Eskom Holdings Ltd Welcomes the SARIE Delegation...2010/02/19 Eskom Holdings Limited Reg No 2002/015527/06 7 Board duties Eskom has a unitary board structure with a majority of non-executive

Eskom Holdings Ltd

Welcomes the SARIE Delegation

19 February 2010

2010/02/19 Eskom Holdings Limited Reg No 2002/015527/06 2

Content of the presentation

• About Eskom

• Role of Eskom in SA context

• Challenges requiring ongoing focus

• Business performance of 2008/9

• Outlook for 2009/10

• Capital expansion programme

• Climate change and the environment

• Contribution to society


About Eskom

• Vision, core business and target market

• Electricity value chain

• Structure

• Key facts

• Plant mix

• Southern African grid

• International comparisons


Our business

Our core business is electricity

Trading

Generating

Distributing

Transporting

“Together building thepowerbase for sustainablegrowth and development”

Vision

Target marketSouth Africa

SADC and the rest of Africa connected

to the SA gridRest of Africa


Electricity value chain


Board of Directors

• Mr JRD Modise

• Mr AJ Morgan

• Ms U Nene

• Mr PM Makwana – Acting Executive Chairman

• Mr PS O’Flaherty

• Ms LCZ Cele

• Mr SD Dube

• Mr LG Josefsson (Swedish)

• Mr HB Lee (Korean)

• Ms WE Lucas-Bull

• Mr J Mirenge (Rwandan)


Board duties

Eskom has a unitary board structure with a majority of non-executive directors. All of the non-executive directors are independent directors, appointed by the shareholder, and are drawn from diverse backgrounds (local and international) and reflect South Africa’s demographics.

Their contributions to the board consisting of a wide range of experience and professional skills, is invaluable. These skills are supplemented at committee level by external committee members.

Its responsibilities are facilitated by a well-developed governance structure through board committees, including the executive management committee (Exco), as well as subcommittees of Exco and a comprehensive delegation of authority framework.


Executive Management Committee

EXCO Members:

• PM Makwana – Acting Executive Chairman and CE

• Paul O’Flaherty – Finance Director

• Brian Dames - Chief Officer (Generation Business)

• Erica Johnson - Chief Officer (Customer Network Business)

• Dr Steve Lennon - Managing Director (Corporate Services Division)

• Bhabhalazi Bulunga – Managing Director (Human Resources Division)

Supported by:

• Mongezi Ntsokolo - Managing Director – Transmission Division• Ayanda Noah - Managing Director – Distribution Division and Special Project

2010 Division

• Thava Govender – Managing Director – Generation Division

• Kannan Lakmeeharan – Managing Director – System Operations & Planning

• Kobus Steyn – Acting Managing Director – Enterprises Division


Exco duties

• The Executive Management Committee (Exco) comprises the Chief Executive, Finance Director, Chief Officer (Generation Business), Chief Officer (Network and Customer Services), Managing Director (Corporate Services Division) and Managing Director (Human Resources Division)

• The committee is chaired by the Chief Executive

• The committee assists the chief executive in guiding the overall direction of the business and in exercising executive control. Its task is to assist with the effective management of the day-to-day operations of the business.


Structure


Key facts

• One of the top 10 utilities in the world by generation capacity

• Generates approximately 95% of electricity used in South Africa

• Generates approximately 45% of electricity used in Africa

• Total group assets: R199 302 million

• Cash flows from operating activities: R11 764 million

• Capital expenditure: R47 099 million

• Number of employees: 37 857

• Training cost: R823 million

• Electricity customers: 4 361 007

• Electricity sales: 214 850GWh

• Nominal capacity: 44 193MW

• Net maximum capacity: 40 503MW

• Power lines: 381 700km (all voltages)


Plant mix

TOTAL 27 stations 40 503 MW

Type Number Net max capacity

Wind energy 1 station 3 MW

Coal-fired

Gas/liquid fuel turbine

Hydroelectric

Pumped storage

Nuclear

13 stations

4 stations

6 stations

2 stations

1 station

34 294 MW

2 409 MW

600 MW

1 400 MW

1 800 MW

Southern African Grid

In addition to these agreements there is a Day-Ahead-Market for short-term trades between the utilities

CO

NG

O

LESOTHO

SWAZILAND

MO

ZAM

BIQUE

MA

LAW

I

TANZANIA

R.

