46
Rand Water April 2013 National Parliamentary ~ Portfolio Committee on Water and Environmental Affairs Adv M Petlane Chairperson Presentation by DKP Sechemane Chief Executive
RAND WATER GROUP ANNUAL RESULT
LAUNCH – 12 OCTOBER 2012 Rand Water
April 2013
National Parliamentary
~
Portfolio Committee on Water and Environmental Affairs
Adv M Petlane
Chairperson
Presentation by
DKP Sechemane
Chief Executive
Rand Water is a public utility wholly owned by government (DWA)
Rand Water has been in existence for 110 yrs
Bulk Water supplier - 4205 Mℓ/d Consumers - Over 12 million Total Pipeline Length - 3 500 km Total Number of Reservoirs - 58
Supply Area - 18 000 km2
Additional 13 000 km2 in the Western Highveld
About Rand Water
Page 2
Pumping and Distribution Elevation
About Rand Water
Page 3
Annual Report for 2011/12
Performance Snapshot against:
Triple Bottom line
Shareholder Compact
Presidential outcomes
Financial performance
Page 4
Audit and Performance snapshot
Employment Equity:
o Disabilities – 4.2%
o Females in total workforce – 30%
o Females in management – 45%
Employee engagement level of 68%
attained against World class
benchmark of 67%
Credit ratings:
o S&P (A/Local Currency) & (BBB+/
Foreign Currency) – Negative outlook
in line with sovereign
o Fitch Rating (F1+ (zaf) – Short term) &
(AA+ (zaf) Long term)
Product Quality - SANS 0241 Class 1 and
2 specification
ISO accreditations maintained:
Corporate ISO 9001:2008
OHSAS 18001:2007
Laboratories ISO 170425
All plants ISO 14001 accredited
BEE attained 92.4% against a target of
83%
Customer centric approach yielding an
overall satisfaction rate of 84%
Management, operations and
maintenance of water and wastewater
treatment works and capacity building
Supply of peak daily demand achieved
Unqualified audit opinion
Page 5
Alignment to National Government Objectives: Presidential Outcomes
National Parliament DWA National Treasury Auditor General
Shareholder Compact
Honourable Minister, Edna Molewa
Corporate Business Plan
Rand Water Strategy
Vision
Mission
Strategic Objectives KPAs
KPIs
Annual Report
Quarterly Reports
Annual Assessment of Water Boards
Reporting Formats
Performance against Shareholder Compact
Strategic Plan
Page 6
Performance Results
Performance against Shareholder Compact
Page 7
Performance Results
Performance against Shareholder Compact
Page 8
Outcome No. 4: Decent employment through inclusive growth.
Outcome No. 5: A skilled and capable workforce to support an inclusive growth path.
Contribution to government and Minister’s performance agreement
(cont.)
Job Creation and Training (2012 – 2017)
Year
New staff
employed by RW
Contractors
Temporary Staff
(indirect) by Rand
Water Foundation
Permanent New
Jobs Within Rand
Water
Rand Water
Academy Training
2012 993 1 150 123 56
2013 400 1 500 100 120
2014 600 3 000 100 150
2015 400 3 000 100 200
2016 300 3 000 100 225
2017 300 3 000 100 250
Total 2 993 14 650 623 1 001 Page 9
Water and Sanitation Projects: School Sanitation
The Foundation refurbished existing ablution blocks in 11 Winterveldt schools in
Tshwane Metropolitan Municipality
Municipal Capacity Building on Operations and Maintenance of Water and Waste
Water Treatment Plant through Unemployment Graduates Training
The project is aimed at contributing towards building municipalities’ capacity and also
to assist municipalities in terms of blue and green drop compliance requirements.
Schools Rainwater Harvesting
The initiative is aimed at Schools Water Supply, Demand Management and
Households Poverty Eradication
The Lesotho Schools Water Supply
The Foundation has equipped 5 schools in Lesotho with boreholes, submersible
pumps connecting to new reservoirs, and reticulation equipment.
War on Water Leaks-Water Demand Management and Conservation
The Foundation managed water demand and ensured conservation within the
Randfontein Municipality in Toekomsrus.
Rand Water Foundation – Flagship Projects
Outcome No. 10: Environmental assets & natural resources that are well protected and enhanced.
