MHLATHUZE WATER PRESENTATION OF THE 2006/2007 ANNUAL REPORT TO THE PORTFOLIO COMMITTEE Presented by: Ms Dudu Myeni (Chairperson) Mr Lawrence Nachito (General Manager: Finance) 07 May 2008

2 OPERATIONAL AREA Umkhanyakude District Municipality Zululand District Municipality uThungulu District Municipality uMhlathuze Local Municipality Northern of Ilembe District Municipality Mhlathuze Water operational area covers 4½ WSA’s in KwaZulu-Natal

3 ALIGNMENT TO DWAF STRATEGY ACCESS TO WATER SERVICES Regional bulk supply in Mandlakazi/Hlabisa area Provision of water and sanitation to schools QUALITY OF PURIFIED WATER National water quality reporting system ASGISA Skills development at technical level Customer care

4 …/cont. Provision of operational and management services to district municipalities Umkhanyakude District Municipality Gert Sibande District Municipality Service Level Agreements signed with WSA in operational area Supply Agreements signed with all customers ENERGY Energy supply to critical installations agreed with supplier and these installations would not be load shedded.

5 STRATEGIC DIRECTION To form strategic partnerships with WSA’s To establish strategic networks with all role players To support and assist WSA’s to meet their mandates To assist DWAF with water and sanitation provisions

6 BUSINESS DEVELOPMENT & PARTNERSHIP OPPORTUNITIES KZN regional bulk water supply Provincial project with DLGH. Water supply to Mandlakazi / Hlabisa Area WfW contract with DWAF for 3 years Water and sanitation project schools (Phase 1 = R48mil)

7 WATER QUALITY SANAS; SABS 241 standard (2004) Physical quality – 99% compliance Bacteriological quality – 99% compliance Log data into National Water Quality Register National Microbial analyses program for bacteriological quality

8 INFRASTRUCTURE DEVELOPMENT Replacement section of waste-water disposal system (R150mil) Upgrade of water treatment plant (R112mil) Refurbishment of water transfer scheme (R5,2mil) Refurbishment budget provision for various installations approved (R16,9 million) Assessment of pipeline integrity in progress Tariffs set for replacement and refurbishment of infrastructure

9 REPRESENTATIVITY OF BOARD & EXECUTIVE MANAGEMENT BOARD EXECUTIVE EQUITY GENDER BLACKWHITEINDIAN FEMALEMALE 5 5 BLACKWHITEINDIAN FEMALEMALE 0 5 EQUITY GENDER

10 TARIFF 2008/09 Approved by National Treasury Discussions held with customers that if electricity cost increase relevant would be passed onto customers

11 FINANCE REPORT AUDIT ISSUES Consortium of new External Auditors, KPMG/Sizwe Ntsaluba, appointed for the FY2006/07 audit Financial statements were prepared in accordance with SA GAAP, Water Services Act and the PFMA. MW received a Qualified Audit opinion for the FY2006/07 on the basis of a Special Purpose Entity, MW Lessor Trust, which was set up to finance a DWAF Emergency Transfer Scheme in The last audited financials of the Trust were in February The purpose for which the Trust was set up ended on 1July 2007 and MW is in the process of dissolving it.

12 …/cont. There was a prior year restatement of the FY2005/06 financials in order to Comply with disclosure requirements Correct seven prior year errors noted

13 INCOME STATEMENT Operating income before finance costs increased by 3% from FY2005/06 to FY2006/07 Operating costs to Total income decreased from 76% in FY2005/06 t0 73% in FY2006/07. This is in line with the Board’s strategy to streamline and contain costs. Net finance costs reduced by 38% from FY2005/06 to FY2006/7 due to; The redemption of loans (R45,1million) in FY2006/07 The renegotiation of interest rates with the loan providers. (DBSA reduced their interest rate from 16.5% to 13%).

14 FINANCE RATIOS TargetFY2006/07FY2005/06 Debtors’ days 45 days90.8 days96.8 days Current ratio 2:11.6:11.4:1 Quick ratio 1:1 0.9:1 Debt /Equity ratio 1< Return on Assets 10%12.9%14.1%

15 CAPITAL EXPENDITURE Actuals (in R000’s)FY2006/07FY2005/06 Richards Bay Effluent disposal Water Schemes CAPITAL BUDGETFY2007/08FY2008/09FY2009/10 Water Schemes Connection