Model inputs and key assumptions
| Financial model escalation assumptions/economic indicator | Rate | Rationale |
|---|---|---|
| General cost escalation (CPI) | 5.5% | In line with the CPI in the Southern African Region |
| Capital cost escalation | 6% | All operating equipment are purchased in USD and EUR Escalation is assumed to be CPI plus 0.5 basis points to cater for the impact of currency volatility |
| Tariffs and escalation rate | 5.5% | Tariffs are benchmarked with SADC port tariffs as a base and escalated in future years Tariff escalation is in line with CPI |
| Volume growth | 3.5% | Traffic growth is in line with generalised SADC container growth. This value is capped at 400,000 TEU which is the assumed maximum capacity of the terminal facility. Refer to Appendix 4 |
| Reporting currency | ZAR | South African Rand (ZAR) |
| Labour costs | CPI +1 | The manning of the terminal is informed by the planned port handling equipment as provided in the capital investment schedule and the design capacity CPI + 1. This is in line with the labour trends in the region |
| Hurdle rate | Verifying based on WACC calculations Appendix 3 | WACC + inflation* = nominal WACC nominal WACC** + project risk*** * The real WACC plus inflation assumed in the SADC to average 5.5% effectively yields a nominal WACC **Determined in Appendix 2 at gearing of 100%, 50%, 45% and 0% ***Project risk = we assume that the funder expects a premium of 4% to compensate for greenfield project risk associated with this concession |
| Operating expenses | Fixed operating costs comprise security costs, land rentals, municipal rates and taxes, materials, repairs and maintenance and other Variable operating costs include labour overtime costs, casual labour, energy costs, water and contract payments Total operating costs constitute between 34% and 42% of revenue | |
| Tax | 25% | Company tax at 25% and VAT at 14% |
| Borrowings | 12% | Benchmarked with the South African Rand (ZAR) prime rate of 10.5% plus a risk premium of 1.5%. The assumed debt tenor of 15 years |
| WACC | Will differ based on the funding mix. Refer to Appendix 3 for WACC, Appendix 1 for the cost of equity and Appendix 2 for the cost of debt calculation |
| Financial model escalation assumptions/economic indicator | Rate | Rationale |
|---|---|---|
| General cost escalation (CPI) | 5.5% | In line with the CPI in the Southern African Region |
| Capital cost escalation | 6% | All operating equipment are purchased in USD and EUR |
| Tariffs and escalation rate | 5.5% | Tariffs are benchmarked with SADC port tariffs as a base and escalated in future years |
| Volume growth | 3.5% | Traffic growth is in line with generalised SADC container growth. This value is capped at 400,000 TEU which is the assumed maximum capacity of the terminal facility. Refer to Appendix 4 |
| Reporting currency | ZAR | South African Rand (ZAR) |
| Labour costs | CPI +1 | The manning of the terminal is informed by the planned port handling equipment as provided in the capital investment schedule and the design capacity |
| Hurdle rate | Verifying based on WACC calculations Appendix 3 | WACC + inflation* = nominal WACC |
| Operating expenses | Fixed operating costs comprise security costs, land rentals, municipal rates and taxes, materials, repairs and maintenance and other | |
| Tax | 25% | Company tax at 25% and VAT at 14% |
| Borrowings | 12% | Benchmarked with the South African Rand (ZAR) prime rate of 10.5% plus a risk premium of 1.5%. The assumed debt tenor of 15 years |
| WACC | Will differ based on the funding mix. Refer to Appendix 3 for WACC, Appendix 1 for the cost of equity and Appendix 2 for the cost of debt calculation |
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