1. 11
UMGENI WATER Briefing to the Portfolio Committee on Water Affairs Annual Report 2008/9 & Tariffs for May 2010

2. Strategy Map 22

3. OPERATIONAL PERFORMANCE 2008/200933
OPERATIONAL PERFORMANCE 2008/2009

4. BULK WATER REVENUE: 6% INCREASE44
BULK WATER REVENUE: 6% INCREASE
3% Volume Growth
3% Average Tariff Increase

5. R116m NET FINANCE COSTS FINANCE COST TREND55
FINANCE COST TREND
R116m NET FINANCE COSTS
Represents a reduction of 30% or R49m
Attributable to increase in investment income
64% improvement in interest cover ratio to 5.52 times in 2009 from times in 2008
Net Finance Costs as a % of Revenue

6. Operating Performance Bulk Water Reduction of 6% in Cost Per Kl66
Operating Performance Bulk Water Reduction of 6% in Cost Per Kl
2.45
2.36
2.19
Increases in
Chemical costs 2c or 26%
Energy costs 1c or 10%
- Mtce costs 4c or 22%
2.02
1.90
- 33%
- 10%
11%

7. 77
5 YEAR PROFIT TREND
R527m
R394m

8. 5 YEAR CAPITAL EXPENDITURE88
5 YEAR CAPITAL EXPENDITURE
2009:R237m
2008: R110m
115% increase on prior year
2010: +/-R500m

9. Abridged Balance Sheet99
Abridged Balance Sheet

10. Capital & Reserves - 5 year trend 2009 increase of 61%
R1546m
R1023m

11. DEBT MANAGEMENT The group’s debt consist of the following:
DEBT MANAGEMENT
The group’s debt consist of the following:
Total debt consists primarily of the UG65 bond of R974m (nominal) which will be redeemed on 1 June 2010 and DBSA amortising loans of R964m (nominal)
Redemption of UG65 Bond
As at 30 June 2009 the group had invested the equivalent of 81% (R787m nominal) towards the redemption assets for the UG65 bond which matures in June 2010
This amount exceeds the 75% cumulative requirement which is set in terms of the redemption strategy.

12. Gearing Ratio & Borrowing Limit
Gearing Ratio & Borrowing Limit
Gearing Ratio
2008/09: % improvement
Target: 0.70
Year
Borrowing Limit
Actual Gross Debt
2008
R3 500m
R2 126m
2009
R2 300m
R2 004m
2010
R2 800m

13. Overall Coverage of WSA
CAPITAL PROJECTS IN SUPPORT OF CUSTOMER & DEVELOPMENT STRATEGY
Overall Coverage of WSA

14. CAPITAL PROJECTS IN SUPPORT OF CUSTOMER & DEVELOPMENT STRATEGY
CAPITAL PROJECTS IN SUPPORT OF
CUSTOMER & DEVELOPMENT STRATEGY
RURAL DEVELOPMENT
The surplus generated during 2009 is being deployed to rural development: R398m
Ngcebo Scheme R40m– serving approximately people in KwaMaphumulo LM, iLembe DM. Specific communities to benefit are Ngcolose, Ekuthadazeni, Ngubane, Washi, Ekhata, Mambulu, Kwahlongwa, Mambulu, Mabomvini, Eshabe, and Mangongo.
KwaMaphumulo PhaseI R188m - iLembe DM
The Mhlabatshane bulk water scheme R155m Ugu DM.
The upper Ndwedwe reservoirs R15m - iLembe and
Sikota Dam (under Planning) -Umgungundlovu DM.

15. Major projects under construction as at 30 June 2009
CAPITAL PROJECTS IN SUPPORT OF
CUSTOMER & DEVELOPMENT STRATEGY (Cont’d)
Major projects under construction as at 30 June 2009
The Northern Aqueduct Booster Pump Station – enhances water supply in eThekwini Metro and eliminate water interruptions in northern areas like Ntuzuma.
The Western Aqueduct (’57 pipeline) along the N3 between Msunduzi and eThekwini – augmenting the water supply to eThekwini.
The DV Harris to World’s View Pipeline – which will augment the Western Aqueduct at Umlaas Road.

16. CAPITAL PROJECTS IN SUPPORT OF
CAPITAL PROJECTS IN SUPPORT OF
CUSTOMER & DEVELOPMENT STRATEGY (Cont’d)
Five projects were in detailed design phase as at 30 June 2009
KwaMaphumulo Phase 1 – provide 12 million litres per day to Maphumulo Town, Maqumbi and Ashville. Approximately 110 000 people will be served.
Honolulu to Mvoti Pipeline – augments water supply to KwaDukuza LM
Ndwedwe Reservoirs 1 and 2,
Richmond Pipeline– which will supply water from Midmar Dam / Water Works to Richmond LM.
Hazelmere to Bifurcation P/L & Hazelmere WW Pump Station upgrade
Two projects in preliminary design phase
One project in detailed feasibility
The total CAPEX for the year was R237 million representing 80% of target

17. CUSTOMER & DEVELOPMENT STRATEGY (Cont’d)
IN SUPPORT OF
CUSTOMER & DEVELOPMENT STRATEGY (Cont’d)
PLANNED MAINTENANCE EXPENDITURE
R101 million spend
Represents 7% of Revenue or 12% of total costs
POTABLE WATER QUALITY
The water produced from our water works and sold to municipalities complied with all the regulated standards for drinking water (SANS 241).
WASTEWATER QUALITY
Overall our average wastewater quality compliance from four treatment works was more than 80%.

