PRESENTATION TO PARLIAMENTARY PORTFOLIO COMMITTEE

Water is our Passion

LEPELLE NORTHERN WATER BUSINESS PLAN, ANNUAL REPORT AND BULK WATER TARIFFS

Ms N.J. Manthata (Finance Chairperson)Mr L.A. Leballo (Chief Executive)

17 – 18 APRIL 2013


Strategic Plan (2012/13) Vision and Mission

Area of Supply and Current Capacity

Strategic Objectives and Priority Issues

Opex and Capex Plans

2011/12 Annual Report Performance Analysis Financial Performance Analysis (External Audit Analysis)

2013/14 Tariff Adjustments Consultations

Challenges / Solutions


Operates 10 purification schemes – ranging from 3 – 74 Ml/day Potable Water

140 Ml/day in Phalaborwa industries

Bulk pipeline length of 1062 km with varying sizes of up to 1.2m

The pipelines caters for 211 Ml/day Potable & 140 Ml/day Industrial water.

KEY ISSUES (2012/13)Financial Sustainability and ViabilityInfrastructure Rehabilitation / RefurbishmentExtension and Expansion of Operations Services

KEY ISSUES (2013/14)Skills Development and Retention of skillsProject and Contract ManagementImage Improvement


VisionA leading bulk water services provider contributing to continuous improved quality of life and economic growth.

Mission

To provide quality, affordable and sustainable bulk water services and support to water services authorities in line with government policies and targets.

STRATEGIC OBJECTIVES


Strategic Objectives 2013/14 Targets

Infrastructure Development • Spent R91.5 m on Capital & Maintenance• Retain Blue Drop on Ebenezer & Olifants• Obtain Blue Drop on other 10 plants• 90% Green Drop certification

Financial Viability and Sustainability • Over/under expenditure ±10%• 100% collection of debt

Effective development and maintenance of LNW Corporate Image and Stakeholder relations

• Excellent stakeholder relations• 100% Branding

Organisational Development • Effective retention strategy and succession planning

Research, Planning & Development • Innovation and best practice technologies.

Effective Corporate Governance • Electronic Audit & Risk system operational• 100% implementation of Board Resolutions

Extension into operational area • Bulk contracts in new areas e.g. Vhembe DM• Increased scope in existing operational areas


Bulk Ageing Infrastructure Exceeding abstraction Permits (high demands) > Permits Over laden treatment plant (upgrades) Deteriorating raw water quality Outstanding debtors by Municipalities

Reticulation Lack of effective cost recovery, water conservation and demand management Ageing internal reticulation infrastructure Default on payment by consumers Lack of maintenance Unauthorized / illegal connections

Technical skills capacity retention


Client Amount Owed Recovery Plan

Mopani District R 251m Implementation of Section 04 of Water Services Act. Municipality not co-operative and non committal to payment of the debt.

Capricorn District R 55m Entered into SLA for payment of the old debt while the current account is being serviced.

Sekhukhune District R 46m Entered into SLA for payment of the old debt while the current account is being serviced.

Total Owed R352m


Client Amount Owed Recovery Plan

Mopani District R 236m Implementation of Section 04 of Water Services Act. Municipality not co-operative and non committal to payment of the debt.

