Area of Service Slides 3-6. Financials : 2009/2010 Financial Year Slides Strategic Objectives 2011/2012 Slides 11-12

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2 Area of Service Slides 3-6 Financials : 2009/2010 Financial Year Slides 7-10 Strategic Objectives 2011/2012 Slides Tariffs 2011/2012 Slides Budget 2011/2012 Slides CAPEX Infrastructure Slides General Comments Slides

3 Overberg Water s area of services is roughly from Botriver in the West, to Riversdal in the East and from the Langeberg in the North to the coast in the South an area of ± 6 000km 2. The Municipalities served are Theewaterskloof, Agulhas, Swellendam and Hessequa. The services rendered are : Theewaterskloof Mun Area : Bulk to Caledon town Bulk to rural Agulhas Mun Area : Retail to rural Swellendam Mun Area : Retail to rural Hessequa Mun Area : Bulk to Heidelberg, Slangrivier, Witsand Retail to rural 3

4 The rural retail is for stock watering and for the domestic use of farmers and their workers this water is considered commercial water because it is primarily an input to an economic activity. Small stock units have increased from to as a result of the provision of water, and it is estimated that it will increase to ± in the near future hence the economic value for the region. We have ± 800 retail clients served by a network of km pipelines from three purification plants. Our network is a branch network with limited capacity that is almost fully allocated. In other words the only possibility for higher sales, is by raising efficiency at the level of the end user which our sliding scale tariff system encouraged. 4

5 In total ± people are served with water by Overberg Water EMPHASIZE: Farming is the main economic activity of our area of service. The towns are just agricultural service centres. If the farming sector should deteriorate, the towns will deteriorate with it leaving many people unemployed. 5

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7 Consolidated Income Statement Income from and expenses financed through Bulk Water Sales Retail Water Sales (as secondary activity) Other Secondary Activities Reserve Admin Fees 2% Other Operational Income 2% Total Income: R Total Expenses: R Interest & Dividends 4% Raw Water 2% Other 18% Chemicals 6% Electricity 12% Depreciation 8% Maintenance 6% Water Sales 92% Labour Costs 48% 7

8 Cash Flow Statement (2009/2010) ITEM AMOUNT (RAND) TOTAL NET INCOME FOR THE YEAR Adjustment for Depreciation & Amortisation Re-evaluation of Investments Changes in Working Capital Loan Repayment Capital Spending less sold & transferred NET CASH FLOW FOR THE YEAR Cash/Capital Beginning of Year ACCOUNTING CASH/CAPITAL AT THE END OF YEAR RESERVED FOR: Working Capital Emergency/Infrastructure Refurbishment Furniture, Equipment & Vehicles HR/Medical/Sundry

9 CAPITAL EMPLOYED R EMPLOYMENT OF CAPITAL Current Liabilities 8% Receivables 7% Inventories 1% Long term Loan 32% Retained Income 56% Cash & Investments 27% PPE 65% Reserves 4% 9

10 INDICATOR / RATIO CALCULATION UNIT 2009/ /2009 Investment in Infrastructure - Capital & Non-Capital {infrastructure capital- + maintenance expenditure} R Current Ratio current assets current liabilities # Debt-Equity Ratio total debt total equity # Debt-Asset Ratio total debt total assets # Debtors Days trade receivables total water sales x 365 days Return on Assets net surplus bulk & retail water supply fixed assets x 100 c 3 1 Return on Turnover net surplus bulk & retail water supply water sales bulk & retail c

11 Ensure access to safe potable water - Comply with SANS 241, 2006 Class 1 water - Comply with service level agreements (bulk & retail) - Review tariff structure annually - Ensure availability of employment of well trained staff Manage financial affairs to meet current & future obligations - Effective revenue management - Effective expense management - Active risk & fraud management - Effective internal control function - Effective cash flow management - Effective stock management - Provide for capital needs 11