18. CUSTOMER & DEVELOPMENT STRATEGY (Cont’d)
IN SUPPORT OF
CUSTOMER & DEVELOPMENT STRATEGY (Cont’d)
COMMUNITY SUSTAINABILITY
As an IA for the KZN DoE – R128m
Sanitation provided at 47 schools.
Water provided at 7 schools.
As an IA for the Umgungundlovu DM
6 300 households provided with sanitation.

19. STRATEGIC SUPPORT TO MUNICIPALITIES OUTSIDE DESIGNATED AREA
STRATEGIC SUPPORT TO MUNICIPALITIES
OUTSIDE DESIGNATED AREA
OR Tambo DM to develop regional bulk infrastructure plans for local municipalities of Mbizana, Ngquza and Ntabankulu.
Mthatha LM under the OR Tambo DM: critical intervention to the water supply crisis in
uThukela Water through KZN DLGTA.

20. Sustainable funding of rural development (topography)
Strategic Challenges
Sustainable funding of rural development (topography)
Declining volumes
Raising of cash/funding/loans under tight market conditions
Water resource inadequacy
Climate change
Declining Raw Water Quality

21. IN SUMMARY For the year ended 2008/09
IN SUMMARY For the year ended 2008/09
Umgeni Water has achieved:
Positive operating performance
Improved financial position
Results in efficient water service delivery at affordable prices

22.
Unqualified Audit Report Maintained Fitch Credit Rating of AA+ Long Term & F1+ Short Term All statutory requirements met Robust Risk Management Framework in place (Strategic and divisional risk registers)
Unqualified Audit Report
Maintained Fitch Credit Rating of AA+ Long Term & F1+ Short Term
All statutory requirements met
Robust Risk Management Framework in place
(Strategic and divisional risk registers)

23. Tariff Setting Process for 2009/10
UW complied/adhered to the tariff setting process as determined in S 42 of the Municipal Finance Management Act (MFMA) 56 of 2003:
Consultation with all its customers was complete by the 30 November 2008
At the start of the consultation process Umgeni Water, presented two tariff proposals,
- one reflecting a high volume growth with a 10.5% tariff increase, and
- the other scenario reflecting a low volume growth with an 8.5% tariff increase.
The issues raised are summarised as follows:
- The status of the Msunduzi outstanding debt
- Continuation of differentiated tariff increases/ring fencing of revenues & costs by customer
- Benchmarking of UW’s cost of bulk water production
- Maintenance costs : considered high /details requested.
- eThekwini disagreed with the lower volume growth (3.6%) assumption and ascertained that
only the higher volume growth (4.5%) be used.
- The Capital Unit Charge (42c/kl ) by TCTA for the Spring-Grove dam not to be applied in FY10. The charge to be recovered only after commissioning of the dam.
- The tariff increase of 8.5% was not accepted and a lower tariff was requested i.e. 5%

24. IMPACT OF RAW WATER INCREASES
IMPACT OF RAW WATER INCREASES
System
2009
Price
Cents/kl
% Increase
2010
2011/12
Mgeni System
15.64
5.8%
15.79
Spring Grove Dam -
269%
42.2
Hazelmere System
69.95
19.0%
81.00
Water Resource Management Fee
1.33
13.4%
1.41

25. Tariff Setting for 1 July 2009-30 June 2010
2. Taking into account customers concerns and managing known financial risks

26. Tariff Setting for 1 July 2009-30 June 2010
3. Agreement with customers reached on 6.5%
4. Submission to National Treasury & SALGA of a 6.5% tariff increase prior to the final submission to the Minister of Water and Environmental Affairs
5. Final submission to the Minister of Water and Environmental Affairs on 25 January 2009 for a 6.5% tariff increase

27. AFFORDABLE TARIFF INCREASES
AFFORDABLE TARIFF INCREASES
(f) Denotes forecast

28. AFFORDABLE TARIFF INCREASES
AFFORDABLE TARIFF INCREASES
(f) Denotes forecast

29.
ACKNOWLEDGEMENTS
Board, Executive and Employees of Umgeni Water for the excellent achievement
eThekwini, iLembe, Ugu, Sisonke and uMgungundlovu and Msunduzi
The Ministry of Water and Environmental Affairs, the Department of Water Affairs (National and Regional Offices)
The Portfolio Committee for Water and Environmental Affairs for their ongoing support and understanding
National Treasury

30.
Thank You