Contribution to government and Minister’s performance
agreement (cont.)
Page 10
Rand Water and Blue Drop status
Rand Water’s awards have increased from last year - 9
to 14 awards this year
Together with the Ekurhuleni, Rand Water was the
nation’s top performer
Rand Water received special recognition for helping
municipalities achieve blue drop status
Extract from 2012 blue drop assessment report:
Special mention has to be made to the bulk supplier,
Rand Water. This water board embraced the Blue Drop
certification concept and invested ……….They also went
to great lengths to implement best practice as prescribed
by the World Health Organisation. They also respect the
regulatory requirements set by the Department of Water
Affairs and through all of this, not only showed that they
are a leading entity in many ways but also a very
valuable team player of the South African water sector”
Outcome No. 10: Environmental assets & natural resources that are well protected and enhanced.
Contribution to government and
Minister’s performance agreement (cont.)
Page 11
Contribution To Government and Ministers Performance
Agreement (cont.)
Rand Water’s Capex Programme
Outcome No. 6: An efficient, competitive and responsive economic infrastructure network.
Page 12
Projected peak day demands to 2035
Station Available
capacity
New
capacity
Come on
line by
Projected peak day demands
Mega litre
2015 2020 2025 2030 2035
Zuikerbosch 3900 1200 2016 3910 4500 4030 4550 4080
Vereeniging 1400 Nil 1400 1400 1400 1400 1400
Clarens
P/line
Nil 1000 2025 1000 1000 2000
Eikenhof 2000 Nil 1400 1550 1700 1840 1980
Zwartkopjes 800 200 2013 700 760 820 880 930
Palmiet 1870 600 2015 1880 2100 2300 2500 2700
Mapleton 960 300 2017 920 1040 1140 1240 1340
Contribution To Government and Ministers Performance
Agreement (cont.) Rand Water’s Capex Programme
Outcome No. 6: An efficient, competitive and responsive economic infrastructure network.
Page 13
Page 14
BG3 raw water
pipeline
9 km x 3500 mm
R50 million budget for
2012/13
Station 5 at Zuikerbosch
1200 Ml/d capacity in two phases
R52 million budget for 2012/13
B19 raw water pipeline
R55 million budget for 2012/13
Primary Systems – 1600 Ml/d growth from 2015 to 2030
Additional Purification Plant – 1200 Ml/d capacity
Additional raw water pipelines and purification plant upgrades
Page 15
Page 16
Page 16
Page 17
Other Projects
Brugspruit Acid Mine Drainage Plant
DWA appointed Rand Water for operations and
maintenance of Brugspruit Acid Mine Drainage Plant
in 2008.
Plant was successfully refurbished and
commissioned in August 2010.
Rand Water continues to work closely with DWA to
operate and maintain the plant
Westonaria Regional Bulk Infrastructure -
Extension of the Hannes Van Niekerk
wastewater treatment works
This was a special project that was identified by the
Presidency and DWA
Rand Water is the implementing agent on this
project
Outcome No. 6: An efficient, competitive and responsive economic infrastructure network.
Contribution to government and Minister’s performance
agreement (cont.)
Page 18
Rand Water has previously proposed
to develop multiple hydropower
projects (the Projects) combining a
total net capacity of 12.9MW, various
sites across South Africa, namel:
Zoekfontein : 5.60 MW
Brakfontein: 2.00 MW
Klipfontein: 3.30 MW
Hartebeeshoek: 2.00 MW
In selecting the project sites, our
primary objective was to locate
the proposed power projects
nearest to our current water
transfer infrastructure where
hydropower can be generated
From the feasibility study
conducted, the outputs of the
Projects indicate that the total
cost of the 4 Projects will be
approx. R463.7 million.
Multi Hydro Power Projects
On 26th Sept 2012, Rand Water was invited to the
Presidential Infrastructure Coordinating Committee
(PICC) to present its proposal to a number of cabinet
Ministers.
There are a number of options available for a closer
working relationship on this regional bulk scheme
1. Rand Water can be involved as the implementing
agent – (construction of the scheme, working closely
together with Emfuleni). Rand Water will then be
available for the operations and maintenance of the
scheme.
