Presentation Format

1. Mainguard TechnologiesandParsons BrinckerhoffAsset Valuation and Asset Management SpecialistsRon Millard and Dries Schoeman

2. Presentation Format • Who are Mainguard Technologies and Parsons Brinckerhoff • The Challenges • Financial and Technical Compliance • Why Asset Management • Life Cycle Asset Management • Implementation of Asset Management System • What we offer

3. Mainguard Technologies Founded in 1993 Head OfficeKwazulu Natal- Durban Regional Office Eastern Cape - Port Elizabeth Gauteng- Centurian Africa: Operational in 14 African Countries Business Focus: Asset Improvement and Optimisation Asset System: Software Independent

4. Parsons Brinckerhoff • Parsons Brinckerhoff, with HQ in New York is a leading international engineering consultancy firm involved in power, infrastructure and transportation. • Currently employs over 12,500 employees in 250 offices worldwide. Parsons Brinckerhoff’s Power division is the global power operating unit. • Provides comprehensive services in planning, design, building, operating, and maintaining of power plants and transmission and distribution systems. • South African subsidiary is Parsons Brinkerhoff Africa (Pty) Ltd (PB).

5. Parsons Brinckerhoff in Africa Mainguard Technologies in Africa Namibia Nigeria Rwanda Uganda Kenya Malawi Zambia Zimbabwe Tanzania Mozambique Swaziland South Africa Cote d'ivoire Ghana Niger Nigeria Sudan Uganda Kenya Malawi Zambia Zimbabwe Mozambique Swaziland South Africa

6. Utilities face several unique challenges including • An aging network • Rapid growth in demand and geographic expansion • Unplanned outages from overloaded infrastructure (limited redundancy) • Constrained capital investment for refurbishment • Higher cost to maintain compounded by poor preventative maintenance practices • Scarcity of qualified and experienced resources

7. To Meet the Challenge Utilities need to develop and implement compliant and effective asset and financial management systems

8. PAS 55 Asset Management Standard • Publicly Available Standard (PAS-55) released by the British Standards Institution (BSI), • The development of PAS-55 led by the Institute of Asset Management (IAM) - in response to the demand from industry for a standard on asset management. • PAS-55 is applicable to any organization where physical assets are key or a critical factor in achieving its business objectives and effective service delivery. • PAS-55 can be described as the definitive asset management standard against which utility asset management practices can be benchmarked

9. PAS 55 - Defining Asset Management • Enterprise Asset Management is a pragmatic approach to managing organisations assets, to achieve its strategic goals while providing tools for making decisions which allow a utility to meet a required standard of service in the most cost effective way.

10. Effective AM is optimisation of : Physical Assets: Ensuring that assets operate at designed parameters with optimal, off-normal operations. Life Cycle Costs: Optimising initial and ongoing investment to extract maximum operating and financial value from the asset over the lifecycle Resources: Maximising the contribution from those who manage the asset through review and assessment of physical and personnel performance Risk: Balancing engineering, operational and financial risk of the assets with expected return.

11. Qualified Asset Management Benefits The financial results of the utility will be improved due to the extension of the useful life of assets. The technical performance of the network will improve due to the improved planned maintenance. Staff resources will be more productive as a direct result of improved planning and better targeted human resource development. The organizational efficiency will increase due to improved and optimized business processes. Decision making will be improved because better information will be available with respect to infrastructure, people and processes. Cost of maintaining network assets will reduce over time, resulting in an a more efficient workforce.

12. Compliant Financial Management • For many reasons a utility should produce compliant financial accounts: • Transparency; • Regulatory/MFMA requirement, and • Stakeholder confidence. • MFMA(56 of 2003) provides the National Treasury • Guidelines on implementation of approved • standards of generally recognised accounting • practice

13. GRAP 17 • PROPERTY PLANT AND EQUIPMENT • Is to prescribe the accounting treatment for property, • plant and equipment so that the users of financial statements can discern information about an entity’s investment in its property, plant and equipment and the changes in such investment. GRAP 17 covers the following: - • The recognition of the assets, • The determination of their carrying amounts, and • The depreciation charges and impairment losses to be recognised in relation to them.

14. GRAP 17(2) Recognition – Clause 11 The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if: (a) it is probable that future economic benefits or service potential associated with the item will flow to the entity, and (b) the cost or fair value of the item can be measured reliably. And Clause 14: - An entity evaluates under this recognition principle all its property, plant and equipment costs at the time they are incurred. These costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it.

15. GRAP 17 (3) • Measurement after recognition – Clause 37 • An entity shall choose either the cost model or the revaluation model as its accounting policy. • Revaluation model - Clause 39 • After recognition as an asset, an item of property, plant and equipment whose fair value can be measured reliably shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation. • Revaluations shall be made with sufficient regularity to ensure that the carrying amount does not differ materially from fair value at the reporting date.

16. Asset Lives • Asset lives are an indication of when, on average, the assets are likely to require replacement, ie the “useful life” of an asset. • The assignment of asset lives is an iterative process and the chosen asset lives should be derived from average replacement lives achieved in practice throughout the industry, manufacturer’s recommendations, and theoretical technical examination. • The asset lives of equipment are largely empirical figures that have evolved over the years and will vary from utility to utility and country to country. • Asset lives are not absolute figures and can, for valid reasons, be changed during the life of the asset.

17. Asset Replacement Costs • Clause 43 - For items of plant and equipment of a specialised nature, fair value may be based on depreciated replacement cost. • It is important that a DRC valuation reflects “average” modern equivalent costs • We therefore trend historic replacement costs over a long period in order to achieve a balanced valuation • Replacement costs over time will therefore more closely reflect increases in line with CPI. • Replacement costs should not reflect “short term” variations due to extraneous factors.

18. How does a Utility achieve compliance? • By establishing and maintaining an accurate asset data base; • By regular and consistent modern equivalent asset valuations • By using an effective asset management and maintenance application linked to the financial system

19. Asset Management

20. Asset Management Life Cycle

21. Asset Management Life Cycle Performance Monitoring

22. Defining distinctive Asset Management Roles

23. Approach • On Award of Contract • Project Scoping Meeting • Identify key role players • Submit inception report and draft project plan • Undertake full needs analysis and assessment • Map out non Compliance in 3 main focus areas • Sample audit report

24. Focus Area 1 APMS System Audit

25. Focus Area 2 KPI’s

26. Focus Area 3 Assessment

27. Finalizing • Agree on Method to Address non Compliance and Needs identified • Workshops • Training • implementation • Map out final Project Plan - Execute Project Plan • Follow up Assessments

28. Sample Project Execution

29. What we offer • Initial Project Cost – software and implementation (Once off cost) • Service Level Agreement – Continual Improvement • Annual asset assessment and valuation (GRAP 17 Clauses 44 and 61) • Annual system and process audit • Annual reports

30. Clients (1) • Royal Swaziland Sugar Mills • APMS and Inventory Control • Fleet and Property • Unilever Africa – 7 African Sites • UETCL Uganda – Transmission Utility • Volkswagen – APMS and Inv Control • Apollo Tyres (Dunlop) – APMS and Inv Control • Sudan – Road Construction • Albert Luthuli Hospital – Assets

31. Clients (2) Federal Mogul IOP Illovo Sugar NCP Alcohols Dorbyl Automotive Faurecia Silicon Dow Agrosciences Belgotex Carpets Altech Island View Storage Durban Coal Terminal HellaRheem Smith & Nephew Smiths Plastics Braken Forestry CiplaMedpro Toyota Stamping Toyota Auto components

32. Questions?