1. Capital Expenditure Programme
24 October 2018
Presenter: Anthony Els
Capital Expenditure Programme
Tariff Consultation

2. The Tariff increase Partly depends on:
The Capex budget; which depends on:
Augmentation & Renewal plan (for core water assets), which depends on:
Demand growth and Asset Renewal requirements

3. SECTION CONTENT Demand growth forecast
2. Augmentation & Renewal plan to 2038
3. Capital budget

4. Supply Area Overview 2017/2018 average demand: ~4200 Mℓ/d
3500+ km of pipeline: mostly > 600 mm
60 reservoirs: 20Mℓ to 650 Mℓ
600 Bulk meters ≥ 100mm dia.

5. Supply systems for Planning
Eikenhof Supply System
Zwartkopjes Supply System
Palmiet Supply System
Mapleton Supply System
Booster Systems
Primary Systems
Vereeniging Purification System
Zuikerbosch Purification System
Raw Water Supply System
Note: Primary = Raw Water + Vereeniging + Zuikerbosch 5

6. Supply systems Palmiet system Eikenhof system Mapleton system
Zwartkopjes system
Primary systems
Vaal Dam

7. Supply topography (Palmiet)
Booster
Primary
200km

8. Potable Demand
Snapshot
4 metros = 83% of Rand Water potable demand

9. Potable Demand Potable water users Historical growth Municipalities
Mines
Direct Users
Historical growth
AADD increase from 1000 Mℓ/d in 1965 to 4200 Mℓ/d in 2017/2018 (potable sales).
Several decades of growth in the 3% to 6% per annum range
AADD Growth from 2007 to 2018 averaged ~2.3%
Current growth < 2% (restrictions and long-term reduction)
Unaccounted for leaks are > 40% in some municipalities (and are/were growing).

10. Forecasting Demand in future
Domestic usage is ~71% of total
Natural population growth, inward migration, AIDS, service backlogs, system losses
Growth in municipal leaks
Growth in leaks of municipal customers
Factors affecting demand growth
Estimated population in 2010 – 11.7 million
Projected population by 2030 – 14.7 million
(Annual population growth rate is declining)
Population demographic model
Supply 83% of total demand to four metros: Johannesburg, Ekurhuleni, Tshwane, Emfuleni
Metros forecast their growth.
Questionnaire model (major customers)

11. Demand Growth Forecast
Scenario 1:
Current growth
Currently < 2% (was negative last year during restrictions)
Projected potable growth
After compiling and correlating data, a decline is seen in both ‘natural’ population growth and inward migration:
Medium term growth of 1.80% p.a.
By 2035 a growth rate of 1.25% p.a.
Growth may level off by about 2070 (0%)
Year
2020
2025
2030
2035
Average Potable Demand (Mℓ/d)
4700
5100
5500
5900 11

12. Demand Growth Forecast
Scenario 1 is ultimately unsustainable:
Unacceptable losses in potable systems downstream of Rand Water (30 to 40%):
Within municipal bulk networks
Within networks of customers of municipalities
Late raw water infrastructure to augment Scenario 1 current growth rate. Increased risk to IVRS when abstracting beyond 1600Mm³/a (4384 Ml/d AADD).

13. Potable Upgrade
Peak Week Potable Demand (retail)
Potable Upgrade
Scenario 1 forward projection for abstraction (incl. RW production losses)
Annual Average Daily Demand (retail. excl production losses)
Infrastructure Capacity
Actual abstraction over time

14. Scenario 1: growth as per Infrastructure Planning Projection (no WDM)
Almost identical
growth
gradients
Vioolsdrift Dam
LH PH2 (late)
Scenario 1: growth as per
Infrastructure Planning
Projection (no WDM)
Polihali Dam LH
PH2 (late)
Historical Abstraction
Proposed 1600 Mm³/a
abstraction licence
Scenario 2: Demand reduced
By ~15% for 5 – 8 years, before
growing again (WDM, etc.) Permits
deferral of some RW augmentation,
but some renewal may be accelerated 14