2. Emfuleni can build the scheme and allow Rand Water
to provide support with regards to project
management and capacity building on behalf of
Emfuleni
3. Rand Water can continue with the operations and
maintenance on behalf Emfuleni
These options demonstrate the wide range of options for
state-owned entities and organs of state to work together.
On 12th November 2012, the Honourable Minister for
Water Affairs issued a directive requesting Rand Water to
be the implementing agent for this project.
Sedibeng Scheme
Outcome No. 6: An efficient, competitive and responsive economic infrastructure network.
Contribution to government and Minister’s performance
agreement (cont.)
Page 19
Swaziland An MoU was signed with Swaziland Water Services
Cooperation (SWSC) for collaboration on broader water
sector issues. SWW appointed Rand Water to assist
them in preparation for ISO accreditation of their
laboratory
DRC Project The DRC requested assistance from the South African
Government in 2007 to improve water supply in the
Katanga Province. Visits to the DRC culminated in the
signing of the Bi-National Agreement between SA and
DRC on 20 June 2011, in Lubumbashi (DRC).
Botswana The Botswana water utility appointed Rand Water to
assist in design and implementation of business
systems. Project commenced in April 2012, end in
November 2012.
Nigeria The Water Operator Partnership (WOP) program was
launched on August 2011 during at the African
Development Bank in Pretoria. The program manager is
accommodated at the Rand Water head office in Reitvlei.
490,000 Euros was provided as a grant by the African
Development Bank acting as trustee for the African
Water Facility (AWF)
Africa Initiatives
Page 20
Financial Performance highlights
Achieved over R6.8bn in revenue
Gross margin improvement from 53.56% to
56.25%
Variable costs increasing by over 24% yoy with
energy costs increasing by 31%
26% increase in EBITDA from R750m to R948m
Improvement in profit from operations from
R536m to R778m
Overall cash reserves of R1,327m
Actual capital investment of R1,481m
For the year ended 30 June
2012
R million
2011
R million
Revenue 6 838 5 891
Net operating expenses 5 890 5 141
EBITDA 948 750
Depreciation and amortisation 212 201
Profit from operations before net finance costs
736 549
Net investment income/(expense)
42 (16)
Taxation - 3
Net Income for the year
778 536 -
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
48%
49%
50%
51%
52%
53%
54%
55%
56%
57%
2008 2009 2010 2011 2012
Revenue GP%
Page 21
536
792
158
258
274
212
11 47
778
-
400
800
1,200
1,600
2,000
201
1 N
et in
co
me
Ta
riff
in
cre
ase
Gro
ss p
rofit
Raw
wa
ter
En
erg
y
Che
mic
als
Sta
ff c
osts
Dep
recia
tion
Oth
er
201
2 N
et in
co
me
Rm
Net Income Analysis
Revenue growth and net income analysis
3.7 3.8 3.7
4.1 4.2
3.04 3.23 3.50 3.99
4.51
-
1.00
2.00
3.00
4.00
5.00
3.2
3.4
3.6
3.8
4.0
4.2
4.4
2008 2009 2010 2011 2012
R/k
l
Ave m
gl/
d
Potable water bulk tariff and volume of water sold
Volume Sold Potable water bulk tariff
• Revenue growth primarily driven by tariff increases of 12.9%
effective from 1 July 2011.
• Volume increases of 3% primarily from the municipal
customers.
• Municipal customer contribution to revenues decreasing year-
on-year from 90% to 89% in 2012.
• Tariffs are cost reflective.
• Water research levy has remained constant year on year.
