
quality of State Governments are as follows:                       Personnel                  (I 6,4 10) (15,419)       (6.0)
• The irrevocable standing payment order ("ISPO")
                                                                   Overheads                   (I 0,890) (25,184)      131.3
    (security utilised by several States, including Akwa
                                                                   Other costs                  (3,909)    (3,228)     (I 7.4)
    Ibom, Delta and Lagos State) was enforced in a
    landmark ruling by the Federal High Court in                   Operating surplus            28,293     43,175       52.6
    February 2003, underpinning the value of this form             Capex                       (34,892) (40,967)        17.4
    of credit enhancement.                                         Net Surplus (Deficit)        (6,599)     2207         n.a.
• The regulatory requirement of the Securities and                Total internally generated revenue increased by 16% to
    Exchange Commission prohibits States from                     N9.2bn in F04, and was mainly comprised of income taxes
    having borrowings of more than 50% of the                     (88%). Delta State's statutory allocation increased
    previous financial year's total revenue.                      significantly in F04, by 51 % to NI6.5bn. Derivation income
• Currently, there is no formal legislation relating to           jumped to N56bn, accounting for 75% (F03: 76%) of the
    external borrowing by State Governments, and                  State's federal revenue and 65% of total income for the year
    although legislation is expected, the timing remains          (F03: 67%). Accordingly, total income increased by 37% to
    uncertain. However, Federal Government approval               N87bn in F04, of which 11 % (F03: 12%) comprised
    is required prior to the procurement of external              internally generated revenue and 89% (F03: 88%) federal
    loans, whilst public issues of long-term debt                 distributions. Notwithstanding the strong growth of
    instruments are governed in terms of the                      internally generated revenue over the review period, the
    regulations of the local financial markets.                   State remains highly dependent on its statutory allocation,
                                                                  while derivation income is potentially very volatile (as it is
Political Factors                                                 exposed to oil price movements).
The Federal Government remains dominant in politics and
government finances, despite the stated decentralisation
objectives. The debate regarding the disparity between
income and expenditure at the various levels of government
continues and this is expected to result in a change in the
allocation of funds in the short term. In this regard it is
noted that nearly 60% of public spending occurs at State
and Local Government levels, whilst combined they
receive less than 50% of public revenue allocations.
Furthermore, most States do not have significant internally
generated revenue sources, leaving them highly financially
dependant on the Federal Government. Additional political
factors include:
     • The relative infancy of democracy and the
          concomitant fragility of the political system;
     • The likelihood of restructuring defaulted public
          debt is increased significantly by the nature of        Personnel costs in F04 increased by a modest 8% to
          public entities (and public assets); and                N15.4bn, well below the rate of inflation of roughly 17% for
     • Historically, the Federal Government has provided          the year. Positively, the growth in personnel costs has
          support to States experiencing financial                slowed down significantly in each year over the review
          difficulties, although this does not necessarily        period, from a high of 139% in FOO to current levels. As
          imply that States can expect support going              such, staff costs comprised a considerably lower 35% of
          forward.                                                total recurring expenditure in F04, from
                                                                  -'          3

