MHLATHUZE WATER

PRESENTATION OF THE 2006/2007 ANNUAL REPORT TO THE PORTFOLIO

COMMITTEE

Presented by:Ms Dudu Myeni (Chairperson)

Mr Lawrence Nachito (General Manager: Finance)

07 May 2008

2

OPERATIONAL AREA

Umkhanyakude District Municipality Zululand District Municipality uThungulu District Municipality uMhlathuze Local Municipality Northern of Ilembe District Municipality

Mhlathuze Water operational area covers 4½ WSA’s in KwaZulu-Natal

3

ALIGNMENT TO DWAF STRATEGY

ACCESS TO WATER SERVICES Regional bulk supply in Mandlakazi/Hlabisa

area Provision of water and sanitation to schools

QUALITY OF PURIFIED WATER National water quality reporting system ASGISA Skills development at technical level Customer care

4

…/cont. Provision of operational and management

services to district municipalities Umkhanyakude District Municipality Gert Sibande District Municipality Service Level Agreements signed with WSA in

operational area Supply Agreements signed with all customers

ENERGY Energy supply to critical installations agreed

with supplier and these installations would not be load shedded.

5

STRATEGIC DIRECTION

To form strategic partnerships with WSA’s To establish strategic networks with all role

players To support and assist WSA’s to meet their

mandates To assist DWAF with water and sanitation

provisions

6

BUSINESS DEVELOPMENT & PARTNERSHIP OPPORTUNITIES

KZN regional bulk water supply Provincial project with DLGH. Water

supply to Mandlakazi / Hlabisa Area WfW contract with DWAF for 3 years Water and sanitation project schools

(Phase 1 = R48mil)

7

WATER QUALITY

SANAS; SABS 241 standard (2004) Physical quality – 99% compliance Bacteriological quality – 99% compliance Log data into National Water Quality

Register National Microbial analyses program for

bacteriological quality

8

INFRASTRUCTURE DEVELOPMENT

Replacement section of waste-water disposal system (R150mil)

Upgrade of water treatment plant (R112mil) Refurbishment of water transfer scheme (R5,2mil) Refurbishment budget provision for various

installations approved (R16,9 million) Assessment of pipeline integrity in progress Tariffs set for replacement and refurbishment of

infrastructure

9

REPRESENTATIVITY OF BOARD & EXECUTIVE MANAGEMENT

BO

AR

DE

XE

CU

TIV

EEQUITY

GENDER

BLACK WHITE INDIAN

8 1 1

FEMALE MALE

5 5

BLACK WHITE INDIAN

3 2 0

FEMALE MALE

0 5

EQUITY

GENDER

10

TARIFF 2008/09

Approved by National Treasury Discussions held with customers that if

electricity cost increase relevant would be passed onto customers

11

FINANCE REPORT

AUDIT ISSUES Consortium of new External Auditors, KPMG/Sizwe

Ntsaluba, appointed for the FY2006/07 audit Financial statements were prepared in accordance with

SA GAAP, Water Services Act and the PFMA. MW received a Qualified Audit opinion for the

FY2006/07 on the basis of a Special Purpose Entity, MW Lessor Trust, which was set up to finance a DWAF Emergency Transfer Scheme in 1996. The last audited financials of the Trust were in February 2005. The purpose for which the Trust was set up ended on 1July 2007 and MW is in the process of dissolving it.

12

…/cont.

There was a prior year restatement of the FY2005/06 financials in order to

• Comply with disclosure requirements• Correct seven prior year errors noted

13

INCOME STATEMENT

Operating income before finance costs increased by 3% from FY2005/06 to FY2006/07

Operating costs to Total income decreased from 76% in FY2005/06 t0 73% in FY2006/07. This is in line with the Board’s strategy to streamline and contain costs.

Net finance costs reduced by 38% from FY2005/06 to FY2006/7 due to; The redemption of loans (R45,1million) in

FY2006/07 The renegotiation of interest rates with the loan

providers. (DBSA reduced their interest rate from 16.5% to 13%) .

14

FINANCE RATIOS

Target FY2006/07 FY2005/06

Debtors’ days 45 days 90.8 days 96.8 days

Current ratio 2:1 1.6:1 1.4:1

Quick ratio 1:1 1:1 0.9:1

Debt /Equity ratio 1< 1.7 1.9

Return on Assets 10% 12.9% 14.1%

15

CAPITAL EXPENDITURE

Actuals (in R000’s) FY2006/07 FY2005/06

Richards Bay Effluent disposal

46 899 5 812

Water Schemes 4 297 2 045

CAPITAL BUDGET FY2007/08 FY2008/09 FY2009/10

Water Schemes 155 576 69 863 99 367

Connection 1 482 119 518 82 000