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MHLATHUZE WATER BOARD

MHLATHUZE WATER BOARD. PRESENTATION ON TARIFFS TO THE PORTFOLIO COMMITTEE. Presented by: Ms Lindy Dhlamini: (Acting General Manager: Finance) 30 June 2009. MHLATHUZE WATER Agenda. Tariffs Proposed by DWAF Impact on Mhlathuze Water Challenges during consultation Achievements

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MHLATHUZE WATER BOARD

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  1. MHLATHUZE WATERBOARD PRESENTATION ON TARIFFS TO THE PORTFOLIO COMMITTEE Presented by: Ms Lindy Dhlamini: (Acting General Manager: Finance) 30 June 2009

  2. MHLATHUZE WATERAgenda • Tariffs Proposed by DWAF • Impact on Mhlathuze Water • Challenges during consultation • Achievements • Viability of Mhlathuze Water’s tariff in light of global recession • Impact of Tariffs on end users

  3. Tariff Proposed by DWAF • The Board of Mhlathuze proposed an increase of 18% Actual increase year 08/09 = 10% Actual increase year 07/08 = 5.9% • National Treasury requested motivations and actions on cost savings • DWAF, Water Boards and SALGA met in Johannesburg to deliberate further on the matter • The Minister approved 14%

  4. Impact on Mhlathuze Water MW considered the following issues in setting it’s tariff • Capital upgrade of it’s Nsezi Plant for a value of R168.4 million at design values • Capital for new Consumers and Connections R304 million • Sharp increase in cost of chemicals • An assumed increase in electricity of 25% actual increase = 31.3% impact on the bottom line R1.9m • Inflation in October 2008 above 13% • Interest rates on new funding assumed at 12% continued

  5. Impact on Mhlathuze WaterTariffs 2010 (figures R millions)

  6. Tariff Assumptionsbased on CPIX for the next 3years • Year 2011 12% • Year 2012 11% • Year 2013 10%

  7. Impact on Mhlathuze WaterTariffs 2013 (figures R millions) Note: The tariff is still the lowest compared to other Water Boards. The reduction to 14% will have a compound effect on future tariffs.

  8. Challenges during consultation • Current negative economic conditions experienced by our clients played a major factor during the consultative process, as they are trying to cut costs in order to survive these challenging times (A lower rate was expected by our clients) • Communication breakdown -delays in responses [SALGA].

  9. Achievements • MW Tariff accepted by uMhlathuze LM after various consultations • Notice of 14% increase communicated to all consumers timely • Consultations with Industrial consumer regarding Nsezi upgrade and resultant improved quality

  10. Viability of Mhlathuze Water’s tariff in light of global recession • MW will not able to cover all capital related costs, as a result of the 4% shortfall. • Furthermore, MW will not be in a position to create the necessary reserves to fund planned projects and to maintain the current infrastructure • Local Municipality experiencing low growth in consumption • Paper pulp exporter experiencing reasonable global demand • Aluminium exporters experiencing large drops in demand

  11. Impact of Tariffs to end users • uMhlathuze LM has a consumer base of 125 000 m3/day and the majority of the users are already feeling the strain and the impact of the recession • Demand projections for households show moderate increase in consumption over next 3 years • Customers will incur additional increase in costs as they are already strained due to the global economic crisis • Inability to grow and sustain their businesses as the majority of their clients are more affected by the economic melt down (participants in the export market).

  12. THANK YOU

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