1. Presentation of Annual Report Annual Report to Portfolio Committee on Water Affairs and Forestry to Portfolio Committee on Water Affairs and Forestry 7 May 2008

2. Contents Corporate Performance Scorecard Financial Performance Raw and Potable Water Quality (including Waste Water Effluent Quality) Investment Plan Water Resources and Infrastructure Management

3. Strategic Pillar 1: Customer & Growth Performance IndicatorsStrategy Output/TargetsPerformance 2006/7 Strategic Objective: Exceed Customer Expectations % customers with signed agreements. Six signed agreements  Compliance with water quantity, water quality & pressure requirements per bulk supply agreements Contractual obligations met Progress in expanding/growing section 30 activities. Understanding & resolving water services related customer challenges. Enhancing capacity of customers in delivery of water services Feedback and assessments from Executive Authority, Portfolio Committee for Water Affairs & Forestry; and National Treasury. Positive feedback from Executive Authority. Positive feedback from Portfolio Committee for Water Affairs & Forestry. Positive feedback from National Treasury.

4. Strategic Objective: Growth (Increase Customer Base) Progress with the implementation of key projects in the Five Year (2008-2012) CAPEX Programme. Increase system coverage through completion/ commissioning/ delivery of projects. Meet Client’s growth requirements for projected water supply demand.  Performance IndicatorsStrategy Output/TargetsPerformance 2006/7 Strategic Pillar 1: Customer & Growth Strategic Objectives: Contribute to National Development Agenda & Reduction of Backlogs Performance IndicatorsStrategy Output/TargetsPerformance 2006/7 School and Household Sanitation Increased access to sanitation Water EducationHealth & Hygiene Awareness

5. Strategic Pillar 2: Water & Socio-Economic Development Strategic Objective: Job Creation & Contribution to BBBEE Number of jobs created through: School Sanitation Household Sanitation Working for Water Implementing CAPEX Generate employment, & entrepreneurial opportunities PPPFA Compliance (BEE Spend) increase % spend on BBBEE Performance IndicatorsStrategy Output/TargetsPerformance 2006/7

6. Strategic Pillar 3: Finance Strategic Objective: Reduce the Net Debt Percentage reduction in debt. Reduced financial risk and increased financial sustainability Improved the financial stability by driving sound business principles throughout UW and subsidiaries DWAF Benchmark ratios: Net Debt: Equity <1.25 Net Debt: Equity 2.99Net Debt: Equity 2.60 Debt Service > 1.35 Debt Service. 2.07Debt Service. 2.14 Debt: Assets < 0.66 Debt: Assets 0.70Debt: Assets 0.67 Strategic Objective: Contribute to an Affordable Tariff Constant tariff in real terms. Affordable tariff : increases aligned to CPIX Tariff: R 2.819 per kl. Increase of 4.5% Total cost per kl: R 2.50; Total cost per kl: R 2.53; 

7. Strategic Pillar 3: Finance Strategic Objective: Improved Return on Assets Improvement on Return on Asset ROA: 16.19% Asset turnover: 0.40 ROA 17.32%. Asset turnover: 0.44  Strategic Objective: Enhance Shareholder Value Credit rating maintained. Access to capital markets and competitive funding rates. Fitch National ratings reaffirmed: AA Long term. F1+ short term.  Improvement on surplus (profit) and accumulated reserves. Strengthening balance sheet. Surplus: R 242.1m Net Profit %: 20.75 Surplus: R 250.7m Net Profit %: 21.01 

8. Strategic Pillar 4: Environmental Management Air Quality and Energy Eco-efficiency Green House Gases Waste Environmental Health Water Stress Biodiversity Natural Disaster and Vulnerability Environmental Governance Science and Technology Heritage Environmentally sustainable water utility Sustainability Policy Finalised  Strategic Objective: Conservation of Natural Resources and Mitigate/Minimise Impacts of all Operations Performance IndicatorsStrategy Output/Targets Performance 2006/7

9. Strategic Pillar 5: Organisational Strategic Objective: Strategic Effectiveness The extent of engagement with the Executive Authority (i.e. DWAF) on substantive issues Accountability to the Executive Authority & legislature  Performance IndicatorsStrategy Output/TargetsPerformance 2006/7 Strategic Objective: Operational Competence The extent to which Integrated Enterprise Wide risks are managed and mitigated to an acceptable level. Managed Enterprise Wide Risk  The extent to which the company adheres to Good Corporate Governance (King II Report). Compliance and adherence to Good Corporate Governance 