48% previously. While this is still considered fairly high,         that on several occasions the debt repayments were
it compares favourably with the average of just below               deducted from the allocation but not paid by the Federal
30% for the South African municipal sector as a whole.              Government (particularly during the military era) and this
Overhead costs, however, experienced a significant 94%              remains an issue of contention between many States and the
increase to N25.2bn in F04, overtaking personnel costs as           Federal Government (the Federal Government refutes this
the largest recurrent expenditure item. Accordingly, total          position). Apparently, part of the foreign debt is in the
recurrent expenditure increased 48% to N42.9bn in F04.              process of being cancelled.
The interest expense also evidenced a large increase in
F04, amounting to N92m from Nl6m previously. Delta                  Internal debt of N8.1bn (F03: N3.6bn) comprises
State posted a sizeable N43.2bn operating surplus for the           domestically raised borrowings from various banks, and is
year (F03: N34bn). It is noted that the State has posted            effectively utilised as bridging finance pending the receipt
operating surpluses throughout the review period, leaving           of federally allocated revenue. These loans are also paid
substantial funds to be applied to capital expenditure              down from time to time as revenues are collected or receipts
programmes. Total capital expenditure increased by 48%              obtained. The Redeemable Development Loan Stock of
to N4lbn in F04, accounting for 48% of total expenditure            N3.5bn relates to the 1st Delta State floating rate
for the year (F03: 48%). Cognisance is taken of the fact            redeemable revenue bond (originally issued in F02). The
that the State has historically funded capital expenditure          bond is secured by an ISPO against the State's share of the
with operating surpluses (excluding FO 1).                          revenue credited to the Federation account.

                                                                    In the absence of the maturity profile of Delta State's debt,
                                                                    GCR has classified the external debt and the bond issue as
                                                                    long term debt, while given the temporary nature of the
                                                                    internal loans, these are assumed to be short term.
                                                                    Accordingly, short term borrowings represented 28% of
                                                                    total borrowings, whilst cash and equivalents, which
                                                                    decreased by 57% to N1.8bn, covered short term
                                                                    borrowings a considerably lower O.22x (F03: 1.18x).
                                                                    Furthermore, days cash on hand fell to just 15 days, well
                                                                    below the level of 52 days reported previously. As such,
                                                                    taking into account our maturity assumptions, and given
                                                                    that a portion of the external debt could be redeemable in
                                                                    the short term, a high degree of liquidity pressure appears

 Financial profile                                                  The State exhibited investments of N18.8bn at the end of
 A regulation was passed in early 2003, which                       F04. Based on the investment schedule provided by
 standardised financial statements of states and local              management, it appears that the investments are comprised
 authorities. The impact of the ruling was that each state          entirely of both listed and unlisted entities. Of this, a
 (and local authority) was required to fully disclose all           significant exposure is to Econet Wireless (Nig) Ltd
 details of its financial position. Prior to the legislation,       (roughly 65%), a listed entity. If it were possible to
 such disclosures were very uncommon. In this regard,               liquidate this investment timeously, this would likely ease
 total interest bearing debt and total loan stock have only         liquidity pressure (although cognisance is taken of the
 been included in the financial statements of Delta State           considerable concentration risk).
 for F03 and F04.
                                                                     The State evidenced a decrease in gross gearing, which
 The composition of debt (as supplied to GCR for F04 and             fell from 38% in F03 to 34% in F04. This is almost in line
 restated for F03) is provided as follows.                           with the South African municipal average of 32%. On a
           Total Debt(Nm)                  F03     F04               net basis, gearing was largely unchanged at a high 32%
External Loans                              17,169     17,608        (South African municipal average: 7%).
Internal Loans                               3,556      8,135
Redeemable Development Loan Stock            3,500      3,500
Total                                       24,225     29,243
 Delta State exhibited total debt of N29.2bn in F04,
 compared to a restated level ofN24.2bn for F03. Of this
 amount, N17.6bn (F03: N17.2bn) has been classified as
 external or foreign debt (mainly sourced from the Paris
 Club), that was inherited from Old Bendel State (from
 which Delta State originated). The Federal Government
 (the guarantor of these foreign loans) deducts the loan
 amounts from the monthly statutory allocation of Delta
 State in order to effect payment. It appears, however,

                                                                      Capital expenditure is budgeted at N69.1bn in F05, being
                                                                      significantly higher than the level of N41bn achieved in
                                                                      F04. In this regard, capex as a percentage of total income is
                                                                      budgeted at a high 60% in F05, compared to levels of 47%
                                                                      in F04 and 43% in F03. While these levels are well above
                                                                      the average displayed by more developed countries,
                                                                      cognisance is taken of the significant capex spend required
                                                                      to address the severe infrastructural concerns of the State
                                                                      going forward.

