1. Presentation to Portfolio Committee
Provide bulk water and sanitation services to improve quality of life and enhance sustainable economic development
Presentation to Portfolio Committee
March 2017

3. Stakeholder Perspective FINANCIAL PERSPECTIVE
Umgeni Water
Strategy
VISION
Leading water utility that enhances value in the provision of bulk water and sanitation services
Deliver on our mandate
MISSION
Provide innovative, sustainable, effective and affordable bulk water and sanitation services
Overarching mission and mandate is to provide innovative, sustainable, effective and affordable bulk water and sanitation services.
Strategy, which is aligned to national government outcomes, comprises:
Four (4) strategic goals,
Nine (9) Strategic,
Ten (10) Outcomes.
Overall, Umgeni Water has achieved excellent performance.
STRATEGIC INTENT
Key Partner that enables government to deliver effective and efficient bulk water and sanitation services
BENEVOLENT INTENT
Provide bulk water and sanitation services to improve quality of life and enhance sustainable economic development
4 Balanced Perspectives
9 Strategic Objectives
Customer and
Stakeholder Perspective
Co-create value with our customers and stakeholders
SO1: Increase services and customers
SO2: Increase customer and stakeholder value
FINANCIAL PERSPECTIVE
Maintain and leverage our solid financial assets
SO3: Increase mobilisation of funds
SO4: Increase financial sustainability
SO5: Improve financial ratios
PROCESS PERSPECTIVE
Create effective and resilient enterprise architecture - our processes, systems and technologies
SO6: Improve
service delivery systems
ORGANISATIONAL
CAPACITY PERSPECTIVE
We will enable our people, secure water resources and ensure infrastructure capacity
SO7: Improve and increase infrastructure assets
SO8: Increase water resources sustainability
SO9: Increase skills and competency

4. Overall Organisational Performance 2015/2016
Performance Trend

5. Product Quality (Water and Wastewater)
Excellent drinking water quality - the SANS 241 standard at all water treatment works
Seventeen (17) water treatment works (WTW)
Four (4) small WTW were acquired during the year
Nine (9) wastewater treatment works (WWTW), Darvill WWTW is the most significant
Five (5) small WWTW were acquired during the year
Darvill WWTW capacity upgrade is a flagship project
Completion scheduled for 2017
There is consistent investment in maintenance R169 million spent in past year and R780 million over past five years. On average:
7.3% of revenue or 3.5% of PPE.

6. Stakeholder Understanding and Support
All stakeholder engagement plans were successfully met in the year
Full spectrum of statutory, strategic, contractual and non-contractual stakeholders.
Umgeni Water is closely aligned to agenda of government
Collaboration enhanced through Joint Operating Committees
JOCs in the North Coast, South Coast and Mgeni systems.
Initiatives included:
Management to extend the duration of available supplies
Planning and implementation of Water Savings Plans
Daily dissemination of data, information and targets
Media and communication campaigns

7. Community and Environmental Sustainability
Make our procurement accessible to Black Economic Enterprises
Participation in Capital Infrastructure Investment Programme
Participation in other supply and services opportunities
CPG target set at ≥ 35%
Includes construction contracts and professional services
Total award ≥ R2 bn since the initiative started in 2013
The introduction of the programme has changed the procurement culture both within the entity and in the supplier domain. This will continue to enable meaningful economic participation.

8. Community and Environmental Sustainability
Umgeni Water created a total of 1514 temporary jobs from its Capex Programme
A total of R39.7 million was paid in wages to local labour
The trend in job creation has been progressively increasing over the years

9. Infrastructure Stability
Significant progress with capital infrastructure implementation - new bulk water supply scheme, refurbishments and upgrades.
Spend performance was just over R2 billion (R1.69 billion in 2015).
R967 million (48%) was spent on projects furthering rural development.
A commendable 93% of target water infrastructure project milestones were met.

10. Water Resources Adequacy
Imvutshane Dam (UW) has been commissioned, although impoundment not successful due to the drought,
uMkhomazi Water Project (DWS and UW) feasibility study which commenced in the prior period is complete,
Hazelmere Dam raising (DWS) construction phase commenced,
Lower Thukela Project (UW) construction almost complete and commissioning will start in mid-2016/2017,
Lower uMkhomazi Bulk Water Supply Scheme (UW) feasibility study complete and a detailed design will follow,
East Coast Desalination Plants, detailed feasibility study is complete.
Umgeni Water works collaboratively with the Department of Water and Sanitation to plan and implement water resources infrastructure.
Progress was made with several water resource infrastructure developments:

11. Optimisation and Resiliency
Operational
Optimisation and Resiliency
Strategic risks are well aligned to its strategy. Of a total of ten (10) strategic risks, nine (9) have been managed to reasonable / good control strength levels.
One strategic risk is outside risk appetite and tolerance level - short-term water resources availability - mitigated through emergency water transfer schemes and implementation of water rationing
Emergency schemes implemented:
A transfer scheme from the Hlimbitwa River to supply the Maphumulo Bulk Water Supply Scheme,
A transfer scheme from the uThongathi River to supplement Hazelmere Dam,
A transfer scheme from the Mpambanyoni River to the South Coast EJ Smith Dam,
A transfer scheme from St Isidore Dam to Ixopo Dam, and
A transfer system from a borehole to the Hospital Water Treatment Works at Applesbosch.