B.

ANGOLA

SOUTH AFRICA

BOTSWANA

GABON

NAMIBIA

ZIMBABWE

ZAMBIA

REP. DEM. CONGO

UGANDA

KENYA

Mozambique:

-HCB: 1 250MW Firm Purchases

-EDM: Wheeling & Standby

-Mozal: 950MW Firm Sales

Swaziland:

-SEC: 250MW Firm

Lesotho:

-LEC: 24MW Firm Sales

-LEC: Surplus purchases

Namibia:

-NamPower: Balance supplier after full utilisation of own supply and demand resources and 10% reduction in off-take

-NamPower: Surplus Purchases

-SkorpionMine : 100MW Firm Sales

-Orange River (Namdeb):40MW firm Sales

Zimbabwe:

-Non-Firm Sales and Purchases

Zambia:

- Non-Firm Sales and Purchases

Botswana:

-BPC:250MW Firm Sales

-

CO

NG

O

LESOTHO

SWAZILAND

MO

ZAM

BIQUE

MA

LAW

I

TANZANIA

R.

B.

ANGOLA

SOUTH AFRICA

BOTSWANA

GABON

NAMIBIA

ZIMBABWE

ZAMBIA

REP. DEM. CONGO

UGANDA

KENYA

Mozambique:

-HCB: 1 250MW Firm Purchases

-EDM: Wheeling & Standby

-Mozal: 950MW Firm Sales

Swaziland:

-SEC: 250MW Firm

Lesotho:

-LEC: 24MW Firm Sales

-LEC: Surplus purchases

Namibia:

-NamPower: Balance supplier after full utilisation of own supply and demand resources and 10% reduction in off-take

-NamPower: Surplus Purchases

-Skorpion Mine : 100MW Firm Sales

-Orange River (Namdeb):40MW firm Sales

Zimbabwe:

-Non-Firm Sales and Purchases

Zambia:

- Non-Firm Sales and Purchases

Botswana:

-BPC:

-

Eskom’s Trade Portfolio in SADC

Projects in the SADC Region

CO

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O

LESOTHO

SWAZILAND

MO

ZAM

BIQUE

MA

LAW

I

TANZANIA

R.

B.

ANGOLA

SOUTH AFRICA

BOTSWANA

GABON

NAMIBIA

ZIMBABWE

ZAMBIA

REP. DEM. CONGO

UGANDA

KENYA

• Inga 3 (3600 MW) Hydro

• Kafue Lower (600 MW) Hydro• Kafue George Rehab (60MW) Hydro• Kariba South Ext. (200MW) Hydro•Tx to Tanzania-Kenya

H

H

T

T

G

• Mpanda Ncua (1200 MW) Hydro• HCB N. Bank (850 MW) Hydro• Moatise (1500 MW) Coal •Benga (1200MW) Coal• Moamba (600MW) Gas• Transmission backbone

HT

H

T

G

Hydro

Thermal

Gas

Network

• Capanda (520 MW) Hydro •Numerous hydro & Natural gas

H

• Ruacana (80MW) Hydro• Kudu (800MW) Gas

• Morupule Exp. (1200MW) Coal

• Mmamabula (1200MW) Coal

• Coal Bed Methane potential

• Hwange Expansion (600MW) Coal• Batoka Gorge (800 MW) Hydro• Gokwe North (1400MW) Hydro• Transmission strengthening