                                                                      The State's capital expenditure programmes largely revolve
   Operating estimates and year to date performance                   around economic development and the creation of
   Total income is budgeted to increase by 33% to Nl16bn in           employment. The following table clearly illustrates the
   F05, with total federal allocations (including VAT)                State's reliance on internally generated income (primarily
   expected to comprise 90% of this amount (F04: 89%).                federal allocations) to fund its capex. As such, the State
   Personnel costs are forecast at N18.3bn, a 19% increase            remains considerably exposed to potential changes in the
   over F04 and 39% of total expenditure for the year (F04:           Federal allocation formulae or any disruptions in the
   35%). Overhead expenditure is budgeted 18% lower                   statutory allocation flows (which would likely result in
   than F04, although based on the year to date performance           severe liquidity problems, as well as exert strain on
   these costs could be well below this level by year end.            existing infrastructure).
                                                                        Capital Expenditure           YTD       Budget     % of
                               YTD      Budge       % of                          (Nm)                June        F05      Total
              Nm               June     t F05       Total                                              F05
                                F05                                   By Category
Internally Generated Revenue   4,534    11,770       38.5             Economic Sector                 7,520     25,680     29.3
                                                                      Social Sector                   5,045     15,259     33.1
Total Federal Allocations      49,891   102,04       48.9
                                                                      Environmental Sector            6,334     22,292     28.4
VAT                            1,452       7         66.5             General Administration          2,663      5,856     45.5
                                         2,183                        Total Capex                    21,562     69,087     31.2
Total Income                   55,877   116,00       48.2             The immediate focus of Delta State, as in prior years, is to
                                                                      keep spending within budget while ensuring that economic
                                                                      development projects are executed within the contractual
Personnel                      8,648    18,288       47.3             periods in order to aid productive employment generation
Overheads                      5,888    20,547       28.7             activities.
Other Costs                    7,543     8,078       93.4
                                                                       Specifically, Delta State is focussing on the following key
Operating Surplus              33,798   69,087       48.9              projects in the short to medium term.
Capex                          21,562   69,087       31.2                •     Roads and bridges are now being provided to the
Net Surplus(Deficit)           12,236     0.0        n.a                      riverine areas of the State, despite the fact that the
                                                                              area encompasses extremely difficult terrain.
   Total income amounted to 48% of the full year budget at               • The national electric power grid is being extended to
   30 June 2005, while total expenditure accounted for a                      the area at a total cost of N4.8bn. The major
   lower 47%. Accordingly, Delta State is reflecting a                        industrial area of the State (the Sapele/Warri axis) is
   N33.8bn operating surplus, or 49% of the full year budget.                 also being provided with adequate power supply.
   Capital expenditure spending for the half year amounted to            • Delta State is investing in the maritime activities to
   only 31 % of the full year budget and is thus unlikely to be               create jobs and to leverage its fishing industry for
   met. Capex to total income amounted to 39%.                                additional revenue from fish, crab and shrimp
                                                                              exports. In this regard, the State is empowering
   Management accounts at the end of June 2005 indicate that                  riverine dwellers to acquire boats on a subsidised
   cash and cash equivalents amounted to N3.6bn, up from                      basis.
   N1.8bn in F04. Total debt was N3.2bn lower than F04 at                • Additional investment is being made on water
   N26bn, with the decline a function of a N2.4bn decrease in                 transport with Delta Water Ways Authority.
   external loans (to N15.2bn) and a NO.8bn decrease in                  • Modem shopping plazas have been erected in 3
   internal loans (to N7.3bn). Cash holdings covered short                    major towns, including the State Capital Asaba,
   term borrowings (internal debt) 0.49x. Investments with the                which was constructed at a total cost ofN1.9bn. In
   MOFI amounted to N20.7bn for the half year. According to                   addition, a specialist hospital at the medical college
   management, the N3.5bn bond issue was redeemed                             of Delta Sate University is being constructed at a
   subsequent to 30 June 2005. Net debt to total income                       cost of N7bn.
   amounted to approximately 20% for the half year, a                 .
   noticeable improvement over F04 (32%).                             • Investment in agriculture and agro-processing capacity
   Capital expenditure                                                     (in conjunction with the private sector) forms the basis
                                                                           of an economic development programme, which will
    initially focus on 3 key areas, namely Cassava crops,           explored, including development financial institutions and
    Palm Oil and Shrimp farming. Delta State has a 3 year           the private sector to assist with development.
    exit plan, which would result in the ventures being
    entirely privately owned and managed. It is noted that
    the State has acquired over 17,000 hectares of land
    from 16 communities, which will be further leased to
    commercial farmers.