12 Operate, maintain, develop & refurbish infrastructure - Availability & application of Standard Work Procedures - Structured routine maintenance - Ensure application of a structured infrastructure failure correction plan - Effective Asset Management Plan/System Empower & develop employees - Address skills shortages, needs (training) - Comply with EE Plan - Effective employee communication Be an aligned & effective institution - Compliance to legislation, regulations & policies - Effective & efficient organisational structures - Effective communication with consumers 12

13 Investec Economic Forecasts CPI 6,6% Electricity 25% Chemicals 15% Fuel & Transport 10% Salary Increase 9,7% Raw Water 20% 13

14 Historical Water Consumption Normal Operational Costs (with certain assumptions) Change in Working Capital Repayment of Loan Infrastructure Refurbishment Needs Backlog in Reserves/Capital 1 st 12 years schemes were state-owned Revision of Tariff Structure to promote Water Demand Management & Water Conservation 14

15 Each scale on tariff structure increase with 15% Availability Fees increase with 15% Drought tariffs effective if dam levels lower as 40% Average Bulk Water Tariff (availability fee + consumption) 2009/ / /2012 R 3,09 R 3,37 9,1% 15,1% R 3,

16 Availability Fee per month: All prices exclude VAT Heidelberg - R Slangrivier R Caledon R

17 INCOME STATEMENT - INCOME ITEM FINANCIAL YEAR 2011/2012 TOTAL BULK RETAIL Volume of Bulk Water Sold Volume of Bulk Water further Distributed m m m3 R c/m3 R c/m3 R c/m3 OPERATIONAL INCOME Water Sales Other Operational Income Interest OTHER INCOME Profit on Sale of Assets Interest from Investments Working for Water Projects TOTAL INCOME

18 Other Income 1% Interest 2% Water Sales 97% 18

19 INCOME STATEMENT - EXPENSES ITEM FINANCIAL YEAR 2011/2012 TOTAL BULK RETAIL OPERATIONAL EXPENSES Raw Water Electricity Chemicals Maintenance & Repairs (routine) Contracted Services Transport Costs Training Remuneration Other Depreciation OTHER EXPENSES Research & Development Medical Pensionars Infrastructure Maintenance Projects TOTAL EXPENSES

20 Raw Water 2% Depreciation 8% Other 11% Chemicals 9% Electricity 18% Labour Costs 37% Maintenance 9% Contracted Services 2% Transpport Costs 3% Training 1% 20

21 CASH FLOW (incl INVESTMENTS) ITEM FIN YEAR 2011/2012 TOTAL NET INCOME FOR THE YEAR Adjustment for Depreciation Changes in Working Capital Loan Repayment CAPEX - Infrastructure CAPEX - Other NET CASH FLOW FOR THE YEAR Cash/Capital Beginning of Year CASH/CAPITAL END OF YEAR ACCOUNTING CASH/CAPITAL AT THE END OF YEAR RESERVED FOR: Working Capital Emergency/Infrastructure Refurbishment Furniture, Equipment & Vehicles HR/Medical/Sundry

22 Purification Works - 3 Reservoirs - 38 Pumps - 45 Pipelines km : Upvc km : Asbestos 132 km : Steel 66 km Road/River/Railway Crossings Scouring Valves Air Valves Connections

23 Steel Pipelines R 51 m Asbestos Pipelines R 87 m Upvc Pipelines R240 m Reservoirs R 82 m Purification Works R 52 m Buildings & Other Structures R 18 m TOTAL REPLACEMENT COSTS: R530 m 23

24 Duivenhoks Pump Capacity R Rûensveld-East Pump Capacity R Rûensveld-East Expansion (ultra filtration plant) R Rûensveld-East Rising Main (preperation study) R Rûensveld-West Pump Capacity (in construction) R Civil/Mechanical/Electronic/Telemetric R Water meters replacement R Pipelines R Flood Damage R

