67411 Financing Urban Water Services In Kenya Utility Shadow Credit Ratings A publication of the Water Services Regulatory Board in collaboration with the Water and Sanitation Program FINANCING URBAN WATER SERVICES IN KENYA U T I L I T Y S H A D OW C R E D I T R AT I N G S A publication of the Water Services Regulatory Board in collaboration with the Water and Sanitation Program ACKNOWLEDGMENTS This report was prepared jointly by a team of WASREB and WSP staff led by Angela Kimani from WASREB, and Rajesh Advani and Jemima Sy from WSP. Task Team: Angela Kimani, Richard Cheruiyot, George Wakaba, Rajesh Advani, Jemima Sy, Johan Kruger, Cherise Paxinos, Benjamin Darche, David Gachui, Joshua Kibet, Anne Gitau, Collins Igunza, and Titus Wahungu. Water and Sanitation Program (WSP) reports are published to communicate the results of WSP’s work to the development community. Some sources cited may be informal documents that are not readily available. The findings, interpretations, and conclusions expressed herein are entirely those of the author and should not be attributed to the World Bank or its affiliated organizations, or to members of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank Group concerning the legal status of any territory or the endorsement or acceptance of such boundaries. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to wsp@worldbank.org. WSP encourages the dissemination of its work and will normally grant permission promptly. For more information, please visit www.wsp.org. ©WASREB/WSP November 2011 Contents Foreword ..................................................................................................................................................... 1 Executive Summary ..................................................................................................................................... 2 Acronyms and Abbreviations........................................................................................................................ 4 1. Introduction .....................................................................................................................................5 1.1 Overview of Water Sector Financing................................................................................................. 5 1.2 Purpose of the Credit Assessment .................................................................................................... 6 2. Credit Ratings in General ..................................................................................................................8 2.1 International Versus Domestic Ratings ............................................................................................ 8 2.2 The Benefits of Credit Ratings .......................................................................................................... 8 3. WaterCAT Credit Assessment and Shadow Rating Methodology......................................................10 3.1 Criteria Used for WaterCAT Credit Analysis and Shadow Rating ..................................................... 11 4. Results of WaterCAT Credit Analysis and Shadow Rating ................................................................13 4.1 General Results ............................................................................................................................... 13 4.2 Shadow Credit Rating Mean Scores ................................................................................................ 15 4.3 Category Results ............................................................................................................................ 15 4.4 Internal Criteria ............................................................................................................................... 16 4.5 External Criteria .............................................................................................................................. 17 5. Analysis of Key Financial Ratios and Operating Performance Indicators ..........................................18 5.1 Current Ratio and Annual Surplus................................................................................................... 18 5.2. Operating Cost Coverage Ratio ....................................................................................................... 20 5.3 Debt Service Coverage Ratio .......................................................................................................... 20 5.4 Net Debtor Days.............................................................................................................................. 21 5.5 Billing Efficiency .............................................................................................................................. 22 5.6 Collection Efficiency ........................................................................................................................ 22 5.7 Metering Ratio ............................................................................................................................... 22 5.8 Impact of WSP Size on Its Rating .................................................................................................... 23 5.9 Analysis of Key Variables Affecting WSP Credit Rating.................................................................... 23 6. Conclusions ....................................................................................................................................24 7. Way Forward ..................................................................................................................................25 Annex 1 - WSP Categorized Credit Rating Scores .................................................................................28 Annex 2 - WaterCAT Model Statistical Analysis ...................................................................................29 Annex 3 - Summary Financials for A, BBB, and BB Rated WSPs............................................................31 Foreword FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 The publication of the first report on shadow credit guidelines to enhance, among others, transparency rating is a giant step in the water services subsector and accountability in the operations of the water in Kenya. It comes at a critical time when there is services sector. increased demand for water services which largely outstrips the service provision capacity of water Though the public sector is charged with the utilities in the country. responsibility of providing public services, the numerous competing demands from the different The rapidly growing population has exerted sectors of the economy make it difficult for available pressure on the aging water and sanitation fiscal resources to match investments required infrastructure, some dating back as far as before in water services infrastructure. Further, the Independence. Though significant funding has come into the sector, it has proved insufficient Constitution recognizes the human right to water and sanitation which impacts the development, 1 to meet both the rehabilitation and expansion organization, and management of water services requirements of water services infrastructure. provision in the country. This makes partnership Natural population growth coupled with increased with the private sector critical in plugging the urbanization has exerted more pressure on urban finance gap for infrastructure development. The water service providers (WSPs) which have to cope WSPs operating at above full cost coverage coupled with increased densities and the rapid expansion with an effective regulatory environment provide and demand for services in towns. an opportunity for private sector financing. This is also enhanced by the bankability of the subsector. In pursuit of its strategic objective of promoting the commercial sustainability of Water Service Boards This shadow credit rating report provides the (WSBs) and WSPs, the Water Services Regulatory private sector with an insight of the subsector and Board (WASREB) has put in place an enabling the opportunities available. environment by issuing licenses to WSBs based on specific technical and financial criteria and I wish to acknowledge the various parties who approving Service Provision Agreements between made this exercise a success. I thank the Water the WSBs and WSPs. Further, the WASREB has and Sanitation Program for its partnership with approved regular tariffs for both urban and rural the WASREB in the exercise, the WSPs for their WSPs. While these providers have been able to cooperation in providing information, WASREB’s realize full operation and maintenance (O&M) cost staff for quality control and coordination of the coverage, with some reporting over 100 percent exercise, and all the teams involved in the drafting O&M coverage, they are unable to exploit their full and editing of this report. potential since they cannot efficiently supplement the WSBs in infrastructure development. Further financing for infrastructural development will increasingly depend on the WSPs’ ability to pay back the loans. This ability is enhanced by strong cash flows and good quality management. These two requirements are underpinned by a strong Eng. Robert Gakubia governance structure. This is the reason behind Chief Executive Officer, WASREB the WASREB putting in place corporate governance October, 2011 Executive Summary FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 The Water Services Regulatory Board (WASREB), investments or those that may not be commercially with support from the Water and Sanitation viable, such as water resource development, Program, is exploring the potential for urban water storage, treatment, and expansion into areas services providers (WSPs) to access medium-term where poor consumers cannot afford cost recovery finance from commercial lenders. The debt will tariffs. The decision to borrow, however, rests be used to finance infrastructure investment to with the management of the creditworthy WSPs. improve access to water services by Kenyans. This Management needs to take up the challenge, paper presents the results of a credit assessment prepare projects for financing, and seek the and shadow rating exercise for 43 urban WSPs.1 necessary support from their boards of directors. The objective of the credit assessment is to Some recommendations to move towards closing 2 provide borrowers and lenders with an overview of the creditworthiness of WSPs to support access financially viable transactions are presented here. to local currency finance from the domestic WSPs must take the lead in identifying and financial market. It gives an overview of the credit developing viable projects for financing. capacity of water utilities, provides utilities with a Ideal projects for commercial finance are those diagnostic to identify areas for improvement, and that will generate sufficient revenue to repay the exposes financial institutions to potential lending debt used to finance them. Such projects are likely opportunities in the water sector. Commercial to be tertiary investments in network densification finance in water is seen as a supplementary and expansion, metering, measures to reduce resource to public finance, which remains the nonrevenue water (NRW), and noncapital intensive predominant source of investment funds in the source augmentation and treatment. sector. Investments should be sized to fit the debt Using domestic ratings that benchmark WSPs capacity of WSPs. against a AAA rating for the Government of When using commercial debt to finance Kenya, the results show that 13 WSPs rated A or infrastructure, capital investment plans should BBB are creditworthy and that another 16 rated fit the debt absorption capacity of the borrower. BB are potentially creditworthy. Relatively small Scaling back or phasing capital investments to improvements in some financial and operating match the financial resource envelope will have to performance indicators should enable the top four be considered by WSPs that are borrowing from BB rated WSPs to access debt from the domestic the market. financial market. The results also show that 14 WSPs are in the ‘No Rating’ category. These WSPs Commercial debt should be blended with financial have difficulty remaining solvent and require support from the public sector. substantial reforms before financial markets will Owing to the relatively recent tariff reform, the advance them loan finance. The assessment rates ability of WSPs to raise all the financial resources WSPs in areas that are particular to a utility, such needed for investment is very limited. Public as financial and credit management, management finance and grants from development partners quality and capacity, and operational performance, can be leveraged to attract investment from the as well as external factors such as economic base, domestic financial market into the water sector. susceptibility to external shocks, and changes in sector policy. Tariff revisions and indexation may be required to support access to commercial debt. By financing parts of the required capital Some tariff hikes might be necessary for WSPs to expenditure on the balance sheet of WSPs with generate enough cash to access market finance. commercial loans, public funds (that is, budget Given the current high inflation environment allocations, grants, and concessional loans from in Kenya, it is likely that some form of annual development partners) can be freed up for larger indexation in tariffs will also be required to ensure that projected surpluses that secure the loans are not eroded by inflation. 1 Data extracted from the assessment have been used for the tables and figures presented in this report. When ascertaining the financial viability of receive priority after essential operating costs have projects and the debt capacity of potential been met should be used to secure debt. borrowers, lenders should couple past FINANCING URBAN WATER SERVICES IN KENYA performance with projected revenues from new The results of the credit assessment present a UTILITY SHADOW CREDIT RATINGS 2011 projects. case for creditworthy WSPs to prepare projects Tariff reforms in the water sector were initiated for financing and for the domestic financial sector in 2009 and were only formalized in 2010. Hence, to consider lending to select water utilities. In there has not been sufficient time for WSPs to addition to improving access to finance, the results record significant surpluses on their balance of the credit assessment provide an opportunity sheets. Lenders should therefore concentrate their for WSPs to identify areas for improvement and appraisals on the ability of management to operate to exchange good practices between utilities. a utility and implement the proposed projects. Positive steps to address performance issues that A security structure that relies on the cash flow hinder access to credit could see significantly more from water sales to provide the lender with the investment in water by the private sector, resulting necessary comfort that debt service payments will in improved access to services in urban areas. 3 Acronyms and Abbreviations FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 AFS Audited Financial Statements CPI Consumer Price Inflation DSCR Debt Service Coverage Ratio GCR Global Credit Ratings GDP Gross domestic product KES Kenyan Shilling MWI Ministry of Water and Irrigation 4 NRW Nonrevenue water NWCPC National Water Conservation Pipeline Company O&M Operation and maintenance OCCR Operating Cost Coverage Ratio S&P Standard and Poor’s SPA Service Provision Agreement VAT Value Added Tax WASREB Water Services Regulatory Board WaterCAT Water Credit Assessment Tool WRMA Water Resources Management Authority WSB Water Service Board WSP Water service provider 1. Introduction FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 1.1. Overview of Water Sector progressive shift towards implementing a full cost recovery tariff policy in the medium term. ‘Full cost Financing recovery’ is defined as the total cost of providing Today, some 8.1 million Kenyans are served by services, which includes operating, capital, 62 urban water services providers (WSPs). This administrative, and debt service costs. WSPs are represents 40 percent of the urban population categorized by the WASREB into three categories: within WSP service areas and 21 percent of category 1 utilities with tariffs that cover operating the total population2. The rate of urban water and maintenance (O&M) costs, regulatory levies, coverage has been growing at a rate of 5 percent and administrative fees paid to the WSB; category over the last four years; the urban population is 2 utilities with tariffs that cover debt service projected to grow from the current 11.5 million to 19 million by 2020,3 that is, at about 7 percent costs in addition to costs covered by category 1 utilities; and category 3 utilities with tariffs that 5 annually. Investments in water supply will thus cover capital investment costs in addition to costs need to rise more rapidly to expand services covered by category 2 utilities. to the growing urban population if Kenya is to achieve its national target for access to safe water At present, capital investment in water is almost of 80 percent in urban areas and 75 percent in entirely financed from public funds. Infrastructure rural areas by 2016.4 investment projects are executed by the WSBs and the National Water Conservation Pipeline Water supply and sewerage services are delivered Company (NWCPC), a state corporation acting as through water services providers (WSPs) acting the implementing agency of the Ministry of Water as agents of eight regional Water Services Boards and Irrigation (MWI) funded by the government (WSBs). WSBs own and develop infrastructure development budget, which is engaged in used in the production and delivery of water development of water resources through services, and contract WSPs to operate the systems construction of dams and drilling of boreholes. in demarcated service areas. The Water Services The annual sector development budget of KES 32 Regulatory Board (WASREB), the independent billion has contributed significantly towards new industry regulator, licenses WSBs who in turn investment and the rehabilitation of dilapidated engage WSPs as agents through service Provision infrastructure. KES 12 billion comes from the Agreements (SPAs). The WASREB oversees the government budget and KES 20 billion from implementation of policies and strategies relating appropriations in aid, either in the form of soft to the provision of water and sewerage services; loans guaranteed by the Treasury or grants5. approves tariff rates; sets rules; and monitors the performance of WSBs and WSPs. Although revenues in the sector are generated at the WSP level, WSPs currently play a very small In a move towards improving the financial role in infrastructure investment. Investments sustainability of WSPs and WSBs, the WASREB are financed by WSBs through loans and grants announced an Extraordinary Tariff Adjustment from the Treasury, some of which originate from in January 2009 that resulted in tariff increases development partners and are on-lent or on-granted levied by WSPs of between 70 percent and 100 to the WSBs. The WSBs recover their operating percent. This move was followed by a formal tariff and debt service costs through administrative fees adjustment process where WSPs and WSBs applied charged to the WSPs. Any surplus revenues - after for regular tariffs to support their cost base in a financial obligations to the WSBs, regulatory levies, and O&M costs have been met - are earmarked for investment in system rehabilitation and expansion. 2 Water Services Regulatory Board coverage data for 62 urban utilities 2009-10 (8.1 million people with access in These surpluses can most effectively be utilized by population area of 20.5 million); as cited in IMPACT Report, borrowing to raise investment capital and repaying Issue no. 4 (2011). the loans through surplus revenues. 3 Source: Kenya Economic Update Edition 4, June 2011, the World Bank Group. 4 Source: Government of Kenya Sector Investment Plan; Ministry of Water and Irrigation 2009. 