Future prospects
                                                                    Expected loss
The local economy is extremely dependent on oil
production, with the State's share of statutory allocated           Expected loss is a function of loss severity and probability
revenue largely derived from oil revenue accrued to the             of default (default frequency). Owing to the nature of
Federal Government. In addition, given the fact that only           public assets, the likelihood of creditors accepting the
around 11 % of revenue is generated internally,                     restructuring or refinancing of public sector debt (in order
Delta State's dependence on its statutory allocation is of          to at least partially recover the investment) is
concern. As such, if oil production were disrupted,                 comparatively high. This, coupled with government's
especially for extended periods, this could have a negative         desire to maintain good standing in the financial markets,
impact on the State's underlying revenue base.                      significantly decreases the average loss severity of public
                                                                    sector debt, relative to the private sector. Furthermore,
In order to alleviate the aforementioned risks and diversify        State government debt issues often include additional
its reliance on oil revenue, the State Government is                security to bondholders in the form of the right to first
endeavouring to develop and strengthen internally                   allocation of the State's federally allocated revenue.
generated revenue sources in order to make it more                  Accordingly, the ultimate expected loss of public sector
autonomous. The economic base is being diversified                  creditors is significantly lower than in the private sector.
largely into agriculture and fisheries, to provide additional
internally generated income and employment.

The State is also developing various alternate ways of
enhancing its internal revenue base, including:
    • Legislative approval is currently pending in Delta
        State's House of Assembly, which if successful
        would enable the State to collect rates from
        organisations that operate businesses in Delta
        State, but are not resident in the State.
    • The implementation of the Delta Internal Revenue
        Card Scheme (a project to bring many individuals
        and small business enterprises in the informal
        sector into the tax net) is now being implemented
        and is expected to generate significant additional

The State's IT infrastructure was recently upgraded, which
has served to enhance revenue collection, the budgeting
process and capital project implementation.

Notwithstanding the progress made by Delta State to date,
the development challenges facing it are significant. While
funds from the federation account continue to grow
rapidly, these remain inadequate in order to address key
infrastructural projects. As such, alternative funding
sources apart from increasing the revenue base need to be

                                                     Delta State 7
                                               (Naira in millions except as noted)
Year End: 31 December
               Income Statement                       2000             2001           2002          2003          2004
 Income tax                                             2,764.1            4,465.7       5,147.6       6,364.8       8,114.0
 Other internally generated revenue                       705.3            2,234.5         233.0         846.7       1,039.0
 Interest and investment income                           281.0              251.0         236.2         711.7           69.7
 Total internally generated revenue                     3,750.4            6,951.3       5,616.8       7,923.2       9,222.6
 Statutory allocation                                   6,633.7            6,594.5       9,026.4      10,951.9      16,495.7
 Value added tax                                          960.8            1,605.7       1,852.7       2,311.0       2,465.6
 Derivation income                                     18,714.6           26,896.1      29,307.1      42,511.0      56,233.6
 Other federal income                                   2,570.0              509.8       1,021.0            0.0      2,587.1
 Total income                                          32,629.6           42,557.3      46,824.0      63,697.1      87,004.6
 Recurrent expenditure                               (13,174.0)        (21,430.4 )    (24,194.3)    (29,060.2)    (42,945.3)
 Appropriations                                         (313.3)            (319.8)       (520.8)       (631.4)       (793.1)
 Interest expense                                       (272.2)            (305.7)       (127.9)         (16.4)        (91.6)
  Operating surplus (deficit)                          18,870.1           20,501.3      21,981.0      33,989.0      43,174.6
  Capital expenditure                               (16,521.3)          (36,485.9)    (20,647.9)    (27,607.5)    (40,967.4)
 Net surplus (deficit)                                  2,348.8         (15,984.6)       1,333.0       6,381.6       2,207.2