15. RW Response to reduce demand
Integrated Vaal River System (IVRS) Project 1600
Committee to establish common ground on usage and abstraction (RW, DWS, SALGA, COGTA) Focusses on Water conservation, WDM
Measurement: RW statistical model rates water use efficiency
Develops and implements appropriate protocols for:
Medium term: compliance with abstraction limit of 1600 Mm³/annum set by DWS until 2025: Lesotho Highlands Phase II.
Shorter term drought and emergency situations, using a phased throttling approach (next slide)
Monitors municipalities and informs them monthly. Problem areas highlighted
From 1 July 2018, all customers are cumulatively ~3% over their 1600 targets.

16. Expected municipal response to reduce demand
Water Demand Management efforts (medium term)
Municipal WDM focuses on municipal delivery infrastructure (closing gaps on unaccounted-for water). However:
Municipal action required on high night flow areas.
Municipal action required to reduce abnormally high household leaks.
Municipalities are currently required to have comprehensive WDM plans (large meters may not be considered unless they do).
Emergency action protocol (short term and still in force):
Phase 1: Notify municipalities to reduce minimum night flows (MNF).
Phase 2: RW assists distressed RW bulk systems from other RW systems.
Phase 3: RW direct intervention: restrict top 25 meters by quantity (may in future change to top 25 volumetric meters, additionally weighted by least efficient recent water usage). 16

17. Expected municipal response to reduce demand
There is currently no financial enforcement mechanism for municipal Project 1600 compliance.
However, municipalities that are not substantially complying may not get new (>25mm) additional connections.
There is currently no direct RW control of WDM in municipal networks.
Planning for demand reduction is the much preferred approach, compared to allowing IVRS levels to drop, resulting in repeated/yearly restrictions). 17

18. The road to Scenario 2
Direct Rand Water WDM control reduces risk of following Scenario 2 for augmentation planning.
Rand Water proposes to engage with municipalities to investigate fitting of Rand Water flow control valves and PRV’s within municipal networks at strategic locations (early days). 18

19. RW Response to limited raw resources
Alternative raw water resources being investigated:
Re-use of Zuurbekom Wells by RW (~10 Ml/d)
Additional boreholes throughout Gauteng for RW
(~200 Ml/d sought)
Return water processing closer to bulk customers (new plants; >400 Ml/d potential):
Collaborations with municipalities/sewage treatment works are sought for sustainable treatment of return water to grey and potable standard
Some municipalities have their own return water treatment plants, in addition to large connections to Rand Water. Arbitrarily alternating between sources disrupts RW bulk operation. More stringent agreements are required 19

20. Effects of WDM-depressed growth
RW Augmentation infrastructure rollout still tracks Scenario 1 (until projects are in place to lower risk of scenario 2)
RW still intends to operate at <=1600 Mm³/a
However, a lower supply = reduced income stream
Fixed costs remain (less efficient operating)
Slower growth requires reactively slowing the RW augmentation programme as follows:
Large, long-lead-time augmentation projects currently underway will still be completed (they will improve flexibility & ability to renew other pipes)
Future projects (5-10yr horizon) are identified for deferral
Some augmentation projects are required to facilitate renewal
In 95% of renewal project cases, deferral is not an option. Renewal completion dates are based on condition, not demand growth.

21. SECTION CONTENT Demand growth forecast
2. Augmentation & Renewal plan to 2038
3. Capital budget

22. Required Augmentation
Augmenting for 2015 to 2030 cycle
Projected growth in peak day demand = 1600 Mℓ/d over 15 years
Growth split between four booster systems
Northern Jhb
Tshwane
Madibeng
Central Jhb
Southern areas
Eastern Tshwane
Ekurhuleni
Mpumalanga
North west Jhb
West Rand
Rustenburg
Zwartkopjes system 300 Mℓ/d growth
Palmiet system 600 Mℓ/d growth
Eikenhof system 400 Mℓ/d growth
Primary (refurb)
Mapleton system 300 Mℓ/d growth
Primary
Primary systems 1600 Mℓ/d growth
Primary 22