5 Source: MWI presentation on sector finances, 2010. Reforms in the water sector facilitate access to extensions to unserved areas of Nairobi are private sector finance by providing financially smaller investments that can be implemented viable WSPs with the necessary autonomy to by the WSP, which has a comprehensive FINANCING URBAN WATER SERVICES IN KENYA raise debt. Although the 2002 Water Act, which understanding of its network and the technical UTILITY SHADOW CREDIT RATINGS 2011 is the basis of reforms, is currently under review skills to implement such projects. to harmonize it with the new 2010 Constitution of Kenya, preliminary deliberations of the review As revenues are generated at the WSP level, committee suggest that provisions relating to Kenyan financiers have indicated that they the commercialization of water services will be will lend to WSPs to capture cash flows from retained and that private sector participation consumers directly. Financial resources from in the delivery of water services will be further the private sector can provide supplementary encouraged. finance for water and therefore complement funding from the public sector and development The private sector, at present, plays a negligible role partners. The entry point for these funds should in financing water and sewerage infrastructure. Yet depend on what the lender is comfortable there is considerable liquidity within the financial with, that is, in the case of domestic banks, the 6 sector, and banks and pension funds are keen to expand their portfolios if creditworthy projects preferred entry point is the WSP, whereas the Treasury may prefer to lend to the WSBs. are presented for financing. The doubling of sector revenues from KES 5.9 billion in 2006/07 WSBs, as state corporations, require approval to KES 12.2 billion estimated in 2010/11 offers from the Treasury to borrow. WSPs, on the opportunities to leverage surplus revenues and other hand, are incorporated as limited liability raise capital for investment in infrastructure. companies and can therefore borrow with the approval of their boards of directors. There are a number of reasons why WSPs should consider undertaking investments themselves, There is no recourse to the Treasury for any even though WSBs are charged with developing loans taken by WSPs. Financiers will lend the majority of sector infrastructure: directly to WSPs based on an assessment of the risk-return profile of the investment/borrower. WSPs can leverage surplus revenues to undertake strategic investments such as As limited liability companies, WSPs are network densification, rehabilitation, metering, liable to pay corporate tax in the absence of and other programs that can rapidly improve any exemptions. Interest paid on loans and their revenue positions. Revenue generating depreciation charged on assets financed by investments can quite easily be financed with WSPs will reduce their tax liability. short- or medium-term commercial loans. These investments can be implemented relatively quickly by WSPs, which have good 1.2. Purpose of the Credit knowledge of their customers and distributions Assessment networks. The main purpose of this credit assessment and It will free up financial resources and allow shadow rating exercise is to provide borrowers WSBs to concentrate on undertaking major and lenders with an overview of WSPs’ investments in storage, treatment, and bulk creditworthiness, with the objective of determining transmission, for example. This will improve their ability to raise debt in the domestic financial the efficient allocation of public funds and market. It gives an overview of the credit capacity concessional loans by ensuring that low cost of the water utilities, provides utilities with a funds go into non-commercially viable long diagnostic to identify areas for improvement, and term investments and areas inhabited by the exposes financial institutions to potential lending poor who cannot afford cost recover tariffs. opportunities in the water sector. For example, the proposed water resource The credit assessment assigns a rating based on augmentation for Nairobi is expected to an appraisal of the likelihood that companies, in cost KES 900 billion, an investment which on this case WSPs, will default on a loan. The rating is account of its large size requires concessional established through a credit analysis methodology, finance and is being undertaken by Athi the Water Credit Assessment Tool (WaterCAT), Water Services Board. On the other hand, to identify, measure, and analyze the key quantitative and qualitative factors used by credit rating agencies to assess the creditworthiness of municipally-owned WSPs. The methodology is FINANCING URBAN WATER SERVICES IN KENYA explained in Section 3 and factors assessed and UTILITY SHADOW CREDIT RATINGS 2011 scores assigned to each WSP in Annex 1. In this assessment, a ‘shadow rating’ is assigned, denoting that it is primarily for diagnostics and sounding out or testing how financiers might evaluate a company’s credit standing. For the lender, the assessment can signal an opportunity for working with WSPs of sound credit. For potential borrowers, it can encourage creditworthy WSPs to finance capital investments off their own balance sheets. For less-than- creditworthy WSPs, it provides an opportunity to focus on areas to improve their rating. This information can improve WSP access to market 7 finance considering that little direct borrowing by WSPs is currently happening. The information on whether commercial financing can be viably used to support investments of selected creditworthy WSPs can also be used as an input to improve sector wide capital planning by directing limited concessional finance into non-commercially viable investments. 2. Credit Ratings in General FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 A credit rating is a formal opinion by an independent, Most emerging market economies, however, specialized agency, the credit rating agency, on the are internationally rated as being of lower credit long term ability, capacity, and willingness of the quality, that is, below investment grade (below borrower to repay commercial debt on a timely BBB). For example, Kenya is rated B+.7 basis. The process of assessment is part science and part art in the sense that historical data, which This gives rise to the concept of domestic is factual, can be used to predict trends into the ratings. Domestic ratings use a ‘within-country’ future, which are speculative. approach by benchmarking other institutions to the government of the country. In domestic ratings, the government receives an AAA rating 8 2.1. International Versus Domestic Ratings even though its international rating is below this. In this assessment, the Kenyan government has a domestic rating of AAA while the international All ratings reflect a loss probability (probability of rating is B+. In the country context, the sovereign defaulting on an obligation) against benchmark is largely regarded as risk-free and assigned a AAA investments that are regarded as risk-free. rating, as it can effectively print money to make a Corporates with the highest quality credit are debt service payment, albeit at the cost of higher awarded AAA (‘triple A’) ratings, and are generally inflation. This implies that domestically no other considered almost risk-free. A lower credit rating entity can have a higher rating than the sovereign indicates a higher probability that an entity will benchmark. Domestic ratings are normally default on a debt service payment. For example, indicated by a country suffix, such as BBB.za for AAA-rated corporates have historically had a an organization or debt instrument rated in the default rate of 0.11 percent every five years and Republic of South Africa. 0.66 percent every 10 years, whereas BB-rated corporates have had a default rate of 14.77 percent every five years and 26.61 percent every 10 years.6 2.2. The Benefits of Credit Entities (such as corporates and municipalities) and Ratings specific debt instruments issued by these entities can both be rated. The ratings often differ between There are a number of benefits to having a formal the two depending on the seniority and underlying credit rating: security that underpins a specific instrument. It provides an independent and objective Sovereign ratings on a global scale measure the evaluation of an institution’s or utility’s most robust economies as benchmarks, where creditworthiness to banks, financial institutions, defaults are regarded as highly improbable. and other lenders. Ratings of sovereigns are based on a number of macro-economic considerations such as export It has been proven, on the whole, to be an surplus, foreign reserves, and the general strength accurate predictor of the risk of default and of the economy. Examples of AAA rated economies the likely severity of a default. This, in turn, are Singapore, Germany, and New Zealand. helps banks or financial institutions to decide whether or not to lend to the entity concerned. 6 Source: Standard & Poor’s (S&P) Risk Solutions Credit Pro 6.2; Fundamentals of Corporate Credit Analysis, Ganguin 7 Source: Standard & Poor’s Global Credit Portal; August 5, and Bilardello. 2011. FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 Not all institutions or utilities are equally investors require for the Umgeni water bond creditworthy, so lenders and investors need a to compensate for the additional risk that way of assessing how risky their loan might be. Umgeni water will default on a debt service The scale of credit ratings allows a potential payment. lender or investor to compare different utilities or institutions with each other and assess their It can improve the negotiating position of the relative creditworthiness. utility or municipality with its lenders, especially with regard to finance costs. In developed It assists investors in pricing risk correctly. For markets where credit ratings are widely used, example, the Republic of South Africa’s four- a rating can often facilitate access to finance year domestic bond with a domestic credit rating of AAA currently has a 6.46 percent without the lender having to perform its own due diligence. 9 yield, whereas Umgeni Water with a domestic rating of AA has yield of 9.26 percent on its five- It allows the rated entity to focus on areas that year bonds. The 2.8 percent yield difference reduce its creditworthiness and launch actions represents the additional compensation to address these issues. 3. WaterCAT Credit Assessment and Shadow Rating Methodology FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 While a formal credit rating is an opinion by an WaterCAT ratings are based on the domestic rating accredited rating agency, a shadow rating is an scale that benchmarks the rated agencies against opinion of the likely rating that the organization an AAA domestic rating for the Government of would get were it to have a formal rating. Formal Kenya. Figure 1 illustrates the WaterCAT shadow credit ratings are not widely used in Kenya, even by credit rating process. companies listed on the Nairobi Stock Exchange. FIGURE 1: WaterCAT PROCESS 10 Shadow credit rating Assumptions Data capture Predictive financial Internal and external statements Input from statistical sources issue requiring attention Financial statements interviews Sustainable financial analysis Peer comparison Trend analysis WaterCAT gathers financial, operating, and formal credit ratings of seven African water management data from Audited Financial utilities carried out by Global Credit Ratings Statements (AFSs) and structured management (GCR) in December 2008 in Uganda, Burkina Faso, interviews, and combines this information with Senegal, Tunisia, and Kenya. The credit assessment socioeconomic data to assign scores against was commissioned by the Water and Sanitation internal and external criteria to determine a Program at the request of the African Water utility’s credit quality rating. Individual WaterCAT Association, and co-funded by the Private-Public scores can be compared to peer utilities to help Infrastructure Advisory Facility and the African identify common creditworthiness trends and Development Bank.8 issues. The WaterCAT methodology was developed and 8 Global Credit Ratings is an independent rating agency based in South Africa that specializes in emerging market credit refined by calibrating the scoring system against ratings. 3.1. Criteria Used for WaterCAT (NRW), water quality, maintenance quality and efficiency, and staff salaries as a percentage of Credit Analysis and Shadow operating expenditure. FINANCING URBAN WATER SERVICES IN KENYA Rating The external criteria comprise the balance (27 UTILITY SHADOW CREDIT RATINGS 2011 To arrive at a shadow credit rating, WSPs were scored against the WaterCAT criteria shown in Table percent) of the total WaterCAT creditworthiness 1. The criteria include internal and external factors score. External factors are beyond the control of that mirror key rating factors used by credit rating the management of a WSP but have a significant agencies for a formal water and sewer utility credit impact on its capacity to make debt service rating. For example, the formal rating assigned by payments and can be mitigated with strategic risk GCR to Nairobi City Water and Sewerage Company management. External criteria measure the political in 2008 is the same as that assigned by this shadow and socioeconomic environment in which a WSP credit assessment. functions that affects its ability to operate, generate revenue, and meet its financial obligations. The internal criteria accounts for 73 percent of the overall credit score of a utility. Internal criteria External criteria focus on the following aspects: comprise company-specific indicators that reflect the financial, operational, and management support from government, autonomy and accountability, external risks, and the economic 11 strength of WSPs and have been closely aligned opportunities/base. ‘Support from government’ with the WASREB’s key performance indicators. measures the degree and predictability of Internal criteria include the following aspects: government support to WSPs, including during financial and credit management, management times of distress. The aspect of ‘autonomy and quality and capacity, operational performance, accountability’ refers to the independence strategic planning and internal transformation, of the utilities to make decisions without human resources and utilization of private sector, external intervention and the accounting and customer relations. controls employed. ‘External risks’ assesses the dependency of WSPs to irregular support, such ‘Financial and credit management’ indicators as reliance on government and donor grants or measure the capacity of the WSP to meet its subsidies, and assesses other external risks, such operating and maintenance expenses and service as the vulnerability to political interference that any debt obligations, and captures indicators such would force a utility to meet unfunded mandates. as efficiency of collections and payments. Internal ‘Economic base’ measures things like the average criteria also measure key aspects of ‘management income of customers in the service area and the quality and capacity’, such as organizational diversity of the customer base. Where region structure and compliance with regulatory specific information such as unemployment and guidelines, while ‘operational performance’ gross domestic product (GDP) per capita was not captures indicators such as nonrevenue water available, national data were used. TABLE 1: CRITERIA AND CATEGORIES USED IN THE WaterCAT CREDIT ANALYSIS AND SHADOW RATING Criteria and Categories Weighting = Maximum Points Internal Criteria Sub-Total: 73 Financial and Credit Management 25 Management Quality and Capacity 19 Operational Performance 15 Strategic Planning and Internal Transformation 5 Human Resources and Utilization of Private Sector 5 Customer Relations 4 External Criteria Sub-Total: 27 Support from Government 10 Autonomy and Accountability 4 External Risks 3 Economic Base 10 Within each category, there are a number of and the scores are scaled against the maximum indicators that measure different aspects. There weighting within the category. The category scores can be between four and 18 indicators within each are aggregated to arrive at a total score that is then FINANCING URBAN WATER SERVICES IN KENYA category. Each indicator is assigned varying weights converted into a percentage out of 100 points. The UTILITY SHADOW CREDIT RATINGS 2011 of importance within the category. Indicators shadow rating assigns a letter rating according to are scored 0–4 against set levels of performance the scores shown in Table 2. TABLE 2: WaterCAT RATING CATEGORIES AND CORRESPONDING SCORES WaterCAT Rating Rating Percentage Score No Rating 0% to 34% BB 35% to 44% BBB 45% to 59% A 60% to 69% 12 AA AAA 70% to 79% 80% and above Lenders consider ‘BBB to AAA’ ratings as significant amount of performance improvement ‘investment grade’, meaning entities with these is required for the utility to access market finance. ratings are of medium to good credit quality and likely to make good on their loans and, therefore, The WaterCAT shadow credit rating scores are can access the private sector financial markets. indicative of creditworthiness. A more thorough Standard and Poors (S&P) defines an A-rating as assessment of the specific WSP loan proposal or having ‘strong payment capacity’ and BBB-rating debt instrument is necessary before definitive as having ‘adequate payment capacity’. With some conclusions can be made about WSPs’ ability to improvements to its financial, management, and access credit. Lenders will normally use the credit operating performance, a BB rated entity could rating as a screening process and then perform an have the potential to access credit. S&P defines independent financial and due diligence analysis of a BB-rating as ‘likely to fulfill obligations; ongoing borrowers that apply for loans and the proposed uncertainty’. Companies rated below BB were projects they intend to finance. assigned a ‘No Rating’, which indicates that a 4. Results of WaterCAT Credit Analysis and Shadow Rating FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 This Section presents the results of the WaterCAT 4.1. General Results shadow credit rating for 43 WSPs. The first part of the Section reviews WaterCAT scores and the The results of the WaterCAT credit analysis and distribution of WSPs into grades of creditworthiness: shadow rating for the 43 WSPs can be grouped into from AAA to ‘No Rating’. The second part of the three categories: (a) 13 investment grade (A and Section analyzes the different internal and external BBB); (b) 16 potentially creditworthy WSPs on the criteria scores of the creditworthy and potentially verge of being investment grade (BB); and (c) 14 creditworthy WSPs. The analysis presented here WSPs with ‘No Rating.’ is based on five years of audited financial reports from 2005/06 to 2009/10 and interviews. 13 TABLE 3: CATEGORIZATION OF WSPs BY RATING AND SCORE Creditworthy Creditworthy Potentially Creditworthy A BBB BB No RatingRating WSP Name Score WSP Name Score WSP Name Score WSP Name Score Nyeri 61% Meru 53% Embu 44% Mombasa 34% Malindi 52% Limuru 43% Sibo 34% Nairobi 49% Kiambu 43% Isiolo 33% Kisumu 49% Nakuru Rural 43% Western 33% Nyahururu 49% Gusii 42% Lodwar 31% Muranga 48% Kericho 42% Muranga South 31% Thika 47% Nzoia 42% Nyandarua 29% Kilifi Eldoret 47% Maraikani 40% Olkalou 29% Nanyuki 46% Nithi 40% Machakos 28% Garissa 46% Mathira 39% Kitui 28% Ruiru Juja 46% Mavoko 39% Kwale 27% Nakuru 45% Narok 39% Noi Turesh 26% Kahuti 38% Eldama Ravine 25% Kikuyu 38% Amatsi 24% Oloolaiser 37% Kirinyaga 36% Thirteen of the 43 WSPs are investment grade in categories and sets the best practice benchmark for the Kenyan context and can be good risks should WSPs interested in securing commercial finance. they access market finance. The highest rating is an All other investment grade-rated WSPs received a ‘A’ for Nyeri, which scored 61 out of a maximum 100 BBB (triple B) rating with scores between 45 and points. Of all the utilities, Nyeri scored the highest 53. Between Nyeri and the highest BBB-rated WSP, in the ‘financial and credit management’, ‘strategic Meru, there is an 8-point difference—about one planning and internal transformation’, and ‘human standard deviation. resources and utilization of the private sector’ Sixteen WSPs are rated BB (double B). BB-rated The results also show that a significant number utilities are considered below investment grade. of WSPs (14, or 33 percent) are in the ‘No Rating’ It is worth noting, however, that all but one BB- category. These WSPs have difficulty remaining FINANCING URBAN WATER SERVICES IN KENYA rated utility is within one standard deviation solvent and require substantial reforms before UTILITY SHADOW CREDIT RATINGS 2011 from the BBB category and can be considered financial markets will advance them loan finance. ‘potentially creditworthy’, that is, likely to fulfill The lowest score for this category is 24 percent financial obligations but with an element of ongoing and half of them score lower than 29 percent. uncertainty. Relatively small improvements in some Categorized scores for each WSP is presented financial and operating performance indicators, in Annex 1 and summary financial statements discussed more fully in Section 5, should enable for A, BBB and BB rated WSPs are presented in the top four of these WSPs to access debt from the Annex 4. domestic financial market. FIGURE 2: WaterCAT SCORES AND SHADOW CREDIT RATING FOR 43 WSPs 14 No Rating BB BBB A 0% 10% 20% 30% 40% 50% 60% 70% Amatsi 23.8% Eldama Ravine 24.7% Eldoret 46.5% Embu 44.3% Garissa 46.3% Gusii 41.5% Isiolo 32.6% Kahuti 37.7% Kericho 42.2% Kiambu 43.4% Kikuyu 37.7% Kilifi Maraikani 39.6% Kirinyaga 36.3% Kisumu 49.3% Kitui 28.3% Kwale 27.2% Limuru 43.5% Lodwar 31.4% Machakos 27.5% Malindi 52.3% Mavoko 38.5% Mathira 39.1% Meru 52.8% Mombasa 34.4% Muranga South 31.0% Muranga 48.2% Nairobi 48.8% Nakuru Rural 43.0% Nakuru 45.2% Nanyuki 46.2% Narok 39.4% Nithi 39.8% Noi Turesh 26.4% Nyandarua 28.8% Nyahururu 48.7% Nyeri 60.7% Nzoia 42.0% Olkalau 28.5% Oloolaiser 37.2% Ruiru Juja 45.8% Sibo 34.4% Thika 47.3% Western 32.9% 4.2. Shadow Credit Rating Mean Scores FINANCING URBAN WATER SERVICES IN KENYA FIGURE 3: DISTRIBUTION OF WSPs BY CREDIT There is most variance in the scores within the BBB UTILITY SHADOW CREDIT RATINGS 2011 RATING SCORE category. It is also notable that the observed mean of 48 percent for this group is below the expected mean for the range of 52 percent, and the median 12 Normal for this group is 47.5 percent - meaning that half of them score below this point. So while WSPs in 10 Mean = 0.39 Std. Dev. = 0.086 the BBB class are investment-ready, they are not N = 43 necessarily uniform in their credit quality and their 8 scores are lower than the expected averages for Frequency 6 BBB rated entities. 