10. The extent to which human resources are developed & managed Employer of choice in the water sector  Progress with implementation of SCM Framework and compliance with the PPP Framework Act Fair, equitable, effective and transparent procurement. Transformation & empowerment. Extent of alignment of IS to business needs Effective IS systems Extent organisation leads and contributes knowledge & innovation in water sector Centre of functional excellence in the water sector Implementation of quality management systems Achieve company ISO 9001 certification by 30 June 2010  Strategic Objective: Functional Excellence Performance IndicatorsStrategy Output/TargetsPerformance 2006/7 Strategic Pillar 5: Organisational

11. Results From Operations Water Water Volume Sold: up by 3.4% Water Volume Sold up by 3.4%

12. Results From Operations Revenue R1.2 billion - up by 9.5% S 30 8% WWW 4% Bulk 88% Bulk water revenue by customer Revenue by Segment

13. COST OF BULK WATER PER KL 2.59 2.54 2.45 2.36 2.17 Increasein operational efficiencies Increase in operational efficiencies

14. Results From Operations (cont) Net profit R250.5m : 82% improvement for the year

15. Bulk Water Tariff per kl

16. Cash flow & Liquidity ■ Solid cash flows from operating activities R724m: increase for the year R80m

17. Cash flow & Liquidity (cont) ■ R177m capex spend in 2007

18. Debt Management ■ Reduced net debt by R267m from R1,923m to R1,656m

19. Increase in capital & reserves ■ Improved earnings results in reversal of accumulated loss R’m

20. Number of people and households without access to basic water services Water Service Authority Total Population Total Pop. below RDP level water service % of Pop. Total Households Total Households below RDP level water service % of House- holds eThekwini MM3,100,000**397,976***12.8721,851*49,747*6.9 Ilembe DM768,669*469,307*61.1193,036*58,663***30.4 Msunduzi LM530,510**99,848***18.8130,990**14,26410.9 Sisonke DM416,528*227,486*54.661,114*33,377*54.6 Ugu DM665,595*380,153*57.195,085***54,308***57.1 uMgungundlovu DM 414,740**87,444****21.1100,665**15,170****15.1 * Population data provided by the WSAs during the backlogs information collection process undertaken in 2006. ** Figure provided by the Water Service Authorities during an information reconciliation process in Dec 2004. *** Calculated figure at 7 persons per household as actual household data was not provided. **** Best estimate on historical data as no update provided (In many cases the 2004 data reduced by 20%)

22. Long-term Water Demand Projection vs. Level of Assurance of Supply To ensure sufficient potable water is available to address the backlogs within its area, and to meet and stimulate the growth and development that is projected within the region, it is necessary for UW to embark on its ambitious infrastructure development programme.

23. South Coast Pipeline R200 Million ‘61 Pipeline Augmentation R246 Million Richmond Pipeline R100 Million North Coast Pipeline R179 Million Extension to Wartburg Bulk System – R300 Million ‘57 Pipeline Augmentation R75 Million KZN Plan – Location of projects Lower Mvoti (Ngcebo KwaDukuza Scheme) R253 Million Durban Heights system R75 Million Greater Bulwer/ Donnybrook Bulk Water Supply Scheme - R34 Million Hazelmere WW Upgrade R64 Million Midmar WW System R125 Million

24. Historical Potable Water Quality Compliance

25. Bulk potable waterworks Average daily volume treated (Ml/d) % Total Supply Volume Compliance with SANS 241: 2006 ChemicalMicrobiological Durban Heights522 48% 100 Wiggins213 20% 100 Midmar211 19% 100 DV Harris44.2 4.1% 100 Hazelmere38.5 3.5% 100 Amanzimtoti33.5 3.1% 100 Umzinto 11.4 1.0% 100 Craigeburn Final - - 100 Craigieburn-Saiccor 6.2 0.57% 10092.6 Mtwalume4.5 0.41% 99.1100 Ixopo2.2 0.20% 100 Ogunjini1.3 0.12% 100 SANS 241 Classification: Excellent water quality: ≥ 99% compliance with Microbiological requirements, ≥ 95% compliance with Class I Chemical requirements and ≥ 97% compliance with Class II Chemical requirements. Poor water quality: < 97% compliance with Microbiological requirements, < 85% compliance with Class I Chemical requirements and <90% compliance with Class II Chemical requirements Potable Water Quality Compliance of Major Water treatment Works