Capricorn District R 0m Settled by October 2012

Sekhukhune District R 0m Settled by November 2012

Total Owed R236m


Actual2 012

Projected2 013

Budget 2 013

Budget2 014

Budget2 015

Budget2 016

Budget2 017

INCOME 314 847 326 057 438 221 489 405 535 743 592 950 654 321

Pumping and Purification 8 725 6 347 7 457 7 942 9 061 9 772 10 526

Electricity 73 120 85 757 107 630 124 763 144 709 167 846 194 682

Purchase of raw water 27 550 26 384 29 600 32 884 36 665 40 882 45 583

Maintenance 36 845 22 670 15 661 16 713 17 836 19 036 20 317

Impairment (55 866) 14 535 0 0 0 0

Fair value adjustment (3638) 0 0 0 0 0 0

Salaries 109 365 98 601 107 242 111 018 112 938 120 279 128 097

Administration Overheads 38386 33 333 52 579 55 996 59 635 52 665 56 088

Depreciation 24618 22 275 25 235 26 348 27 437 28 692 29 116

Refurbishment 0 6336 45 815 36 345 31 832 29 297 38 097

OPERATING EXPENDITURE 149710 309 902 391 219 412 009 440 115 468 469 522 507

Operating Surplus/Deficit 56104 16 156 47 002 77 397 95 627 124 481 131 813

Other Income 45685

Interest received 15064 14 875 12 681 5 634 1 032 3 974 4 850

Less Net finance Costs (2357) 2 448 1 991 1 508 988 741 585

Actuarial gains 222 0 0 0 0

Total 110718 28 583 57 692 81 523 95 671 127 714 136 078


2011 2 012 2013 2014 2015 2016 2017

ASSETS

NON-CURRENT ASSETS 414 157 449 324 509 783 523 463 531 192 536 763 551 802

CURRENT ASSETS 373 126 426 495 296 650 362 717 448 774 572 253 784 238

TOTAL ASSETS 787 283 875 819 806 433 886 180 979 966 1 109 015 1 336 040

EQUITY AND LIABILITIES

CAPITAL AND RESERVES 628 219 740 782 714 494 796 017 891 688 1 019 403 1 154 464

NON-CURRENT LIABILITIES 35 679 31 183 25 547 22 641 19 769 18 111 16 448

CURRENT LIABILITIES 123 385 103 854 66 392 67 522 68 509 71 502 165 129

TOTAL EQUITY AND LIABILITIES 787 283 875 819 806 433 886 180 979 966 1 109 015 1 336 040


2011 2012 2013 2014 2015 2016 2017

Surplus for the year 42 462 28 583 57 692 81 523 95 671 127 714 136 078

Cash generated from operations 17 182 74 230 47 560 99 298 113 784 153 933 265 279

Cash flow from operating activities 31 753 86 937 47 560 99 298 113 784 153 933 265 279

Cash flow from Investing activities -64 558 -57 564 -101 468 -40 028 -35 167 -34 262 -45 173

Net cash flow outflow from financing activities-4 687 -4 572 -5 253 -2 906 -2 872 -1 658 -1 663

Net increase in cash and cash equivalents -36 752 -12 816 -59 162 56 364 75 745 118 013 218 443

Cash and cash equivalents at beginning of the year

316 081 278 589 266 512 207 350 263 714 339 459 457 471

Cash and cash equivalents at end of the year 278 589 303 390 207 350 263 714 339 459 457 471 675 914



YearIncome (R’000)

Expenditure (R’000)

2011/12 314 847 262 221

2012/13 438 221 391 219

2013/14 489 405 412 009

2014/15 535 743 440 115

2015/16 592 950 468 469

2016/17 654 321 522 507

Total 3 025 487 2 496 540


Various Infrastructure envisaged for O&M:

New Dam (De Hoop) – almost complete

Lebalelo Water Association Infrastructure

Greater Letaba Dam Scheme

Lephalale Bulk Infrastructure

Nandoni Dam Scheme

Flag Boshielo to Mokopane Pipeline

Other Groundwater development infrastructure.


Fin Year Capital Maintenance

2012/13 145 770 15 661

2013/14 74 790 16 713

2014/15 65 345 17 836

2015/16 64 931 19 036

2016/17 81 464 20 317



Beginning

Middle

Completed


This project

was aimed at rural areas


14 Mℓ in capacity


2011/12Polokwane = 16 Ventilated Improved Pits (VIPs)