4 For the other two categories (BB and ‘No Rating’), 2 the observed mean are higher than the expected mean. In particular, the observed mean for the ‘No 15 Rating’ group is 29.4 percent whereas the expected 0 mean for the range 0 percent to 34 percent is only 0.20 0.30 0.40 0.50 0.60 0.70 17 percent. This indicates that the average scores Credit Rating Scores of these WSPs are better than expected for BB and No Rating entities. The median score for the 43 utilities is 40 percent, that is, half of the WSPs reviewed are below, and 4.3. Category Results the other half above, this point. The mean (39 percent) is to the left of center, which implies that Figure 5 provides the average score of rating groups the distribution of WSPs across the scores is slightly (A, BBB, and so on) for each of the categories skewed to the left towards the lower ratings. The analyzed in WaterCAT. Blue bars (dark and light) red line in Figure 3 is a reference line at 45 percent, represent the investment grade WSPs, and orange the threshold for an investment-grade rating. bars represent those that are not. The graph also shows, in green bars, the maximum score for each Figure 4 shows the number of WSPs in each rating of the categories. category and their mean WaterCAT scores. Within each rating category, the distribution of WSP scores is skewed to the right, that is, towards the threshold point to reach the next higher level. FIGURE 4: WaterCAT TOTAL MEAN SCORES BY SHADOW RATING CATEGORY 37% 33% No. of WSPs: 16 No. of WSPs: 14 Mean score: Mean score: 29.4% 40.3% 28% No. of WSPs: 12 Mean score: 2% No. of 48.1% WSPs: 1 A BBB BB No Rating FIGURE 5: WaterCAT MEAN CATEGORY SCORES BY RATING 28.0 FINANCING URBAN WATER SERVICES IN KENYA 24.0 UTILITY SHADOW CREDIT RATINGS 2011 20.0 16.0 12.0 8.0 4.0 0.0 Management Capacity Operational Performance Strategic Planning & Internal Transformation Human Resources & Utilisation of Private Sector External Risks Economic Base Management Quality & Customer Relations Support from Government Autonomy & Accountability Financial & Credit 16 Maximum Score for the Category A BBB BB No Rating The analysis finds a statistically significant (to the in internal factors such as ‘management quality 0.01 level) correlation between ‘financial and credit and capacity’, ‘operational performance’, and management’ results from this assessment and ‘human resources and utilization of private sector’. the ‘management quality and capacity’ (Pearson Correlation: 0.414) and an even larger correlation Table 4 presents the top five ranking WSPs within between ‘operational performance’ and ‘management each of the internal criteria categories. Note that quality and capacity’ (Pearson Correlation: 0.567). The Nyeri appears in the top five across all categories, data suggest that sound, strategic management plays while Meru appears in all but the last category. a critical role in the good financial and operational While dominated by Nyeri and other BBB-rated performance of a utility. WSPs, it is worth noting that in some categories even those in noninvestment grade categories can be competitive. A more detailed statistical analysis 4.4. Internal Criteria and the full ranking per category are included in Annexes 1 and 3. Comparing investment- and below investment- grade WSPs, the former seem to have an advantage TABLE 4: TOP FIVE WSPs ACCORDING TO INTERNAL CRITERIA Category Rank 1 Rating Rank 2 Rating Rank 3 Rating Rank 4 Rating Rank 5 Rating Financial Nyeri A Kisumu BBB Nithi BB Meru BBB Narok BB and Credit Management Management Malindi BBB Meru BBB Nyahururu BBB Thika BBB Nyeri A Quality and Capacity Operational Narok BB Malindi BBB Nyeri A Nyandarua No Meru BBB Performance Rating Strategic Planning Nyeri A Thika BBB Nakuru BBB Nakuru- BB Meru BBB and Internal Rural Transformation Human Resources Nyeri A Oloolaiser BB Eldoret BBB Meru BBB Malindi BBB and Utilization of Private Sector Customer Kisumu BBB Nyeri A Kericho BB Malindi BBB Nairobi BBB Relations 4.5. External Criteria hand, the variable ‘autonomy and accountability’ showed a statistically significant (at the 0.01 level) Investment-grade WSPs as a class also seem to and strong correlation (Pearson Correlation: 0.534) FINANCING URBAN WATER SERVICES IN KENYA be working under a more robust economic base with the outcomes of ‘management quality and than their counterparts. This is true even if two UTILITY SHADOW CREDIT RATINGS 2011 capacity’. out of nine indicators (unemployment and GDP per capita) within the economic base category The results suggest that the experience of WSPs have been ‘neutralized’ by assigning a similar score across a number of external criteria indicators across WSPs. This was done because data were not did not differ between utilities, creditworthy or available at local levels, but only at national level. not. Indicators where WSPs scored practically the same are: government provision of operational Apart from this, however, a number of external support, probably of government assistance in criteria categories do not distinguish between case of serious management problems, alignment investment- and below investment-grade WSPs. For of WSB tariff proposal with tariff approvals by example, average scores across rating categories the regulator, independence to take loans, and are similar for ‘support from government’, vulnerability to political changes. As the external 17 ‘autonomy and accountability’, and ‘external criteria assess the WSPs in the overall economic risks’. Statistical tests comparing the results in the context and not just the context of the water sector ‘financial and credit management category’ to per se, they also represent the performance of the ‘support from government’, and to ‘external risks’ water sector against other sectors of the economy. confirm these observations and find no correlation between the sets of variables. On the other 5. Analysis of Key Financial Ratios and Operating Performance Indicators FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 This Section presents results of selected indicators The financial ratios and performance indicators that have a significant impact on the shadow discussed in this Section are listed in Table 5 with credit rating of utilities assessed in this paper. their formulae. TABLE 5: KEY FINANCIAL RATIOS AND OPERATING PERFORMANCE INDICATORS Indicator Calculated as 1. Current Ratio Current assets/Current liabilities 18 2. Net Surplus/(Deficit) % 3. Operating Cost Coverage Ratio Net surplus (deficit) after tax as a percentage of total revenues Total operating revenue/Total O&M costs 4. Debt Service Coverage Ratio Surplus (deficit) after tax plus interest and depreciation/Debt service (interest + principal) 5. Debtor Days Net debtors/Operating revenue x 365 6. Nonrevenue Water (NRW) (Volume water produced – volume water sold)/Volume water produced 7. Billing Efficiency Total volume of water billed/Total volume water produced 8. Collection Efficiency Total cash collections/Total annual water and sewage billed 9. Metering Ratio (Total no. connections – metered no. connections)/Total no. connections 5.1. Current Ratio and Annual expenditures and debt service payments. A current ratio below 1.0 indicates substantial stress in a Surplus WSP’s cash flow and threatens its ability to meet The current ratio is an indicator of short-term its short-term financial obligations. It also signals liquidity. It evaluates the availability of cash and to creditors that these WSPs may not make timely other liquid assets to meet short-term financial debt service payments. Figure 6 shows the current obligations such as operating and maintenance ratios for five years for A/BBB and BB rated WSPs. FIGURE 6: 2006 - 10 CURRENT RATIO, A/BBB AND BB WSPs (IN MILLIONS OF KES) 6.0 5.0 4.0 Current Ratio Value 3.0 2.0 1.0 0 2006 2007 2008 2009 2010 Creditworthy WSPs (A and BBB) Potentially Creditworthy (BB) The trends show that the rated WSPs evaluated For both groups there was a dramatic improvement had sufficient liquidity between 2006 and 2010. A/ in net income from substantial negative levels in BBB-rated WSPs maintained a stable current ratio 2006 to an average of about 2.5 percent (for BB) FINANCING URBAN WATER SERVICES IN KENYA throughout the period, whereas BB-rated WSPs and 3 percent (for A/BBB) since 2008, as shown in UTILITY SHADOW CREDIT RATINGS 2011 had a significantly higher current ratio between Figure 7. This is mostly as a result of incremental 2006 and 2008, declining thereafter to similar revenues being generated by the WSPs following levels as A/BBB-rated WSPs. It is noteworthy that the Extraordinary Tariff Adjustment passed receivables are included in current assets, and the by the WASREB in January 2009. However, at high debtor days’ ratio affecting all WSPs indicates approximately 2 percent, the thin net operating that a significant portion of receivables may not be income of WSPs may need to grow to improve collectable. If adequate provisions are made for access to market finance because spikes in bad debts, the current ratios may decline. operating costs may result in losses in the absence of a tariff mechanism that allows adjustment for The annual surplus (deficit) percent, or profit unforeseen costs. margin, is a ratio of surplus (deficit) over revenues. FIGURE 7: 2006 - 10 ANNUAL SURPLUS (DEFICIT) %, A/BBB AND BB WSPs (IN MILLIONS OF KES) 19 8% 6% 4% 2% 0% 2006 2007 2008 2009 2010 -2% % -4% -6% -8% -10% -12% Creditworthy WSPs (A and BBB) Potentially Creditworthy (BB) 5.2. Operating Cost Coverage Ratio indicator in assessing debt capacity. Compared to surplus (deficit), which measures profitability, Operating Cost Coverage Ratio (OCCR) measures OCCR is more a measure of the ability of a WSP to FINANCING URBAN WATER SERVICES IN KENYA a WSP’s ability to recover operating costs with control costs. current operating revenues, and is a critical UTILITY SHADOW CREDIT RATINGS 2011 FIGURE 8: 2006 - 10 OPERATING COST RECOVERY RATIO FOR BB AND A/BBB WSPs (IN MILLIONS OF KES) 140% 120% 100% 80% % 60% 20 40% 20% 0% 2006 2007 2008 2009 2010 Creditworthy WSPs (A and BBB) Potentially Creditworthy (BB) A- and BBB-rated WSPs have sustained operating BB-rated WSPs will need to rise above the 100 cost recovery (above 100 percent), but have percent level and sustain short term cost recovery stagnated since 2008. BB utilities are close to before lenders will finance rehabilitation and/or operating cost recovery and show a similar expansion improvements. A and BBB utilities, on pattern: declining to 91 percent after achieving a the other hand, should strive to improve their 98 percent level in 2008. OCCR to reduce the probability of default. 5.3. Debt Service Coverage Ratio TABLE 6: 2006 - 10 DEBT SERVICE COVERAGE RATIOS FOR SELECTED A/BBB AND BB WSPs Creditworthy WSPs (A and BBB) 2006 2007 2008 2009 2010 Nyeri 70.4 N/A 121.8 2.9 1.2 Eldoret 0.2 0.5 1.1 1.0 1.1 Nairobi 20.6 6.3 1.1 1.8 1.6 MEAN 30.4 3.4 41.3 1.9 1.3 Potentially Creditworthy (BB) 2006 2007 2008 2009 2010 Embu N/A 1.1 4.6 12.0 74.5 Mathira N/A N/A 2.0 14.5 20.6 MEAN N/A 1.1 3.3 13.3 47.5 Debt Service Coverage Ratio (DSCR) is one of the the event that net operating income is less than most important financial ratios that lenders use to projected, and provides surplus cash to build assess creditworthiness. It measures the amount of up a debt service reserve fund. The debt service FINANCING URBAN WATER SERVICES IN KENYA “free cash� available from operations to cover debt reserve fund can be drawn upon by the lender in UTILITY SHADOW CREDIT RATINGS 2011 service payments. Table 6 presents DSCR for five the event of default. Once the fund has enough WSPs that have recorded debt obligations in their cash to meet six months’ worth of debt service financial statements. DSCR for A and BBB WSPs payments, lenders will typically not require any show increased borrowing after 2008, whereas further deposits to be made into the fund. improved DSCR for the two BB WSPs indicates that outstanding debt obligations were settled during In this case, all utilities have sufficient cash to meet the period under review. Projected DSCR analysis their debt service obligations. In the case of Eldoret is used to ascertain the debt absorption capacity and Nyeri, however, lenders will be reluctant to of a borrower. This includes revenues from provide additional financing to these WSPs on investments to be financed with the proceeds of account of their low DSCRs in 2010, unless more any loans being applied for. free cash by way of tariff increases, for example, is available to the potential borrowers. WSPs Lenders typically require a water utility to have more free cash than the required debt service with positive but low DSCRs will need to ensure that earlier loan proceeds are put to appropriate 21 payment: that is, a DSCR of between 1.3 and 1.5. use that will generate the planned increases in This provides comfort to the lender that there is revenue. sufficient cash to meet debt service obligations in 5.4. Net Debtor Days FIGURE 9: 2006 - 10 NET DEBTOR DAYS, A/BBB AND BB WSPs 350 300 250 Number of Days 200 150 100 50 0 2006 2007 2008 2009 2010 Creditworthy WSPs (A and BBB) Potentially Creditworthy (BB) The debtor days’ ratio measures accounts Over 60 percent of the total WSP revenues, that receivable in terms of equivalent in daily revenue, is, over two-thirds, have accumulated as accounts and indicates how quickly cash is being collected receivable in their 2010 balance sheets. This may from debtors. The longer it takes for a company to in part be due to inherited legacy debts for which collect, the greater the number of debtor days. This bad debt provisions have not been made. Creating is an area of concern for WSPs across the board. As provisions for bad debts will improve the net Figure 9 indicates, net debtor days across all utilities debtor days, as this indicator accounts for debtors in the WaterCAT assessment range from 200 to net of provisions. The following WSPs improved 250 days. The average levels for the period are their debtor days’ ratio since inception: Nyeri, 225 days for A and BBB, and 250 days for BB WSPs. Eldoret, Garissa, Kisumu, Meru, Muranga, Nairobi, Uncollected receivables have the primary effect Nyahururu, and Ruiru Juja. of reducing the available cash to meet day-to-day operating expenses and debt service payments. 5.5. Billing Efficiency This is an area where the cost-benefit of improving billing systems by using state-of-the-art information Net debtor days assume that amounts are billed management systems, combined with a focus on FINANCING URBAN WATER SERVICES IN KENYA but have not been collected. Billing efficiency, on customer management, can deliver substantial the other hand, measures the amount of water results within a short time frame. UTILITY SHADOW CREDIT RATINGS 2011 sold that has been billed. While uncollected bills affect the cash position of a WSP, unbilled sales affect its revenue potential. 5.6. Collection Efficiency WaterCAT interviews with utilities indicated very Collection efficiency measures the amount of cash low billing (and collection) efficiency scores. Less collections over billings. It is a measure of the than half of the utility managers interviewed efficiency with which a utility is able to realize cash believed their billing systems were adequate from its billed revenue. The disconnection policy and efficient, regardless of their shadow rating. employed by a WSP for nonpayment by customers Inadequacies range from lack of consumer will often impact its collection efficiency. Most utility records, inadequate updating of customer managers indicated that they apply service cut- accounts, outdated systems used for monitoring, offs rigorously and without political interference. 22 noncategorization of receivables by customer type However, the poor performance in terms of and age, fragmented information management, debtor days suggests that collecting receivables is and other administrative problems. a significant constraint for WSPs. Figure 10 shows the worsening collection ratios between 2006 and 2009, with some steady improvement thereafter. FIGURE 10: 2006 - 10 COLLECTION EFFICIENCY, A/BBB AND BB WSPs 100% 95% 90% % 85% 80% 75% 2006 2007 2008 2009 2010 Creditworthy WSPs (A and BBB) Potentially Creditworthy (BB) 5.7. Metering Ratio accounts versus about 80 percent for BB WSPs. Moving towards metering of all customer accounts The metering ratio measures the number of will result in improvements in NRW and most of the active meters as a proportion of the total number other financial ratios and performance indicators of customer accounts that a WSP has on record. used to judge creditworthiness. About 90 percent of A and BBB WSPs had metered FIGURE 11: METERING RATIO FOR A/BBB AND BB WSPs FINANCING URBAN WATER SERVICES IN KENYA 100% UTILITY SHADOW CREDIT RATINGS 2011 80% 60% % 40% 20% 0% 2006 2007 2008 2009 2010 Creditworthy WSPs (A and BBB) Potentially Creditworthy (BB) 23 5.8. Impact of WSP Size on Its Rating TABLE 7: WSP SIZE AND IMPACT ON RATING Rating Size by Number of Connections1 Total No Data Small Medium Large Very Large <5,000 5,000–9,999 10,000–34,999 >35,000 No Rating 2 7 4 0 1 14 BB 0 4 4 8 0 16 BBB 0 1 5 4 2 12 A 0 0 0 1 0 1 Total 2 12 13 13 3 43 Statistical analysis does not find that the size of 5.9. Analysis of Key Variables utilities, as measured by the number of connections, Affecting WSP Credit Rating correlate to their credit rating scores. Even though seven out of 13 ‘investment grade’ WSPs are either A regression analysis of these variables - service large or very large, five of the 12 WSPs rated BBB coverage, number of house connections, current are medium sized. Size is therefore not an indicator ratio, NRW, operating cost coverage ratio (2010 of WSP creditworthiness. Indeed, the challenge data only), surplus, size of the service area, and for WSPs when expanding water supply coverage volume of water produced - showed significant to a growing population is to ensure they do not correlation to credit rating. erode their operating efficiency, which negatively impacts their financial viability. Careful capital The credit score is predicted to increase by 4.5 planning, and maintaining adequate tariffs levels percent for every 1 percent increase in operating and operating efficiency, are critical for utilities to cost coverage. A similar increase in NRW results maintain creditworthiness.9 in almost a 5 percent drop in credit score. Size of the service area also negatively affects the credit score, that is, a larger service area results in a lower credit score. The aggregate statistical results 9 See also Sy, Prospects and Pitfalls of Integrated Water Utilities are presented in Annex 3. in the Philippines; Water and Sanitation Program, 2009. 