23. Peak demand by pumping station
Design capacity (Mℓ/d)
Projected peak day demands (Mℓ/d)
Yellow = WDM change (indicative)
2020
(2025)
2025
(2030)
2030
(2035)
2035
(2040)
Primary Systems
Zuikerbosch
3810
4300
4800
5300
5800
Vereeniging
1200
1300
Booster systems
Palmiet
1875
2000
2190
2380
2570
Mapleton
960
990
1080
1180
1270
Eikenhof
1800
1470
1610
1750
1880
Zwartkopjes
800
760
780
840
880

24. Augmentation & Renewal Planning
Augmentation: Increase capacity to meet future demands
20 year view of projects based on long term view of demands
Renewal: Asset management approach
Operate and maintain asset;
Monitor asset condition;
Refurbish and extend life of existing asset when appropriate;
Replace when economical and if condition merits it
Integration of augmentation and renewal
Renewal and augmentation can facilitate each other (e.g. pipelines)
Integrated at plant, site and system level

25. Asset Portfolios Buildings and property Civil structures Pipelines
Mechanical
Electrical
Process
Automation 25

26. Asset Replacement Value
Buildings
Civil
Pipelines
Electrical
Mechanical
Process
Automation
All Assets
Raw Water 74
1,619
2,083
1,403 32
0.6
5,212
Vereeniging
1,254
881
1,997
172
1,508
3,434 22
9,268
Zuikerbosch
1,972
4,158
264
1,707
7,718 45
15,864
Eikenhof
275
1,572
17,241
128
1,258
263
11.5
20,749
Zwartkopjes
1,499
847
8,850
126
892
266
14.5
12,495
Palmiet
204
2,867
19,635
105
1,020
242
13.5
24,087
Mapleton
164
1,165
13,283 81
856
166
10.5
15,726
Total
5,442
13,109
63,089
876
8,644
12,121
117.6
103,400
Total Asset Replacement values (per corporate system)
Total Asset Replacement values (per Asset Category)
(61%)
Total for all assets: R103.4 million

27. Infrastructure Augmentation
Providing for 2015 to 2030 augmentation cycle
Augment primary capacity, with associated major pipelines and booster pumping capacity
Package of linked major projects for backbone infrastructure
2009 Additional Water Supply (AWS) Scheme
Anchor project for the 2009 AWS Scheme
Purifies and pumps into the network additional 1200 Mℓ/d after completion of phase 2
Station 5 at Zuikerbosch

28. The Primary systems Augmenting for 2015 to 2030 cycle
Projected growth in peak day demand = 1600 Mℓ/d over 15 years
Growth split between four booster systems
Palmiet system 600 Mℓ/d growth
Mapleton system 300 Mℓ/d growth
Eikenhof system 400 Mℓ/d growth
Zwartkopjes system 300 Mℓ/d growth
Primary systems 1600 Mℓ/d growth
North west Jhb
West Rand
Rustenburg
Central Jhb
Southern areas
Northern Jhb
Tshwane
Madibeng
Eastern Tshwane
Ekurhuleni
Mpumalanga
Primary
Primary (refurb) 28

29. The Primary systems Overview Growth in demand
Increase of 1600 Mℓ/d from 2015 to 2030
Key augmentation projects
Station 5 at Zuikerbosch “anchor project” (1200 Mℓ/d in two phases)
Canal 2 & Forebay in future
B19 raw water pipeline from Lethabo to Vg (tie-ins needed)
Lethabo pipe header upgrade
Panfontein Drying Beds Phase 2
Key renewal projects
Vg Engine Room 4 upgrade
250 Ml/d Sedimentation Tank at Vg
Vg Chlorine plant 2
Zb Filter House 1 renewal
Zb Chlorine Plant 4 renewal

30. Primary Systems – 1600 Mℓ/d growth from 2015 to 2030
Additional Purification Plant – 1200 Mℓ/d capacity
Additional raw water pipelines and purification plant upgrades
Vg Sed Tank
R300 million over next 5 years (renewal)
B19 raw water pipeline
R10 million budget for 2016/17
Station 5 at Zuikerbosch
1200 Mℓ/d capacity in two phases
R1 310 million budget over 4 yrs: aug
Panfontein Drying Beds
R490 million over next 5 years (augment)