Revenue growth
Page 22
Asset base analysis and cost breakdown
R’000,000
June 2011
historical cost
June 2011
replacement value
June 2012
historical
cost
June 2012
replacement
value
Profit/loss for the period 534 534 778 778
Adjustments: Depreciation and amortisation (1,573) (1,402)
Adjusted profit after revaluation for the year 534 (1,039) 778 (623)
Equity cumulative impact: Closing Equity 6,756 5,184 7,534 4,561
Adjustments: Revaluation of PPE - 71,484 - 72,466
Adjusted closing Equity balance 6,756 76,668 778 77,027
Statement of financial position : PPE 7,154 78,639 8,417 80,000
RATIOS
Return on assets 7% NONE 9% NONE
Debt/Equity ratio 15% 1% 19% 2%
49%
19%
4% 4%
21%
3%
2012 cost breakdown
Cost of raw water
Energy
Chemicals
Other costs
Labour
Dep&Amort
51%
16%
5%
4%
20%
4%
2011 cost breakdown
Cost of raw water
Energy
Chemicals
Other costs
Labour
Dep&Amort Page 23
for the year ended 30 June 2012
R million 2011
R million
EQUITY AND LIABILITIES
Equity 7 534 6 756
Non-current liabilities 1 428 998
Borrowings 985 646
Post-retirement benefit obligation 294 274
Statement of financial position
Capital and Reserves (R million) Debt: Equity (%)
5,339 5,925
6,222 6,756
7,534
0
2,000
4,000
6,000
8,000
2008 2009 2010 2011 2012
18
16
14 14
20
0
4
8
12
16
20
2008 2009 2010 2011 2012
Page 24
for the year ended 30 June 2012
R million 2011
R million
Cash flow from operating activities 1 169 950
Cash generated from operations 1 196 970
Other (28) (20)
Cash flows from investing activities (1 316) (956)
Acquisitions (1 360) (1 011)
Proceeds from disposal of assets 3 14
Other investment activities 41 41
Cash flow from financing activities 544 12
Increase in bank and cash 397 6
• Cash generated from operations after working capital changes increased by 23% to R1 196m
• Net cash generated from operating activities increased by 23% to R1 169m
Abridged statement of cash flows
Cash generated from operations (R million)
959 881
546
970
1,196
0
200
400
600
800
1,000
1,200
1,400
2008 2009 2010 2011 2012
Page 25
Analysis of 2011/12 Budget
Page 26
2011/12 Actual performance against
budget
For the year ended 30 June
2012 Actual
R million
2012 Budget
R million
Variance
%
Revenue 6 838 6 706 2
Net operating expenses 5 890 5 810 1.3
EBITDA 948 896 5.8
Depreciation and amortisation 212 194 (9.3)
Profit from operations before net finance costs
736 702 4.8
Net investment income/(expense)
42
Taxation -
Net Income for the year 778 702 10.5
Page 27
Analysis of operational expenditure - year
on year (yoy) and against budget
-42%
28% 36% 49%
16%
0%
6.9 8.6
11.9
17.0 19.5
16.5
0
5
10
15
20
25
-60%
-40%
-20%
0%
20%
40%
60%
2008 2009 2010 2011 2012Budget
2012Actual
% growth in chemical costs yoy R/kl
R/k
l
848 961 1,065
1,112
1,276
0.58 0.67 0.71 0.74 0.83
0.00
0.20
0.40
0.60
0.80
1.00
-
200
400
600
800
1,000
1,200
1,400
2009 2010 2011 2012Budget
2012Actual
R’m
Staff costs (16.9% increase in R/kl yoy) Headcount increase of 4% (123 new heads in 2012)
Staff costs R/kl
R /
kl
268 266 270
271
254
0.18 0.19 0.18 0.18
0.17
0.15
0.16
0.17
0.18
0.19
0.20
245
250
255
260
265
270
275
2009 2010 2011 2012Budget
2012Actual
R/k
l
Opex (8.8% decrease in R/kl yoy)
Opex R/kl
Rm
Excludes cost of sales – non-core
2,251
2,435
2,734
3,031
2,992
1.55 1.70 1.83
2.01
1.94
0.00
0.50
1.00
1.50
2.00
2.50
-
500
1,000
1,500
2,000
2,500
3,000
3,500
2009 2010 2011 2012Budget
2012Actual
R’m
Cost of raw water (6.0% increase yoy)
Cost of raw water R/kl
R/k
l
Page 28
Energy management
Energy Efficiency
improvement
Cogeneration Other
Security of supply Tariff minimization