 Capital Receipts                                      2,105.1          14,182.0        (416.7)       1,638.5      (1,605.3)

 Balance Sheet
 Funds, reserves and accumulated surplus              20,277.2           38,359.4       3,158.6       3,264.6      5,471.8
 Long term interest bearing liabilities                    0.0            3,500.0      15,274.7      20,669.4     21,107.9
 Short term interest bearing liabilities                 940.6            4,306.9       2,854.4       3,555.6       8,134.6
 Total interest bearing liabilities                      940.6            7,806.9      18,129.1      24,225.0     29,242.5
 Non interest bearing liabilities                        548.3              603.5       8,999.4           0.0           0.0
 Total liabilities                                    21,766.1           46,769.9      30,287.1      27,489.7     34,714.4

 Fixed assets                                         11,999.5           28,504.2      18,129.1       7,559.6     14,176.9
 Investments                                             614.8            8,192.3       7,953.4      15,590.4     18,760.6
 Cash and cash equivalents                             4,859.7            2,948.9       3,829.6       4,200.4       1,807.3
 Other current assets                                  4,292.1            7,124.5         375.0         139.3         (30.4)
 Total assets                                         21,766.1           46,769.9      30,287.1      27,489.7      34,714.4

 Key ratios
 Population growth                                           2.8                2.8           2.9           2.2          2.8

 Credit Protection Measures
 Total debt: total income                                  2.9                 18.3          38.7          38.0        33.6
 Net debt: total income Capex :                         (12.0)                 11.4          30.5          31.4        31.5
 total income                                             50.6                 85.7          44.1          43.3        47.1

 Total revenue growth                                    366.4                 30.4         10.0         36.0          36.6
 IGR growth                                               55.1                 85.3       (19.2)         41.1          16.4
 Total expenditure growth (including capex)              292.6                 93.3       (22.3)         26.0          47.9
 Personnel cost growth                                   138.8                 47.1         21.8         13.8           7.7
 Capex growth                                            627.9                120.8       (43.4)         33.7          48.4
 IGR : Total revenue                                      11.5                 16.3         12.0         12.4          10.6
 Non discretionary expenditure: Total expenditure         45.4                 37.7         54.6         51.8          51.7
  Non discretionary expnditure: IGR                      366.9                317.3       442.3         374.9         475.2
 Personnel cost: Total expenditure                        51.0                 46.8         50.7         48.2          35.2
 Interest charge: Total expenditure                        2.0                  1.4         n.a.          0.1           0.2

 Total liabilities : Total income                          4.6                 19.8          57.9        38.0          33.6
 Total income: Total debt                                 34.7                  5.5           2.6         2.6           3.0
 Operating surplus: Total debt                            20.1                  2.6           1.2         1.4           1.5
 IGR : Short term liabilities                              4.0                  1.6           2.0         2.2           1.1
 Cash: Short term libilities                               5.2                  0.7           1.3         1.2           0.2
 Days cash on hand                                       128.9                 48.8          56.3        51.6          15.1
  Cash: Interest charge                                   17.9                  9.6          29.9       255.9          19.7

