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 A PRIL 2013

Water is our Passion  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

Water is our Passion  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.  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 Viability Infrastructure Rehabilitation / Refurbishment Extension and Expansion of Operations Services KEY ISSUES (2013/14) Skills Development and Retention of skills Project and Contract Management Image Improvement KEY ISSUES (2012/13) Financial Sustainability and Viability Infrastructure Rehabilitation / Refurbishment Extension and Expansion of Operations Services KEY ISSUES (2013/14) Skills Development and Retention of skills Project and Contract Management Image Improvement

Water is our Passion Vision A 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. Vision A 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 Infrastructure Development Financial Sustainability and Viability Organizational Development Planning and Research Development Image Improvement and stakeholders Relations Physical Extension of Operations Effective Corporate Governance

Water is our Passion Strategic Objectives2013/14 Targets Infrastructure DevelopmentSpent 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 SustainabilityOver/under expenditure ±10% 100% collection of debt Effective development and maintenance of LNW Corporate Image and Stakeholder relations Excellent stakeholder relations 100% Branding Organisational DevelopmentEffective retention strategy and succession planning Research, Planning & DevelopmentInnovation and best practice technologies. Effective Corporate GovernanceElectronic Audit & Risk system operational 100% implementation of Board Resolutions Extension into operational areaBulk contracts in new areas e.g. Vhembe DM Increased scope in existing operational areas

Water is our Passion  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

Water is our Passion ClientAmount OwedRecovery Plan Mopani DistrictR 251mImplementation of Section 04 of Water Services Act. Municipality not co-operative and non committal to payment of the debt. Capricorn DistrictR 55mEntered into SLA for payment of the old debt while the current account is being serviced. Sekhukhune DistrictR 46mEntered into SLA for payment of the old debt while the current account is being serviced. Total OwedR352m

Water is our Passion ClientAmount OwedRecovery Plan Mopani DistrictR 236mImplementation of Section 04 of Water Services Act. Municipality not co-operative and non committal to payment of the debt. Capricorn DistrictR 0mSettled by October 2012 Sekhukhune DistrictR 0mSettled by November 2012 Total OwedR236m

Water is our Passion Actual Projected Budget Budget Budget Budget Budget INCOME Pumping and Purification Electricity Purchase of raw water Maintenance Impairment (55 866) Fair value adjustment (3638) Salaries Administration Overheads Depreciation Refurbishment OPERATING EXPENDITURE Operating Surplus/Deficit Other Income Interest received Less Net finance Costs (2357) Actuarial gains Total

Water is our Passion ASSETS NON-CURRENT ASSETS CURRENT ASSETS TOTAL ASSETS EQUITY AND LIABILITIES CAPITAL AND RESERVES NON-CURRENT LIABILITIES CURRENT LIABILITIES TOTAL EQUITY AND LIABILITIES

Water is our Passion Surplus for the year Cash generated from operations Cash flow from operating activities Cash flow from Investing activities Net cash flow outflow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year

Water is our Passion

Year Income (R’000) Expenditure (R’000) 2011/ / / / / / Total

Water is our Passion 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.

Water is our Passion Fin YearCapitalMaintenance 2012/ / / / /

Water is our Passion

Beginning Middle Completed

Water is our Passion This project was aimed at rural areas

Water is our Passion 14 Mℓ in capacity

Water is our Passion 2011/12 Polokwane = 16 Ventilated Improved Pits (VIPs) & Mogalakwena 16 VIPs 2012/13 (Current) providing another 30 VIPs in Mogalakwena 2011/12 Polokwane = 16 Ventilated Improved Pits (VIPs) & Mogalakwena 16 VIPs 2012/13 (Current) providing another 30 VIPs in Mogalakwena

Water is our Passion

Year of AuditOpinionMajor Findings 2007/08Unqualified Materiality Framework; Outstanding Debts Water Balances 2008/09UnqualifiedOutstanding Debts 2009/10UnqualifiedOutstanding debts 2010/11 UnqualifiedOutstanding Debts 2011/12 UnqualifiedOutstanding debts

Water is our Passion

Business Performance of LNW 2007 Actual 2008 Actual 2009 Actual 2010 Actual 2011 Actual 2012 Actual Gross margin % 88%92%90.70%73.00%69.00% 65% Current ratio Return on assets % 13%3.50%5.01%-0.70%6.00% 13% Asset turnover Debt to Total Capital ratio Debt-equity ratio

Water is our Passion 2013 Ratio Var 2014 Ratio Var 2015 Ratio Var 2016 Ratio Var 2017 Ratio Var Working ratio89%-6%84%-6%82%-2%79%-4%80%1% Gross margin64%4%63%-1%62%-3%60%-3%60%0% Current ratio4.56%5.420%6.622%8.022%4.7-41% Debt to equity13%-24%11%-12%10%-13%9%-11%16%79% Return on asset7%94%9%29%0%-100%12%0%10%-12% Return on equity 8%86%10%27%11%5%13%17%12%-6% Assets turnover54%29%55%2%55%-1%53%-2%49%-8%

Water is our Passion -Cash at hand as of 30 June 2012 = R303m -Capex Investment -Refurbishment of Infrastructure

Water is our Passion -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

Water is our Passion

Institution ConsultedDateComments / Feedback WS Authorities: Mopani District Capricorn District Polokwane LM Sekhukhune District Mogalakwena LM 19 November rd October November January November 2012 No feedback received (only received on 20 May 2011) Feedback received on tariff acceptance SALGA03 rd December 2012Comments Received from National Salga National Treasury 03 th December 2012Comments received from National Treasury. DWA 31 th January 2013 No Feedback received from Minister on potable water tariff increase.

Water is our Passion WATER SCHEME 2012/13 Current 2013/14 Proposed % 2013/14 Adjusted % Phalaborwa Potable % % Ebenezer % % Politsi % % Olifantspoort % % Doorndraai % % Flag Boshielo % % Modjadji % % Average Tariff % %

Water is our Passion LNW abides by the following PAJA principles  follow 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; and  tell people that they have the right to ask for the reasons for any decision taken to be given to them in writing.

Water is our Passion  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)

Water is our Passion THANK YOU