Energy Cost
optimization
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
-
10
20
30
40
50
60
70
2005 2006 2007 2008 2009 2010 2011 2012
c/k
Wh
Cost of energy
c/kWh % growth yoy
-
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2009 2010 2011 2012
Mw
h/m
l
Energy Usage
Page 29
1000 1000 1074
1477
986 910
970
1361 99%
91% 90%
92%
86%
88%
90%
92%
94%
96%
98%
100%
0
200
400
600
800
1000
1200
1400
1600
2009 2010 2011 2012
Budget Capex % Achievement
R’m
Capital expenditure performance excluding moveable assets
Capital expenditure
Page 30
2013/14 Tariff
Page 31
Previous Cycle Tariff Consultation (Before revised energy tariff)
for Financial Year Ending 30th June 2013
Price Forecast Percent Weighted
Year-End ~ 30 June increase 2013 of total
% R m % %
TCTA 8.2% 2888 40.7% 3.5%
DWA 10.3% 590 8.3% 0.7%
Raw Water 8.5% 3478 48.9% 4.2%
Energy - Eskom 26.1% 808 11.4% 3.0%
Energy - Municipalities 38.6% 726 10.2% 3.9%
Chemicals 12.5% 330 4.7% 0.6%
Multi-Partnered Uncontrollable Costs 5342 75.2% 11.7%
Labour 8.2% 1165 16.4% 1.3%
Other 5.4% 598 8.4% 0.5%
Total 7105 100.0% 13.5%
Target bulk tariff increase 13.5%
Rand Water Tariff = Rand Water Internal Inflation• Rand Water has
followed a consistent
rationale for
increasing its tariff
over the years.
• This rationale has
been based on
assessing the Rand
Water internal rate of
inflation.
• This is a projection of
the expected increase
in total costs.
• A breakdown of the
total costs and their
overall expected rate
of price increase is
then proposed as the
proposed tariff
increment.
Page 32
for Financial Year Ending 30th June 2013
Price Forecast Percent Weighted
Year-End ~ 30 June increase R 2,013.00 of total
% R m % %
TCTA 8.18% 2888 41.3% 3.5%
DWA 10.3% 590 8.4% 0.7%
Raw Water 8.5% 3478 49.7% 4.2%
Energy - Eskom 16.7% 747 10.7% 1.8%
Energy - Municipalities 29.2% 677 9.7% 2.8%
Chemicals 12.5% 330 4.7% 0.6%
Multi-Partnered Uncontrollable Costs 5233 74.8% 9.4%
Labour 8.2% 1165 16.6% 1.4%
Other 5.4% 598 8.5% 0.5%
Total 6996 100.0% 11.3%
Target bulk tariff increase 11.3%
Rand Water Tariff = Rand Water Internal Inflation
10.0%
12.0%
14.0%
16.0%
18.0% 16.7% 15.7%
13.5%
11.1%
16.0%
Tariff Consultation after revised energy tariff
Eskom Tariff Revision – Original Tariff Increment – 26.1%
In line with a consistent rationale for
increasing its tariff over the years, Rand
Water revised its tariff to 11.3%.
© SAP 2008 / Page 33
for Financial Year Ending 30th June 2014
Price Forecast Percent Weighted
Year-End ~ 30 June increase 2014 of total
% R m % %
TCTA 8.47% 2845 37.2% 3.24%
DWA 10.8% 603 7.9% 0.69%
Raw Water 8.7% 3448 45.0% 3.92%
Energy - Eskom 15.0% 887 11.6% 1.74%
Energy - Municipalities 15.0% 725 9.5% 1.42%
Chemicals 8.9% 360 4.7% 0.42%
Multi-Partnered Uncontrollable Costs 5420 70.8% 7.50%
Labour 8.0% 1303 17.0% 1.36%
Other 7.8% 933 12.2% 0.96%
Total 7656 100.0% 9.82%
Target bulk tariff increase 9.82%
Bond Raised (R m) 1210
Rand Water Tariff = Rand Water Internal Inflation
Current Cycle of Tariff Consultation – Tariff increase on 1st July 2013
Page 34
Current Cycle of Tariff Consultation – Tariff increase on 1st July 2013
Page 35
NERSA approved a general tariff increase of 8% on the price of electricity.
Following the announced increase, Eskom went into the different categories of
their tariff structure to apply different rates on their diverse customer profile
based on Eskom’s priorities and justification. This would result in an average
8% increase on Eskom’s average price.
The Eskom tariff structure is based on 23 categories determined by their
customer profile.