31. The Palmiet system Augmenting for 2015 to 2030 cycle
Projected growth in peak day demand = 600 Mℓ/d over 15 years
Mapleton system 300 Mℓ/d growth
Eikenhof system 400 Mℓ/d growth
Zwartkopjes system 300 Mℓ/d growth
North west Jhb
West Rand
Rustenburg
Central Jhb
Southern areas
Northern Jhb
Tshwane
Madibeng
Eastern Tshwane
Ekurhuleni
Mpumalanga
Primary
Primary (refurb)
Palmiet system 600 Mℓ/d growth
Primary systems 1600 Mℓ/d growth 31

32. The Palmiet system Overview Main customers Growth in demand
Eastern and Northern Johannesburg
Central, Western and Northern Tshwane
Western Ekurhuleni
Growth in demand
Increase of 600 Mℓ/d from 2015 to 2030
Key augmentation projects
Zuikerbosch to Palmiet B17 pipeline (in commissioning)
Engine Room 3b at Palmiet pumping station
Germiston to Lombardy Phase 2 O6 pipeline
Klipfontein to Brakfontein H39 pipeline
Brakfontein-Lyttleton Heights H43 (and H14 pipeline)
Kensington to Yeoville pumping station
Key renewal projects
O2 Pipeline and O1/G25
Palmiet Engine Room 1 upgrade
B6 refurbishment
Sections of 17 priority pipes for refurbishment

33. Zuikerbosch Purification & Pumping Station
Palmiet System – 600 Mℓ/d growth from 2015 to 2030
Additional Engine Room – 600 Mℓ/d capacity
Total of 150 km of pipe between 600 mm and 2100 mm diameter
H43 Brakfontein – Lyttleton
R724 million in next 5 years (aug)
O6 Germiston to Lombardy
R460 million in next 5 years (aug)
H39 Phase 2: Dale Road to Modderfontein
R350 million in next 5 years (aug)
Kensington – Yeoville system
R400 million in next 5 years (aug)
B6 Renewal:
R240 million over 5 years (renewal)
G37/H37
Condition based renewal of sections of 17 pipes throughout the Palmiet supply system have been prioritized: Over the next 3 years: R1 500 million
B17
Zuikerbosch Purification & Pumping Station 33

34. The Mapleton system Augmenting for 2015 to 2030 cycle
Projected growth in peak day demand = 300 Mℓ/d over 15 years
Eikenhof system 400 Mℓ/d growth
Zwartkopjes system 300 Mℓ/d growth
North west Jhb
West Rand
Rustenburg
Central Jhb
Southern areas
Northern Jhb
Tshwane
Madibeng
Eastern Tshwane
Ekurhuleni
Mpumalanga
Primary
Primary (refurb)
Palmiet system 600 Mℓ/d growth
Mapleton system 300 Mℓ/d growth
Primary systems 1600 Mℓ/d growth 34

35. The Mapleton system Overview Main customers Growth in demand
Central and eastern Tshwane
Eastern Ekurhuleni
Growth in demand
Increase of 300 Mℓ/d from 2015 to 2030
Key augmentation projects
Zuikerbosch – Slangfontein B16 pipeline
Engine Room 3 at Mapleton pumping station
S4 Van Dyk Park to Vlakfontein pipeline
Vlakfontein Reservoir 200Mℓ
Bronberg Reservoir 100Mℓ
R5 Vlakfontein to Mamelodi pipeline
Key renewal projects
Mapleton disinfection plant
M1 pipeline replacement
Sections of 20 priority pipes for refurbishment over 4 years

