Pelladrift Water BoardAnnual Report 2005/2006 Presentation

toPortfolio Committee on Water Affairs

and Forestryat

Parliament on 19 March 2007

19 March 2007

Geographical location

19 March 2007

Overview

• External audit opinion

• Human resources information

• Achievements during 2006

• Annual financial statements

• Notes to the financial statements

• Actual performance & water sales

• Independent consultants technical report

• Key challenges going forward

19 March 2007

External Audit Opinion

“ the financial statements present fairly in all material respects the financial position of the Board at 30 June 2006 and the results of their operations and cash flows for the year then ended in accordance with SA statements of GAAP and in the manner required by the Water Services Act 1997 ”

External Auditor: Du Toit Van Den Heever, Registered CA (SA), 29 Aug 2006

19 March 2007

Human resources information

• Board was formed to establish sustainable water supply to BM mine (90.5%) and the surrounding areas – only strategic objective!

• BM mine is a division of Anglo Operations Limited (AOL) and manages pumping station

• Board Members: BM mine GM (Chair), BM Fin Mgr (Secretary), AOL Accounting Officer (Jhb), KM Municipal Mgr, Pella Councillor

• Term expired 21 Dec 2005 and the selection process is still ongoing

19 March 2007

Pump station organogram

Jaap Jacobs Manager: Services

Nathan Williams HOD: Process Plants

P.J. van den Heever Pump Supervisor

J. Du Preez Pump Supervisor

M. Staak Pump Supervisor

I. Waterboer Pump Operator

E. Cloete Pump Operator

B.X Basson Pump Operator

J.S. Dippenaar Pella Superintendent

M.P. Second Pump Operator

P. Jaar Pump Operator

Dolf van Emmenis Section Engineer

Francis. Green Pump Operator

C2 1C1 3Level 1 6

Total 10

19 March 2007

Water flow at pump station

Nalco 5306

ChlorineDosing

LimeDosingNalco8174

Dosing

Water Clarifier

Balancing Reservoir

Low Lift Pump Station

Domestic Supply

ControlRoom Offices

ChemicalStore

Horseshoereservoir

Kokerboom

River Flow

River Flow

Saddlebackreservoir

Average Water abstracted = 381 024 m3 /monthWater turbidity raw = 9 – 500 NTUp = 7,4 - 9,0H High Lift Pump Station

BM Mine

PellaPofadder

Other

AggeneysVillage

19 March 2007

Achievements during 2006

• New delivery PR valve installed for Pella community

• Technical assistance given to Pofadder for installation of their own servitude pumps

• Full integrity inspection conducted on length of pipeline (GUL tests)

• Cathodic protection system on pipeline replaced and the protected area extended

• Servitude extended for community plantation project alongside the Orange river

• Clarifier reagent consumption reduced by 20%

19 March 2007

Income Statement

Note 2006 2005Revenue 1 5 711 235 5 664 497Operating expenses 5 745 237 5 456 232

- Direct operating expenses 4 987 624 4 751 664

- Administrative expenses 757 613 704 568

Net operating income (34 002) 208 265Interest received 70 957 58 880Income for the period 36 955 267 145Accumulated reserves 8 802 541 1 935 396LT liabilities redeemed - 6 600 000Accum. reserves at end 6 8 839 496 8 802 541

19 March 2007

Balance Sheet

Assets Note 2006 2005Non-current assets

Property, plant and equipment

2 9 200 757 9 200 757

Current assetsAccounts receivable 3 126 448 132 387Short-term investments 4 1 184 737 1 184 737Bank balance and cash 5 170 912 30 949

10 682 854 10 548 830Equity and LiabilitiesCapital and reserves

General reserves 6 8 839 496 8 802 541

Current Liabilities Accounts payable 7 1 843 358 1 746 289

10 682 854 10 548 830

19 March 2007

Cash Flow Statement

2006 2005

Cash flow from operations:

- Cash generated from primary activities (34 002) 208 265

- Cash generated from secondary activities 103 008 122 447

- Interest received 70 957 58 880

Net change in cash & cash equivalents 139 963 144 698

Cash & cash equivalents (start of year) 1 215 686 1 070 988

Cash & cash equivalents (end of year) 1 355 649 1 215 686

19 March 2007

Notes to financial statements

1. Accounting PolicyThe financial statements are prepared on historical cost basis where:

I. Depreciation Land buildings and capital works are reflected at cost with no provision made for

depreciation

II. General reserve fund Any surplus funds that are not immediately required for a specific purpose may at the

discretion of the Board be transferred to the General reserve fund to be applied for any permitted purposes i.t.o. the Water Act (1997)

III. Revenue Water sales are accounted for on an accrual basis Interest income is accounted for by

reference to the effective yield

IV. Financial instruments Financial instruments carried in the balance sheet include bank balance and cash,

accounts receivable and accounts payable. These instruments are carried at their estimated fair value

19 March 2007

Notes to financial statements

2. Property, plant and equipment 2006 2005Pipelines and civil works 6 525 472 6 525 472Machinery 1 839 512 1 839 512Other 835 773 835 773