Megflex is the wholesale price aimed at big industrial consumers (the drivers of
our economy) and municipalities (slightly different from the industrial version).
Given that 97% of Rand Water’s energy received from Eskom is based on only
one category i.e. Megaflex, it follows that the tariff increase that will matter most
to Rand Water is the Megaflex tariff increase.
Depending on Eskom’s priorities and rationale on restructuring the tariffs,
different categories would be affected differently by the price increase.
Current Cycle of Tariff Consultation – Tariff increase on 1st July 2013
Page 36
The table below illustrates the price
movements in the last three years per item on
the Megaflex tariff category applicable to Rand
Water
The table below shows the actual percentage
increase per item.
PERCENTAGE CHANGE PER ITEM
(Based on Megaflex) - Palmiet Pumping StationUNITS
SUMMER WINTER SUMMER WINTER SUMMER WINTER
Administration Charge 1 15.1% 15.1% 8.0% 8.0%
Service Charge 1 15.1% 15.1% 8.0% 8.0%
kWh Peak 3,616,395 15.1% 15.1% 11.8% -4.3%
Standard 8,977,295 15.1% 15.1% 25.6% 11.5%
Off-Peak 12,470,300 15.1% 15.1% 13.9% 13.3%
Notified Network Access 48,863 15.1% 15.1% 7.5% 7.5%
TX Network Access 48,863 15.1% 15.1% 8.1% 8.1%
NetworkDemand Charge 43,030 15.1% 15.1% 7.5% 7.5%
Reactive Energy 326,863 15.1% 8.0%
Reliability & Afordability Charges 100.0% 100.0% New Items
Premium Connection Charge 1 0.0% 0.0% 0.0% 0.0%
Electrifcation & Rural Subsidy Levy 15.1% 15.1% 13.8% 13.8%
Envrironmental Levy 0.0% 75.0% 75.0% 0.0%
Monthly Bill 14.3% 16.9% 23.5% 8.0%
Annual Costs 15.2% 17.9%
R/kWh 15.2% 17.9%
2011/12 2012/13 2013/14
ESKOM
(Based on Megaflex) - Palmiet Pumping StationUNITS
SUMMER WINTER SUMMER WINTER SUMMER WINTER
Administration Charge 1 2,016.00 2,016.00 2,320.80 2,320.80 2,506.50 2,506.50
Service Charge 1 2,104.29 2,104.29 2,422.28 2,422.28 2,616.06 2,616.06
kWh Peak 3,616,395 0.5104 1.8283 0.5875 2.1046 0.6568 2.0133
Standard 8,977,295 0.3127 0.4752 0.3600 0.5470 0.4520 0.6099
Off-Peak 12,470,300 0.2187 0.2539 0.2517 0.2923 0.2868 0.3312
Notified Network Access 48,863 8.63 8.63 9.93 9.93 10.67 10.67
TX Network Access 48,863 4.3 4.3 4.95 4.95 5.35 5.35
NetworkDemand Charge 43,030 16.35 16.35 18.82 18.82 20.23 20.23
Reactive Energy 326,863 0.0756 0.087 0.094
Reliability & Afordability 25,063,990 0 0 0.0233 0.0233 New Items
Premium Connection Charge 1 24,390.00 24,390.00 24,390.00 24,390.00 24,390.00 24,390.00
Electrifcation & Rural Subsidy Levy25,063,990 0.0397 0.0397 0.0457 0.0457 0.0520 0.0520
Envrironmental Levy 25,063,990 0.0200 0.0200 0.0200 0.0350 0.0350 0.0350
Monthly Bill 300,767,880 10,240,431 16,928,953 11,707,974 19,783,852 14,456,818 21,364,379
Annual Costs 142,950,736.43 164,723,323.60 194,204,503.62
R/kWh 0.4753 0.5477 0.6457
% Increase on R/kWh 26.8% 15.2% 17.9%
2011/12 2012/13 2013/14
Page 37
What drives the high increase?
