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Water is our Passion Click to edit Master subtitle style 5/30/11 PRESENTATION TO PARLIAMENTARY PORTFOLIO COMMITTEE LEPELLE NORTHERN WATER STRAT PLAN, ANNUAL.

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Presentation on theme: "Water is our Passion Click to edit Master subtitle style 5/30/11 PRESENTATION TO PARLIAMENTARY PORTFOLIO COMMITTEE LEPELLE NORTHERN WATER STRAT PLAN, ANNUAL."— Presentation transcript:

1 Water is our Passion Click to edit Master subtitle style 5/30/11 PRESENTATION TO PARLIAMENTARY PORTFOLIO COMMITTEE LEPELLE NORTHERN WATER STRAT PLAN, ANNUAL REPORT AND BULK WATER TARIFFS Mr. James Mpai (Chairperson of the Board) Mr. Labane Leballo (Chief Executive) 25th May 2011

2 Water is our Passion 5/30/11 Contents Strategic Plan (2011/12) Area of Supply and Current Capacity Strategic Plan, Key Focus Areas and Priority Issues Challenges Opex and Capex Plans 2009/10 Annual Report Performance Analysis Financial Performance Analysis (External Audit Analysis) 2011/12 Tariff Adjustments Consultations Challenges / Solutions

3 Water is our Passion 5/30/11 Area of Supply Operates 8 purification schemes – ranging from 4 – 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. Of the 8 schemes 3 are operated on behalf of DWEA ex Contract KEY ISSUES (2011/12) Financial Sustainability and Viability Infrastructure Rehabilitation / Refurbishment Extension and Expansion of Operations Services KEY ISSUES (2012/13) Skills Development and Retention of skills Project and Contract Management Image Improvement

4 Water is our Passion 5/30/11 LNW’s Strategy Vision LNW envisages itself as 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. Financial Sustainabili ty and Viability Physical Extension of Operations Effective Corporate Governance Planning and Research Development Organizational Development Image Improvement and stakeholders Relations Sustainable Bulk Supply of Water Services KFAs

5 Water is our Passion 5/30/11 Strategic Challenges 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

6 Water is our Passion 5/30/11 Municipal Outstanding Bulk Water Services Payments-December 2010 Client Amount Owed Recovery Plan Mopani DistrictR 242m Implementation of Section 04 of Water Services Act. Municipality not co-operative and non committal to payment of the debt. Capricorn DistrictR 73m Payment Agreement signed for 12 months repayment. Municipality not adhering to the payment terms. Sekhukhune DistrictR 32m Payment Agreement for 6 months signed for repayment Total OwedR 349m

7 Water is our Passion 5/30/11 INCOME STATEMENT Actual 2010 Projected 2011 Budget 2012 Variance % Budget 2013 Budget 2014 Budget 2015 Budget 2016 R'000 INCOME273,650338,065378,37212%446,295496,043552,625623,940 Pumping and Purification7,1608,0099,61720%10,73011,54712,42013,430 Electricity40,41651,45364,48225%83,27697,804112,501129,411 Purchase of raw water24,54925,12626,8707%32,35836,11739,91844,152 Maintenance18,84121,68317,427-20%18,52019,74921,06022,459 Impairment79,61851,5990-100%0000 Salaries85,03291,82297,9166.6%121,573129,129137,161145,966 Administration Overheads36,49830,99937,70822%40,03842,64145,41448,368 Depreciation20,20520,81825,46722%28,55732,80837,26642,417 OPERATING EXPENDITURE312,319301,510297,042-1%348,625381,940417,912462,074 Operating Surplus/Deficit-38,66936,55581,329122%97,669114,103134,713161,866 Interest received37,67314,10312,681-10%12,41515,29618,10019,872 Less Net finance Costs4,3772,4481,991-19%1,5084,1887,1416,985 TOTAL-5,37348,21092,01991%108,576125,211145,672174,753

8 Water is our Passion 5/30/11 BALANCE SHEET Statement of Financial Position for the year ending June 201020112,0122013201420152016 NON-CURRENT ASSETS 371,672 438,628 557,448 622,906 719,012 816,927 930,534 CURRENT ASSETS 399,929 348,945 323,848 368,651 399,403 450,765 516,976 TOTAL ASSETS 771,601 787,573 881,296 991,557 1,118,415 1,267,692 1,447,510 EQUITY AND LIABILITIES CAPITAL AND RESERVES 575,023 623,233 715,253 823,829 949,040 1,094,712 1,269,465 NON-CURRENT LIABILITIES 38,742 34,127 29,851 25,269 22,362 21,403 19,737 CURRENT LIABILITIES 157,836 130,213 136,192 142,460 147,013 151,578 158,308 TOTAL EQUITY AND LIABILITIES 771,601 787,573 881,296 991,557 1,118,415 1,267,692 1,447,510