36. The Mapleton system Mapleton System 100Mℓ Bronberg Reservoir
R124 million over next 4 yrs (aug)
R5 Vlakfontein, Mamelodi
R520 million over next 4 yrs (aug)
200Mℓ Vlakfontein Reservoir
R330 million over next 5 yrs (aug)
S4 Van Dyk Park - Rynfield
R407 million over next 5 yrs (aug)
210Mℓ Brakpan Reservoir
R234 million over next 5 yrs (aug)
M1, M6 replacement
R237 million over next 5 yrs (renew)
Condition based renewal of sections of 21 pipes throughout the Mapleton system have been prioritized: Over the next 4 years: R1 400 million (renew)
B16 Zuikerbosch - Slangfontein
R920 million over next 5 yrs (aug)
Engine Room 3 at Mapleton
R660 million over next 5 yrs
B16 Zuikerbosch – Slangfontein system 36

37. The Eikenhof system Augmenting for 2015 to 2030 cycle
Projected growth in peak day demand = 400 Mℓ/d over 15 years
Zwartkopjes system 300 Mℓ/d growth
North west Jhb
West Rand
Rustenburg
Central Jhb
Southern areas
Northern Jhb
Tshwane
Madibeng
Eastern Tshwane
Ekurhuleni
Mpumalanga
Primary
Primary (refurb)
Palmiet system 600 Mℓ/d growth
Mapleton system 300 Mℓ/d growth
Eikenhof system 400 Mℓ/d growth
Primary systems 1600 Mℓ/d growth 37

38. The Eikenhof system Overview
Main customers (includes significant mining use)
Western Johannesburg and Soweto
Far West Rand
Rustenburg
Growth in demand
Increase of 400 Mℓ/d from 2015 to 2030
Key augmentation projects
F34 Waterval to Weltevreden pipeline
F49 Krugersdorp to Randfontein pipeline
Meredale reservoir 1 x 210Mℓ
Additional Meredale reservoir storage (2 x 100Mℓ)
Key renewal projects
Replace Eikenhof disinfection plant
Replace F18 pipe at Witpoortjie Reservoir
Replace pipework from Moroka to Zuurbekom
Ten priority pipes for refurbishment

39. The Zwartkopjes system
Augmenting for 2015 to 2030 cycle
Projected growth in peak day demand = 300 Mℓ/d over 15 years
Northern Jhb
Tshwane
Madibeng
Central Jhb
Southern areas
Eastern Tshwane
Ekurhuleni
Mpumalanga
North west Jhb
West Rand
Rustenburg
Zwartkopjes system 300 Mℓ/d growth
Palmiet system 600 Mℓ/d growth
Eikenhof system 400 Mℓ/d growth
Primary (refurb)
Mapleton system 300 Mℓ/d growth
Primary
Primary systems 1600 Mℓ/d growth
Primary 39

40. The Zwartkopjes system
Overview
Main customers
Northern Emfuleni and Southern Johannesburg
Central Johannesburg (largely developed, low growth expected)
Benoni
Growth in demand
Increase of 300 Mℓ/d from 2015 to 2030
Key augmentation projects
Amanzimtoti pumping station upgrade
T5 Orange Farm to Ennerdale pipeline
Daleside additional 40 Mℓ reservoir
Arcon Park to Langerand A13 pipeline duplication
Key renewal projects
Replace Vg-Daleside A6 and A8 pipelines
Lay new Zb-Daleside pipe to allow refurbishment of B1 and B2
Sections of 15 priority pipes for refurbishment

41. Balancing and Emergency Storage
Reservoir storage
20 year plan includes additional 1300 Mℓ reservoir storage
40% to 50% is in the Eikenhof system to boost emergency storage
Water quality – total volume, through flow, circulation
Availability of appropriate sites is an issue
Reservoir projects
“Lower” Meredale 210Mℓ reservoirs (and associated pipework)
Additional 300Mℓ reservoirs at Meredale
Daleside 40Mℓ reservoir
Selcourt two x 40 Mℓ reservoirs
Vlakfontein 210Mℓ reservoir
Bronberg 100Mℓ reservoir
Hartebeesthoek additional reservoir
Brakpan 210Mℓ reservoir