H

• No. of small hydro’s – require refurbishment & Tx strengthening

• Lumombo (1000 MW) Coal

• Muela Ph2 (110 MW) Hydro

H

H

G

Current Initiatives and Programmes

February 2012September 20131st Unit COD

80% with downward variability75% fixedEskom Off-take

780MW1200MWNet Capacity

Combined Cycle Gas TurbinePulverised Fuel BoilerTechnology

Natural GasCoalPrimary Energy

Sasol, EDM and IntelecCIC Energy Corporation and International Power

Developers

MozambiqueBotswanaLocation

Moamba Energy ProjectMmamabula Energy Project

February 2012September 20131st Unit COD

80% with downward variability75% fixedEskom Off-take

780MW1200MWNet Capacity

Combined Cycle Gas TurbinePulverised Fuel BoilerTechnology

Natural GasCoalPrimary Energy

Sasol, EDM and IntelecCIC Energy Corporation and International Power

Developers

MozambiqueBotswanaLocation

Moamba Energy ProjectMmamabula Energy Project

� Cross Border Initiatives

BLOEMFONTEIN

DE AAR

KOMATIPOORT

RICHARD'S BAY

WITBANKNamibia

Botswana

Mozambique

Swaziland

CAPE TOWN

DURBAN

EAST LONDON

PORT ELIZABETH

PRETORIA

DE AAR

Mercury

Perseus

Hydra

Gamma

Omega

Kudu

2009

2009

2009

765 kV400 kV

Medupi2009/10 for integration of

Medupi Power Station

Marang

Dinaledi

Grassridge

Eros

Delphi

Neptune2010

2007

BEAUFORT WEST

Juno

Bloemfontein

2010

2010

20102011

Beta

Kappa

Ariadne

Melmoth

Umtata

2010

Majuba

Transmission Projects

2007

Project time lines subject to acquisition of servitudes


International comparisons

Source: Datamonitor April 2009

Role of Eskom in SA context


Our value proposition

• Providing power to South Africa is fundamental

• Power is like oxygen to the economy

• This is fundamental to the aspirations of our country

• The current operations have a substantial macro-eco nomic footprint

• The total value chain of Eskom is like a “mini” economy

• The capital expansion programme is a major economic stimulus

• Growing the economy

• Mitigating the global economic crisis

• Ensuring adequate power for the future

• Confidence in future supply key for economy to grow


Principles guiding the role of Eskom

• A united, democratic and prosperous South Africa

• Eradication of poverty and unemployment

• A thriving economy connected to the world and integrated with the broader African continent

• A sustainable economy, not harmful to the environment and committed to climate change mitigation initiatives

• Enhancing the potential of each citizen through an integrated education and skills development system

• Leveraging the role of financially sustainable state-owned enterprises to set a foundation for growth and development of the economy

Challenges requiring ongoing focus


• Primary energy

• Managing cost

• Managing availability

• Transportation

• Securing future sources

• Industry-wide collaboration

• Executing the build programme

• Largest capital expansion programme in the country

• Managing cost, schedule and quality

• Access to funding




• Commodity-linked pricing

• Strategy used during the excess capacity phase

• Current plan to limit exposure to commodity pricing

• Limit embedded derivative volatility

• Financial sustainability

• Aiming to achieve ‘break even’ position for 2009/10

• A sustainable funding solution going forward

• Ongoing business efficiency



• Safety

• Driving the culture of zero harm

• Managing increased number of contractors on our sites

• Road safety

• Continued focus on public safety

• Security of supply

• The supply will remain tight until the next major power station (Medupi) comes online

• Energy efficiency is critical



• Public perception

• Concerns about:

• Financial sustainability; and

• Keeping the lights on

• Transformation of company culture

• Transparency and keeping the public informed

Business performance 2008/9


Highlights for the year

• Keeping the lights on

• No load shedding since April 2008

• Coal stocks now at an optimum level

• Improved plant performance

• Increased capacity – return to service and open cycle gas turbine stations

• Countrywide collaboration (energy efficiency)

• Economic slow-down reduced demand and created additional opportunity for maintenance