6. Conclusions FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 The assessment suggests that the 13 A/BBB need to be analyzed in greater detail by WSPs rated creditworthy WSPs are in a position to seeking to access market finance. WSPs currently access debt from the domestic financial market play a limited role in this regard because capital for infrastructure development. The 16 BB rated planning is currently done by the WSBs. WSPs can improve their credit ratings through relatively small improvements in financial and The results of the credit assessment have also operating efficiency. These include measures to highlighted issues that affect water utilities across improve operating cost coverage, metering ratios, the board, which may need to be addressed collection efficiency, and NRW reduction through through policy change. The large amount of investments in network rehabilitation. accounts receivables on the books of WSPs is one 24 The analysis has shown that the quality of such policy issue. Uncollectible receivables may have to be written off as bad debts and policies on management is highly correlated with both recovering measures from classes of clients that financial and operating results. WSPs should habitually delay payment of water bills, such as therefore strive to build strong management teams government agencies, for example, may have to that use results-based monitoring mechanisms be put in place. The results provide an opportunity to evaluate the performance of their utilities. for WSPs to identify areas for improvement and to Key areas that contribute to good management share good practices between utilities. performance are the commitment and experience of the management team, compliance with the Positive steps to address performance issues that WASREB’s corporate governance guidelines, the hinder access to credit could see significantly more extent to which the WASREB’s nine key performance investment in water by the private sector resulting indicators are met, and strategic management of in improved access in urban areas. The decision the utility. A key aspect of strategic management is to borrow, however, rests with the management capital investment planning. Hence, the questions of these WSPs. The next Section suggests a way of when to invest, in what to invest, and how to forward for WSPs to access market finance. invest are critical to utility performance, and will 7. Way Forward FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 The water sector reforms underpinned by the commercial debt to finance infrastructure, capital Water Act of 2002 were aimed at ensuring the self investment plans should fit the debt absorption sustainability of water sector entities. Creditworthy capacity of the borrower. Scaling back or phasing WSPs can realize these objectives by taking on a capital investments to match the financial resource portion of investment financing as proposed in this envelope will have to be considered by WSPs that paper and, in doing so, ensure that the surpluses are borrowing from the market. WSPs will need to being generated through consumer tariffs are focus on high revenue generating investments, for invested in infrastructure to improve access to example, metering and leak management. water services by more Kenyans. These suggestions are also supported by the Constitution of Kenya Commercial debt should be blended with financial 2010, which puts counties in charge of water services delivery and puts more responsibility on support from the public sector. Owing to the relatively recent tariff reform, the 25 the service delivery agents to ensure access to ability of WSPs to raise all the financial resources residents of their service areas. needed for investment is very limited. Public finance can efficiently be used to support access To access market finance, the management of to commercial debt, especially where capital- WSPs needs to take up the challenge and prepare intensive upstream investments in source projects for financing and seek the necessary augmentation, for example, are required. WSBs can support from their boards of directors. Some use their investment funds to leverage additional recommendations to move towards closing resources from the market, and thereby increase financially viable transactions are presented here. the total investment in the sector. Grants from development partners could also be leveraged WSPs must take the lead in identifying and to attract investment from the domestic financial developing viable projects for financing. market into the water sector. While WSBs will need to continue investing in bulk infrastructure assets that require long-term finance Tariff revisions and indexation may be required to and are therefore best funded using public sector support access to commercial debt. resources, creditworthy WSPs should take the lead Some tariff hikes might be necessary for WSPs to in identifying projects that can be financed with generate enough cash to access market finance. short- to medium-term commercial finance, which Given the current high inflation environment in will generate sufficient revenue to repay the debt Kenya with annual Consumer Price Inflation (CPI) at used to finance them. Such projects are likely to be 16.6 percent,10 it is likely that some form of annual tertiary investments in network densification and indexation in tariffs will also be required to ensure expansion, metering, measures to reduce NRW, that projected surpluses that underpin the loans and noncapital intensive source augmentation are not eroded by inflation. These revisions will, and treatment. Banks will only finance plans that however, be considered by the WASREB on a case are technically feasible, hence proper investment by case basis and should not act as a disincentive preparation and execution is essential to access for WSPs to seek to improve their surpluses market finance. through improvements in operating efficiency, for instance, through NRW reduction and controlling Investments should be sized to fit the debt costs. Tariff increases and indexation should be capacity of WSPs. coupled with reasonable projections of improved While traditional planning for water systems operating performance, and as far as possible, be has focused on building infrastructure to meet linked to actual increases in costs. demand for the next 20 to 30 years, limited financial resources invariably inhibits the 10 Source: CPI for August 2011; Central Bank of Kenya website achievement of these objectives. When using http://www.centralbank.go.ke. When ascertaining the financial viability of projects projects. Asset-backed lending is not appropriate and the debt capacity of potential borrowers, for water projects, as the assets being financed lenders should couple past performance with have little liquidation value. A security structure FINANCING URBAN WATER SERVICES IN KENYA projected revenues from new projects. that relies on the cash flow from water sales to UTILITY SHADOW CREDIT RATINGS 2011 Tariff reforms in the water sector were initiated provide the lender with the necessary comfort that in 2009 and were only formalized in 2010. Hence debt service payments will receive priority after there has not been sufficient time for WSPs to essential operating costs have been met should record significant surpluses on their balance be used to secure debt. A sample loan structure sheets. Lenders should therefore concentrate showing the priority of payments from revenue is their appraisals on the ability of management to presented in Figure 12. operate a utility and implement the proposed FIGURE 12: SAMPLE COMMERCIAL LOAN STRUCTURE FOR A WSP 26 Customer benefits & WSP enhances revenue through increased sales Customers Project Construction account Customer deposit WSP Water Revenue Loan proceeds Escrow account collection account STATUTORY PAYMENTS • WRMA extraction fee LENDERS • 1% WASREB levy • WSB Lease fee • Income/ VAT taxes • Non compliance penalties Loan repayment SURPLUS CASH BUDGETED O&M Remains in collection account Pre - approved operating & to meet other expenses maintenance expenditure approved by the WSB, WSP and lender DEBT SERVICE Principal & interest payments DEBT SERVICE RESERVE FUND Escrow account to be accessed by the Lenders in the event of failure to make timely debt service payments The proposed security structure allows WSPs to fund has enough cash to meet six months worth take out budgeted costs from their cash flows to of debt service payments, lenders will typically not meet statutory payments and O&M costs as a require any further deposits to be made into the FINANCING URBAN WATER SERVICES IN KENYA priority. Any costs incurred in addition to budgeted fund, and surpluses will be available to the utility. UTILITY SHADOW CREDIT RATINGS 2011 amounts that have been agreed with the lender In coordination with their WSBs, WSPs should seek may then only be paid after debt service obligations to include provisions in the SPA that will provide have been met. Once the debt service reserve the necessary security to the lenders. 27 Annex 1 - WSP Categorized Credit Rating Scores FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 KENYAN WSPs SUMMARY SHADOW CREDIT RATING SCORES Planning Human resources & utilization of private & Credit Management Quality Operational Internal from Customer relations TOTAL Rating % Transformation Economic Base Accountability Financial & External Risks Management Performance Government & Capacity Autonomy Strategic Support Rating sector & Nyeri 18.1 9.7 7.7 3.0 3.8 3.3 3.4 3.2 2.7 6.0 61% A Meru 10.9 10.7 7.5 2.8 3.4 2.6 3.0 3.1 2.3 6.5 53% BBB Malindi 10.6 10.9 7.9 2.1 3.4 2.9 3.1 3.2 2.7 5.5 52% BBB Kisumu 11.9 8.6 4.9 1.1 3.3 3.3 3.8 3.3 2.3 6.9 49% BBB Nairobi 10.0 8.8 5.8 1.4 3.4 2.9 4.1 3.3 2.3 6.8 49% BBB 28 Nyahururu Muranga 9.7 10.0 10.7 7.6 5.3 7.5 1.8 3.0 3.1 2.6 2.4 2.9 4.4 4.1 3.2 3.3 2.3 1.9 6.0 5.3 49% 48% BBB BBB Thika 4.7 10.5 7.5 2.9 2.8 1.9 3.4 3.2 2.6 8.0 47% BBB Eldoret 10.0 7.8 6.4 1.1 3.8 2.5 3.0 3.0 2.4 6.5 47% BBB Garissa 9.1 9.5 7.5 1.5 3.0 1.7 3.3 3.3 2.4 5.1 46% BBB Nanyuki 9.4 8.1 7.3 2.8 2.8 2.9 3.5 2.5 2.4 4.6 46% BBB Ruiru Juja 9.7 9.0 5.1 2.0 3.1 2.0 3.6 3.2 2.3 5.9 46% BBB Nakuru 9.4 8.3 5.1 2.8 3.1 2.1 3.0 2.7 2.1 6.8 45% BBB Embu 7.5 9.3 4.9 1.8 3.1 2.9 4.0 2.9 2.4 5.6 44% BB Limuru 8.1 6.9 7.1 2.1 3.0 2.7 4.0 3.2 1.6 4.8 43% BB Kiambu 7.2 7.4 6.6 2.5 2.9 2.5 2.6 3.1 2.0 6.6 43% BB Nakuru Rural 5.0 8.6 6.8 2.9 2.1 2.7 3.6 3.0 2.4 6.0 43% BB Kericho 9.4 6.2 4.5 1.8 2.8 3.1 3.1 3.0 2.3 6.1 42% BB Nzoia 8.1 8.6 6.2 0.8 2.3 1.7 4.1 3.0 2.3 5.0 42% BB Gussi 9.7 7.1 3.8 2.1 2.6 2.6 2.9 3.2 1.2 6.4 42% BB Nithi 11.6 5.9 6.0 0.8 1.5 2.2 2.1 3.0 2.2 4.5 40% BB Kilifi Maraikani 7.8 7.1 5.8 1.1 2.2 1.9 3.0 3.2 2.3 5.1 40% BB Narok 10.9 4.3 8.3 1.9 1.1 1.4 2.6 2.6 1.6 4.8 39% BB Mathira 7.8 9.0 5.4 0.8 2.0 1.1 2.6 3.2 2.7 4.5 39% BB Mavoko 4.1 7.8 5.4 2.4 2.8 1.8 3.4 3.2 2.4 5.1 39% BB Kahuti 7.2 7.4 4.1 1.5 2.2 1.6 3.9 3.0 2.3 4.6 38% BB Kikuyu 8.1 4.8 5.8 2.4 2.3 1.7 2.5 3.3 0.8 6.0 38% BB Oloolaiser 9.1 6.4 4.1 1.5 3.8 1.7 1.8 3.0 1.9 4.0 37% BB Kirinyaga 6.9 5.7 4.1 1.5 1.9 2.2 3.4 3.0 2.2 5.4 36% BB Sibo 6.9 5.9 6.0 1.8 2.4 1.1 3.9 3.0 1.5 1.9 34% No rating Mombasa 7.5 4.5 3.4 0.8 1.5 1.5 4.1 2.4 2.4 6.3 34% No rating Western 5.6 5.9 2.4 1.1 2.3 2.3 3.5 2.2 1.8 5.8 33% No rating Isiolo 6.6 5.0 3.9 2.4 2.4 1.6 2.6 3.1 2.2 2.9 33% No rating Lodwar 10.9 2.6 3.8 1.2 1.4 0.4 4.5 2.3 1.8 2.5 31% No rating Muranga South 4.4 5.9 3.0 2.5 1.6 1.6 3.1 2.3 2.1 4.5 31% No rating Nyandarua 2.5 4.8 7.7 1.9 1.1 0.9 2.1 2.3 2.1 3.4 29% No rating Olkalou 5.0 2.9 6.2 0.8 1.1 1.0 3.0 3.1 1.8 3.6 29% No rating Kitui 4.7 3.1 2.3 1.1 3.0 2.2 3.0 2.6 1.4 5.1 28% No rating Machakos 3.8 6.2 2.3 1.1 1.3 1.0 3.0 2.0 2.1 4.9 28% No rating Kwale 4.4 4.3 3.2 1.5 1.3 0.5 3.0 2.6 2.4 4.0 27% No rating Noi Turesh 5.9 3.6 2.8 1.2 1.1 1.6 3.4 2.1 1.2 3.6 26% No rating Eldama Ravine 2.5 4.8 1.1 1.6 1.2 0.8 3.9 3.2 2.2 3.4 25% No rating Amatsi 4.1 1.9 1.3 1.8 1.4 1.3 4.3 2.6 1.9 3.4 24% No rating Maximum score 25 19 15 5 5 4 10 4 3 10 Annex 2 - WaterCAT Model Statistical Analysis FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 A test was done to review whether there exists, and the strength of, a dependency relationship between the variables used in the WaterCAT based on the results. Since the credit scores and letter ratings are an aggregate of the various weighted constructs defined by the model, these were not selected to test the relationship. Rather, the ‘financial and credit management’ category, which is largely based on data from audited financial statements, was selected as the dependent variable. The remaining internal and external category/factors were used as predictors or independent variables. The results at the model level are shown here: WaterCAT Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .687a .472 .328 a. Predictors: (Constant), Economic, Support, Strategic, External Risks, Autonomy, Operations, Human 2.50856 29 Resources, Customer, Management. ANOVAb Model Sum of Squares df Mean Square F Sig. 1 Regression 185.357 9 20.595 3.273 .006a Residual 207.665 33 6.293 Total 393.021 42 a. Predictors: (Constant), Economic, Support, Strategic, External Risks, Autonomy, Operations, Human Resources, Customer, Management. b. Dependent Variable: Financial. The results show that, taken together, there are real effects by the different category variables on the WSPs’ financial and credit management performance but only explain 47 percent of the variance in performance. Thus, as a whole, the model appears to be a modestly robust predictor of financial and credit management. However, none of the individual independent variables, except for ‘operational performance,, is statistically significant—it cannot be said, therefore, that at the level of individual variables, whether the ‘effects’ to ‘financial and credit management’ are due to something more than chance. In the same way, results showing a sign that is not consistent with expectations cannot be said to be real effects. Coefficientsa Unstandardized Standardized Coefficients Coefficients Model B Std. Error Beta t Sig. 1 (Constant) 2.897 4.406 .657 .515 Management -.054 .360 -.042 -.151 .881 Operations .606 .270 .380 2.246 .031 Strategic -1.241 .660 -.272 -1.881 .069 Human Resources 1.300 .848 .352 1.532 .135 Customer 1.378 .909 .341 1.515 .139 Support .239 .658 .049 .363 .719 Autonomy .068 1.328 .009 .051 .959 External Risks -.403 1.024 -.068 -.394 .696 Economic -.333 .459 -.141 -.726 .473 a. Dependent Variable: Financial. In future iterations of the WaterCAT, there will be a need to look into whether the range used in scoring within categories, on which basis a 0-4 score is assigned, has to be adjusted to be better sensitive to different experiences. In relation to criteria scores that rely on management interviews, the model should test whether FINANCING URBAN WATER SERVICES IN KENYA the perception of utility managers are similar or if there is a need to find a more objective basis to characterize UTILITY SHADOW CREDIT RATINGS 2011 those perceptions. Additional analysis of predictor variables yields strong correlation between the score of WSPs (dependent variable) and these predictors/independent variables: service coverage, number of house connections, current ratio, NRW, operating cost coverage ratio (2010 data only), surplus, size of the service area, and volume of water produced. At the level of individual variables, ‘operating cost coverage’, ‘NRW’ and ‘size of the service area’ significantly affect the credit score. Credit score is predicted to increase by 4.5 for every increase in operating cost coverage. An increase in NRW results in almost a 5 unit drop in credit score. The size of the service area also negatively affects the credit score, that is, a larger service area results in a lower credit score. Model Summary 30 Model R R Square Adjusted R Square Std. Error of the Estimate 1 .852a .726 .656 4.81722 a. Predictors: (Constant), Service Coverage, H20Cnnx, Current Ratio, NRW, OCCR10, Surplus BDAT, Service Area, M3 Produced. ANOVAb Model Sum of Squares df Mean Square F Sig. 1 Regression 1908.126 8 238.516 10.278 .000a Residual 719.374 31 23.206 Total 2627.500 39 a. Predictors: (Constant), Service Coverage, H20Cnnx, Current Ratio, NRW, OCCR10, Surplus BDAT, Service Area, M3 Produced. b. Dependent Variable: Score. Coefficientsa Unstandardized Standardized Coefficients Coefficients Model B Std. Error Beta t Sig. 1 (Constant) 35.876 3.889 9.225 .000 OCCR10 .162 .036 .572 4.491 .000 NRW -.247 .050 -.481 -4.944 .000 H20Cnnx 4.386E-5 .000 .222 .243 .809 M3 Produced -4.762E-8 .000 -.133 -.142 .888 Surplus BDAT -.016 .038 -.055 -.425 .674 Service Area .000 .000 -.443 -2.579 .015 Current Ratio -.299 .474 -.063 -.630 .534 Service Coverage .060 .044 .246 1.350 .187 a. Dependent Variable: Score. Annex 3 - Summary Financials for A, BBB, and BB Rated WSPs FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 NYERI [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY Revenue Operating revenue from water and sewerage sales 120.0 - 225.8 211.4 257.3 267.6 Other operating revenue and capital and operating subsidies 1.5 - 3.2 10.5 12.0 7.2 Other revenue 1.1 - 1.5 1.6 3.4 12.0 Total Revenue 122.7 - 230.5 223.6 272.7 286.8 Expenditure Direct production costs 13.1 - 16.6 13.5 14.5 15.3 Employee related costs 49.6 - 100.4 65.3 78.3 78.3 Lease fees to WSBs 11.8 - 22.4 24.7 34.2 31.6 WARMA and WASREB levies 0.4 - 2.6 0.8 2.4 3.0 Repairs and maintenance Other operating expenditure 9.7 20.6 - - 15.3 34.8 13.3 17.4 14.8 30.3 14.3 62.9 31 Total Operating and Maintenance Expenditure 105.1 - 192.1 135.0 174.5 205.4 Interest expense 0.2 - 0.3 29.0 28.0 27.4 Depreciation 7.7 - 63.4 46.7 46.6 47.6 Total Expenditure 113.1 - 255.8 210.8 249.2 280.4 EBITDA 17.6 - 38.4 88.5 98.2 81.4 Surplus (Deficit) Before Tax for the Year 9.6 - (25.3) 12.8 23.5 6.4 Income tax expense / provision - - - 3.8 7.1 1.9 Surplus (Deficit) After Tax for the Year 9.6 - (25.3) 8.9 16.5 4.5 BALANCE SHEET SUMMARY Current assets 56.0 - 52.8 125.0 137.8 - Non-current assets 1,030.4 - 1,198.6 1,178.6 1,158.1 - Total Assets 1,086.4 - 1,251.4 1,303.6 1,296.0 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities 54.3 - 55.0 61.6 74.0 - Long term borrowings (interest and non interest bearing) 954.7 - 1,144.4 1,181.1 1,123.0 - Other non current liabilities - - - - - - Equity & reserves 77.3 - 52.0 61.0 98.9 - Total Equity and Liabilities 1,086.4 - 1,251.4 1,303.6 1,296.0 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities 6.9 - 36.9 63.3 102.3 - Cash generated from investing activities (219.6) - (228.0) (55.2) (51.9) - Cash generated from financing activities 202.1 - 189.6 36.7 (36.6) - Cash and cash equivalents movement for the year (10.6) - (1.5) 44.8 13.9 - Cash and cash equivalents at end of year (30th June) 9.8 - 8.4 17.8 21.7 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 51.6% 56.5% 52.9% 46.4% 39.3% Repairs & maintenance cost as a % of total operating and maintenance 9.2% 7.9% 9.8% 8.5% 7.0% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 17.3 38.1 55.7 63.1 52.1 Operating surplus (deficit) [%] 13.5% 16.1% 39.2% 35.2% 25.3% Surplus (deficit) after tax [%] 7.9% -11.0% 4.0% 6.0% 1.6% Net debtors days (Collection period) [Days] 104 63 111 84 - Net debtors as percentage of operating revenue [%] 29% 17% 30% 23% 0% Operating cost coverage ratio (OCCR) [%] 115.6% 119.2% 164.4% 154.3% 133.8% Debt service coverage ratio (DSCR) 70.4 121.8 2.9 1.2 2.9 Current ratio 1.0 1.0 2.0 1.9 KEY OPERATING INDICATORS Number of water connections 9,701.0 10,605.0 12,517.0 13,995.0 18,460 Number of sewerage connections 1,851.0 2,794.0 3,327.0 3,551.0 3,962 Volume water produced per annum [Cubic meter] 3,630,444.0 4,557,252.0 5,501,051.0 5,219,356.0 4,734,417 Volume water sold i.e. billed 2,116,919.0 2,489,068.0 2,864,021.0 3,191,800.0 3,259,199 Non revenue Water [NRW] 42% 45,30% 48,00% 39,00% 31% Collection ratio 98% 96,80% 101,00% 90,00% 95% Service area coverage [Sq Km] 179 Population of area 132,434.0 134,968.0 118,644.0 122,203.0 136,531 Population served with potable water 53,466.0 77,607.0 86,663.0 83,408.0 111,193 Service area coverage [population served with water/ population of area] 40% 57,50% 73,00% 68,00% 81% Total Value of water sold [KES] 174,918,917 Average tariff per cubic meter of water sold [KES] 55.4 55.0 53.5 68.5 54 ELDORET [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales 203.0 238.6 264.9 259.4 271.0 624.2 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies 2.9 3.3 3.6 3.9 4.4 - Other revenue 4.7 4.8 5.9 25.2 21.9 4.0 Total Revenue 210.5 246.7 274.4 288.6 297.3 628.2 Expenditure Direct production costs 34.2 29.1 23.1 25.5 36.2 18.2 Employee related costs 61.9 68.6 71.1 79.2 96.3 121.1 Lease fees to WSBs 36.0 36.0 36.0 36.0 36.0 - WARMA and WASREB levies - - - - 0.7 - Repairs and maintenance 10.5 15.5 9.5 17.9 10.8 14.0 Other operating expenditure 55.0 59.4 56.4 86.0 78.2 314.2 Total Operating and Maintenance Expenditure 197.6 208.7 196.0 244.6 258.1 467.5 Interest expense 71.3 71.3 71.3 42.2 36.3 42.0 Depreciation 52.1 69.4 69.6 71.6 73.3 - Total Expenditure 321.0 349.4 336.9 358.4 367.7 509.5 32 EBITDA Surplus (Deficit) Before Tax for the Year 12.9 (110.5) 38.0 (102.7) 78.4 (62.5) 43.9 (69.9) 39.1 (70.4) 160.7 118.7 Income tax expense / provision - - - - - - Surplus (Deficit) After Tax for the Year (110.5) (102.7) (62.5) (69.9) (70.4) 118.7 BALANCE SHEET SUMMARY Current assets 261.4 248.8 288.1 309.2 344.7 - Non-current assets 2,314.3 2,253.7 2,210.7 2,168.6 2,153.4 - Total Assets 2,575.6 2,502.4 2,498.8 2,477.7 2,498.1 - Short term borrowings (interest and non interest bearing) 88.0 95.2 89.9 84.2 85.9 - Other current liabilities 73.2 69.3 68.4 79.4 110.5 - Long term borrowings (interest and non interest bearing) 1,464.1 1,490.2 1,555.3 1,598.9 1,631.9 - Other non current liabilities - - - - - - Equity & reserves 950.4 847.7 785.2 715.3 669.9 - Total Equity and Liabilities 2,575.6 2,407.2 2,408.9 2,393.6 2,412.2 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities 69.3 (11.0) 76.5 12.4 34.6 - Cash generated from investing activities (69.9) 6.3 (51.9) (29.8) (38.1) - Cash generated from financing activities - - - - 24.9 - Cash and cash equivalents movement for the year (0.6) (4.6) 24.6 (17.5) 21.5 - Cash and cash equivalents at end of year (30th June) 5.4 0.8 25.4 7.9 29.4 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 34.6% 36.8% 40.3% 37.0% 40.2% 25.9% Repairs & maintenance cost as a % of total operating and maintenance 5.3% 7.4% 4.8% 7.3% 4.2% 3.0% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] -58.4 -33.3 7.1 1.7 2.9 118.7 Operating surplus (deficit) [%] 4.0% 13.7% 27.0% 7.1% 6.3% 25.1% Surplus (deficit) after tax [%] -52.5% -41.6% -22.8% -24.2% -23.7% 18.9% Net debtors days (Collection period) [Days] 400 339 293 318 341 - Net debtors as percentage of operating revenue [%] 110% 93% 80% 87% 94% 0% Operating cost coverage ratio (OCCR) [%] 104.1% 115.9% 137.0% 107.6% 106.7% 133.5% Debt service coverage ratio (DSCR) 0.2 0.5 1.1 1.0 1.1 3.8 Current ratio 1.6 1.5 1.8 1.9 1.8 KEY OPERATING INDICATORS Number of water connections 19,767.0 25,274.0 27,826.0 31,272.0 38,206 Number of sewerage connections 9,261.0 11,557.0 10,704.0 11,321.0 11,488 Volume water produced per annum [Cubic meter] 11,719,642.0 12,227,000.0 12,318,750.0 15,512,500.0 10,364,678 Volume water sold i.e. billed 5,605,309.0 6,857,408.0 7,087,852.0 7,517,274.0 7,765,475 Non revenue Water [NRW] 52% 44% 42% 52% 25% Collection ratio 107% 103% 70% 81% 97% Service area coverage [Sq Km] 270 Population of area 350,000.0 272,472.0 375,193.0 401,456.0 429,558 Population served with potable water 114,787.0 147,544.0 233,000.0 260,512.0 220,198 Service area coverage [population served with water/ population of area] 33% 54% 62% 65% 51% Total Value of water sold [KES] 202,403,457 Average tariff per cubic meter of water sold [KES] 36.7 34.8 40.2 38.9 26 GARISSA [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - 49.1 62.7 66.8 89.6 88.0 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - 15.0 - - 0.5 2.8 Other revenue - 0.3 0.6 0.3 - - Total Revenue - 64.4 63.3 67.1 90.1 90.7 Expenditure Direct production costs - - 4.2 3.6 4.5 14.4 Employee related costs - 8.7 13.5 24.0 28.1 33.1 Lease fees to WSBs - - 1.5 4.7 6.4 8.1 WARMA and WASREB levies - - 0.4 1.2 1.6 1.8 Repairs and maintenance - 1.7 13.7 10.7 21.7 12.3 Other operating expenditure - 13.8 10.5 8.7 15.7 15.9 Total Operating and Maintenance Expenditure - 24.1 43.9 52.9 77.9 85.6 Interest expense - - 0.2 0.2 0.2 - Depreciation - 3.1 4.1 4.3 4.7 - Total Expenditure - 27.2 48.1 57.4 82.8 85.6 EBITDA Surplus (Deficit) Before Tax for the Year - - 40.3 37.2 19.4 15.1 14.3 9.7 12.2 7.3 5.1 5.1 33 Income tax expense / provision - 11.2 4.5 2.9 2.2 1.5 Surplus (Deficit) After Tax for the Year - 26.1 10.6 6.8 5.1 3.6 BALANCE SHEET SUMMARY Current assets - 57.5 74.1 86.6 70.3 - Non-current assets - 15.0 17.3 14.3 11.9 - Total Assets - 72.5 91.4 100.8 82.2 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - 14.6 21.3 24.1 28.2 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - 1.6 1.4 0.7 - Equity & reserves - 57.9 68.5 75.3 53.3 - Total Equity and Liabilities - 72.5 91.4 100.8 82.2 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - 23.5 (3.4) (2.4) 7.1 - Cash generated from investing activities - (6.0) (6.5) (1.2) (2.3) - Cash generated from financing activities - - 1.4 (0.3) (0.4) - Cash and cash equivalents movement for the year - 17.4 (8.5) (4.0) 4.4 - Cash and cash equivalents at end of year (30th June) - 17.4 8.9 5.0 9.4 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 38.9% 33.0% 47.4% 38.7% 38.7% Repairs & maintenance cost as a % of total operating and maintenance 6.9% 31.3% 20.2% 27.8% 14.4% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 29.1 14.7 11.1 9.8 3.6 Operating surplus (deficit) [%] 62.4% 30.0% 20.9% 13.5% 5.7% Surplus (deficit) after tax [%] 40.5% 16.7% 10.2% 5.7% 4.0% Net debtors days (Collection period) [Days] 296 367 430 239 - Net debtors as percentage of operating revenue [%] 81% 101% 118% 65% 0% Operating cost coverage ratio (OCCR) [%] 203.4% 142.9% 126.4% 115.6% 106.0% Debt service coverage ratio (DSCR) - - - - Current ratio 4.0 3.5 3.6 2.5 KEY OPERATING INDICATORS Number of water connections 6,238.0 7,379.0 6,892.0 8,739.0 8,446 Number of sewerage connections 351.0 410.0 372.0 376.0 8,782,605 Volume water produced per annum [Cubic meter] 3,240,000.0 3,240,000.0 3,463,455.0 3,960,068.0 4,344,969 Volume water sold i.e. billed 1,236,000.0 2,343,194.0 1,198,192.0 1,421,430.0 1,789,832 Non revenue Water [NRW] 62% 77% 65% 64% 59% Collection ratio 88% 45% 63% 74% 86% Service area coverage [Sq Km] 147 Population of area 180,000.0 210,000.0 110,000.0 186,522.0 132,500 Population served with potable water 37,404.0 120,000.0 91,542.0 121,239.0 124,715 Service area coverage [population served with water/ population of area] 21% 57% 83% 65% 94% Total Value of water sold [KES] 89,626,751 Average tariff per cubic meter of water sold [KES] 17.5 20.4 52.7 51.4 50 KISUMU [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales 156.4 182.3 187.2 229.5 275.8 317.5 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies 3.1 8.9 10.2 8.8 8.7 17.2 Other revenue 0.0 0.8 0.4 0.7 1.5 - Total Revenue 159.5 191.9 197.8 239.0 286.0 334.7 Expenditure Direct production costs 53.8 66.2 56.3 88.1 93.0 117.2 Employee related costs 49.2 60.2 61.3 71.3 74.3 94.6 Lease fees to WSBs - 18.0 18.0 18.0 18.0 18.0 WARMA and WASREB levies - - - 3.1 5.2 4.8 Repairs and maintenance 7.0 13.3 8.2 12.3 13.1 21.7 Other operating expenditure 44.9 26.7 28.9 32.1 63.9 76.3 Total Operating and Maintenance Expenditure 154.9 184.4 172.8 224.9 267.5 332.7 Interest expense 0.0 0.4 - - - - Depreciation 4.3 5.4 5.4 5.7 6.2 9.1 Total Expenditure 159.2 190.2 178.2 230.7 273.8 341.8 34 EBITDA Surplus (Deficit) Before Tax for the Year 4.7 0.4 7.5 1.8 25.0 19.6 14.1 8.4 18.5 12.2 2.0 (7.1) Income tax expense / provision 3.0 0.7 5.9 2.6 3.8 - Surplus (Deficit) After Tax for the Year (2.6) 1.0 13.7 5.7 8.4 (7.1) BALANCE SHEET SUMMARY Current assets 258.2 260.2 288.4 317.8 315.6 - Non-current assets 29.0 36.8 33.7 38.1 40.5 - Total Assets 287.2 296.9 322.1 356.0 356.1 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities 137.2 169.8 184.0 204.0 192.3 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities 156.3 132.3 135.3 143.7 148.1 - Equity & reserves (6.3) (5.1) 2.8 8.2 15.6 - Total Equity and Liabilities 287.2 296.9 322.1 356.0 356.1 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities 14.6 10.3 (1.0) 5.1 6.5 - Cash generated from investing activities (12.9) (14.7) (2.7) (9.1) (9.7) - Cash generated from financing activities 2.9 0.2 3.0 3.8 3.4 - Cash and cash equivalents movement for the year 4.6 (4.2) (0.7) (0.2) 0.2 - Cash and cash equivalents at end of year (30th June) 6.0 2.0 1.2 1.0 1.3 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 34.0% 33.4% 36.1% 32.4% 28.6% 30.2% Repairs & maintenance cost as a % of total operating and maintenance 4.5% 7.2% 4.8% 5.5% 4.9% 6.5% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 1.7 6.4 19.1 11.5 14.6 2.0 Operating surplus (deficit) [%] 2.9% 3.5% 12.1% 5.4% 5.8% 0.6% Surplus (deficit) after tax [%] -1.6% 0.5% 6.9% 2.4% 2.9% -2.1% Net debtors days (Collection period) [Days] 575 484 514 435 338 - Net debtors as percentage of operating revenue [%] 157% 133% 141% 119% 92% 0% Operating cost coverage ratio (OCCR) [%] 103.0% 103.7% 113.7% 105.7% 106.1% 100.6% Debt service coverage ratio (DSCR) - - Current ratio 1.9 1.5 1.6 1.6 1.6 KEY OPERATING INDICATORS Number of water connections 8,474.0 8,152.0 8,205.0 9,232.0 11,628 Number of sewerage connections 1,200.0 4,458.0 4,902.0 4,852.0 5,215 Volume water produced per annum [Cubic meter] 7,394,073.0 6,743,453.0 6,818,200.0 6,199,553.0 5,225,585 Volume water sold i.e. billed 1,852,120.0 2,098,303.0 2,780,057.0 2,337,958.0 2,635,181 Non revenue Water [NRW] 75% 69% 59% 62% 50% Collection ratio 110% 100% 91% 84% 93% Service area coverage [Sq Km] 297 Population of area 500,000.0 520,000.0 512,500.0 525,313.0 379,270 Population served with potable water 128,086.0 138,008.0 158,277.0 153,083.0 181,512 Service area coverage [population served with water/ population of area] 26% 27% 31% 29% 48% Total Value of water sold [KES] 259,274,489 Average tariff per cubic meter of water sold [KES] 87.9 86.9 67.3 98.2 98 MALINDI [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - 180.6 137.6 187.9 226.6 291.0 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - 13.2 10.7 10.8 15.9 34.0 Other revenue - 0.0 0.4 0.4 0.5 - Total Revenue - 193.8 148.7 199.1 243.0 325.0 Expenditure Direct production costs - 89.6 62.3 70.9 74.6 112.0 Employee related costs - 37.6 38.0 58.1 68.7 75.5 Lease fees to WSBs - 18.0 12.6 15.9 20.3 25.5 WARMA and WASREB levies - - 1.2 1.7 2.3 2.8 Repairs and maintenance - 13.9 7.6 7.8 8.6 17.8 Other operating expenditure - 38.6 32.1 38.1 51.5 44.9 Total Operating and Maintenance Expenditure - 197.7 153.7 192.4 226.1 278.7 Interest expense - 0.0 0.0 0.1 0.3 - Depreciation - 3.3 3.3 4.9 4.5 - Total Expenditure - 201.0 157.1 197.4 230.8 278.7 EBITDA Surplus (Deficit) Before Tax for the Year - - (3.9) (7.2) (5.0) (8.4) 6.7 1.7 17.0 12.2 46.3 46.3 35 Income tax expense / provision - - - - - - Surplus (Deficit) After Tax for the Year - (7.2) (8.4) 1.7 12.2 46.3 BALANCE SHEET SUMMARY Current assets - 28.0 55.6 69.8 103.0 - Non-current assets - 98.0 105.8 114.9 114.5 - Total Assets - 126.0 161.4 184.7 217.5 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - 26.2 69.7 91.4 99.1 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - 57.1 57.1 57.1 57.1 - Equity & reserves - 42.7 34.5 36.2 61.3 - Total Equity and Liabilities - 126.0 161.4 184.7 217.5 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - (1.7) 10.8 11.9 (3.6) - Cash generated from investing activities - (44.2) (10.6) (14.0) (4.2) - Cash generated from financing activities - 49.9 - - 12.9 - Cash and cash equivalents movement for the year - 4.0 0.2 (2.1) 5.1 - Cash and cash equivalents at end of year (30th June) - 4.0 4.3 (2.7) 7.2 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 25.6% 31.8% 37.8% 36.3% 29.3% Repairs & maintenance cost as a % of total operating and maintenance 7.0% 5.0% 4.1% 3.8% 6.4% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] -3.9 -5.1 6.6 16.7 46.3 Operating surplus (deficit) [%] -2.0% -3.7% 3.1% 6.8% 5.9% Surplus (deficit) after tax [%] -3.7% -5.6% 0.8% 5.0% 14.2% Net debtors days (Collection period) [Days] 17 49 56 75 - Net debtors as percentage of operating revenue [%] 5% 14% 15% 21% 0% Operating cost coverage ratio (OCCR) [%] 98.0% 96.5% 103.2% 107.3% 106.3% Debt service coverage ratio (DSCR) - - - - Current ratio 1.1 0.8 0.8 1.0 KEY OPERATING INDICATORS Number of water connections 9,394.0 7,710.0 11,128.0 12,356.0 14,997 Number of sewerage connections - - - - - Volume water produced per annum [Cubic meter] 4,174,420.0 5,066,770.0 4,490,880.0 4,301,060.0 4,053,735 Volume water sold i.e. billed 3,205,127.0 3,820,345.0 3,995,114.0 3,995,114.0 3,609,684 Non revenue Water [NRW] 23% 25% 11% 7% 11% Collection ratio 94% 73% 85% 85% 97% Service area coverage [Sq Km] 7,605 Population of area 373,000.0 67,992.0 259,756.0 418,482 Population served with potable water 192,000.0 43,902.0 - 207,804.8 370,000 Service area coverage [population served with water/ population of area] 51% 65% 0% 80% 88% Total Value of water sold [KES] 226,609,855 Average tariff per cubic meter of water sold [KES] 43.0 49.1 39.9 39.9 63 MERU [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales 44.6 55.8 62.1 80.6 106.2 89.2 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies 3.8 4.2 6.7 6.1 12.8 8.0 Other revenue 0.9 4.5 2.7 2.6 4.1 7.9 Total Revenue 49.2 64.6 71.4 89.3 123.0 105.2 Expenditure Direct production costs 3.5 3.4 2.4 3.1 4.2 4.7 Employee related costs 24.4 21.9 23.9 27.6 32.8 36.8 Lease fees to WSBs - - - - - - WARMA and WASREB levies - - - - - 0.9 Repairs and maintenance 5.0 7.9 6.4 7.2 6.0 13.6 Other operating expenditure 16.7 18.0 21.1 62.7 62.7 39.6 Total Operating and Maintenance Expenditure 49.6 51.3 53.7 100.6 105.6 95.6 Interest expense - - - - - - Depreciation 7.0 5.9 6.8 6.0 6.4 9.6 Total Expenditure 56.6 57.2 60.5 106.6 112.0 105.2 36 EBITDA Surplus (Deficit) Before Tax for the Year (0.3) (7.3) 13.3 7.4 17.7 10.9 (11.3) (17.3) 17.4 11.0 9.6 0.0 Income tax expense / provision - - - - - - Surplus (Deficit) After Tax for the Year (7.3) 7.4 10.9 (17.3) 11.0 0.0 BALANCE SHEET SUMMARY Current assets 62.3 69.8 85.6 94.5 136.7 - Non-current assets 34.5 36.2 35.8 35.9 38.7 - Total Assets 96.8 105.9 121.4 130.4 175.4 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities 10.5 11.9 17.7 15.4 22.0 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities 43.7 43.6 43.6 43.6 37.6 - Equity & reserves 42.6 50.5 60.2 71.4 115.9 - Total Equity and Liabilities 96.8 105.9 121.4 130.4 175.4 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities 13.2 22.1 7.7 28.6 24.8 - Cash generated from investing activities (10.0) (6.2) (15.0) (3.8) (6.1) - Cash generated from financing activities 0.1 (0.1) 0.8 - 5.6 - Cash and cash equivalents movement for the year 3.2 15.8 (6.5) 24.8 24.3 - Cash and cash equivalents at end of year (30th June) 24.5 40.3 33.8 58.5 82.8 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 53.6% 47.2% 47.9% 28.5% 33.1% 40.9% Repairs & maintenance cost as a % of total operating and maintenance 10.2% 15.5% 11.9% 7.1% 5.6% 14.3% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] -0.3 13.3 17.7 -11.3 17.4 9.6 Operating surplus (deficit) [%] -2.4% 14.5% 21.9% -16.0% 11.2% 1.7% Surplus (deficit) after tax [%] -14.9% 11.5% 15.3% -19.3% 9.0% 0.0% Net debtors days (Collection period) [Days] 239 139 180 81 113 - Net debtors as percentage of operating revenue [%] 65% 38% 49% 22% 31% 0% Operating cost coverage ratio (OCCR) [%] 96.9% 117.0% 126.4% 86.2% 107.4% 101.7% Debt service coverage ratio (DSCR) Current ratio 6.0 5.9 4.8 6.1 6.2 KEY OPERATING INDICATORS Number of water connections 3,870.0 4,769.0 4,874.0 5,687.0 7,463 Number of sewerage connections 640.0 - 748.0 748.0 800 Volume water produced per annum [Cubic meter] 1,323,000.0 1,588,903.0 1,680,314.0 1,926,119.0 1,799,018 Volume water sold i.e. billed 960,102.0 1,150,181.0 1,233,392.0 1,378,429.0 1,377,228 Non revenue Water [NRW] 27% 28% 27% 28% 23% Collection ratio 137% 118% 86% 110% 67% Service area coverage [Sq Km] 61 Population of area 165,088.0 63,325.0 103,602.0 105,985.0 128,274 Population served with potable water 24,980.0 44,872.0 45,829.0 53,146.0 56,914 Service area coverage [population served with water/ population of area] 15% 71% 44% 50% 44% Total Value of water sold [KES] 85,936,932 Average tariff per cubic meter of water sold [KES] 46.4 48.5 50.3 55.7 62 MURANGA [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - - 34.6 51.1 64.1 81.8 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - - 23.4 21.2 17.8 11.5 Other revenue - - 0.9 0.1 0.0 0.5 Total Revenue - - 58.9 72.4 81.9 93.8 Expenditure Direct production costs - - 15.1 18.4 19.6 21.0 Employee related costs - - 22.5 21.5 25.9 22.0 Lease fees to WSBs - - 4.5 5.5 5.8 7.1 WARMA and WASREB levies - - 0.2 0.7 1.2 0.9 Repairs and maintenance - - 5.8 7.3 8.5 8.2 Other operating expenditure - - 8.4 5.5 10.1 10.8 Total Operating and Maintenance Expenditure - - 56.5 58.8 71.1 70.1 Interest expense - - - - - - Depreciation - - 1.9 3.7 4.8 - Total Expenditure - - 58.4 62.5 75.9 70.1 EBITDA Surplus (Deficit) Before Tax for the Year - - - - 2.4 0.5 13.6 9.9 10.8 6.0 23.7 23.7 37 Income tax expense / provision - - 0.1 3.0 1.8 7.1 Surplus (Deficit) After Tax for the Year - - 0.3 6.9 4.2 16.6 BALANCE SHEET SUMMARY Current assets - 4.1 22.8 24.8 23.4 - Non-current assets - - 16.6 27.2 38.2 - Total Assets - 4.1 39.3 52.0 61.6 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - - 5.7 11.5 16.8 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - - - - Equity & reserves - 4.1 33.6 40.5 44.8 - Total Equity and Liabilities - 4.1 39.3 52.0 61.6 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - - 16.9 19.2 12.0 - Cash generated from investing activities - - (18.5) (14.4) (15.8) - Cash generated from financing activities - - 0.5 0.6 - - Cash and cash equivalents movement for the year - - (1.1) 5.4 (3.7) - Cash and cash equivalents at end of year (30th June) - 4.1 3.0 8.4 4.7 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 41.2% 37.8% 38.6% 34.2% Repairs & maintenance cost as a % of total operating and maintenance 10.3% 12.4% 11.9% 11.7% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 2.3 10.7 9.0 16.6 Operating surplus (deficit) [%] 2.6% 16.6% 12.7% 24.9% Surplus (deficit) after tax [%] 0.6% 9.6% 5.1% 17.7% Net debtors days (Collection period) [Days] 190 94 90 - Net debtors as percentage of operating revenue [%] 52% 26% 25% 0% Operating cost coverage ratio (OCCR) [%] 63.7% 94.4% 97.3% 116.8% Debt service coverage ratio (DSCR) Current ratio 4.0 2.2 1.4 KEY OPERATING INDICATORS Number of water connections 4,989.0 4,803.0 4,538.0 4,911.0 4,992 Number of sewerage connections - 1,000.0 1,747.0 2,156.0 2,391 Volume water produced per annum [Cubic meter] 1,111,440.0 1,404,598.0 1,800,000.0 1,800,000.0 1,810,000 Volume water sold i.e. billed 691,242.0 319,442.0 759,724.0 907,485.0 890,000 Non revenue Water [NRW] 38% 77% 58% 50% 51% Collection ratio 67% 98% 117% 103% 94% Service area coverage [Sq Km] 12 Population of area 75,746.0 40,000.0 45,000.0 47,000.0 50,000 Population served with potable water 20,670.0 20,412.0 24,132.0 24,816.0 30,000 Service area coverage [population served with water/ population of area] 27% 51% 54% 53% 60% Total Value of water sold [KES] 51,639,804 Average tariff per cubic meter of water sold [KES] 32.5 77.9 39.8 46.5 58 NAIROBI [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales 3,158.2 2,954.4 3,185.8 3,082.3 4,512.4 5,646.6 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies 153.7 250.6 464.0 394.2 545.1 676.0 Other revenue 0.2 0.9 - (0.2) - - Total Revenue 3,312.1 3,205.9 3,649.8 3,476.2 5,057.4 6,322.6 Expenditure Direct production costs 272.0 254.2 262.4 340.3 399.1 402.4 Employee related costs 954.3 1,164.9 1,221.9 1,243.4 1,548.9 2,154.5 Lease fees to WSBs 407.0 519.2 518.3 520.6 526.2 632.1 WARMA and WASREB levies - - - - - - Repairs and maintenance 338.5 246.1 161.1 233.7 488.1 529.3 Other operating expenditure 732.3 690.8 1,047.2 604.5 1,667.8 1,276.6 Total Operating and Maintenance Expenditure 2,704.0 2,875.3 3,210.9 2,942.4 4,630.1 4,994.9 Interest expense 7.6 24.5 41.4 84.1 77.9 68.6 Depreciation 54.0 67.7 165.1 190.0 203.5 336.7 Total Expenditure 2,765.6 2,967.4 3,417.5 3,216.5 4,911.5 5,400.2 38 EBITDA Surplus (Deficit) Before Tax for the Year 608.1 546.5 330.6 238.5 438.8 232.3 533.8 259.7 427.4 146.0 1,327.7 922.4 Income tax expense / provision 163.9 71.5 69.7 77.9 43.8 276.7 Surplus (Deficit) After Tax for the Year 382.5 166.9 162.6 181.8 102.2 645.7 BALANCE SHEET SUMMARY Current assets 2,601.1 3,086.9 2,440.4 3,353.2 3,045.7 - Non-current assets 530.7 796.4 854.6 791.5 732.6 - Total Assets 3,131.8 3,883.3 3,295.0 4,144.7 3,778.3 - Short term borrowings (interest and non interest bearing) 13.9 213.9 80.4 100.0 114.0 - Other current liabilities 1,716.0 1,870.8 1,271.0 2,006.6 2,125.7 - Long term borrowings (interest and non interest bearing) 22.9 5.9 - 316.7 237.1 - Other non current liabilities 64.2 92.8 662.8 441.0 593.9 - Equity & reserves 1,314.7 1,699.9 1,280.8 1,280.4 707.6 - Total Equity and Liabilities 3,131.8 3,669.4 3,214.6 4,044.7 3,664.3 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities 335.1 33.9 188.3 (207.6) 326.1 - Cash generated from investing activities (380.5) (363.5) (230.4) (128.1) (144.5) - Cash generated from financing activities 60.1 381.1 (21.0) 336.2 (65.6) - Cash and cash equivalents movement for the year 14.7 51.5 (63.1) 0.6 116.1 - Cash and cash equivalents at end of year (30th June) 16.5 68.0 4.9 5.5 121.6 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 35.7% 40.9% 38.3% 42.9% 33.8% 43.3% Repairs & maintenance cost as a % of total operating and maintenance 12.5% 8.6% 5.0% 7.9% 10.5% 10.6% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 436.5 234.6 327.7 371.8 305.7 982.4 Operating surplus (deficit) [%] 18.4% 10.3% 12.0% 15.4% 8.5% 21.0% Surplus (deficit) after tax [%] 11.5% 5.2% 4.5% 5.2% 2.0% 10.2% Net debtors days (Collection period) [Days] 234 271 197 297 172 - Net debtors as percentage of operating revenue [%] 64% 74% 54% 81% 47% 0% Operating cost coverage ratio (OCCR) [%] 120.6% 108.3% 110.8% 118.0% 109.0% 126.6% Debt service coverage ratio (DSCR) 20.6 6.3 1.1 1.8 1.6 15.3 Current ratio 1.5 1.5 1.8 1.6 1.4 KEY OPERATING INDICATORS Number of water connections 234,571.0 209,476.0 195,044.0 244,297.0 268,616 Number of sewerage connections 155,369.0 119,886.0 82,779.0 157,371.0 168,209 Volume water produced per annum [Cubic meter] 125,396,825.0 170,000,000.0 178,000,000.0 154,000,000.0 146,816,185 Volume water sold i.e. billed 79,000,000.0 102,701,452.0 107,195,094.0 93,119,437.0 85,347,432 Non revenue Water [NRW] 37% 40% 40% 40% 42% Collection ratio 71% 85% 82% 80% 95% Service area coverage [Sq Km] 700 Population of area 2,798,661.0 3,140,173.0 3,167,665.0 3,203,201.0 3,555,553 Population served with potable water 1,272,810.0 1,107,330.0 2,085,827.0 2,157,826.0 2,250,607 Service area coverage [population served with water/ population of area] 45% 35% 66% 67% 63% Total Value of water sold [KES] 2,710,313,474 Average tariff per cubic meter of water sold [KES] 46.2 29.5 29.3 34.1 32 NAKURU [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales 288.1 303.3 286.7 550.8 581.9 660.0 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies 7.4 8.7 10.0 14.1 8.5 7.4 Other revenue 5.6 15.2 - - 12.8 - Total Revenue 301.2 327.3 296.7 564.9 603.2 667.4 Expenditure Direct production costs 90.6 75.7 97.7 112.6 166.0 191.0 Employee related costs 66.6 68.5 91.0 152.2 120.8 185.3 Lease fees to WSBs 23.5 22.4 24.4 48.4 68.3 101.0 WARMA and WASREB levies - - - - 10.5 11.0 Repairs and maintenance - 10.9 2.5 8.0 6.5 39.4 Other operating expenditure 95.6 133.2 59.4 157.8 87.2 (527.7) Total Operating and Maintenance Expenditure 276.3 310.6 275.0 479.0 459.2 - Interest expense - - - - - - Depreciation 3.6 4.4 4.6 8.2 6.4 7.1 Total Expenditure 279.9 315.0 279.6 487.2 465.6 7.1 EBITDA Surplus (Deficit) Before Tax for the Year 24.9 21.3 16.7 12.3 21.7 17.1 85.9 77.7 143.9 137.6 667.4 660.3 39 Income tax expense / provision 6.4 3.7 5.1 23.3 41.3 198.1 Surplus (Deficit) After Tax for the Year 14.9 8.6 12.0 54.4 96.3 462.2 BALANCE SHEET SUMMARY Current assets 69.9 104.0 97.0 135.5 290.8 - Non-current assets 25.3 23.0 17.7 21.8 40.2 - Total Assets 95.3 126.9 114.7 157.3 331.0 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities 73.6 96.7 72.8 75.8 141.7 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities 225.3 225.3 225.3 225.3 225.3 - Equity & reserves (203.7) (195.1) (183.4) (143.8) (36.0) - Total Equity and Liabilities 95.3 126.9 114.7 157.3 331.0 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities 16.7 3.4 (16.5) 59.5 (6.1) - Cash generated from investing activities (21.7) (5.5) (0.7) (6.0) (25.1) - Cash generated from financing activities - - - - 11.5 - Cash and cash equivalents movement for the year (5.0) (2.1) (17.2) 53.5 (19.7) - Cash and cash equivalents at end of year (30th June) 4.7 2.6 (14.6) 39.0 19.3 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 24.1% 22.0% 33.1% 33.5% 28.5% Repairs & maintenance cost as a % of total operating and maintenance 0.0% 3.5% 0.9% 1.7% 1.4% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 18.5 13.0 16.6 62.6 102.7 469.3 Operating surplus (deficit) [%] 6.5% 0.5% 7.3% 15.2% 22.2% 100.0% Surplus (deficit) after tax [%] 5.0% 2.6% 4.0% 9.6% 16.0% 69.3% Net debtors days (Collection period) [Days] 66 96 98 33 135 - Net debtors as percentage of operating revenue [%] 18% 26% 27% 9% 37% 0% Operating cost coverage ratio (OCCR) [%] 107.0% 100.5% 107.9% 117.9% 128.6% Debt service coverage ratio (DSCR) Current ratio 0.9 1.1 1.3 1.8 2.1 KEY OPERATING INDICATORS Number of water connections 15,913.0 23,161.0 19,935.0 26,475.0 23,374 Number of sewerage connections 7,810.0 9,572.0 9,988.0 13,040.0 11,016 Volume water produced per annum [Cubic meter] 12,181,751.0 9,316,872.0 9,974,963.0 10,301,546.0 12,134,897 Volume water sold i.e. billed 3,858,658.0 4,421,852.0 5,356,804.0 5,453,088.0 5,726,240 Non revenue Water [NRW] 68% 53% 46% 47% 53% Collection ratio 119% 72% 79% 92% 74% Service area coverage [Sq Km] 130 Population of area 400,000.0 540,000.0 450,000.0 674,789.0 473,288 Population served with potable water 98,320.0 360,000.0 352,274.0 472,352.0 372,366 Service area coverage [population served with water/ population of area] 25% 67% 78% 70% 79% Total Value of water sold [KES] 351,872,492 Average tariff per cubic meter of water sold [KES] 62.2 102.1 56.0 71.4 61 NANYUKI [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - - 157.1 107.9 114.0 163.6 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - - 84.7 27.5 16.4 38.9 Other revenue - - 0.3 0.7 0.6 0.4 Total Revenue - - 242.1 136.1 131.0 202.9 Expenditure Direct production costs - - 4.7 5.0 5.4 5.4 Employee related costs - - 42.4 37.0 40.1 38.5 Lease fees to WSBs - - 25.1 17.0 24.0 44.9 WARMA and WASREB levies - - 1.2 1.8 2.0 1.6 Repairs and maintenance - - 2.5 8.0 6.5 7.5 Other operating expenditure - - 58.5 31.3 41.9 93.4 Total Operating and Maintenance Expenditure - - 134.4 100.2 119.8 191.4 Interest expense - - - - - - Depreciation - - - 9.2 9.9 11.5 Total Expenditure - - 134.4 109.4 129.8 202.9 40 EBITDA Surplus (Deficit) Before Tax for the Year - - - - 107.7 107.7 35.9 26.7 11.2 1.3 11.5 - Income tax expense / provision - - 32.3 8.0 0.4 - Surplus (Deficit) After Tax for the Year - - 75.4 18.7 0.9 - BALANCE SHEET SUMMARY Current assets - - 227.8 235.8 246.8 - Non-current assets - - 217.6 256.0 264.5 - Total Assets - - 445.4 491.8 511.3 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - - 36.7 64.8 83.3 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - - - - Equity & reserves - - 408.7 427.0 427.9 - Total Equity and Liabilities - - 445.4 491.8 511.3 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - - (96.1) 28.1 15.3 - Cash generated from investing activities - - (217.6) (48.0) (18.4) - Cash generated from financing activities - - 334.8 1.1 4.1 - Cash and cash equivalents movement for the year - - 21.1 (18.8) 1.0 - Cash and cash equivalents at end of year (30th June) - - 21.1 2.3 3.2 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 33.5% 40.8% 36.4% 21.5% Repairs & maintenance cost as a % of total operating and maintenance 1.8% 8.0% 5.4% 3.9% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 75.4 27.9 10.8 11.5 Operating surplus (deficit) [%] 44.4% 26.0% 8.1% -11.0% Surplus (deficit) after tax [%] 31.1% 13.8% 0.7% 0.0% Net debtors days (Collection period) [Days] 312 629 679 - Net debtors as percentage of operating revenue [%] 85% 172% 186% 0% Operating cost coverage ratio (OCCR) [%] 179.9% 135.2% 108.8% 90.1% Debt service coverage ratio (DSCR) Current ratio 6.2 3.6 3.0 KEY OPERATING INDICATORS Number of water connections 5,182.0 5,262.0 8,103.0 8,000.0 8,428 Number of sewerage connections 2,550.0 2,574.0 2,136.0 3,364.0 3,484 Volume water produced per annum [Cubic meter] 5,250,000.0 3,984,710.0 4,008,107.0 3,832,309.0 3,833,256 Volume water sold i.e. billed 2,407,838.0 1,908,588.0 2,169,899.0 2,084,047.0 2,187,889 Non revenue Water [NRW] 54% 52% 46% 46% 43% Collection ratio 90% 63% 69% 84% 95% Service area coverage [Sq Km] 141 Population of area 80,000.0 80,000.0 80,000.0 83,360.0 86,054 Population served with potable water 54,240.0 41,840.0 46,626.0 50,360.0 57,252 Service area coverage [population served with water/ population of area] 68% 52% 58% 60% 67% Total Value of water sold [KES] 79,834,005 Average tariff per cubic meter of water sold [KES] 56.4 75.2 76.2 60.8 36 NYAHUTURU [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - 37.6 - 74.0 84.9 105.4 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - 4.6 - 4.4 7.1 11.6 Other revenue - 0.3 - 0.4 0.8 0.4 Total Revenue - 42.5 - 78.8 92.9 117.4 Expenditure Direct production costs - 8.0 - 17.1 17.8 13.2 Employee related costs - 23.7 - 35.4 33.9 47.5 Lease fees to WSBs - 3.2 - 6.1 6.6 1.1 WARMA and WASREB levies - 0.4 - 1.5 1.9 1.6 Repairs and maintenance - 0.9 - 2.8 9.1 6.5 Other operating expenditure - 5.7 - 11.0 18.1 30.1 Total Operating and Maintenance Expenditure - 41.9 - 73.8 87.5 99.8 Interest expense - 0.1 - - - - Depreciation - 2.4 - 4.5 4.6 - Total Expenditure - 44.4 - 78.3 92.1 99.8 EBITDA Surplus (Deficit) Before Tax for the Year - - 0.6 (1.9) - - 5.0 0.6 5.4 0.8 17.6 17.6 41 Income tax expense / provision - - - - - - Surplus (Deficit) After Tax for the Year - (1.9) - 0.6 0.8 17.6 BALANCE SHEET SUMMARY Current assets 1.2 20.5 - 24.7 29.5 - Non-current assets - 65.2 - 66.5 71.3 - Total Assets 1.2 85.7 - 91.2 100.8 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - 15.7 - 21.0 31.4 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - - - - Equity & reserves 1.2 70.0 - 70.2 69.4 - Total Equity and Liabilities 1.2 85.7 - 91.2 100.8 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - 2.7 - 4.4 8.2 - Cash generated from investing activities - (1.6) - (5.8) (9.4) - Cash generated from financing activities - (0.3) - - - - Cash and cash equivalents movement for the year - 0.9 - (1.3) (1.2) - Cash and cash equivalents at end of year (30th June) 1.2 2.1 - 0.7 (0.4) - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 57.8% 48.7% 40.6% 48.3% Repairs & maintenance cost as a % of total operating and maintenance 2.1% 3.8% 10.4% 6.5% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 0.5 5.0 5.4 17.6 Operating surplus (deficit) [%] 0.7% 5.9% 5.0% 7.5% Surplus (deficit) after tax [%] -4.5% 0.7% 0.9% 15.0% Net debtors days (Collection period) [Days] 136 101 108 - Net debtors as percentage of operating revenue [%] 37% 28% 29% 0% Operating cost coverage ratio (OCCR) [%] 100.7% 106.3% 100.0% 108.1% Debt service coverage ratio (DSCR) - Current ratio 1.3 1.2 0.9 KEY OPERATING INDICATORS Number of water connections 3,514.0 3,604.0 5,373.0 6,302.0 6,696 Number of sewerage connections 1,629.0 1,661.0 2,182.0 3,163.0 2,624 Volume water produced per annum [Cubic meter] 1,080,000.0 1,080,000.0 2,245,716.0 2,291,150.0 2,496,306 Volume water sold i.e. billed 671,379.0 671,379.0 989,771.0 979,311.0 1,062,894 Non revenue Water [NRW] 38% 38% 56% 57% 57% Collection ratio 98% 98% 103% 95% 98% Service area coverage [Sq Km] 205 Population of area 48,853.0 33,764.0 83,998.0 95,000.0 103,264 Population served with potable water 27,865.0 16,849.0 29,377.0 35,564.0 46,014 Service area coverage [population served with water/ population of area] 57% 50% 35% 37% 45% Total Value of water sold [KES] 83,224,441 Average tariff per cubic meter of water sold [KES] 47.7 47.7 38.0 55.0 78 RUIRU JUJA [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - 8.0 16.4 23.3 35.7 54.6 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - - 5.8 6.4 4.7 22.5 Other revenue - - 0.1 2.0 2.5 3.2 Total Revenue - 8.0 22.4 31.7 42.8 80.3 Expenditure Direct production costs - 1.2 3.9 9.0 11.2 - Employee related costs - 0.7 8.5 10.5 12.4 19.9 Lease fees to WSBs - 0.6 0.8 2.0 3.2 8.9 WARMA and WASREB levies - - - - - - Repairs and maintenance - 0.3 1.5 1.0 0.9 - Other operating expenditure - 2.2 4.6 7.0 4.8 30.2 Total Operating and Maintenance Expenditure - 5.1 19.4 29.5 32.5 59.0 Interest expense - - - - - - Depreciation - 0.0 0.6 1.0 1.2 - Total Expenditure - 5.1 20.0 30.5 33.7 59.0 42 EBITDA Surplus (Deficit) Before Tax for the Year - - 2.9 2.9 3.0 2.4 2.2 1.2 10.3 9.1 21.3 21.3 Income tax expense / provision - - - - 2.8 - Surplus (Deficit) After Tax for the Year - 2.9 2.4 1.2 6.3 21.3 BALANCE SHEET SUMMARY Current assets - 5.6 4.9 7.9 16.3 - Non-current assets - 0.3 4.8 6.4 7.8 - Total Assets - 5.9 9.7 14.3 24.1 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - 3.8 4.4 6.0 9.4 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - - - - Equity & reserves - 2.0 5.3 8.3 14.7 - Total Equity and Liabilities - 5.9 9.7 14.3 24.1 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - 3.1 3.3 1.2 5.1 - Cash generated from investing activities - (0.3) (5.2) (1.5) (0.7) - Cash generated from financing activities - 0.0 0.9 - - - Cash and cash equivalents movement for the year - 2.8 (1.0) (0.3) 4.4 - Cash and cash equivalents at end of year (30th June) - 2.8 1.8 1.5 6.0 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 30.3% 49.5% 39.8% 38.9% 33.7% Repairs & maintenance cost as a % of total operating and maintenance 6.3% 7.9% 3.6% 2.7% 0.0% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 2.9 3.0 2.2 7.5 21.3 Operating surplus (deficit) [%] 36.7% 12.9% 0.6% 19.5% -6.5% Surplus (deficit) after tax [%] 36.3% 10.7% 3.9% 14.7% 26.5% Net debtors days (Collection period) [Days] 127 69 69 78 - Net debtors as percentage of operating revenue [%] 35% 19% 19% 21% 0% Operating cost coverage ratio (OCCR) [%] 157.9% 84.7% 79.0% 109.8% 92.6% Debt service coverage ratio (DSCR) Current ratio 1.5 1.1 1.3 1.7 KEY OPERATING INDICATORS Number of water connections 3,271.0 5,168.0 3,846 Number of sewerage connections 100.0 100.0 146 Volume water produced per annum [Cubic meter] 603,140.0 735,878.0 834,966 Volume water sold i.e. billed 413,773.0 542,544.0 572,225 Non revenue Water [NRW] 31% 26% 31% Collection ratio 90% 86% 91% Service area coverage [Sq Km] 297 Population of area 136,734.0 115,375.0 176,342 Population served with potable water 72,446.0 50,765.0 69,740 Service area coverage [population served with water/ population of area] 53% 64% 40% Total Value of water sold [KES] 35,700,185 Average tariff per cubic meter of water sold [KES] 39.6 43.0 62 THIKA [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - - - - 149.9 - UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - - - - - - Other revenue - - - - 9.0 - Total Revenue - - - - 158.9 - Expenditure Direct production costs - - - - 66.8 - Employee related costs - - - - 41.2 - Lease fees to WSBs - - - - 23.0 - WARMA and WASREB levies - - - - 3.4 - Repairs and maintenance - - - - 8.5 - Other operating expenditure - - - - 40.9 - Total Operating and Maintenance Expenditure - - - - 183.8 - Interest expense - - - - - - Depreciation - - - - 0.8 - Total Expenditure - - - - 184.6 - EBITDA Surplus (Deficit) Before Tax for the Year - - - - - - - - (25.0) (25.7) - - 43 Income tax expense / provision - - - - - - Surplus (Deficit) After Tax for the Year - - - - (25.7) - BALANCE SHEET SUMMARY Current assets - - - - 254.2 - Non-current assets - - - - 17.5 - Total Assets - - - - 271.7 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - - - - 74.1 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - - - - Equity & reserves - - - - 197.6 - Total Equity and Liabilities - - - - 271.7 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - - - - (203.8) - Cash generated from investing activities - - - - 204.9 - Cash generated from financing activities - - - - - - Cash and cash equivalents movement for the year - - - - 1.1 - Cash and cash equivalents at end of year (30th June) - - - - 1.1 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 26.3% Repairs & maintenance cost as a % of total operating and maintenance 4.6% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] -25.0 Operating surplus (deficit) [%] -22.6% Surplus (deficit) after tax [%] -16.2% Net debtors days (Collection period) [Days] 607 Net debtors as percentage of operating revenue [%] 166% Operating cost coverage ratio (OCCR) [%] 81.5% Debt service coverage ratio (DSCR) Current ratio 3.4 KEY OPERATING INDICATORS Number of water connections 89.0 162.0 16,708 Number of sewerage connections - - 9,600 Volume water produced per annum [Cubic meter] 206,436.0 522,887.0 9,000,000 Volume water sold i.e. billed 147,851.0 236,482.0 5,400,000 Non revenue Water [NRW] 40% Collection ratio 85% Service area coverage [Sq Km] 254 Population of area 32,600.0 32,000.0 400,000 Population served with potable water 18,980.0 7,020.0 330,000 Service area coverage [population served with water/ population of area] 83% Total Value of water sold [KES] 148,916,366 Average tariff per cubic meter of water sold [KES] 30.4 28.6 28 EMBU [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales 46.0 55.7 77.2 89.3 116.5 146.2 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies 1.2 0.2 1.2 2.0 2.5 2.2 Other revenue 0.3 1.0 0.4 0.5 2.6 0.2 Total Revenue 47.5 56.9 78.9 91.8 121.6 148.6 Expenditure Direct production costs 8.6 2.9 1.4 2.1 3.3 - Employee related costs 9.8 17.1 24.4 32.5 49.7 43.3 Lease fees to WSBs 2.4 2.8 3.7 4.7 5.0 - WARMA and WASREB levies 2.4 2.8 0.6 1.0 1.0 - Repairs and maintenance 5.7 3.4 6.2 7.5 11.1 13.9 Other operating expenditure 11.5 8.9 14.1 19.0 26.7 46.4 Total Operating and Maintenance Expenditure 40.3 37.8 50.4 66.7 96.8 103.5 Interest expense - - 0.1 0.5 0.3 0.2 Depreciation 6.6 18.6 19.6 19.2 19.3 24.1 Total Expenditure 46.9 56.4 70.1 86.5 116.4 127.8 44 EBITDA Surplus (Deficit) Before Tax for the Year 7.3 0.6 19.1 0.5 28.4 8.8 25.1 5.4 24.8 5.2 45.1 20.8 Income tax expense / provision 0.2 0.2 2.1 1.6 1.6 6.3 Surplus (Deficit) After Tax for the Year 0.4 0.4 6.7 3.7 3.6 14.6 BALANCE SHEET SUMMARY Current assets 46.5 37.1 52.6 67.3 84.4 - Non-current assets 117.8 138.1 139.4 138.6 140.0 - Total Assets 164.3 175.2 192.0 205.9 224.5 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities 13.1 14.6 27.0 39.5 56.4 - Long term borrowings (interest and non interest bearing) - 8.1 2.5 1.1 - - Other non current liabilities - - 3.7 2.9 2.0 - Equity & reserves 151.2 152.5 158.9 162.4 166.0 - Total Equity and Liabilities 164.3 175.2 192.0 205.9 224.5 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities (16.8) 25.3 16.8 22.9 20.4 - Cash generated from investing activities 26.3 (38.9) (20.8) (18.4) (20.7) - Cash generated from financing activities - 9.1 (0.3) (2.2) (0.9) - Cash and cash equivalents movement for the year 9.6 (4.4) (4.3) 2.4 (1.2) - Cash and cash equivalents at end of year (30th June) 9.6 5.1 0.8 4.6 3.4 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 24.2% 45.7% 50.3% 49.7% 56.2% 41.8% Repairs & maintenance cost as a % of total operating and maintenance 14.1% 8.9% 12.3% 11.3% 11.5% 13.4% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 7.1 19.0 26.3 22.9 22.9 38.7 Operating surplus (deficit) [%] 14.7% 32.4% 35.7% 26.9% 18.6% 30.2% Surplus (deficit) after tax [%] 0.9% 0.6% 8.6% 4.1% 3.0% 9.8% Net debtors days (Collection period) [Days] 274 204 209 214 222 - Net debtors as percentage of operating revenue [%] 75% 56% 57% 59% 61% 0% Operating cost coverage ratio (OCCR) [%] 117.2% 147.9% 155.6% 136.9% 122.9% 143.4% Debt service coverage ratio (DSCR) 1.1 4.6 12.0 74.5 243.7 Current ratio 3.6 2.5 2.0 1.7 1.5 KEY OPERATING INDICATORS Number of water connections 7,214.0 4,970.0 5,690.0 7,065.0 11,202 Number of sewerage connections 1,146.0 983.0 2,029.0 2,480.0 1,945 Volume water produced per annum [Cubic meter] 1,555,760.0 2,308,080.0 3,211,463.0 3,725,658.0 3,748,675 Volume water sold i.e. billed 1,077,335.0 1,126,707.0 1,338,647.0 1,596,486.0 1,597,866 Non revenue Water [NRW] 31% 51% 58% 57% 57% Collection ratio 63% 108% 77% 92% 83% Service area coverage [Sq Km] 900 Population of area 120,000.0 120,000.0 120,000.0 140,000.0 149,000 Population served with potable water 60,000.0 57,480.0 53,192.0 67,549.0 83,865 Service area coverage [population served with water/ population of area] 50% 48% 44% 48% 56% Total Value of water sold [KES] 101,914,797 Average tariff per cubic meter of water sold [KES] 69.7 46.8 57.7 55.9 64 GUSSI [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - 19.2 18.5 31.2 58.0 58.2 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - 31.4 24.7 42.4 41.9 22.3 Other revenue - - - - - - Total Revenue - 50.6 43.2 73.6 99.8 80.5 Expenditure Direct production costs - 19.2 17.2 27.1 36.0 23.1 Employee related costs - 18.7 17.8 28.6 23.2 21.8 Lease fees to WSBs - - - - - 5.4 WARMA and WASREB levies - - - - - 1.3 Repairs and maintenance - 0.9 1.5 1.2 2.7 9.8 Other operating expenditure - 6.8 9.9 12.5 13.3 26.7 Total Operating and Maintenance Expenditure - 45.6 46.4 69.3 75.1 88.0 Interest expense - - - - - - Depreciation - 0.0 0.0 0.1 0.7 - Total Expenditure - 45.6 46.4 69.4 75.8 88.0 EBITDA Surplus (Deficit) Before Tax for the Year - - 5.0 5.0 (3.1) (3.1) 4.3 4.2 24.7 24.1 (7.5) (7.5) 45 Income tax expense / provision - 1.5 - 0.3 7.2 - Surplus (Deficit) After Tax for the Year - 3.5 (3.1) 3.9 16.8 (7.5) BALANCE SHEET SUMMARY Current assets - 13.8 15.2 25.2 43.6 - Non-current assets - 0.0 0.1 0.1 2.4 - Total Assets - 13.8 15.3 25.4 45.9 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - 10.3 14.6 25.3 29.0 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - 4.2 4.5 - - - Equity & reserves - (0.7) (3.8) 0.1 17.0 - Total Equity and Liabilities - 13.8 15.3 25.4 45.9 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - (0.0) (0.3) (0.6) 6.2 - Cash generated from investing activities - (0.0) (0.1) (0.0) (2.8) - Cash generated from financing activities - 1.4 0.4 0.4 0.5 - Cash and cash equivalents movement for the year - 1.3 (0.0) (0.2) 3.8 - Cash and cash equivalents at end of year (30th June) - 1.3 1.3 1.1 4.9 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 44.3% 42.6% 42.6% 32.3% 26.0% Repairs & maintenance cost as a % of total operating and maintenance 2.0% 3.3% 1.7% 3.5% 11.2% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 3.5 -3.1 4.0 17.5 -7.5 Operating surplus (deficit) [%] 9.8% -7.2% 5.8% 24.8% -9.4% Surplus (deficit) after tax [%] 6.9% -7.3% 5.3% 16.9% -9.4% Net debtors days (Collection period) [Days] 230 260 267 235 - Net debtors as percentage of operating revenue [%] 63% 71% 73% 64% 0% Operating cost coverage ratio (OCCR) [%] 43.2% 41.5% 47.3% 79.9% 68.2% Debt service coverage ratio (DSCR) Current ratio 1.3 1.0 1.0 1.5 KEY OPERATING INDICATORS Number of water connections 11,555.0 394.0 4,513.0 12,400 Number of sewerage connections 1,056.0 - 1,230.0 1,200 Volume water produced per annum [Cubic meter] 1,093,176.0 963,465.0 1,210,271.0 1,291,980 Volume water sold i.e. billed 622,409.0 575,602.0 669,745.0 700,000 Non revenue Water [NRW] 53% 40% 45% 46% Collection ratio 89% 142% 72% 100% Service area coverage [Sq Km] 326 Population of area 1,600,000.0 1,550,000.0 1,600,000.0 503,052 Population served with potable water 640,000.0 200,000.0 300,000.0 221,439 Service area coverage [population served with water/ population of area] 8% 13% 19% 44% Total Value of water sold [KES] 41,312,935 Average tariff per cubic meter of water sold [KES] 31.0 21.9 46.8 59 KAHUTI [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - 13.0 15.4 23.8 33.4 34.2 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - 1.4 1.5 2.7 3.0 2.0 Other revenue - 0.0 0.1 0.1 0.2 0.2 Total Revenue - 14.4 17.0 26.6 36.6 36.4 Expenditure Direct production costs - 0.0 1.6 1.7 2.5 2.5 