capital funding 14 december 2009 sustainability

Capital Funding 14 December 2009

Sustainability

Robert BennettCFO

Outline

• 10 year sustainability profile

• Importance of setting precedents

• ESF Funding Strategy - Capital Projects

Age and Floor Area of ESF Schools

Age and Floor Area of ESF Schools

SustainabilityR&M expenditures from 1998 - 2008

0

50

100

150

200

250

School Year

HK

$ (m

ln)

Non-capitalised 61.43 53.68 55.95 64.43 41.27 45.26 33.30 44.61 42.33 63.68 107.77

Capitalised 100.71 20.68 36.63 48.60 109.14 164.28 21.81 14.23 1.99 13.93 22.47

Total 162.14 74.36 92.58 113.03 150.41 209.54 55.11 58.84 44.31 77.61 130.24

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

SC/SJS $60M

SIS $26M

WIS $52M

SIS $75M

Gov’t Funding Status

• Current Projects (First 10 years)– KJS $420M

• ESF could fund, but Gov’t funding imperative• Establish the precedent

– KGV $240M• ESF could fund – Gov’t funding level to be tested

– IS $600-800++M• ESF cannot fund without strain on resources

ESF Funding - Balanced Approach

• Current Funding Options– Cash available for Capital Projects

• $150M• Free cash flow ~ $60M per year

– Capital Levy (Stakeholder Contribution)• @$25k per student = $300M

– Refundable – Years 1 & 7 (6 year collection plan)

– Secured Borrowings• $300M approved by Fin Com against Property

ESF must demonstrate the ability to fund a share of future sustainability

ESF Funding

• Capital Levy• @$25k per student, $10k for 3rd child onward• Generate Cash of $300M over 6 years• Commences Aug 2011 for Years 1 & 7 only• Each new year 1 & Year 7 entrant pays in

subsequent years• Current enrolled year 6 & above exempt• Applies to staff with some payment support• New students at any level pay after Aug 2011• Fully Refundable (subject to no fees outstanding)• Not applicable to PIS or Kindergartens

Funding Components

Government Capital Grants

Refundable Capital Levy

ESF Cash Flow & Commercial Borrowings

Refundable Levy CollectionCurrent

ESF Student Status

Will Pay Levy when

entering

New ESF Student Status

2009/10 Year 7 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18Year 1 2015/16 Year 1 Levy Levy Levy Levy Levy Levy LevyYear 2 2014/15 Year 2 Levy Held Levy Held Levy Held Levy Held Levy Held Levy HeldYear 3 2013/14 Year 3 Levy Held Levy Held Levy Held Levy HeldYear 4 2012/13 Year 4 Levy Held Levy Held Levy HeldYear 5 2011/12 Year 5 Levy Held Levy HeldYear 6 No Levy Year 6 Levy HeldYear 7 No Levy Year 7 Levy Levy Levy Levy Levy Levy Levy HeldYear 8 No Levy Year 8 Levy Held Levy Held Levy Held Levy Held Levy Held Levy HeldYear 9 No Levy Year 9 Levy Held Levy Held Levy Held Levy Held Levy HeldYear 10 No Levy Year 10 Levy Held Levy Held Levy Held Levy HeldYear 11 No Levy Year 11 Levy Held Levy Held Levy HeldYear 12 No Levy Year 12 Levy Held Levy HeldYear 13 No Levy Year 13 Levy Held

Levy = New Students entering ESF pay LevyLevy Held = Students paid levy in a prior year

No Levy = Students will not need to pay the Levy

Refundable Levy AccumulationHK$ Mil

ESFEnrolment 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Year 1 1020 24.7MYear 2 1020 24.7MYear 3 1020 24.7MYear 4 1020 24.7MYear 5 1020 24.7MYear 6 1020 24.7M

6120

Year 7 1031 25.0MYear 8 1016 24.6MYear 9 1008 24.4MYear 10 1019 24.7MYear 11 942 22.8MYear 12 872 21.1MYear 13 765 18.6M

6653

12773 49.7M 49.3M 49.1M 49.4M 47.5M 45.8M 18.6M

2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/1849.7M 99.0M 148.1M 197.5M 245.0M 290.8M 309.4MTotal Levy Held

Questions?