9 Water is our Passion 5/30/11 CASHFLOW For The Period Ending June 2010201120122013201420152016 Surplus for the year -5,383 48,210 92,019 108,576 125,211 145,672 174,753 Cash generated from operations -20,053 55,637 112,217 134,967 152,869 177,190 218,435 Cash flow from operating activities 13,243 55,637 112,217 134,967 152,869 177,190 218,435 Cash flow from Investing activities -25,379 -87,774 -144,287 -94,015 -128,915 -135,181 -156,024 Net cash flow outflow from financing activities -4,040 -4,615 -4,276 -4,583 -2,907 -959 -1,666 Net increase in cash and cash equivalents -16,176 -36,752 -36,345 36,369 21,048 41,050 60,745 Cash and cash equivalents at beginning of the year 332,255 316,080 279,328 242,982 279,352 300,400 341,450 Cash and cash equivalents at end of the year 316,080 279,328 242,982 279,352 300,400 341,450 402,195

10 Water is our Passion 5/30/11 Operational Expenditure

11 Water is our Passion 5/30/11 Salary Structure

12 Water is our Passion 5/30/11 OPERATIONAL REVENUE BUDGET Year Income (R’000) Expenditure (R’000) 2010/11338 065301 510 2011/12378 372297 042 2012/13446 295348 625 2013/14496 043381 940 2014/15552 625417 912 2015/16623 940462 074 Total2 835 3402 209 103

13 Water is our Passion 5/30/11 Capital Projects DescriptionPeriodAmount Estimated Beneficiaries PROJECTS IN PREVIOUS PERIOD (COMPLETED) Flag Boshielo West Water Supply Phase 22007 - 2008R 6.0 m 5 470 Premier Emergency Water Projects (Greater Tubatse) 2006 – 2008R 19 m19 000 Nkadimeng Water Supply Phase 32008/09R 5.4m6 257 Olifantspoort South NS7 Phase 42006/07R 0.6m6 900 Sekhukhune Deep Rural Schemes2006- 2007/08R 12 m19 269 PROJECTS UNDER REPORTING PERIOD (COMPLETED) Nkadimeng Water Supply Phase 42007/08 – 2009/10R 5.8 m9 299 Flag Boshielo West Water Supply Phase 32008/09 – 2009/10R 6.5 m6 500 Olifantspoort Treatment Plant Upgrade Phase 2 to 60Ml/day 2007/08 – 2009/10R 218 m250 000 TOTALR 273.3m

14 Water is our Passion 5/30/11 Future Schemes Various Infrastructure envisaged for O&M:  New Dam (De Hoop) – under construction  Lebalelo Water Association Infrastructure  Greater Letaba Dam Scheme  Lephalale Bulk Infrastructure  Nandoni Dam Scheme  Flag Boshielo to Mokopane Pipeline (Water Supply Agreements under negotiations with DWEA/TCTA)  Other Groundwater development infrastructure.

15 Water is our Passion 5/30/11 CAPITAL / REFURBISHMENT PLAN Capital Expenditure20122013201420152016 R'000 Phalaborwa 43,477 26,805 20,180 16,410 16,612 Ebenezer 15,044 27,362 42,895 5,489 5,656 Olifantspoort 24,142 28,475 42,615 106,195 116,225 Politsi 3,153 2,060 2,380 3,565 3,427 Doorndraai 15,818 2,035 1,750 307 609 Corporate Head Office and IT 41,387 5,955 17,712 1,770 11,985 TOTAL 143,021 92,692 127,532 133,736 154,514

16 Water is our Passion 5/30/11 MAINTENANCE BUDGET Year Owned by LNW Non owned 2010/1118 070 50011 832 800 2011/1242 185 8005 890 830 2012/1330 794 9078 562 627 2013/1416 903 6294 664 680 2014/1522 462 5367 452 889 Total130 417 37245 403 826

17 Water is our Passion 5/30/11 INFRASTRUCTURE SPENT  Abstraction Licences  Municipal Readiness for bulk infrastructure  Outstanding Debts by Municipalities.  Municipal Agreements on Infrastructure.

