Area of Service Slides 3-6 Financials : 2009/2010 Financial Year Slides 7-10 Strategic Objectives 2011/2012 Slides 11-12 Tariffs 2011/2012 Slides 13-16 Budget 2011/2012 Slides 17-21 CAPEX Infrastructure Slides 22-27 General Comments Slides 28-34 2
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
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 800 000 to 2 500 000 as a result of the provision of water, and it is estimated that it will increase to ± 3 000 000 in the near future hence the economic value for the region. We have ± 800 retail clients served by a network of 1 320 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
In total ± 70 000 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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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: R24 465 204 Total Expenses: R24 073 663 Interest & Dividends 4% Raw Water 2% Other 18% Chemicals 6% Electricity 12% Depreciation 8% Maintenance 6% Water Sales 92% Labour Costs 48% 7
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 391 541 1 882 455 813 744 667 280-1 205 300-6 442 267-3 892 547 24 906 339 21 013 792 3 372 877 15 249 851 2 211 162 179 902 8
CAPITAL EMPLOYED R76 588 804 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
INDICATOR / RATIO CALCULATION UNIT 2009/2010 2008/2009 Investment in Infrastructure - Capital & Non-Capital {infrastructure capital- + maintenance expenditure} R 6 323 182 3 864 313 Current Ratio current assets current liabilities # 2.63 4.32 Debt-Equity Ratio total debt total equity # 0.67 0.68 Debt-Asset Ratio total debt total assets # 0.40 0.40 Debtors Days trade receivables total water sales x 365 days 86 74 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 8 2 10
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
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
Investec Economic Forecasts CPI 6,6% Electricity 25% Chemicals 15% Fuel & Transport 10% Salary Increase 9,7% Raw Water 20% 13
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
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) 2009/2010 2010/2011 2011/2012 R 3,09 R 3,37 9,1% 15,1% R 3,88 15 15
Availability Fee per month: All prices exclude VAT Heidelberg - R43 580 Slangrivier R10 725 Caledon R157 460 16
INCOME STATEMENT - INCOME ITEM FINANCIAL YEAR 2011/2012 TOTAL BULK RETAIL Volume of Bulk Water Sold Volume of Bulk Water further Distributed 4 680 000 m3 4 680 000 m3 2 430 000 m3 R c/m3 R c/m3 R c/m3 OPERATIONAL INCOME 30 967 180 6.62 18 581 600 3.97 12 385 580 5.10 Water Sales 30 211 000 6.46 18 158 000 3.88 12 053 000 4.96 Other Operational Income 419 000 0.09 313 000 0.07 106 000 0.04 Interest 337 180 0.07 110 600 0.02 226 580 0.09 OTHER INCOME Profit on Sale of Assets Interest from Investments Working for Water Projects 242 680 20 000 220 000 2 680 TOTAL INCOME 31 209 860 17
Other Income 1% Interest 2% Water Sales 97% 18
INCOME STATEMENT - EXPENSES ITEM FINANCIAL YEAR 2011/2012 TOTAL BULK RETAIL OPERATIONAL EXPENSES 27 797 420 5.94 18 280 980 3.91 9 516 440 3.92 Raw Water 645 380 0.14 645 380 0.14-0.00 Electricity 5 148 000 1.10 4 633 200 0.99 514 800 0.21 Chemicals 2 529 540 0.54 2 529 540 0.54-0.00 Maintenance & Repairs (routine) 1 221 000 0.26 366 300 0.08 854 700 0.35 Contracted Services 636 000 0.14 381 600 0.08 254 400 0.10 Transport Costs 931 230 0.20 285 620 0.06 645 610 0.27 Training 250 000 0.05 150 000 0.03 100 000 0.04 Remuneration 11 014 160 2.35 6 608 500 1.41 4 405 660 1.81 Other 3 074 170 0.66 2 093 860 0.45 980 310 0.40 Depreciation 2 347 940 0.50 586 980 0.13 1 760 960 0.72 OTHER EXPENSES Research & Development Medical Pensionars Infrastructure Maintenance Projects TOTAL EXPENSES 1 640 660 60 760 159 900 1 420 000 29 438 080 19
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
CASH FLOW (incl INVESTMENTS) ITEM FIN YEAR 2011/2012 TOTAL NET INCOME FOR THE YEAR 1 771 780 Adjustment for Depreciation 2 347 940 Changes in Working Capital -1 209 180 Loan Repayment -1 206 200 CAPEX - Infrastructure -6 677 000 CAPEX - Other -615 000 NET CASH FLOW FOR THE YEAR -5 587 660 Cash/Capital Beginning of Year 12 600 000 CASH/CAPITAL END OF YEAR 7 012 340 ACCOUNTING CASH/CAPITAL AT THE END OF YEAR 7 012 340 RESERVED FOR: Working Capital 3 000 000 Emergency/Infrastructure Refurbishment 3 012 340 Furniture, Equipment & Vehicles 750 000 HR/Medical/Sundry 250 000 21
Purification Works - 3 Reservoirs - 38 Pumps - 45 Pipelines 1 320 km : Upvc 1 122 km : Asbestos 132 km : Steel 66 km Road/River/Railway Crossings - 555 Scouring Valves - 934 Air Valves 3 090 Connections 1 335 22
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
Duivenhoks Pump Capacity R 3 032 000 Rûensveld-East Pump Capacity R 2 508 400 Rûensveld-East Expansion (ultra filtration plant) R 2 585 800 Rûensveld-East Rising Main (preperation study) R 750 500 Rûensveld-West Pump Capacity (in construction) R 5 325 800 Civil/Mechanical/Electronic/Telemetric R 3 147 700 Water meters replacement R 623 100 Pipelines R 578 500 Flood Damage R 320 300 24
CAPITAL NEEDS - INFRASTRUCTURE ITEM 2011/2012 2012/2013 2013/2014 2014/2015 2016+ Duivenhoks Capacity Expansion Duivenhoks Storage Dam Rûensveld-East Capacity Expansion 4 905 000 940 000 14 000 000 Rûensveld-East Rising Main 5 869 000 7 200 000 Rûensveld-West Pumpstation 427 000 Rûensveld-West Rising Main 10 256 000 9 000 000 Steel Pipelines Replacements 853 000 824 000 1 028 000 1 231 000 39 500 000 Asbestos Pipelines Replacements 8 702 000 8 988 000 9 606 000 10 256 000 193 770 000 UPVC Pipelines Replacements 288 000 299 000 319 000 338 000 11 800 000 Airvalves Replacement 405 000 445 000 1 419 000 1 415 000 1 390 000 Capital Works/Infrastructure 16 520 000 16 425 000 19 572 000 23 496 000 269 460 000 R9 843 000 R69 336 000 25
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
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
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
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
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
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
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
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
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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