Development Bank signs R829m deal with Umgeni Water

The Development Bank of Southern Africa has signed an R829-million deal with Umngeni Water that will see 800 000 households benefiting from improved water access and sanitation facilities.

Umgeni Water is the largest catchment-based water utility in Southern Africa, providing over 300-million cubic meters of water annually to approximately six-million people in KwaZulu-Natal.

The DBSA said in a statement on Monday that the purpose of the loan is to refinance certain of the utility’s short-term debt so as to align its debt maturity profile with the surplus cash generated by operations in the future years after taking operational expenditure and interest costs into account.

The loan application is primarily to “kick-start” a process of balance sheet restructuring, whereby short-term maturity is more closely aligned to future surplus cash flows which have been determined based on current financial and water demand assumptions.

The DBSA’s loan period of 15 years and the resulting asset and liability matching achieved through this loan will ensure greater long-term solvency and sustainability of the business.

DBSA Chairman Jay Naidoo says the programme will not only contribute towards lowering the cost of bulk water, but will also make a significant contribution towards addressing the bulk water infrastructure backlogs in Umgeni’s supply area.

It will also enhance the social and economic development of the population through economic regeneration, which will ultimately increase the demand for bulk water and the sustainability of the Umgeni Water Board, the DBSA said.

The handing over of the Rural Reticulation Schemes to the local authorities, which is currently in progress, will also improve Umgeni’s financial position and business focus.

The loan will furthermore enable the DBSA to monitor and add value to the restructuring process and present the DBSA with the opportunity to cement our

existing partnership with Umgeni.

The purpose of this loan is thus twofold—to improve the overall financial position of Umgeni Water in order to re-engineer its balance sheet, guaranteeing an appropriate asset and liability match now and in the future as well as strengthening the basis for future economic development.

The DBSA is also expected to extend its capacity building and technical assistance facilities to Umgeni through grant funding, it said. - I-Net Bridge

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