&Mogalakwen

a16 VIPs

2012/13 (Current)providing

another 30 VIPs in

Mogalakwena



Year of Audit Opinion Major Findings

2007/08 Unqualified•Materiality Framework; Outstanding Debts•Water Balances

2008/09 Unqualified •Outstanding Debts

2009/10 Unqualified •Outstanding debts

2010/11 Unqualified •Outstanding Debts

2011/12 Unqualified •Outstanding debts



Business Performance of LNW

2007Actual

2008Actual

2009Actual

2010Actual

2011Actual

2012Actual

Gross margin % 88% 92% 90.70% 73.00% 69.00% 65%

Current ratio 2.67 2.49 2.54 2.53 3.07 4.11

Return on assets % 13% 3.50% 5.01% -0.70% 6.00% 13%

Asset turnover 0.29 0.27 0.26 0.32 0.37 0.36

Debt to Total Capital ratio 0.02 0.03 0.05 0.03 0.20 0.15

Debt-equity ratio 0.35 0.35 0.37 0.34 0.25 0.18


2013

RatioVar

2014

RatioVar

2015

RatioVar

2016

RatioVar

2017

RatioVar

Working ratio 89% -6% 84% -6% 82% -2% 79% -4% 80% 1%

Gross margin 64% 4% 63% -1% 62% -3% 60% -3% 60% 0%

Current ratio 4.5 6% 5.4 20% 6.6 22% 8.0 22% 4.7 -41%

Debt to equity 13% -24% 11% -12% 10% -13% 9% -11% 16% 79%

Return on asset 7% 94% 9% 29% 0% -100% 12% 0% 10% -12%

Return on

equity8% 86% 10% 27% 11% 5% 13% 17% 12% -6%

Assets turnover 54% 29% 55% 2% 55% -1% 53% -2% 49% -8%


- Cash at hand as of 30 June 2012 = R303m- Capex Investment - Refurbishment of Infrastructure


- Resolve outstanding debt and late payment for bulk services by WSAs

- Rehabilitation and Maintenance of infrastructure

- Support municipalities with regard to cost recovery, water conservation and demand management strategies

- Capacity building, retention of skills and succession planning



Institution Consulted Date Comments / Feedback

WS Authorities:•Mopani District•Capricorn District•Polokwane LM•Sekhukhune District•Mogalakwena LM

19 November 201223rd October 201216 November 201218 January 201329 November 2012

No feedback received (only received on 20 May 2011)Feedback received on tariff acceptanceFeedback received on tariff acceptanceFeedback received on tariff acceptanceFeedback received on tariff acceptance

SALGA 03rd December 2012

Comments Received from National Salga

National Treasury 03th December 2012

Comments received from National Treasury.

DWA 31th January 2013

No Feedback received from Minister on potable water tariff increase.


WATER SCHEME2012/13Current

2013/14Proposed % 2013/14

Adjusted %

Phalaborwa Potable 2.84 3.10 8.5% 3.06 7.7%

Ebenezer 4.83 5.19 7.5% 5.11 5.8%

Politsi 3.74 4.91 31.2% 4.82 28.8%

Olifantspoort 4.99 5.31 6.5% 5.15 3.2%

Doorndraai 4.53 4.92 8.5% 4.86 7.3%

Flag Boshielo 5.05 5.54 9.5% 5.47 8.3%

Modjadji 2.98 3.78 26.8% 3.77 26.8%

Average Tariff 4.14 4.68 13% 4.60 11.3%


LNW abides by the following PAJA principlesfollow fair procedure when making a decision and clearly explain any decisions taken;allow relevant parties to voice their opinion before making any decision that might affect their rights;inform people about any redress mechanisms in their apartment. If there is no internal appeal system, they must tell citizens of their right to ask the courts to review the decision; andtell people that they have the right to ask for the reasons for any decision taken to be given to them in writing.


LNW also complies with PAIA by amongst others making its corporate documents/ information available in:

Hardcopies, i.e. Annual reports/Business Plans Internet and Quarterly newsletters, etc.

Furthermore any information is always provided on request subject to amongst others Section 9(b)(i)


THANK YOU

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PRESENTATION TO PARLIAMENTARY PORTFOLIO COMMITTEE

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