Employee related costs - 8.3 9.5 11.2 16.3 21.1 Lease fees to WSBs - - 1.6 1.9 2.8 2.2 WARMA and WASREB levies - - 0.0 0.6 0.6 0.5 Repairs and maintenance - - 1.7 2.2 2.5 2.2 Other operating expenditure - 4.5 2.2 6.5 5.2 4.9 Total Operating and Maintenance Expenditure - 12.8 16.6 24.2 29.8 33.4 Interest expense - - - - - - Depreciation - - 0.1 0.3 0.6 - Total Expenditure - 12.8 16.7 24.4 30.5 33.4 46 EBITDA Surplus (Deficit) Before Tax for the Year - - 1.6 1.6 0.4 0.3 2.4 2.1 6.7 6.1 3.0 3.0 Income tax expense / provision - 0.5 0.1 0.6 1.8 0.9 Surplus (Deficit) After Tax for the Year - 1.1 0.2 1.5 4.3 2.1 BALANCE SHEET SUMMARY Current assets 0.1 2.0 2.1 17.7 23.7 - Non-current assets - 0.7 2.1 3.0 4.8 - Total Assets 0.1 2.7 4.2 20.6 28.5 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - 1.5 2.8 4.2 7.8 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - - - - Equity & reserves 0.1 1.2 1.4 16.4 20.7 - Total Equity and Liabilities 0.1 2.7 4.2 20.6 28.5 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - 2.6 0.7 (11.5) 4.0 - Cash generated from investing activities - (0.7) (1.5) (1.1) (2.5) - Cash generated from financing activities - - - 13.5 - - Cash and cash equivalents movement for the year - 1.9 (0.8) 0.9 1.6 - Cash and cash equivalents at end of year (30th June) 0.1 2.0 1.2 2.1 3.7 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 64.7% 58.5% 46.7% 57.0% 64.9% Repairs & maintenance cost as a % of total operating and maintenance 0.0% 10.4% 9.3% 8.3% 6.5% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 1.1 0.3 1.7 4.9 2.1 Operating surplus (deficit) [%] 11.1% 1.8% 8.5% 18.1% 7.8% Surplus (deficit) after tax [%] 7.8% 1.2% 5.6% 11.7% 5.8% Net debtors days (Collection period) [Days] - 19 219 197 - Net debtors as percentage of operating revenue [%] 0% 5% 60% 54% 0% Operating cost coverage ratio (OCCR) [%] 112.5% 101.8% 104.2% 118.1% 108.5% Debt service coverage ratio (DSCR) Current ratio 1.3 0.8 4.2 3.0 KEY OPERATING INDICATORS Number of water connections 3,234.0 3,901.0 4,712.0 9,970 Number of sewerage connections - - - - Volume water produced per annum [Cubic meter] 3,240,000.0 3,240,000.0 3,240,000.0 3,135,484 Volume water sold i.e. billed 615,960.0 821,720.0 909,420.0 972,000 Non revenue Water [NRW] 81% 75% 72% 69% Collection ratio 82% 95% 87% 88% Service area coverage [Sq Km] 300 Population of area 160,000.0 153,286.0 179,983.0 179,985 Population served with potable water 25,000.0 27,018.0 34,212.0 52,578 Service area coverage [population served with water/ population of area] 12% 18% 19% 29% Total Value of water sold [KES] 33,365,465 Average tariff per cubic meter of water sold [KES] 19.4 18.8 26.1 34 KERICO [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales 49.2 56.6 68.2 86.2 101.3 111.9 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies 0.1 0.1 0.1 0.2 0.0 5.3 Other revenue 1.6 2.1 1.6 2.1 2.3 - Total Revenue 50.8 58.8 69.8 88.5 103.6 117.2 Expenditure Direct production costs 4.1 2.0 1.5 7.7 5.2 6.3 Employee related costs 31.1 22.7 38.4 42.1 50.4 52.5 Lease fees to WSBs 6.0 - 8.3 10.0 9.2 9.2 WARMA and WASREB levies - - - 0.6 0.9 3.5 Repairs and maintenance 4.7 2.3 6.5 5.7 8.5 6.3 Other operating expenditure 12.1 27.6 12.8 11.7 25.6 27.6 Total Operating and Maintenance Expenditure 58.0 54.6 67.4 77.8 99.9 105.4 Interest expense - - - - 0.2 - Depreciation 0.9 0.9 1.1 2.2 3.8 - Total Expenditure 59.0 55.5 68.4 79.9 103.8 105.4 EBITDA Surplus (Deficit) Before Tax for the Year (7.2) (8.2) 4.2 3.3 2.4 1.4 10.7 8.5 3.7 (0.2) 11.8 11.8 47 Income tax expense / provision - - - 1.5 - - Surplus (Deficit) After Tax for the Year (8.2) 3.3 1.4 7.0 (0.2) 11.8 BALANCE SHEET SUMMARY Current assets 21.9 22.2 35.1 51.2 52.5 - Non-current assets 5.1 5.2 8.3 9.7 17.2 - Total Assets 27.0 27.4 43.5 60.9 69.7 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities 22.5 19.0 32.7 43.0 48.6 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities 19.1 19.7 20.7 20.8 24.2 - Equity & reserves (14.5) (11.3) (9.9) (2.9) (3.1) - Total Equity and Liabilities 27.0 27.4 43.5 60.9 69.7 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities 3.0 2.5 2.2 7.9 6.4 - Cash generated from investing activities (2.8) (1.1) (4.1) (3.4) (11.3) - Cash generated from financing activities (1.3) 0.7 0.9 0.3 3.4 - Cash and cash equivalents movement for the year (1.2) 2.1 (1.0) 4.8 (1.5) - Cash and cash equivalents at end of year (30th June) (2.3) (0.1) (1.1) 3.7 2.2 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 56.7% 44.4% 59.5% 56.3% 52.7% 52.1% Repairs & maintenance cost as a % of total operating and maintenance 8.1% 4.2% 9.6% 7.3% 8.5% 6.0% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] -7.2 4.2 2.4 9.2 3.5 11.8 Operating surplus (deficit) [%] -18.1% 3.5% 1.1% 9.8% 1.4% 10.0% Surplus (deficit) after tax [%] -16.0% 5.6% 2.0% 7.9% -0.2% 10.0% Net debtors days (Collection period) [Days] 118 122 168 186 167 - Net debtors as percentage of operating revenue [%] 32% 33% 46% 51% 46% 0% Operating cost coverage ratio (OCCR) [%] 84.7% 103.6% 101.2% 110.9% 101.4% 111.2% Debt service coverage ratio (DSCR) 21.5 Current ratio 1.0 1.2 1.1 1.2 1.1 KEY OPERATING INDICATORS Number of water connections 5,818.0 7,362.0 7,843.0 8,631.0 12,000 Number of sewerage connections 1,871.0 1,877.0 1,903.0 1,923.0 2,633 Volume water produced per annum [Cubic meter] 2,595,016.0 2,994,655.0 2,954,151.0 3,006,642.0 2,609,374 Volume water sold i.e. billed 1,227,850.0 1,453,302.0 1,441,310.0 1,443,107.0 1,418,402 Non revenue Water [NRW] 53% 51% 51% 52% 46% Collection ratio 96% 97% 89% 86% 95% Service area coverage [Sq Km] 110 Population of area 121,798.0 113,000.0 115,825.0 118,720.0 142,842 Population served with potable water 33,066.0 63,280.0 46,430.0 60,543.0 98,507 Service area coverage [population served with water/ population of area] 27% 56% 40% 51% 69% Total Value of water sold [KES] 98,697,984 Average tariff per cubic meter of water sold [KES] 39.4 41.1 45.1 58.6 70 KIAMBU [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - 33.5 36.7 42.7 40.3 54.6 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - 0.9 - 4.8 1.6 1.0 Other revenue - 0.0 0.1 0.0 0.0 - Total Revenue - 34.4 36.8 47.5 41.9 55.7 Expenditure Direct production costs - 7.0 7.8 16.9 21.4 18.0 Employee related costs - 14.4 13.5 15.4 14.0 19.0 Lease fees to WSBs - - - 2.9 5.2 - WARMA and WASREB levies - - - - 0.3 - Repairs and maintenance - 4.1 3.0 4.8 5.3 - Other operating expenditure - 11.1 7.3 6.0 2.4 20.7 Total Operating and Maintenance Expenditure - 36.7 31.5 46.0 48.6 57.7 Interest expense - - - - - 0.1 Depreciation - 0.4 0.9 0.9 0.8 0.9 Total Expenditure - 37.2 32.4 46.8 49.4 58.6 48 EBITDA Surplus (Deficit) Before Tax for the Year - - (2.3) (2.8) 5.2 4.4 1.5 0.6 (6.7) (7.5) (2.0) (2.9) Income tax expense / provision - - 0.5 0.2 - - Surplus (Deficit) After Tax for the Year - (2.8) 3.9 0.4 (7.5) (2.9) BALANCE SHEET SUMMARY Current assets - 11.3 16.7 20.0 21.2 - Non-current assets - 1.5 2.3 1.5 0.7 - Total Assets - 12.8 19.0 21.5 21.9 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - 7.8 12.6 14.7 22.6 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - - - - Equity & reserves - 5.1 6.4 6.8 (0.7) - Total Equity and Liabilities - 12.8 19.0 21.5 21.9 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - (3.5) 3.9 0.3 (1.0) - Cash generated from investing activities - 1.9 (1.4) 0.4 - - Cash generated from financing activities - 7.8 0.9 (0.4) - - Cash and cash equivalents movement for the year - 6.2 3.3 0.3 (1.0) - Cash and cash equivalents at end of year (30th June) - 0.9 0.8 1.1 0.1 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 40.3% 43.6% 34.9% 29.6% 32.9% Repairs & maintenance cost as a % of total operating and maintenance 11.3% 9.4% 10.4% 10.9% 0.0% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] -2.3 4.8 1.3 -6.7 -2.1 Operating surplus (deficit) [%] -6.8% 14.1% 3.1% -16.1% -3.6% Surplus (deficit) after tax [%] -8.1% 10.6% 0.9% -17.8% -5.3% Net debtors days (Collection period) [Days] 86 134 138 165 - Net debtors as percentage of operating revenue [%] 24% 37% 38% 45% 0% Operating cost coverage ratio (OCCR) [%] 93.6% 116.5% 92.8% 82.9% 96.5% Debt service coverage ratio (DSCR) (30.6) Current ratio 1.5 1.3 1.4 0.9 KEY OPERATING INDICATORS Number of water connections 2,296.0 3,026.0 3,166 Number of sewerage connections 923.0 804.0 749 Volume water produced per annum [Cubic meter] 1,044,747.0 1,040,616.0 1,263,074 Volume water sold i.e. billed 684,337.0 645,798.0 778,932 Non revenue Water [NRW] 0% 38% 38% Collection ratio 74% 92% 96% Service area coverage [Sq Km] 55 Population of area 73,524.0 89,921.0 78,000 Population served with potable water 11,802.0 15,162.0 21,630 Service area coverage [population served with water/ population of area] 16% 17% 28% Total Value of water sold [KES] 3,463,242 Average tariff per cubic meter of water sold [KES] 53.7 66.1 4 KIKUYU [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - 17.6 24.2 37.4 41.1 56.4 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - 11.7 13.3 29.0 14.0 - Other revenue - 0.2 0.0 0.2 0.0 1.0 Total Revenue - 29.5 37.5 66.6 55.2 57.4 Expenditure Direct production costs - 11.7 12.2 22.2 33.9 25.6 Employee related costs - 5.2 9.3 10.9 13.3 13.4 Lease fees to WSBs - 1.7 2.4 2.9 3.2 - WARMA and WASREB levies - - - 0.3 0.6 1.1 Repairs and maintenance - 4.3 5.7 8.0 4.9 5.3 Other operating expenditure - 1.9 4.6 15.0 4.7 12.9 Total Operating and Maintenance Expenditure - 24.8 34.1 59.3 60.6 58.5 Interest expense - - - - - - Depreciation - 0.5 1.2 1.1 1.0 - Total Expenditure - 25.3 35.3 60.4 61.6 58.5 EBITDA Surplus (Deficit) Before Tax for the Year - - 4.7 4.2 3.4 2.3 7.2 6.1 (5.4) (6.4) (1.1) (1.1) 49 Income tax expense / provision - 1.3 0.7 1.8 - - Surplus (Deficit) After Tax for the Year - 3.0 1.6 4.3 (6.4) (1.1) BALANCE SHEET SUMMARY Current assets - 2.9 4.3 10.1 11.6 - Non-current assets - 5.4 6.1 5.8 6.4 - Total Assets - 8.3 10.4 15.9 18.0 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - 2.7 4.3 6.6 15.1 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - 2.3 1.1 - - - Equity & reserves - 3.4 5.0 9.3 2.9 - Total Equity and Liabilities - 8.3 10.4 15.9 18.0 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - 6.3 3.9 1.5 0.8 - Cash generated from investing activities - (5.5) (2.6) (0.0) (1.6) - Cash generated from financing activities - 2.3 (1.1) (1.1) - - Cash and cash equivalents movement for the year - 3.0 0.1 0.4 (0.8) - Cash and cash equivalents at end of year (30th June) - 2.7 2.8 3.3 2.5 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 22.3% 28.4% 19.3% 22.4% 24.2% Repairs & maintenance cost as a % of total operating and maintenance 17.5% 16.6% 13.5% 8.1% 9.1% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 3.4 2.7 5.4 -5.4 -1.1 Operating surplus (deficit) [%] 15.4% 9.1% 10.6% -9.8% -3.6% Surplus (deficit) after tax [%] 10.0% 4.2% 6.5% -11.6% -1.9% Net debtors days (Collection period) [Days] 2 7 65 80 - Net debtors as percentage of operating revenue [%] 1% 2% 18% 22% 0% Operating cost coverage ratio (OCCR) [%] 71.1% 71.0% 63.0% 67.9% 96.5% Debt service coverage ratio (DSCR) Current ratio 1.1 1.0 1.5 0.8 KEY OPERATING INDICATORS Number of water connections 6,704.0 7,422.0 9,806 Number of sewerage connections - - - Volume water produced per annum [Cubic meter] 1,050,000.0 1,858,882.0 1,810,524 Volume water sold i.e. billed 718,435.0 1,012,142.0 834,706 Non revenue Water [NRW] 32% 46% 54% Collection ratio 128% 94% 98% Service area coverage [Sq Km] 90 Population of area 141,110.0 112,830.0 143,930 Population served with potable water 111,912.0 38,136.0 66,486 Service area coverage [population served with water/ population of area] 79% 34% 46% Total Value of water sold [KES] 41,148,686 Average tariff per cubic meter of water sold [KES] 26.2 30.9 49 KILIFI MARIAKANI [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - 103.7 101.3 136.6 168.5 213.0 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - 1.7 3.0 7.6 24.4 15.7 Other revenue - - - 0.0 0.0 - Total Revenue - 105.3 104.3 144.2 192.9 228.7 Expenditure Direct production costs - 42.1 38.1 51.7 52.2 67.9 Employee related costs - 23.7 34.6 35.2 67.6 68.1 Lease fees to WSBs - 8.1 10.1 10.5 14.0 18.0 WARMA and WASREB levies - - - 1.2 1.6 2.1 Repairs and maintenance - 8.0 8.5 16.6 23.2 10.5 Other operating expenditure - 27.4 20.6 24.3 29.2 50.1 Total Operating and Maintenance Expenditure - 109.3 111.9 139.4 187.7 216.6 Interest expense - - - - - - Depreciation - 0.6 1.4 2.3 2.1 1.4 Total Expenditure - 109.8 113.2 141.7 189.9 218.0 50 EBITDA Surplus (Deficit) Before Tax for the Year - - (3.9) (4.5) (7.6) (9.0) 4.7 2.5 5.2 3.0 12.1 10.7 Income tax expense / provision - - - - - - Surplus (Deficit) After Tax for the Year - (4.5) (9.0) 2.5 3.0 10.7 BALANCE SHEET SUMMARY Current assets - 40.3 48.7 65.0 77.2 - Non-current assets - 36.6 39.0 40.3 40.2 - Total Assets - 76.9 87.7 105.2 117.3 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - 45.0 64.9 48.3 68.7 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - 18.3 18.3 - Equity & reserves - 31.9 22.8 38.6 30.3 - Total Equity and Liabilities - 76.9 87.7 105.2 117.3 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - 3.9 1.2 (25.4) (1.7) - Cash generated from investing activities - (2.9) (3.8) (3.5) (2.0) - Cash generated from financing activities - 2.1 - 31.7 - - Cash and cash equivalents movement for the year - 3.2 (2.7) 2.7 (3.8) - Cash and cash equivalents at end of year (30th June) - 3.2 0.5 3.3 (0.5) - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 27.4% 33.9% 29.5% 38.2% 33.7% Repairs & maintenance cost as a % of total operating and maintenance 7.3% 7.6% 11.9% 12.3% 4.8% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] -3.9 -7.6 4.7 5.2 12.1 Operating surplus (deficit) [%] -3.7% -7.3% 3.3% 2.7% 5.3% Surplus (deficit) after tax [%] -4.3% -8.6% 1.7% 1.6% 4.7% Net debtors days (Collection period) [Days] 128 155 152 148 - Net debtors as percentage of operating revenue [%] 35% 42% 42% 41% 0% Operating cost coverage ratio (OCCR) [%] 96.4% 93.2% 103.4% 97.8% 105.6% Debt service coverage ratio (DSCR) Current ratio 0.9 0.8 1.3 1.1 KEY OPERATING INDICATORS Number of water connections 6,472.0 8,067.0 16,673 Number of sewerage connections - - - Volume water produced per annum [Cubic meter] 4,422,279.0 4,424,383.0 4,545,928 Volume water sold i.e. billed 2,741,813.0 2,708,790.0 2,773,211 Non revenue Water [NRW] 38% 39% 39% Collection ratio 88% 83% 97% Service area coverage [Sq Km] 4,988 Population of area 764,090.0 764,090.0 709,221 Population served with potable water 325,679.0 428,161.0 418,307 Service area coverage [population served with water/ population of area] 43% 56% 59% Total Value of water sold [KES] 168,525,103 Average tariff per cubic meter of water sold [KES] 37.3 50.4 61 KIRINYAGA [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - 24.1 40.6 61.7 73.9 59.8 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - 9.3 11.7 16.2 9.9 20.4 Other revenue - 0.0 0.0 0.2 0.3 - Total Revenue - 33.4 52.3 78.1 84.1 80.2 Expenditure Direct production costs - 1.5 5.2 8.8 8.5 9.7 Employee related costs - 16.3 27.1 35.6 36.6 38.7 Lease fees to WSBs - 2.7 4.2 7.9 7.0 7.3 WARMA and WASREB levies - - - - 2.5 2.6 Repairs and maintenance - 1.7 2.1 12.6 9.9 9.3 Other operating expenditure - 8.1 7.3 12.3 13.2 5.2 Total Operating and Maintenance Expenditure - 30.4 45.9 77.3 77.7 72.8 Interest expense - - - - - - Depreciation - 0.2 2.9 3.0 3.0 - Total Expenditure - 30.6 48.8 80.2 80.7 72.8 EBITDA Surplus (Deficit) Before Tax for the Year - - 3.0 2.8 6.4 3.5 0.9 (2.1) 6.5 3.5 7.4 7.4 51 Income tax expense / provision - 0.8 1.0 - 0.4 2.2 Surplus (Deficit) After Tax for the Year - 1.9 2.4 (2.1) 3.1 5.2 BALANCE SHEET SUMMARY Current assets 0.5 46.3 41.8 45.5 46.3 - Non-current assets - 0.7 12.4 12.8 17.7 - Total Assets 0.5 47.0 54.2 58.3 64.0 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - 2.4 7.1 13.3 15.9 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - - - - Equity & reserves 0.5 44.6 47.1 45.0 48.0 - Total Equity and Liabilities 0.5 47.0 54.2 58.3 64.0 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - 10.7 11.6 5.9 5.5 - Cash generated from investing activities - (0.9) (13.1) (3.7) (7.8) - Cash generated from financing activities - - - - - - Cash and cash equivalents movement for the year - 9.8 (1.5) 2.2 (2.4) - Cash and cash equivalents at end of year (30th June) 0.5 10.3 7.3 9.5 7.1 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 55.2% 59.9% 47.4% 48.8% 54.1% Repairs & maintenance cost as a % of total operating and maintenance 5.6% 4.5% 16.3% 12.7% 12.8% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 2.2 5.4 0.9 6.1 5.2 Operating surplus (deficit) [%] 9.0% 12.2% 0.8% 7.3% 9.3% Surplus (deficit) after tax [%] 5.8% 4.7% -2.7% 3.6% 6.5% Net debtors days (Collection period) [Days] 521 265 174 147 - Net debtors as percentage of operating revenue [%] 143% 73% 48% 40% 0% Operating cost coverage ratio (OCCR) [%] 79.3% 88.4% 85.6% 98.8% 98.1% Debt service coverage ratio (DSCR) Current ratio 19.7 5.9 3.4 2.9 KEY OPERATING INDICATORS Number of water connections 8,959.0 9,699.0 10,733.0 19,930 Number of sewerage connections - - - - Volume water produced per annum [Cubic meter] 6,435,495.0 8,683,254.0 1,504,667.0 7,799,703 Volume water sold i.e. billed 1,785,588.0 1,372,799.0 1,447,766.0 1,411,372 Non revenue Water [NRW] 72% 84% 86% 82% Collection ratio 98% 107% 107% 99% Service area coverage [Sq Km] 572 Population of area 331,082.0 348,000.0 348,000.0 430,000 Population served with potable water 53,754.0 132,264.0 110,106.0 186,478 Service area coverage [population served with water/ population of area] 16% 38% 39% 43% Total Value of water sold [KES] 73,907,360 Average tariff per cubic meter of water sold [KES] 15.9 28.7 38.1 52 LIMURU [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - 11.2 16.8 29.0 38.1 61.9 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - 5.6 8.9 13.4 8.7 2.2 Other revenue - 0.4 0.0 0.3 0.3 - Total Revenue - 17.2 25.6 42.7 47.1 64.1 Expenditure Direct production costs - 3.9 6.7 19.1 17.0 19.3 Employee related costs - 3.7 6.9 9.9 13.2 18.3 Lease fees to WSBs - 1.4 1.7 2.4 4.5 - WARMA and WASREB levies - - - - - - Repairs and maintenance - 0.8 2.7 3.0 4.0 - Other operating expenditure - 3.6 5.0 5.4 7.2 26.1 Total Operating and Maintenance Expenditure - 13.4 23.0 39.9 45.8 63.7 Interest expense - - - - - - Depreciation - - 0.1 2.0 2.5 - Total Expenditure - 13.4 23.1 41.9 48.4 63.7 52 EBITDA Surplus (Deficit) Before Tax for the Year - - 3.8 3.8 2.7 2.6 2.8 0.7 1.3 (1.2) 0.4 0.4 Income tax expense / provision - 1.1 0.8 0.2 - - Surplus (Deficit) After Tax for the Year - 2.6 1.8 0.5 (1.2) 0.4 BALANCE SHEET SUMMARY Current assets - 42.5 42.0 47.2 39.3 - Non-current assets - 0.7 4.3 10.6 10.9 - Total Assets - 43.2 46.3 57.7 50.2 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - 1.8 3.1 12.3 5.8 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - - - - Equity & reserves - 41.4 43.2 45.5 44.4 - Total Equity and Liabilities - 43.2 46.3 57.7 50.2 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - 9.1 5.7 7.5 (0.6) - Cash generated from investing activities - (0.7) (3.7) (8.3) (2.7) - Cash generated from financing activities - 0.0 - - - - Cash and cash equivalents movement for the year - 8.4 2.0 (0.8) (3.3) - Cash and cash equivalents at end of year (30th June) - 8.4 10.4 9.7 6.3 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 30.9% 31.6% 26.1% 30.6% 31.4% Repairs & maintenance cost as a % of total operating and maintenance 5.8% 11.9% 7.6% 8.8% 0.0% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 2.6 1.9 2.6 1.3 0.4 Operating surplus (deficit) [%] 20.3% 10.4% 5.9% 2.2% 0.6% Surplus (deficit) after tax [%] 15.4% 7.0% 1.2% -2.6% 0.6% Net debtors days (Collection period) [Days] 1,097 673 457 300 - Net debtors as percentage of operating revenue [%] 300% 184% 125% 82% 0% Operating cost coverage ratio (OCCR) [%] 84.8% 74.4% 75.0% 87.0% 100.6% Debt service coverage ratio (DSCR) Current ratio 23.5 13.5 3.8 6.8 KEY OPERATING INDICATORS Number of water connections 4,685 Number of sewerage connections 780 Volume water produced per annum [Cubic meter] 924,000 Volume water sold i.e. billed 639,092 Non revenue Water [NRW] 31% Collection ratio 100% Service area coverage [Sq Km] 286 Population of area 239,738 Population served with potable water 54,978 Service area coverage [population served with water/ population of area] 23% Total Value of water sold [KES] 26,700,684 Average tariff per cubic meter of water sold [KES] 42 MATHIRA [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales 12.1 20.7 37.3 44.3 47.8 65.7 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies 0.3 0.5 1.5 3.6 2.7 0.1 Other revenue - - - 3.4 3.2 - Total Revenue 12.4 21.3 38.7 51.2 53.7 65.8 Expenditure Direct production costs 0.4 2.1 0.5 1.7 1.1 2.0 Employee related costs 3.9 6.7 11.4 15.0 16.9 19.4 Lease fees to WSBs 1.0 1.7 2.9 3.7 3.8 5.4 WARMA and WASREB levies - - - - - 1.5 Repairs and maintenance 2.3 4.3 7.1 9.8 12.0 18.9 Other operating expenditure 5.0 8.7 12.8 11.5 9.6 12.0 Total Operating and Maintenance Expenditure 12.6 23.5 34.7 41.7 43.5 59.2 Interest expense - - 0.0 0.1 0.1 0.1 Depreciation 0.4 0.6 1.1 1.0 2.0 1.7 Total Expenditure 13.0 24.2 