presentation to public enterprises portfolio committee 8 march 2000 transnetlimited
TRANSCRIPT
PRESENTATIONTO
PUBLIC ENTERPRISESPORTFOLIO COMMITTEE
8 MARCH 2000
TRANSNETTRANSNETLIMITEDLIMITED
TRANSNET PENSION FUND
TRANSNET DEBT RESTRUCTURING PLAN
TRANSNET NET BORROWINGS
199419951996199719981999
Total in R’bn
22,61921,46722,62422,65123,84627,185
Pension Fund andMedical Aidas % of total
54%56%52%52%50%43%
43% of our net borrowings is the Pension Fund T11 Bond and Medical Aid Provision. Our focus is on
solving these two structural problems
HISTORY
PROCESS - AGREEMENTS
WAY FORWARD
TRANSNET PENSION FUNDRESTRUCTURING
PENSION FUNDHISTORY
1990 VALUATION
AssetsLiabilitiesShortfall
R5 billion R22 billion(R17 billion)
LIABILITIES - R22 BILLION
Statutory 2% =Social Liabilities 6,5% =
R11,835 billion R10,394 billion(R22,229 billion)
T11 BOND WAS R10,394 BILLION
31 MARCH 1990SOCIAL LIABILITY 6,5%
R10,394 BILLION
Increases already granted =Future Increases - Existing Pensioners =Future Increases - Members =TOTAL
R2,137 billion*
R4,635 billion*
R3,621 billionR10,394 billion
T11 BOND
R10,394 billion 20 years to Year 2010 16,5% fixed coupon
TRANSNETPENSION FUND DEBENTURES (R’MILLION)
ProvisionSupplementary
Benefits
ProvisionNon-
Pension Fundmembers
Capitaldiscount onsettlement
T011Debentures
Discount rate/Interest rate 12% 12% 16,50%
90/9101/04/90Provision created at company
formation31/03/91Partial settlement at discount
10 3944 462
5370 900 3 562
5 932 537 900 3 56291/9201/10/92Partial settlement at discount 5 932 0 1 191 4 741
0 537 2 091 8 30392/9331/03/93Settlement 537 0 537
0 2 091 8 84094/9501/04/94Repayment – V&A 249
8 59195/9601/08/95Repayment – Admin buildings 120
8 471
FUNDING LEVEL
LIABILITIES Transnet Active Members Transnet Pensioners SATS PensionersTOTAL LiabilitiesASSETS
Equities Fixed interest and cash T11 Property Loans to unlisted companies Foreign Equity investments Accrued Investment Income Net current assetsTOTAL AssetsDEFICIT
MARCH 1990
(R’bn)
22,0
MARCH 1998
(R’bn)
13,97,4
14,435,7
5,0
5,0R17 billion
19,03,37,32,30,10,40,40,1
32,9R3 billion
CHANGES IMPLEMENTED
SINCE 1997
REDUCTION TO THE PENSION FUND DEFICITR17 BILLION - 1990 TO R3 BILLION - 1998
DECISIONS POSITIVE EFFECT NEGATIVE EFFECT EXECUTIVE’S ACTIONSON THE PENSION ON THE COMPANY TO REVERSE (CORRECT)FUND SOME OF THE DECISIONS
1. 1990 - Creation of the T11 The Pension Fund had Transnet had a liabilityBond - R8,4 billion for an asset of R8,4 billion. in its balance sheet of20 years Funding level dramatic R8bn for 20 years. Debt/
increase Equity Ratio goes to 72%
2. 1990 - Coupon Rate of The Pension Fund receives Transnet has a fixed16,5% was fixed on the interest from the company commitment of R1,4bnT11 Bond of R1,4 bn per annum. Interest payment/year.
Accumulated to current Accumulated interest payment = R8 billion to current is R8bn out of its
income statement
3. 1993 - Additional contributions R500 m/year additional Transnet paid out of its cash Additional contributions by the company of 9% contributions received from flows R500m to the Pension reduced by 4,5% in
the company Fund. Accumulated additional 1997 to R250m/year Accumulated to current contribution to current= R3,0 billion = R3,0 billion
4. 1994 - V&A Waterfront property The V&A Waterfront Asset Valuable asset could have Company bought backsold by the Company to the is valued at ±R2bn in the been in the Transnet 26% controlling stake Pension Fund for R249 million Pension Fund Asset balance sheet effective 31 March 1999
5. 1995 - 3 valuable Transnet The Pension Fund tied the Transnet committed to lease Negotiating to buy back buildings sold to TPF for company to 20-25 year payments for full occupancy the buildingsR120 million lease payments with for 20-25 years and
unfair conditions maintenance
} Investment Strategy being} discussed with the } Government Actuary
PHASE 1SOLUTION
EFFECT OF THE CHANGE IN THE PENSION INCREASE POLICY
Investment earningsPension Increases
Valued at
AFTERTHE
CHANGE
12,0%5,0%
7,0%
BEFORE THE
CHANGE
12,0%7,5%
4,5%
ASSETS OF THE FUND - 31/03/99
Shares, Investment Policy & Foreign EquityFixed-interest StockTransnet T011 Stock (nominal value)PropertyLoans to Unlisted CompaniesDeposits and Promissory NotesCash at BankAccrued Investment IncomeDebtors
Creditors
TOTAL
MarketValue (R’m)
16792,21258,77327,02743,0
157,21699,1
224,5362,8294,7
30859,2(244,8)
30 614,4
ActuarialValue
R’m
16624,21258,79070,82743,0
157,21699,1
224,5362,8294,7
32435,0(244,8)
32190,2
FUNDING LEVEL - 31/03/1999A. PENSION FUND
LIABILITIES
SATS PensionersTransnet PensionersTransnet Active
Total Liabilities
B. PENSION FUND ASSETS
EquitiesFixed Interest and CashTIIPropertyLoans to unlisted companiesForeign equity investmentsAccrued investment incomeNet current assets
Total Assets
SURPLUS/(DEFICIT)
Actuarial Valuation 31/3/98
R’bn14,4}
7,4}13,935,7
17,23,39,12,30,10,40,40,1
32,9
(R3,0 billion)
Actuarial Valuation31/03/99
R’bn11,9
6,913,332,1
16,21,39,12,70,20,40,42,0
32,2
R88 million
TRANSNET PENSION FUND
22.7
66.5 64.274.6
82.4 84.9 89.5 90.3 91.4100.3
0
20
40
60
80
100
120
31/0
3/90
31/0
3/91
31/0
3/92
31/0
3/93
31/0
3/94
31/0
3/95
31/0
3/96
31/0
3/97
31/0
3/98
31/0
3/99
FUNDING LEVEL (%)
PENSION FUND ACTUARIAL SHORTFALL
-6786 -8516 -10472-6494 -4621 -3236 -3042 88-4209 -3248
-10394
-20000-18000-16000-14000-12000-10000
-8000-6000-4000-2000
02000
(R'm
)
Column 2 -10394
Column 1 -6786 -8516 -10472 -6494 -4621 -4209 -3248 -3236 -3042 88
31/03/90 31/03/91 31/03/92 31/03/93 31/03/94 31/03/95 31/03/96 31/03/97 31/03/98 31/03/99
PHASE 1
CONCLUDED PENSION FUND FULLY FUNDED
GOVERNMENT AND PARLIAMENTARY SUPPORT IS CRITICAL TO THE
SUCCESS OF THISNEXT PHASE OF THE SOLUTION
THANK YOU
TRANSNETTRANSNETLIMITEDLIMITED