18 Water is our Passion 5/30/11 2009/10 Annual Report Performance Analysis

19 Water is our Passion 5/30/11 Successes in service delivery  Free Basic Water Service Provision and Cost Recovery in Capricorn District Municipality and GSDM (11 949 households)  Water Demand Management (continued upgrade of telemetry systems) resulting in water losses averaging 3.5% on bulk  Water Quality compliance with SANS241:2006 (95% Class 1 and 100% Class 2) – Blue Drop Certification on Olifantspoort and Ebenezer  Yard Connections installations in rural Greater Sekhukhune DM  Turnaround Strategy Implementation in Phalaborwa LM and Greater Tubatse LM on Cost Recovery  Billing and Meter Reading Support to Greater Tubatse LM  Recomissioning of underground water supply in Lepelle Nkumpi Municipality

20 Water is our Passion 5/30/11 2009/10 Audit analysis and findings

21 Water is our Passion Externa Audit Reports Year of AuditOpinionMajor Findings 2005/06Unqualified None 2006/07Unqualified Outstanding debts 2007/08Unqualified Materiality Framework; Outstanding Debts Water Balances 2008/09Unqualified Outstanding Debts 2009/10Unqualified Outstanding debts

22 Water is our Passion 5/30/11 2009/10 Financial Analysis and Performance

23 Water is our Passion Financial Analysis / Results

24 Water is our Passion Financial Ratios Business Performance Area 2005 Actual 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Actual Gross Margin (%) 83%77%88%92%91%71.10% Current Ratio 1.741.842.672.492.542.53 Return on Assets (%) 9.0%8.4%13%3.5%5.01%-0.70% Debt-equity ratio (%) 101.9%45.7%35% 37%34% Asset turnover 0.200.280.290.270.260.32 Debt ratio (%) 5.06%3.14%2.49%2.57%2.7%2.5%

25 Water is our Passion 5/30/11 Cash Reserves - Cash at hand as of 30 June 2010 = R316m - Capex Investment - Refurbishment of Infrastructure - Credit Worthiness

26 Water is our Passion 5/30/11 Wayforward - Resolve outstanding debt and late payment for bulk services by WSAs - Rehabilitation and Maintenance of infrastructure - Support municipalities with regard to cost recovery and water conservation and demand management strategies - Capacity building, retention of skills and succession planning

27 Water is our Passion 5/30/11 2011/12 Bulk Water Tariff Adjustments

28 Water is our Passion 5/30/11 Bulk Water Tariff Consultations Institution ConsultedDateComments / Feedback WS Authorities: Mopani District Capricorn District Polokwane LM Sekhukhune District Mogalakwena LM 05th November 2010 03rd November 2010 21st November 2010 16th November 2010 06th October 2010 No feedback received (only received on 20 May 2011) Feedback received on tariff acceptance No feedback received Feedback received on tariff acceptance SALGA 15th January 2011 Comments Received from National Salga National Treasury 30th November 2010 Comments received from National Treasury. DW Affairs 15th January 2011 Feedback received from Minister approving the average 10.2% increase on potable water tariff increase. Industrial Clients Foskor PMC Sasol Nitro 28th October 2010 27th October 2010 Feedback received on tariff acceptance

29 Water is our Passion 5/30/11 Proposed Bulk Water Tariffs Increase WATER SCHEME 2010/11 R/kl 2011/12 R/kl (proposed) 2012/13 R/kl (proposed) 2013/14 R/kl (Proposed) 2014/15 R/kl (proposed) Phalabora Foskor1.4091.601.912.342.86 Phalabora Mining1.3781.561.912.342.86 Sasol Nitro1.3881.8881.912.342.86 New Mining Co2.3342.4961.91 Phalaborwa Potable)2.4942.642.863.103.37 Ebenezer4.3314.584.925.295.69 Politsi2.6543.444.586.096.66 Olifantspoort4.4194.725.035.355.70 Doorndraai3.9814.214.574.965.38 Flag Boshielo3.5554.684.085.515.97 Modjadji2.6542.782.993.213.45 Average Tariff2.8783.2183.333.854.25 Average % Increase7.3610.2211.8511.5611.04

30 Water is our Passion 5/30/11 THANK YOU

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