Increase Proportion Contribution
Per Item of Bill to Total Increase
Administration Charge 8.0% 0.02% 0.00%
Service Charge 8.0% 0.02% 0.00%
kWh TOTAL 12.6% 72.5% 9.2%
Notified Network Access 7.5% 3.2% 0.2%
TX Network Access 8.1% 1.6% 0.1%
NetworkDemand Charge 7.5% 5.4% 0.4%
Reactive Energy 8.0% 0.0% 0.0%
Reliability & Afordability Charges 100.0% 3.6% 3.6%
Premium Connection Charge 0.2%
Electrifcation & Rural Subsidy Levy 13.8% 8.1% 1.1%
Envrironmental Levy 47.4% 5.4% 2.6%
17.9%
Rand Water is therefore unable to reduce its tariff based on this energy tariff
which is higher than the projected tariff.
Looking forward and other strategic
matters
Rand Water Priority areas
Capex plan for next 5 years
Funding overview
PAIA and PAJA
Other strategic matters
Other strategic issues
Page 38
39
Presidential
Outcomes
Quality and
quantity of
Raw Water
Bulk
Sanitation
Growth
Initiatives Top 10
Risks
Organizational
Preparedness
RAND
WATER
2030
RAND WATER
STRATEGY
RW
Academy
Priority areas
Rural
development
Page 39
Capital expenditure in the near and
medium term
Pipeline R4,061
Purification R2,463
Pumping R1,484
Reservoirs R122
Capital expenditure split between main plant categories (Rm)
• Continuing business – R1.5 billion
• Augmentation projects – R1 billion
• Renewal projects – R 0.5 billion
Annual budget
2012/13
Project distribution by value
• Expenditure planned on 300 projects
• Top 15 projects have total planned expenditure of about R1 billion
• Many smaller projects
Typical renewal projects
• Zwartkopjes – East Rand system: pipelines
• Pre-stressed concrete pipelines
• Upgrade/replacement of switchgear, pumps, motors, valves,
instrumentation
• Total planned capital expenditure =
R11 billion (2013 – 2017)
• Projected R8 billion for augmentation
projects
5-year plan
Relation to asset replacement value
• Estimated current asset replacement value of R80 billion –
should spend 1% to 2% per annum on renewal
• Forecast average demand growth of 1.75% per annum to 2030
Funding for augmentation and renewal
• Augmentation – R1.6 billion p.a.
• Renewal – R0.6 billion p.a.
• Need better long term balance
0.7
1.0 1.0 1.2
1.4
1.6
2.4 2.4 2.6
2.3
-
0.5
1.0
1.5
2.0
2.5
3.0R
m
Financial year
Capital expenditure forecast on continuing business
Capital budget for 2012/13 Capital expenditure 5-year plan
Page 40
Major capital projects 2012 – 2013
Major capital projects
Actual cost to
date
Rm
Estimated total
cost
Rm
Palmiet - Klipfontein augmentation 1 520
BG3 pipeline 466 612
Zuikerbosch to Palmiet pipeline 158 1,376
Zuikerbosch scheme (phase 1) 20 2,312
Sedimentation tanks at Zuikerbosch 101 330
Palmiet Engine Room 3b 4 475
Co-generation 5 465
Hydropower
Sedibeng Scheme
Effluent re-use
Growth investments and green agendas
System Year of
completion
Augmentation
(Rm)
Renewal
(Rm)
Total
(Rm)
Eikenhof 2016 552 242 794
Mapelton 2017 519 187 706
Palmiet 2016/17 3,276 454 3,730
Raw Water 2016 538 566 1104
Vereeniging 325 752 1077
Zuikerbosch 2016/17 2,766 431 3,197
Zwartkopjes 2015 234 501 735
Total 8,210 3,134 11,344
R11 billion 5-year capital expenditure plan on continuing
business
Page 41
Funding overview
Rand Water has made use of the capital markets for many decades,
with a history of regular issuances going as far back as 1970.
Recent issuances
• RW02 was issued at a nominal value of R208 million in 2000, but
has since been tapped into for an additional R425 million by Rand
Water during its 12 year tenor.
• RW21 was issued in April 2011 at a nominal value of R468 million,
and Rand Water made a tap issuance of R506 million in 2012.
• Over the next 5-year period, Rand Water has a funding requirement
of R6 billion which will be funded thru the available funding facilities
The RW21 bond is the only Rand Water Issuance that is currently
trading in the capital market and has not matured.