9 200 757 9 200 7573. Accounts Receivable

Trade debtors 78 312 103 545Less: provision for bad debts - -SARS – VAT Control account 41 209 22 726Provision - interest 6 927 6 116

126 448 132 3874. Short-term investment

Call deposit – Standard Bank 1 184 737 1 184 737

19 March 2007

Notes to financial statements

5. Bank balance and cash 2006 2005Bank balance – Standard Bank 170 912 30 949

6. General Reserve FundBalance at start of year 8 802 541 1 935 396Amount transferred 36 955 6 867 145Balance at end of year 8 839 496 8 802 541

7. Accounts payableSundry creditors 1 693 240 1 273 262Provisions 142 118 465 027Deposit – KM Municipality 8 000 8 000

1 843 358 1 746 289

19 March 2007

Notes to financial statements

8. Water Charges

The last increase in water tariff was effective from 1 January 2006:

• Consumption up to 7 000 units from R0.79 to R0.83 per unit

• Consumption over 7 000 units from R1.35 to R1.42 per unit

9. Consumption by local authoritiesWater was supplied to Khai-Ma Municipality (previously named the

Pofadder Municipality and the Pella Management Board) during

the period under review

19 March 2007

Performance vs. Budget

Budget Actual12 months ending: 30 June 2006

Revenue 6 768 588 5 711 235

Operating Expenses 6 826 514 5 745 237

Net operating loss (57 926) (34 002)

Interest received 65 000 70 957Income for the period 7 074 36 955

Accum. Reserves (start) 8 839 496 8 802 541Accum. Reserves (end) 8 846 570 8 839 496

19 March 2007

Water Sales 2006

m3

Black Mountain – A Division of Anglo Operations Limited

3 859 599

Khai-Ma Municipality 376 655

Other (farmers, NDM Loop 10 road, etc.) 28 296

4 264 550

19 March 2007

CBI Technical Report

• No major capital work was carried out during the year and BM operations staff congratulated for good condition of pump station

• Maintenance and replacement were carried out on the following items:– 400mm diameter rising main– Scour valves and NR valve on high lift pump 3– Balance discs on high lift pump 2– Clarifier cleaned out and rakes repaired– Saddleback reservoir roof repaired

19 March 2007

CBI Technical Report

• Damage to the high lift rising main due to April 2001 flood led to 360m length pipe replacement, re-routing away from the river bed and a new extended CP system installed

• Water quality after clarification was good despite variable raw water quality and pH control was kept in optimal range

• Water consumption is stable at below 12 mega litres per day

19 March 2007

Key challenges

• Board faces lethargy from Pella and Pofadder consumers who are reluctant to pay water bills and will not accept even mild tariff increases

• Technical evaluation of the installation to be carried out to quantify future long-term capital requirements

• Benchmarking against similar sized water boards• Succession planning, average age: 48 years• Develop relationships with other water utility service

providers• Integration with BM initiatives: CI, SCM, SHE, etc.

19 March 2007

Key challenges

• Communication with the pump station poor in case of emergency while Telkom has been slow in addressing this issue

• Recruitment of Board members as civil servants without any compensation

• BM mine is targeting reduced water consumption which will reduce revenue generation significantly

• Ageing equipment will become more maintenance intensive as time goes on, putting more pressure on tariff increases

• Educating the surrounding communities on the operation of the water works

19 March 2007

Key challenges

• Set up DWAF office in Springbok to work more closely with the water board

• Partnership with the BM mine is beneficial but ultimately not sustainable

• Capacity within KM Municipality to manage the pumping station is non-existent

• Unawareness of government’s IT strategy, service delivery improvement plan

• Board capacity insufficient for possible Gamsberg expansion

19 March 2007

Board service capacity

Nominal capacity: 12 000 m3/dayMaximum continuous capacity: 14 000 m3/day (fully utilised by BM)

River intake to purification plant:Number of installed v/s pumps 2Number of fixed speed pumps 1Nominal pump capacity at intake 15 600 m3/dayOne low lift pump installed capacity 15 600 m3/day

Water purification plant:Chemical dosing & chlorination 24 000 m3/day26 m diameter clarifier capacity 12 000 m3/dayOne open concrete balancing reservoir 2 000 m3/day

19 March 2007

Board service capacity

High lift pump station:2 x M&P PL150 pumps capacity 5 000 m3/day each1 x M&P PL200 pump capacity 9 840 m3/day1 x Sulzer HPH32 pump capacity 9 960 m3/dayMaximum pumping capacity of high lift pipeline 17 500 m3/day

Pipeline capacity (50km in total length):406 mm OD high lift steel rising main length 29 400 mMax design head for high pressure main 800 mHorseshoe reservoir capacity (end of rising main) 2 000 m3/day400/300 mm ID concrete lined main length (gravity feed to Saddleback balancing reservoir)

20 000 m

19 March 2007

Pelladrift Water Board