35.8 42.9 45.6 61.0 EBITDA Surplus (Deficit) Before Tax for the Year (0.2) (0.6) (2.3) (2.9) 4.0 2.9 9.5 8.4 10.3 8.1 6.6 4.8 53 Income tax expense / provision - - - 2.3 2.4 - Surplus (Deficit) After Tax for the Year (0.6) (2.9) 2.9 6.0 5.7 4.8 BALANCE SHEET SUMMARY Current assets 15.7 37.9 48.8 60.1 63.7 - Non-current assets 1.9 1.9 3.0 5.4 6.7 - Total Assets 17.6 39.8 51.8 65.6 70.4 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities 1.5 4.5 8.3 14.7 14.1 - Long term borrowings (interest and non interest bearing) 2.0 2.0 1.4 3.0 2.8 - Other non current liabilities - - - - - - Equity & reserves 14.0 33.3 42.2 47.8 53.5 - Total Equity and Liabilities 17.6 39.8 51.8 65.6 70.4 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities (13.6) (20.6) (2.8) 0.0 4.9 - Cash generated from investing activities (2.2) (0.7) (2.2) (3.4) (3.3) - Cash generated from financing activities 16.5 22.2 4.3 1.6 (0.2) - Cash and cash equivalents movement for the year 0.7 0.9 (0.7) (1.8) 1.3 - Cash and cash equivalents at end of year (30th June) 0.7 1.6 0.8 2.9 4.3 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 43.1% 39.6% 43.5% 39.5% 41.2% 35.0% Repairs & maintenance cost as a % of total operating and maintenance 18.1% 18.1% 20.5% 23.4% 27.7% 31.8% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] -0.2 -2.3 4.0 7.1 7.7 6.5 Operating surplus (deficit) [%] -1.8% -10.7% 10.3% 12.8% 14.0% 10.0% Surplus (deficit) after tax [%] -4.7% -13.7% 7.5% 11.8% 10.6% 7.3% Net debtors days (Collection period) [Days] 354 560 365 428 421 - Net debtors as percentage of operating revenue [%] 97% 154% 100% 117% 115% 0% Operating cost coverage ratio (OCCR) [%] 98.3% 90.3% 111.5% 114.6% 116.3% 111.1% Debt service coverage ratio (DSCR) 2.0 14.5 20.6 55.0 Current ratio 10.1 8.4 5.9 4.1 4.5 KEY OPERATING INDICATORS Number of water connections 4,543.0 7,120.0 5,583.0 5,582.0 17,042 Number of sewerage connections 536.0 70.0 2,701.0 2,800.0 2,806 Volume water produced per annum [Cubic meter] 211,700.0 3,911,176.0 4,064,270.0 3,967,074.0 4,017,709 Volume water sold i.e. billed 123,479.0 1,609,551.0 1,754,945.0 1,538,489.0 1,382,001 Non revenue Water [NRW] 42% 65% 57% 61% 66% Collection ratio 99% 101% 78% 78% 80% Service area coverage [Sq Km] 320 Population of area 180,000.0 180,000.0 180,000.0 180,000.0 148,847 Population served with potable water 26,718.0 41,328.0 32,040.0 54,000.0 29,760 Service area coverage [population served with water/ population of area] 15% 23% 18% 30% 20% Total Value of water sold [KES] 39,643,788 Average tariff per cubic meter of water sold [KES] 127.5 14.9 20.4 29.5 29 MAVOKO [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - 70.3 55.3 34.8 53.5 120.8 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - 1.1 12.3 12.1 22.3 3.3 Other revenue - - 0.4 0.5 0.1 - Total Revenue - 71.4 68.0 47.4 75.9 124.1 Expenditure Direct production costs - 0.7 14.9 8.8 24.3 53.4 Employee related costs - 29.6 24.3 22.1 26.7 28.1 Lease fees to WSBs - 5.4 4.0 3.4 3.3 - WARMA and WASREB levies - - - - - - Repairs and maintenance - 3.4 3.4 6.6 9.3 - Other operating expenditure - 31.2 17.8 12.4 13.2 40.6 Total Operating and Maintenance Expenditure - 70.3 64.4 53.3 76.7 122.1 Interest expense - - - - - - Depreciation - 0.4 1.2 2.4 4.4 0.6 Total Expenditure - 70.7 65.7 55.7 81.1 122.7 54 EBITDA Surplus (Deficit) Before Tax for the Year - - 1.1 0.6 3.6 2.3 (5.9) (8.3) (0.8) (5.2) 2.0 1.4 Income tax expense / provision - 0.2 0.7 - - - Surplus (Deficit) After Tax for the Year - 0.4 1.6 (8.3) (5.2) 1.4 BALANCE SHEET SUMMARY Current assets - 98.6 46.1 25.0 31.1 - Non-current assets - 1.3 3.0 5.9 7.4 - Total Assets - 99.9 49.1 30.9 38.5 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - 91.5 39.1 13.9 25.1 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - 14.1 15.8 - Equity & reserves - 8.4 10.0 2.9 (2.4) - Total Equity and Liabilities - 99.9 49.1 30.9 38.5 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - 25.9 (3.6) (15.3) (2.4) - Cash generated from investing activities - (1.7) (2.7) (5.4) (5.9) - Cash generated from financing activities - 7.9 - 0.1 - - Cash and cash equivalents movement for the year - 32.1 (6.4) (20.6) (8.4) - Cash and cash equivalents at end of year (30th June) - 32.1 25.8 5.2 (3.2) - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 43.0% 40.7% 45.4% 36.8% 24.5% Repairs & maintenance cost as a % of total operating and maintenance 4.9% 5.3% 12.4% 12.1% 0.0% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 0.9 2.9 -5.9 -0.8 2.0 Operating surplus (deficit) [%] 1.5% 4.7% -13.6% -4.1% 1.6% Surplus (deficit) after tax [%] 0.6% 2.4% -17.5% -6.8% 1.1% Net debtors days (Collection period) [Days] 338 104 142 149 - Net debtors as percentage of operating revenue [%] 92% 28% 39% 41% 0% Operating cost coverage ratio (OCCR) [%] 100.0% 94.7% 86.4% 93.0% 101.6% Debt service coverage ratio (DSCR) Current ratio 1.1 1.2 1.8 1.2 KEY OPERATING INDICATORS Number of water connections 1,700.0 2,826.0 3,134.0 3,831 Number of sewerage connections - - 418 Volume water produced per annum [Cubic meter] 2,113,567.0 1,535,815.0 687,960.0 969,518 Volume water sold i.e. billed 1,562,400.0 956,276.0 448,540.0 610,903 Non revenue Water [NRW] 38% 38% 35% 37% Collection ratio 81% 117% 95% 71% Service area coverage [Sq Km] 697 Population of area - 150,000.0 170,000.0 190,284 Population served with potable water - 33,300.0 35,595.0 47,571 Service area coverage [population served with water/ population of area] 20% 22% 21% 25% Total Value of water sold [KES] 49,296,463 Average tariff per cubic meter of water sold [KES] 37.6 38.2 35.6 81 NAKURU RURAL [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - - 123.0 102.3 151.5 167.8 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - - 2.7 2.6 2.7 3.0 Other revenue - - - - - - Total Revenue - - 125.7 104.9 154.3 170.8 Expenditure Direct production costs - - 26.3 25.7 34.5 18.0 Employee related costs - - 47.5 46.6 73.1 70.5 Lease fees to WSBs - - - - - - WARMA and WASREB levies - - - - - - Repairs and maintenance - - 9.2 11.0 14.3 9.8 Other operating expenditure - - 46.8 59.1 75.7 72.4 Total Operating and Maintenance Expenditure - - 129.8 142.4 197.6 170.8 Interest expense - - - - - - Depreciation - - 0.3 0.4 0.6 - Total Expenditure - - 130.1 142.8 198.3 170.8 EBITDA Surplus (Deficit) Before Tax for the Year - - - - (4.1) (4.4) (37.5) (37.9) (43.4) (44.0) - - 55 Income tax expense / provision - - - - - - Surplus (Deficit) After Tax for the Year - - (4.4) (37.9) (44.0) - BALANCE SHEET SUMMARY Current assets - - 258.9 254.5 259.2 - Non-current assets - - 1.3 1.2 1.6 - Total Assets - - 260.2 255.7 260.8 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - - 36.6 74.4 126.3 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - - - - Equity & reserves - - 223.7 181.3 134.5 - Total Equity and Liabilities - - 260.2 255.7 260.8 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - - (229.6) 4.0 (1.9) - Cash generated from investing activities - - (1.6) (0.3) (0.9) - Cash generated from financing activities - - 229.2 1.6 (0.5) - Cash and cash equivalents movement for the year - - (2.0) 5.3 (3.4) - Cash and cash equivalents at end of year (30th June) - - (2.0) (2.7) (8.4) - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 38.6% 35.1% 38.2% 41.3% Repairs & maintenance cost as a % of total operating and maintenance 7.1% 7.7% 7.2% 5.7% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] -4.1 -37.5 -43.4 - Operating surplus (deficit) [%] -3.3% -35.8% -28.1% 0.0% Surplus (deficit) after tax [%] -3.5% -36.1% -28.5% 0.0% Net debtors days (Collection period) [Days] 747 861 605 - Net debtors as percentage of operating revenue [%] 205% 236% 166% 0% Operating cost coverage ratio (OCCR) [%] 96.8% 73.7% 78.1% 100.0% Debt service coverage ratio (DSCR) Current ratio 7.1 3.4 2.1 KEY OPERATING INDICATORS Number of water connections 21,522.0 11,129.0 12,980.0 16,266 Number of sewerage connections - - - - Volume water produced per annum [Cubic meter] 8,304,881.0 5,312,340.0 6,404,832.0 8,825,346 Volume water sold i.e. billed 4,514,878.0 4,119,864.0 4,119,864.0 3,378,551 Non revenue Water [NRW] 46% 22% 36% 62% Collection ratio 72% 90% 90% 92% Service area coverage [Sq Km] 600 Population of area 250,000.0 409,801.0 441,174.0 453,105 Population served with potable water 122,616.0 171,234.0 202,378.0 213,376 Service area coverage [population served with water/ population of area] 49% 42% 46% 47% Total Value of water sold [KES] 151,540,714 Average tariff per cubic meter of water sold [KES] 28.0 26.9 26.9 45 NAROK [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - - 3.4 9.9 18.4 15.0 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - - - - 10.6 19.1 Other revenue - - - - - 0.1 Total Revenue - - 3.4 9.9 29.0 34.2 Expenditure Direct production costs - - - 2.2 10.7 12.3 Employee related costs - - 0.1 1.1 6.1 7.1 Lease fees to WSBs - - 0.7 2.1 1.4 2.7 WARMA and WASREB levies - - - - 0.9 0.3 Repairs and maintenance - - 0.6 1.1 5.3 4.1 Other operating expenditure - - 1.0 2.3 3.8 5.7 Total Operating and Maintenance Expenditure - - 2.5 8.8 28.2 32.2 Interest expense - - - - - - Depreciation - - 0.0 0.1 0.4 - Total Expenditure - - 2.5 8.9 28.7 32.2 56 EBITDA Surplus (Deficit) Before Tax for the Year - - - - 0.9 0.9 1.1 1.0 0.8 0.3 2.0 2.0 Income tax expense / provision - - 0.3 0.3 0.1 0.6 Surplus (Deficit) After Tax for the Year - - 0.6 0.7 0.2 1.4 BALANCE SHEET SUMMARY Current assets - - 3.7 4.5 4.9 - Non-current assets - - 0.1 1.2 1.6 - Total Assets - - 3.8 5.7 6.5 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - - 0.9 2.0 3.3 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - - - - Equity & reserves - - 2.9 3.7 3.2 - Total Equity and Liabilities - - 3.8 5.7 6.5 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - - (0.8) 1.0 1.1 - Cash generated from investing activities - - (0.2) (1.2) (0.8) - Cash generated from financing activities - - 2.2 - - - Cash and cash equivalents movement for the year - - 1.3 (0.2) 0.3 - Cash and cash equivalents at end of year (30th June) - - 1.3 1.1 1.4 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 13.4% 18.7% 23.9% 24.4% Repairs & maintenance cost as a % of total operating and maintenance 25.8% 12.2% 18.9% 12.9% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 0.6 0.8 0.7 1.4 Operating surplus (deficit) [%] 26.0% 11.5% 2.6% 5.7% Surplus (deficit) after tax [%] 17.8% 7.2% 0.8% 4.1% Net debtors days (Collection period) [Days] 262 124 70 - Net debtors as percentage of operating revenue [%] 72% 34% 19% 0% Operating cost coverage ratio (OCCR) [%] 135.2% 113.0% 65.0% 46.6% Debt service coverage ratio (DSCR) Current ratio 4.1 2.2 1.5 KEY OPERATING INDICATORS Number of water connections 1,452.0 1,454.0 1,625.0 1,655.0 1,711 Number of sewerage connections - - - - - Volume water produced per annum [Cubic meter] 547,500.0 864,000.0 612,000.0 792,000.0 548,252 Volume water sold i.e. billed 342,259.0 214,200.0 294,036.0 332,412.0 297,482 Non revenue Water [NRW] 37% 75% 52% 58% 46% Collection ratio 85% 107% 60% 67% 95% Service area coverage [Sq Km] 30 Population of area 53,749.0 60,000.0 60,000.0 60,000.0 43,000 Population served with potable water 30,000.0 12,490.0 25,350.0 25,814.0 22,640 Service area coverage [population served with water/ population of area] 56% 21% 42% 43% 53% Total Value of water sold [KES] 18,352,430 Average tariff per cubic meter of water sold [KES] 20.0 37.2 51.6 47.0 62 NITHI [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - 4.2 7.9 20.6 23.5 29.9 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - - 17.9 6.3 13.8 7.0 Other revenue - - 0.0 - 0.1 - Total Revenue - 4.2 25.8 26.9 37.4 36.9 Expenditure Direct production costs - 0.1 0.0 0.7 0.7 - Employee related costs - 0.1 7.6 7.7 8.6 9.0 Lease fees to WSBs - 0.3 0.6 1.0 2.1 1.9 WARMA and WASREB levies - - 0.1 - - 0.7 Repairs and maintenance - 0.2 12.0 0.4 2.7 13.0 Other operating expenditure - 1.5 2.7 3.1 5.3 (5.0) Total Operating and Maintenance Expenditure - 2.3 22.9 12.9 19.3 19.6 Interest expense - - - - - - Depreciation - 0.0 0.1 0.9 2.2 0.9 Total Expenditure - 2.3 23.1 13.8 21.4 20.5 EBITDA Surplus (Deficit) Before Tax for the Year - - 1.9 1.9 2.9 2.7 14.0 13.1 18.2 16.0 17.3 16.4 57 Income tax expense / provision - 0.6 0.8 3.9 4.8 4.9 Surplus (Deficit) After Tax for the Year - 1.3 1.9 9.2 11.2 11.5 BALANCE SHEET SUMMARY Current assets - 1.9 5.7 14.5 28.8 - Non-current assets - 0.1 0.5 5.4 11.0 - Total Assets - 2.0 6.2 19.9 39.8 - Short term borrowings (interest and non interest bearing) - - - - - - Other current liabilities - 0.6 1.6 6.5 13.1 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - - - - Equity & reserves - 1.3 4.5 13.4 26.7 - Total Equity and Liabilities - 2.0 6.2 19.9 39.8 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - 1.6 2.7 4.4 10.5 - Cash generated from investing activities - (0.1) (0.6) (2.6) (7.7) - Cash generated from financing activities - - - - - - Cash and cash equivalents movement for the year - 1.5 2.1 1.8 2.8 - Cash and cash equivalents at end of year (30th June) - 1.5 3.6 5.4 8.5 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 7.3% 33.6% 61.8% 46.9% 45.9% Repairs & maintenance cost as a % of total operating and maintenance 9.9% 52.3% 3.0% 13.8% 66.4% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] 1.4 2.0 10.1 13.4 12.4 Operating surplus (deficit) [%] 46.0% 11.0% 52.0% 39.9% 46.9% Surplus (deficit) after tax [%] 31.9% 7.4% 34.1% 29.9% 31.2% Net debtors days (Collection period) [Days] 34 37 143 289 - Net debtors as percentage of operating revenue [%] 9% 10% 39% 79% 0% Operating cost coverage ratio (OCCR) [%] 185.2% 34.4% 159.6% 124.4% 158.8% Debt service coverage ratio (DSCR) Current ratio 3.1 3.5 2.2 2.2 KEY OPERATING INDICATORS Number of water connections 2,056.0 1,494.0 1,734.0 5,250 Number of sewerage connections - - - - Volume water produced per annum [Cubic meter] 148,200.0 1,089,137.0 1,385,288.0 2,282,048 Volume water sold i.e. billed 127,424.0 315,810.0 363,036.0 423,509 Non revenue Water [NRW] 14% 71% 74% 81% Collection ratio 100% 97% 71% 71% Service area coverage [Sq Km] 151 Population of area 67,102.0 68,791.0 69,811.0 67,102 Population served with potable water 4,944.0 14,814.0 15,996.0 32,968 Service area coverage [population served with water/ population of area] 7% 22% 23% 49% Total Value of water sold [KES] 23,525,310 Average tariff per cubic meter of water sold [KES] 33.0 26.0 53.7 56 NZOIA [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales 71.1 88.1 76.9 111.0 142.3 194.0 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies 0.4 29.4 10.0 9.3 3.2 7.1 Other revenue 2.7 3.6 1.1 0.4 0.8 - Total Revenue 74.3 121.1 88.0 120.7 146.2 201.1 Expenditure Direct production costs 38.8 51.6 32.7 44.6 42.2 35.2 Employee related costs 17.8 46.3 40.1 40.2 40.8 59.1 Lease fees to WSBs 5.7 11.5 10.0 10.5 11.3 - WARMA and WASREB levies 4.3 - 0.8 1.3 3.1 - Repairs and maintenance 6.1 4.0 3.5 3.2 9.2 - Other operating expenditure 15.2 19.1 14.3 19.8 21.3 38.1 Total Operating and Maintenance Expenditure 87.9 132.4 101.4 119.6 127.9 132.4 Interest expense - - - - - - Depreciation 0.6 0.7 0.8 0.9 0.7 - Total Expenditure 88.4 133.1 102.2 120.4 128.6 132.4 58 EBITDA Surplus (Deficit) Before Tax for the Year (13.6) (14.2) (11.3) (12.0) (13.4) (14.2) 1.1 0.2 18.4 17.7 68.7 68.7 Income tax expense / provision - - - - - - Surplus (Deficit) After Tax for the Year (14.2) (12.0) (14.2) 0.2 17.7 68.7 BALANCE SHEET SUMMARY Current assets 24.8 66.7 80.1 95.4 107.7 - Non-current assets 3.2 4.2 4.0 2.8 2.1 - Total Assets 28.0 70.9 84.0 98.2 109.8 - Short term borrowings (interest and non interest bearing) - - - 6.0 5.0 - Other current liabilities 17.1 40.5 65.5 82.6 77.6 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities 2.1 6.6 9.0 - - - Equity & reserves 8.8 23.8 9.5 9.6 27.3 - Total Equity and Liabilities 28.0 70.9 84.0 92.2 104.8 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities 4.2 (8.2) (4.0) 23.3 2.7 - Cash generated from investing activities (3.7) (1.7) (0.6) (0.4) - - Cash generated from financing activities - 4.6 - (2.3) - - Cash and cash equivalents movement for the year 0.4 (5.2) (4.6) 20.6 2.7 - Cash and cash equivalents at end of year (30th June) 0.3 (4.9) (9.6) 1.7 4.4 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 21.4% 37.3% 40.8% 34.5% 34.0% 44.6% Repairs & maintenance cost as a % of total operating and maintenance 7.0% 3.0% 3.5% 2.6% 7.2% 0.0% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] -13.6 -11.3 -13.4 1.1 18.4 68.7 Operating surplus (deficit) [%] -22.8% -12.6% -16.7% 0.6% 12.1% 34.1% Surplus (deficit) after tax [%] -19.1% -9.9% -16.2% 0.2% 12.1% 34.1% Net debtors days (Collection period) [Days] 123 243 345 284 257 - Net debtors as percentage of operating revenue [%] 34% 67% 95% 78% 70% 0% Operating cost coverage ratio (OCCR) [%] 81.4% 67.7% 77.6% 95.5% 113.0% 151.2% Debt service coverage ratio (DSCR) Current ratio 1.4 1.6 1.2 1.1 1.3 KEY OPERATING INDICATORS Number of water connections 13,285.0 16,093.0 18,772.0 17,653.0 20,392 Number of sewerage connections 3,784.0 4,143.0 4,129.0 4,203.0 4,324 Volume water produced per annum [Cubic meter] 5,404,300.0 3,321,204.0 4,518,965.0 5,109,457.0 6,437,016 Volume water sold i.e. billed 2,574,648.0 2,198,108.0 2,209,039.0 2,209,039.0 2,339,068 Non revenue Water [NRW] 52% 53% 51% 57% 64% Collection ratio 103% 82% 108% 88% 101% Service area coverage [Sq Km] 441 Population of area 392,920.0 450,000.0 364,825.0 377,036.0 199,602 Population served with potable water 186,826.0 159,241.0 143,688.0 174,215.0 117,924 Service area coverage [population served with water/ population of area] 48% 35% 39% 46% 59% Total Value of water sold [KES] 113,836,498 Average tariff per cubic meter of water sold [KES] 27.4 37.2 32.4 49.3 49 OLOLLAISER [KES Million] 2006 2007 2008 2009 2010 Budget 2011 INCOME STATEMENT SUMMARY FINANCING URBAN WATER SERVICES IN KENYA Revenue Operating revenue from water and sewerage sales - 12.3 20.8 36.3 53.9 101.7 UTILITY SHADOW CREDIT RATINGS 2011 Other operating revenue and capital and operating subsidies - 0.2 17.2 22.4 6.1 10.2 Other revenue - - - - - - Total Revenue - 12.5 38.1 58.7 59.9 111.9 Expenditure Direct production costs - - 9.1 20.9 16.9 28.1 Employee related costs - 5.5 15.8 15.7 18.2 23.8 Lease fees to WSBs - - 1.9 2.9 4.3 22.7 WARMA and WASREB levies - - - 1.9 1.3 2.2 Repairs and maintenance - 2.6 5.1 2.8 3.7 4.1 Other operating expenditure - 4.6 5.9 9.3 12.1 19.3 Total Operating and Maintenance Expenditure - 12.6 37.7 53.5 56.5 100.2 Interest expense - - - - - - Depreciation - 0.0 0.3 0.4 0.7 0.4 Total Expenditure - 12.7 38.0 54.0 57.2 100.6 EBITDA Surplus (Deficit) Before Tax for the Year - - (0.1) (0.1) 0.4 0.1 5.2 4.7 3.4 2.7 11.8 11.3 59 Income tax expense / provision - - 0.0 1.4 0.8 3.4 Surplus (Deficit) After Tax for the Year - (0.1) 0.1 3.3 1.9 7.9 BALANCE SHEET SUMMARY Current assets - 6.2 7.4 13.8 16.7 - Non-current assets - 0.0 5.0 1.0 1.4 - Total Assets - 6.2 12.4 14.8 18.1 - Short term borrowings (interest and non interest bearing) - - - 0.4 - - Other current liabilities - 2.4 4.7 7.7 9.5 - Long term borrowings (interest and non interest bearing) - - - - - - Other non current liabilities - - - - - - Equity & reserves - 3.8 7.7 6.7 8.6 - Total Equity and Liabilities - 6.2 12.4 14.4 18.1 - CASH FLOW STATEMENT SUMMARY Cash generated from operating activities - (3.3) 2.8 0.2 1.7 - Cash generated from investing activities - (0.0) (5.3) (0.8) (1.1) - Cash generated from financing activities - 3.9 3.8 0.4 (0.4) - Cash and cash equivalents movement for the year - 0.6 1.4 (0.2) 0.2 - Cash and cash equivalents at end of year (30th June) - 0.6 2.0 1.8 2.0 - KEY FINANCIAL RATIOS Personnel cost as a % of total operating and maintenance expenditure [%] 46.6% 43.0% 30.4% 33.6% 24.9% Repairs & maintenance cost as a % of total operating and maintenance 20.6% 13.5% 5.3% 6.6% 4.1% expenditure [%] Surplus (deficit) before depreciation and after tax [KES Mil] -0.1 0.3 3.8 2.6 8.4 Operating surplus (deficit) [%] -0.9% 1.0% 8.8% 5.7% 10.5% Surplus (deficit) after tax [%] -0.9% 0.2% 5.6% 3.1% 7.1% Net debtors days (Collection period) [Days] 162 87 112 96 - Net debtors as percentage of operating revenue [%] 44% 24% 31% 26% 0% Operating cost coverage ratio (OCCR) [%] 99.1% 59.7% 72.5% 98.6% 105.7% Debt service coverage ratio (DSCR) 6.5 Current ratio 2.6 1.6 1.7 1.7 KEY OPERATING INDICATORS Number of water connections 4,687.0 2,751.0 3,358.0 6,331 Number of sewerage connections - - - - Volume water produced per annum [Cubic meter] 799,632.0 1,271,303.0 1,622,640.0 1,762,100 Volume water sold i.e. billed 447,228.0 719,800.0 971,409.0 993,394 Non revenue Water [NRW] 44% 43% 40% 44% Collection ratio 83% 107% 78% 93% Service area coverage [Sq Km] 733 Population of area 132,000.0 270,056.0 420,000.0 397,961 Population served with potable water 16,620.0 28,886.0 32,528.0 116,025 Service area coverage [population served with water/ population of area] 13% 11% 8% 29% Total Value of water sold [KES] 53,859,615 Average tariff per cubic meter of water sold [KES] 27.6 26.3 41.1 FINANCING URBAN WATER SERVICES IN KENYA UTILITY SHADOW CREDIT RATINGS 2011 60 A publication of the Water Services Regulatory Board in collaboration with the Water and Sanitation Program