208
468 506
-
200
400
600
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
R’m
RW02 RW21
Salient features of bond RW21
Amount issued ZAR974 million
Coupon 9.97%
Capital profile Bullet
Interest profile Fixed
Date of maturity 21 April 2021
Tenor 10 year
Credit rating A-, Standard & Poor’s
Sources of funding
17%
83%
Debt profile
< 1 year 9 years
RW02 (R208m) matured: July 2012
RW21 (R974m) maturing: April 2021
Credit ratings
Standard & Poors Fitch Ratings
Short term A+ F1+ (zaf)
Long term BBB AA+ (zaf)
Facility
amount
Utilisation Available
Cash 700 0 700
General banking
facilities
2 500 2
2 498
DMTN 5 000 974 4 026
DFI 1 000 0 1,000
Total 9 200 980 8 220
Page 42
Rand Water & the Promotion of Access to Information Act, No 2 of
2000 (PAIA)
• Rand Water’s compliance with the above Act, is in accordance with Section 14, being an
office of state
• As required by the Act, a manual has been compiled and has been published in the
Government Gazette, no. 23888, dated 4 October 2002. This manual is updated annually
• The manual has been submitted to the Human Rights Commission for the first time on
15 August 2002 and updated versions has been submitted to the Commission ever since
• The manual is available in English, Zulu and Southern Sotho
• The manual is also electronically available on Rand Water’s website and intranet
• In terms of the Act, the Chief Executive is the Information Officer and a Deputy
Information Officer has been designated since 15 July 2002. Currently there are two
Deputy Information Officers, being the Group Company Secretary and the Group Shared
Services Executive
Page 43
Rand Water & the Promotion of Administrative Justice Act (PAJA)
• South Africa is a constitutional
democracy. Government and state organs
must act within the confines of the law. In
order to give effect to the protection of
people’s rights, the Constitution has a Bill
of Rights which at section 33 provides
that everyone has a right to an
administrative action that is lawful,
reasonable and procedurally fair.
• National legislation (PAJA) was passed in
order to give effect to section 33 of the
Bill of Rights. PAJA sets out mandatory
rules for a fair procedure where rights or
legitimate expectation of a person or a
group are affected. The mandatory
procedure is that before an administrative
decision is made:
The person affected by the decision must
be given written adequate notice of the
nature and purpose of the administrative
action;
• The person must be given an opportunity
to make representation
• The person must be informed of his rights
Rand Water as an Organ of State is subject
to the provisions of PAJA .
• Example: Blacklisting/delisting of Service
Providers from RW’s database due to
financial irregularities, fraud, corruption
etc. – before blacklisting is done, the
Services Provider is given the opportunity
to attend meeting, the allegations and
findings of an internal investigation is
presented to the SP who is then given the
opportunity to defend/rebut the allegations
with factual corroboration;
• Letters to non-successful tenderes are
sent notifying them of them not being the
successful tenderer
• Land and rights – servitude
negotiations/expropriations – process put
in place to ensure proper consultation with
the land owners before servitude is
registered or expropriated. Page 44
1. It is important to note that some municipalities have passed on to households
Rand Water’s original tariff of 13.5 per cent. Rand Water suggests that this
differential be utilised by local councils to establish a fund for Project 15%
2. Project 15% - There is growing alarm that this project has not been
successful. Rand Water would like to offer its assistance which will help to
reduce the high growth in demand. SALGA and Rand Water should work
closely to impart lessons from other local councils where Rand Water has
worked on this matter.
3. Energy Tariffs – In previous years, local councils have imposed a far high tariff
increment than Eskom.
4. Encroachment on Rand Water Servitudes - The issue of informal settlements
imposes a great risk to people close to Rand Water’s pipe network and the
supply of water. This is an issue that requires urgent assistance to water
boards and other state owned utilities.
5. Experiencing steep increases in input costs, i.e chemicals and energy and
fluctuations in steel prices
6. Higher wage rate increase in the water sector
7. Maintain and improve Rand Water’s credit profile
8. Default risk by major municipalities
9. Deteriorating raw water quality as a result of poor catchment management
Strategic Issues
Page 45
Thank You
Page 46