25 CAPITAL NEEDS - INFRASTRUCTURE ITEM 2011/ / / / Duivenhoks Capacity Expansion Duivenhoks Storage Dam Rûensveld-East Capacity Expansion Rûensveld-East Rising Main Rûensveld-West Pumpstation Rûensveld-West Rising Main Steel Pipelines Replacements Asbestos Pipelines Replacements UPVC Pipelines Replacements Airvalves Replacement Capital Works/Infrastructure R R

26 Projected Cash Flow Statement (including investments) calculated till 2014/2015 Based on Annual Tariff Increase of 15% Certain Economic Assumptions (VPI, salary increases, electricity, chemicals, fuel/transport costs & raw water) Projections of Water Sales Capital for Infrastructure Excluded Estimated Balance 30 June 2015: R27,7 million 26

27 Estimated Balance June 2015 : R27,7 m less reserved as working capital : R 3,5 m less reserved for Furniture, Equipment & Vehicles : R 1,0 m less reserved for HR/Medical/Sundry : R 0,3 m Left for Infrastructure : R22,9 m Capital Needs till June 2015 : R69,3 m Shortfall - R46,4 million! Estimated capital needs from July 2015 onwards: R269,5 million 27

28 Overberg Water has once again received an Unqualified Financial Report for the 2009/2010 financial year. Until now Overberg Water was able to conduct its business on a sustainable basis as can be seen from our audited results and statements. We were able to do so in spite of a number of constraints, of which the fact that we were unable to build reserves for refurbishment from the time Overberg Water was first established, was a major issue. 28

29 Business plans and targets are very important but at the end of the day only cold hard cash for refurbishment will be able to save Overberg Water from a disastrous future with a severe negative impact on the economy of the region and with a knock on effect for job creation and poverty alleviation. It is necessary to emphasize that all our available reserves will shortly be depleted when spent on current refurbishment projects. Thereafter we will only be able to spend what we get in on an annual basis, which is far too little to make a meaningful difference. In other words the process of decline and rising risk will accelerate from now on. 29

30 Overberg Water has a close and productive relationship with the Regional Office of DWA and we thank this office and especially Mr. Rashid Kahn for his support and co-operation. As a result of this co-operation, Overberg Water acted as implementing agent for the Masimbambane Project, which has involved capital in excess of 20 million Rands over the past three years. The rainwater harvesting projects in the West Coast ( Bitterfontein) and Dysselsdorp in the Western Cape) is of particular interest as it is seen as an important issue in finding solutions to the challenges over the next few years. 30

31 Overberg Water is particularly proud of its involvement with the development and installation of new membrane technology in the form of Ultra Filtration at its Rûensveld East plant which was carried out in cooperation with a BBBEE company IKUSASA Water. We believe that the knowledge and experience gained will place Overberg Water in the forefront of green technology implementation and finding alternative and affordable solutions. With our refurbishment program all our pump stations were upgraded with the latest technology which puts Overberg Water in a position to achieve up to a 16% reduction in its energy/electricity consumption. 31

32 Overberg Water would like to commend the Minister on her initiative to bring the World Water Council conference to Cape Town recently. In this respect Overberg Water supported the activities of the Regional Office of DWA and also participated in a debate within the WWC on the future provision of water services to Cities. Our input was very well received which resulted in an invitation, which we subsequently accepted, to become an active member of the World Water Council which will enable us to enjoy networking opportunities world wide. 32

33 Institutional reform is seen as an urgently necessary strategy to deal with the challenges in the water sector against the background of the current confusing proliferation of the sector which makes it extremely difficult, if not impossible, to control and regulate. In this respect Overberg Water, with valuable experience and expertise would be happy to be of assistance. It is noteworthy that Overberg Water is also very active in providing training and programs for water controllers which is accepted in the industry as a very scarce and important skill. 33

34 In conclusion Overberg s CEO will be retiring at the end of 2011 and we are currently in the process of procuring a suitable successor. We must however ensure that the expertise and many years of his experience will not be irrevocably lost to Overberg Water and the water sector. 34

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