26. Pre-feasibility Phase ProjectsFeasibility/Design Phase Projects One project area was reported on:Fourteen assessment areas reported on: One good performance x 1Five good performances x 5 Nine satisfactory performances  x 9 Construction/Defects Phase ProjectsSummary Four assessment areas reported on:A total of nineteen assessments: Two good performances x 2Eight good performances x 8 One satisfactory performance  x 1Ten satisfactory performances  x 10 One unsatisfactory performance  x 1One unsatisfactory Performance  x 1  The environmental problem is either significant or has occurred, or the deadline for remedial action was not met  Progress and/or performance are satisfactory Good environmental practice or commendable performance from staff, a contractor or consultant Environmental Assessment of projects in planning, design and construction phases

27. Historical Effluent Discharge Compliance with Standards Wastewater Quality Target:  2006/7:10% wastewater quality failures  Actual:10.1%  2007/8:Maintain or improve on the 2006/7 target

28. Quality of Raw Water Resources in Umgeni Water Supply Area

29. Project NameLocal Municipality Number of Units Over Multi-(3) years Units Completed 2006/07 Estimated Population to be Served Swayimane Ward 9Mshwati2 27142019 195 Swayimane Ward 10Mshwati2 60749022 228 Swayimane Ward 11Mshwati2 07210116 077 MagodaRichmond2 05328511 801 NdaleniRichmond3 13649817 135 StoffeltonMpendle1 2033458 206 TendeleMpofana143 2 071 MakholweniUmkhambathini2 01036813 521 OzwathiniNdwedwe560 5 775 Total-16 0553 210116 009 Household Sanitation

30. Project NameDistrict Municipalities Projects Planned FY06/07 Projects Completed FY06/07 Pupils & Educators School sanitation phase 3 Ugu, Sisonke & UMgungundlovu 403918 000 Curriculum upgrade Ugu, Sisonke & UMgungundlovu 322419 200 School Sanitation Phase 3 and Curriculum Upgrade Programmes

31. ■ Continued commitment to a stable and affordable tariff. ■ Continued focus on debt reduction to optimal levels and operational efficiencies ■ Commitment to deliver on the capital expenditure to support customer requirements and water service delivery Forward View 2007/2008

32. Strategic Challenges Co-ordination & Integration within the Sector [Alignment of Funding streams] Institutional Reform [Uncertainty] Increasing water access & coverage [Cost & topography] Water Resources investments & timeous availability Profitability levels – tariff acceptability by Municipalities

33. Acknowledgements 1.I would like to acknowledge the sterling contribution by and dedication of current and past employees of Umgeni Water and the Executive Management team. 2.I would like to thank our Municipal customers - Executive Mayors, Municipal Managers, Technical Directors and Finance Directors - for promoting cordial working relationships and partnerships. Their significant contribution, in the form of untapped insights into community expectations, has been invaluable in shaping Umgeni Water. 3.I would like to thank the Board of Umgeni Water for its leadership, guidance and focus on substantive issues. 4.I would like to thank the Minister of Water Affairs and Forestry, Lindiwe Hendricks, for involving us in the Strategy Planning Session, of the Department of Water Affairs and Forestry in January 2007, and for driving the co-ordinated and integrated water institutions family culture. 5.Thanks to the Chairman of the Water Affairs and Forestry Portfolio Committee, Connie September, and members for driving the focus and effectiveness of the Water Boards. 6.Thanks to the KwaZulu-Natal MEC for Education, Ina Cronje, for affording Umgeni Water the opportunity to assist with the department’s School Sanitation and Curriculum Upgrade programmes. 7.We acknowledge the Director-General of the Department of Water Affairs and Forestry, Jabulani Sindani; the Deputy Director-General (Regions), Thandeka Mbassa, and the Chief Director (KwaZulu-Natal), Vusi Kubheka, for their unstinting support.

34. Thank you Questions??