Khanya Cold Chain Business Plan — Risk Analysis

The principal risks facing a start-up cold store, from occupancy shortfall and tariff escalation to refrigeration failure, with controls.

Risk Analysis

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12.1 The risks that matter
12.2 Sensitivity
12.3 Scenarios and the downside
12.4 Trigger points

12.1 The risks that matter

Occupancy failing to ramp is the dominant risk and it is not close. Break-even including debt service is 56 per cent against a Year 1 plan of 46 per cent, and an eight-point shortfall removes R8 498 791 of Year 3 EBITDA, nearly half of it. It is managed by anchor contracting of 1 200 positions before drawdown, by the pre-committed trigger points in Section 12.4, and by a commercial approach that treats an occupied pallet at a poor rate as better than an empty position drawing power.

Covenant breach in Years 1 and 2 is close to certain on a standard test. Cover of 0.22 times and 1.15 times is below a 1.30 times covenant, and it must be addressed in the term sheet through a Year 3 covenant start, an interest reserve or a longer moratorium, not discovered when the first test date arrives.

Capital cost overrun is the risk that is cheapest to eliminate. Refrigeration and envelope are 50 per cent of capital expenditure on indicative pricing, and a 15 per cent overrun on those two lines alone is R6 675 000. Firm fixed-price contracting with retention before drawdown removes most of it.

Lease renewal and landlord leverage is a structural exposure created by the decision to lease. R89 800 000 of plant fixed into a building the business does not own gives the landlord considerable negotiating power at renewal. A ten-year term with tenant renewal options is a condition of proceeding, and a purchase option would remove the risk entirely.

Ammonia is a regulatory and safety exposure rather than a line item. A plant of this size is a major hazard installation requiring risk assessment, an emergency plan tested with the local authority and competent-person inspections. The approval timeline is a gating item in the construction programme capable of delaying commissioning by months, and the residual safety risk is managed through the competent-person regime and insurance rather than eliminated.

12.2 Sensitivity

Driver	Downside	Upside	Swing	As a share of base EBITDA
Occupancy ±8 points	14 807 526	23 306 316	8 498 791	45%
Storage tariff ±6%	15 302 334	22 811 508	7 509 175	39%
Occupancy ±4 points	16 932 224	21 181 618	4 249 395	22%
Other operating costs ±10%	17 650 393	20 463 449	2 813 056	15%
Electricity cost ±20%	18 475 934	19 637 908	1 161 973	6%
Electricity cost ±10%	18 766 428	19 347 414	580 986	3%
Base case Year 3 EBITDA	19 056 921

12.3 Scenarios and the downside

	Downside	Base	Upside
Occupancy assumption	−13 points	As modelled	+5.5 points
Tariff assumption	−6%	As modelled	+3.5%
Electricity assumption	+14%	As modelled	−4%
Year 1 EBITDA	(6 159 380)	1 418 599	5 135 068
Year 3 EBITDA	8 466 455	19 056 921	24 396 803
Year 5 EBITDA	13 993 106	26 819 815	33 333 192
Year 5 EBITDA margin	19.6%	31.9%	36.8%
Project IRR	−1.7%	18.2%	23.8%

Figure 23. Cash position, base against downside.

Downside case (R)	Year 1	Year 2	Year 3	Year 4	Year 5
Occupancy	33%	55%	66%	72%	75%
Revenue	20 590 281	38 053 425	52 182 729	63 202 294	71 396 760
EBITDA	(6 159 380)	2 898 206	8 466 455	12 127 192	13 993 106
Debt service cover	-0.98x	0.28x	0.80x	1.15x	1.33x
Cash / (funding shortfall)	(1 346 640)	(16 951 723)	(27 378 702)	(32 680 283)	(34 658 147)
Book value of equity	29 954 311	17 054 526	9 333 301	5 132 496	2 916 744

The downside is dilution, not insolvency — and that is a genuine distinction

On thirteen points lower occupancy, 6 per cent lower tariffs and 14 per cent higher energy cost, the business still produces positive EBITDA from Year 2 and reaches R13 993 106 by Year 5. Book equity never falls below R2 916 744. The asset does not become worthless: it becomes a business that cannot service the debt it was given. The cash line is where the damage shows, the shortfall reaches R34 658 147 against a R12 000 000 revolver. The realistic response is a second equity call of roughly R25 000 000 in Year 2 or Year 3, priced at whatever the incoming investor demands from a founder with a half-full cold store and a covenant breach. Existing shareholders would be heavily diluted; they would not be wiped out. That is a meaningfully better downside than most start-ups offer and a direct consequence of the asset backing, but the recovery is well below cost, because plant fixed into a leased building sells at a steep discount. Asset-backed should not be read as capital protected.

12.4 Trigger points

Point	Trigger	Committed response
Month 6	Below 32% occupancy	Freeze vehicle purchases and all discretionary capital. Reprice to fill space, accepting lower rates for term
Month 12	Below 40% average occupancy	Formal lender review. Offer short-term overflow contracts at marginal rates; an occupied pallet at a poor rate beats an empty position
Month 18	Blast tunnels below 35% utilisation	The premium service is not selling. Review pricing, sales coverage and whether the capacity was over-specified
Month 24	Debt service cover below 1.00x	Approach lenders for restructuring before breach. A negotiated extension is far cheaper than a default
Month 30	Cash below R6m with the revolver fully drawn	Initiate an equity raise. Do not fund operations from the revolver beyond this point
Month 36	Below 60% occupancy	The base case has failed. Evaluate a sale of the operating business to a national operator, who can fill the building with volume the company cannot win

These are adopted as board policy before drawdown rather than debated when the trigger arrives. The month-36 trigger deserves emphasis. A half-full cold store is worth considerably more to a national operator with national volume than it is to the founders, and the moment to explore that is while the business still has cash and a lender who is being kept informed, not after a default.

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