1. 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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. Water is our Passion Actual 2 012 Projected 2 013 Budget 2 013 Budget 2 014 Budget 2 015 Budget 2 016 Budget 2 017 INCOME 314 847 326 057438 221489 405535 743592 950654 321 Pumping and Purification 8 725 6 3477 4577 9429 0619 77210 526 Electricity 73 120 85 757107 630124 763144 709167 846194 682 Purchase of raw water 27 550 26 38429 60032 88436 66540 88245 583 Maintenance 36 845 22 67015 66116 71317 83619 03620 317 Impairment (55 866) 14 5350000 Fair value adjustment (3638)000000 Salaries 109 365 98 601107 242111 018112 938120 279128 097 Administration Overheads 38386 33 33352 57955 99659 63552 66556 088 Depreciation 24618 22 27525 23526 34827 43728 69229 116 Refurbishment 0 633645 81536 34531 83229 29738 097 OPERATING EXPENDITURE 149710 309 902391 219412 009440 115468 469522 507 Operating Surplus/Deficit 56104 16 15647 00277 39795 627124 481131 813 Other Income 45685 Interest received 15064 14 87512 6815 6341 0323 9744 850 Less Net finance Costs (2357) 2 4481 9911 508988741585 Actuarial gains 222 0000 Total 110718 28 58357 69281 52395 671127 714136 078

10. Water is our Passion 20112 01220132014201520162017 ASSETS NON-CURRENT ASSETS 414 157449 324509 783523 463531 192536 763551 802 CURRENT ASSETS 373 126426 495296 650362 717448 774572 253784 238 TOTAL ASSETS 787 283875 819806 433886 180979 9661 109 0151 336 040 EQUITY AND LIABILITIES CAPITAL AND RESERVES 628 219740 782714 494796 017891 6881 019 4031 154 464 NON-CURRENT LIABILITIES 35 679 31 183 25 547 22 64119 769 18 11116 448 CURRENT LIABILITIES 123 385103 854 66 392 67 52268 509 71 502165 129 TOTAL EQUITY AND LIABILITIES 787 283875 819806 433886 180979 9661 109 0151 336 040

11. Water is our Passion 2011201220132014201520162017 Surplus for the year 42 462 28 58357 692 81 523 95 671127 714 136 078 Cash generated from operations 17 18274 23047 560 99 298113 784153 933 265 279 Cash flow from operating activities 31 75386 93747 560 99 298113 784153 933 265 279 Cash flow from Investing activities -64 558 -57 564 -101 468 -40 028-35 167-34 262-45 173 Net cash flow outflow from financing activities -4 687-4 572-5 253-2 906-2 872-1 658-1 663 Net increase in cash and cash equivalents -36 752 -12 816 -59 162 56 364 75 745118 013 218 443 Cash and cash equivalents at beginning of the year 316 081 278 589266 512207 350 263 714339 459 457 471 Cash and cash equivalents at end of the year 278 589 303 390207 350263 714339 459457 471 675 914

12. Water is our Passion

13. Year Income (R’000) Expenditure (R’000) 2011/12 314 847262 221 2012/13 438 221391 219 2013/14 489 405412 009 2014/15 535 743440 115 2015/16 592 950468 469 2016/17 654 321522 507 Total 3 025 4872 496 540

14. 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.

15. Water is our Passion Fin YearCapitalMaintenance 2012/13145 77015 661 2013/1474 79016 713 2014/1565 34517 836 2015/1664 93119 036 2016/1781 46420 317

16. Water is our Passion

17. Beginning Middle Completed

18. Water is our Passion This project was aimed at rural areas

19. Water is our Passion 14 Mℓ in capacity

20. 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

21. Water is our Passion

22. 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

23. Water is our Passion

24. 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 2.672.492.542.533.07 4.11 Return on assets % 13%3.50%5.01%-0.70%6.00% 13% Asset turnover 0.290.270.260.320.37 0.36 Debt to Total Capital ratio 0.020.030.050.030.20 0.15 Debt-equity ratio 0.35 0.370.340.25 0.18

25. 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%

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

27. 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

28. Water is our Passion

29. Institution ConsultedDateComments / Feedback WS Authorities: Mopani District Capricorn District Polokwane LM Sekhukhune District Mogalakwena LM 19 November 2012 23 rd October 2012 16 November 2012 18 January 2013 29 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.

30. Water is our Passion WATER SCHEME 2012/13 Current 2013/14 Proposed % 2013/14 Adjusted % Phalaborwa Potable2.843.108.5%3.067.7% Ebenezer4.835.197.5%5.115.8% Politsi3.744.9131.2%4.8228.8% Olifantspoort4.995.316.5%5.153.2% Doorndraai4.534.928.5%4.867.3% Flag Boshielo5.055.549.5%5.478.3% Modjadji2.983.7826.8%3.7726.8% Average Tariff4.144.6813%4.6011.3%

31. 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.

32. 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)

33. Water is our Passion THANK YOU