12. Leadership and Employee Development
A total of 103 employees successfully completing these programmes
Emerging Management Programme (EMP).
Senior Management Development Programme (SMDP)
Management Development Programme (MDP)
Progress with skills development programmes during the reporting period included: employee training, development and assisted education
Fifty-seven (57) learnerships and apprenticeships
Thirty-nine (39) graduate trainee and Internships
Thirteen (13) students in the bursary programme

13. Revenue increased by R155m, 7% yoy
Bulk water revenue 5% : 7.8% bulk water tariff increase combined with a 2.5% reduction in sales volumes 7%
Reduction in sales volumes driven by the drought.
2.5%

14. Cost of sales increased by R90m, 9% yoy6%
Average price increases of 8% offset by lower usage resulting from optimisation in chemical dosages as well as lower volumes of water treated.
Please add text here …
17%
Average tariff increase of 12.7% coupled with additional pumping to assist with alleviating the drought.

15. Cost of sales increased by R90m, 9% yoy cont.…
The reduction is mostly due to renewals which were capital in nature which were capitalised to PPE, R32m.
10%
18%
Increases in the staff complement - new contracts for the O&M with UMDM, average salary increases for the year were 8%.

16. Cost of sales increased by R90m, 9% yoy cont.…2%
Raw water costs reduced by 2% as a result of the lower volumes abstracted due to the drought. Average tariff increase for the year was 5%.

17. Other operating and administration expenses increased by R110m, 18% yoy
Higher impairments on property, plant and equipment of R133m (2015: R90m), increased consulting fees and licence costs.

18. Consolidated statements of profit & loss

19. Property plant & equipment increased by R1 536m, 20% yoy
Achieved an unprecedented R2 Billion Capex Spend
Spend on development projects totalled R967m (2015: R799m), upgrades R788m (617m).
20%
Debtors days are slightly lower than the prior year and within the target of 42 days set for 2016.

20. Statement of Financial Position - Assets
R267m
25% improvement

21. Gross borrowings increased by R857m
Underutilisation R369m
The UG26 bond was issued in March for R935m, while R78m loans were repaid.
The UG26 bond of R935m was issued in March 2016 which contributed to the deterioration in the debt to equity ratio. Loan covenants remained unbreached, interest cover ratio was (2015: 5.93)

22. Statement of Financial Position – Equity & Liabilities
5yr capex programme R3.6bn

23. Cashflow from operations vs cash used in investing activities
Shortfall of R610m
The shortfall was funded by financing activities which totalled R616m (2015: R543m) through the issuance of the UG26 bond of R935m.

24. Statement of Cashflows

25. PROGRESS ON THE MERGER OF THE TWO WATER BOARDS
The progress is as follows:
The Minister of Water and Sanitation (DWS) appointed an Independent Transitional Committee to oversee the processes that will lead to the establishment of the single Water Board in Kwazulu-Natal.
The Minister has approved that the following seven (7) members serve on the Independent Transitional Committee:
The Committee reports to the Minister of Water and Sanitation (through the Department).
The Chairperson will brief the Committee on progress made thus far.
Panel Member
Designation in the Transitional Committee
Designation
Ms D Myeni
Chairperson
Chairperson of Mhlathuze Water
Mr A Mahlalutye
Deputy Chairperson
Chairperson of Umgeni Water -
Ordinary member
KZN Premier Representative
Ms N Magewu
KZN MEC of COGTA Representative
Mr A Singh
DWS Representative
Ms T Sigwaza
Ms V Pillay

26. LOOKING AHEAD The strategy going forward encompasses:-
Remaining financially sustainable within the difficult operating environment as the drought continues
Delivering on our capital expenditure programme to deliver crucial bulk water infrastructure in line with the shareholder compact and service delivery mandate.
prioritisation of capex projects in this difficult time and increased efforts to secure grant funding,
managing controllable costs
and continuing to partner closely with its customers and shareholder to manage the risks and impact of the drought.
uphold our strong Financial Controls and full compliance with laws and regulations in order to maintain our Clean Audit Report thereby maintaining Investor and Stakeholder confidence