GCR                     GLOBAL CREDIT RATING CO.                                               RATING DEFINITIONS
                        Local Expertise * Global Presence
Long Term Debt Rating Scale
Investment Grade                                                          A1-        High certainty of timely payment. Liquidity
AAA      Highest credit quality. The risk factors are                                factors are strong and supported by good
         negligible, being only slightly more than for risk
         free government bonds.                                                      fundamental protection factors. Risk factors are
                                                                                     very small.
AA+      Very high credit quality. Protection
AA       factors are very strong. Adverse changes
AA-      in business, economic or financial conditions                    Good Grade
         would increase investment risk although not                      A2       Good certainty of timely payment. Liquidity
         significantly.                                                            factors and company fundamentals are sound.
                                                                                   Although ongoing funding needs may enlarge
A+       High credit quality. Protection factors                                   total financing requirements, access to capital
A        are good. However, risk factors are more                                  markets is good. Risk factors are small.
         variable and greater in Aperiods of economic
         stress.                                                          Satisfactory Grade
BBB+     Adequate protection factors and                                  A3       Satisfactory liquidity and other protection
BBB      considered sufficient for prudent                                         factors qualify issues as to investment grade.
BBB      investment. However, there is considerable                                However, risk factors are larger and subject to
         variability in risk during                                                more variation.
         economic cycles.                                                 Non-Investment Grade
                                                                          B        Speculative investment characteristics. Liquidity
Non-investment grade                                                               is not sufficient to insure against disruption in
BB+     Below investment grade but capacity for BB                                 debt service. Operating factors and market
        timely repayment exists. Present or
        prospective                                                                access may be subject to a high degree of
BB      financial protection factors fluctuate according                           variation.
        to industry conditions or company fortunes.                       Default
        Overall quality may move up or down                               C        Issuer failed to meet scheduled principal or
        frequently within this category.                                           interest payments.
B+      Below investment grade and possessing
B       risk that obligations will not be met                             Claims Paying Ability Ranting Scale
B       when due. Financial          protection factors                   AAA Highest claims paying ability. The risk factors
        will fluctuate widely according to economic                               are negligible.
        cycles, industry conditions and/or company                        AA+     Very high claims paying ability. Protection
        fortunes.                                                         AA      factors are strong. Risk is modest, but may vary
CCC     Well below investment grade securities.                           AA-     slightly over time due to economic and/or
        Considerable uncertainty exists as to timely                              underwriting conditions.
        payment of principal or interest. Protection                      A+      High claims paying ability. Protection factors
        factors are narrow and risk can be substantial                    A       are above average although there is an
        with        unfavourable        economic/industry                 A-      expectation of variability in risk over time due to
        conditions, and/or with unfavourable company                              economic and/or underwriting conditions.
        developments.                                                     BBB+ Adequate claims paying ability. Protection
DD      Defaulted debt obligations. Issuer failed to meet                 BBB     factors are adequate although there is
        scheduled principal and/or Interest payments.                     BBB- considerable variability in risk over time due to
Short Term Debt Rating Scale                                                      economic and/or underwriting conditions.
High Grade                                                                BB+     Moderate claims paying ability. The ability of
A1+     Highest certainty of timely payment. Short-term                   BB      these organisations to discharge obligations is
        liquidity, including internal operating factors                   BB-     considered moderate and thereby not well
        and/or access to alternative sources of funds, is                         safeguarded in the event of adverse changes in
        outstanding, and safety is just below that of risk-                       economic and/or underwriting conditions.
        free treasury bills.                                              B+      Possessing substantial risk that policyholder and
AI      Very high certainty oftimely payment. Liquidity                   B       contractholder obligations will not be paid when
        factors are excellent and supported by good                       B-      due. Judged to be speculative to a high degree.
        fundamental protection factors. Risk factors are                  CCC     Company has been, or is likely to be, placed
        minor.                                                                    under an order of the court.

                                             GLOBAL CREDIT RATING CO.
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