42. SECTION CONTENT Demand growth forecast
2. Augmentation & renewal plan to 2038
3. Capital budget

43. 2019
2038
Raw Vg
Augmentation Zb
Eik
Red projects: timing can be altered to suit WDM success
Zks
Palmiet
Mapleton

44. Infrastructure renewal Pg1
2038
2019
Raw Vg
Infrastructure renewal Pg1 Zb
Eik
Zks
Pal
Mapleton

45. Infrastructure renewal Pg2
Pal
2019
2038
Eik
Infrastructure renewal Pg2
Map
Zks
Pal
Eik
Map

46. Capital budget Annual budget 2018/19 Theoretical Augmentation spend
Augmentation projects – R1.4 billion â
Renewal projects – R2.0 billion á
Overall: R3.5 billion á
Annual budget 2018/19
Forecast average demand growth of 1.8% to 2020, (1.75% -> 2025, 1.6% -> 2030, 1.2% -> 2035)
Roughly equates to a need for ~R1.6 bn p.a.
2019 planned is R1.4 bn (R2.5 bn for 2020)
Theoretical Augmentation spend
RW should be spending 1% - 2% p.a. of replacement value on renewals
This equates to R1.0 – R2.0 billion p.a.
Planned for 2019 is R2.0bn/a (1.9%). 2020: R3.3bn (3.2%)
Theoretical Renewal spend

47. Replacement value (RM) 18/19 renewal allocation (Rm)
Renewal spending
Asset category
Replacement value (RM)
Design life (yrs)
18/19 renewal allocation (Rm)
Pipelines
63 090
65+
1 426
Civil
13 110
50 to 100
201
Mechanical
8 644
30+ 84
Process
12 121
15 to 20+
105
Buildings
5 442
80+ 28
Electrical
876
20 to 30+ 35
Automation
117.6
5 to 10+ 50
Total
1 929 (1.9%)

48. 2019 projects entering scoping/investigation Indicative ttl cost (Rm)
Item
Sys.
Project Description
Indicative ttl cost (Rm) 1
Primary
Raw Water Canal and Forebay
1 900 2
System 5B at Zuikerbosch Pumping Station
3 400 3
Vereeniging Engine Room 2
200 4
Palmiet
Palmiet PS to Meyersdal Reservoir O4 Pipeline and Pump station Upgrade
100 5
Remainder of the C25 pipeline from Glenvista to Meyers Hill Reservoir 79 6
B6 Pipeline Refurbishment (Phase 2)
370 7
Mapleton
Construction of 150 Mℓ reservoir at Ekandustria 8
Construction of Engine Room 2 at Mamelodi Booster Pumping Station
140 9
Augmentation of W1 Pipeline Mamelodi to Ekandustria Municipal Reservoir
1 270 10
Augmentation of H7 Pipeline Olifantsfontein to Monument Park
245 11
Replacement of N1 Pipeline Selcourt to Wildebeestfontein Reservoirs (Ren.)
1 422 12
Eikenhof
Roodepoort Booster Pump Station (RBPS) 85 13
P1/P2 pipeline augmentation: 100Ml/day scheme from Hartbeespoort Dam
1 102
Replace and Augment E2 & E5 pipeline (Renewal)
330 14 15
Zks
Replacement of K1 Pipeline Leeuwpoort to Benoni (Renewal) 74 16
Daleside - Ennerdale Augmentation and Engine Room 2
375 17
Zuikerbosch – Daleside pipeline
436

49. 5-year Capital Expenditure (2019 - 2023)
forecast of R25.7 billion for continuing business
System
Augmentation (Rm)
Renewal
(Rm)
Total
Eikenhof
1 526 á
2 826 á
Mapleton
4 569 á
2 086 á
6 655 á
Palmiet
2 426 á
2 231 á
4 657 á
Primary systems
3 315 á
2 288 á
5 603 á
Zwartkopjes
1 377 á
1 971 á
3 348 á
Other
223 â á
2 616 â á á á
Percent of total
Aug: (51%) â
Renewal: (49%) á
100% 49

50. Capital Expenditure: Augmentation + Renewal forecast

51. Thank You…