• Shareholder support

• R176 billion guarantee

• R60 billion equity loan

• Support on pricing policy application

• Energy efficiency drive

• Credit rating

• Despite the earlier downgrade, rating agencies are holding their rating until the funding solution is finalised

• Fitch moved from negative to stable



• Collaboration with stakeholders

• Support for finding a sustainable funding solution

• Support for the build programme

• Ongoing dialogue

• Various independent forums established

• Paying for the recovery

• Conscious decision to keep the lights on

• Planned operating loss contained

• Long-term sustainability important

Eskom Holdings Limited Reg No 2002/015527/06

Group income statement

2008/9 2007/8 Increase

%

Revenue 53,826 44,448 21%

Primary energy 25,351 18,314 38%

Operating expenses 29,300 22,235 32%

Operating income / (loss) (825) 3,899

Fair value gain/(loss) 2,370 684

Operating loss before embedded derivatives (3,195) 3,215

Embedded derivatives loss (9,514) (1,680)

Net finance charges 314 1,788

Net interest 3,750 2,515 49%

Capitalised 3,436 727

Loss before tax (12,986) (223)

Tax credit 3,805 600

Profit / (loss) after tax (9,181) 377

Sales growth -4.20% 2.90%

R'million


R’m

Operating profit/(loss) before embedded derivatives & net finance cost %

Electricity % sales growth

Negative growth as a result of the slowdown in the economy and consumer curtailment

Financial health

-3,195

3,215

-6,000

-3,000

0

3,000

6,000

9,000

2004/5 2005/6 2006/7 2007/8 2008/9

-4.2

2.9

-6-5-4-3-2-10123456

2004/5 2005/6 2006/7 2007/8 2008/9

Outlook for 2009/10


Outlook for 2009/10

• Financial

• At least break even at operating income level

• Living within our means, targeted savings


Outlook for 2009/10

• Security of supply

• Anticipate increase in demand as economy strengthens

• Successful Confederations Cup a good dry run for 2010 FIFA World Cup South AfricaTM

• Confident of adequate supply for 2010 FIFA World Cup South AfricaTM

• Improved plant performance, maintenance and coal stock

• Expensive plant utilisation to ensure reliability of supply

• Continued focus on energy efficiency to improve reserve margin

Capital expansion programme


Capacity expansion

• Capital expansion programme

• Return to service stations

• Open cycle gas turbine stations

• Coal-fired power stations

• Transmission


Capital expenditure

24985

50454

0

10000

20000

30000

40000

50000

60000

2004/5 '2005/6 '2006/7 '2007/8 '2008/9

R’m


Comparative projects

• Three Gorges dam

• – world’s largest electricity project

Kusile

Medupi

Ingula

• Olympic Dam

• – world’s largest mining project

5 yr capexon rail, port and pipeline upgrades

Eskom’s three largest build projects

Ranked among the world’slargest constructionprojects


Open-cycle gas turbines: 2 078MW

Ingula Pumped storage scheme:

1 352MW

Medupi Coal: 4 788MW

Renewable 100MW Wind

facility

Bravo (coal)4 818MW

Return to service stations:

3600MW

Lima Pumped storage scheme:

1 500MW

Projects totalling R385 billion approved since 2004

• Return to service stations = 3 720MW

• Open cycle gas turbine stations = 2 084MW

• Ingula pumped storage = 1 352MW

• Medupi coal-fired station = 4 764MW

• Kusile clean coal-fired station = 4 800MW

18 886 MW of power generation capacity committed sin ce 2004

Approved generation projects


Return to service projects

Camden – 8 units

• All units currently operational (last unit since 31 July 2008)

• Camden’s eight units added approximately 1 520MW installed capacity to the national system

Grootvlei – 6 units

• Three units currently operational

• Last unit expected to be in operation by 2010

• Grootvlei’s six units will add 1200MW net capacity to the national system

Komati – 9 units

• Two units currently operational

• Last unit expected to be in operation by end of 2011

• Komati units will add approximately 1000MW net capacity to the national system


Open cycle gas turbine stations

Gourikwa – located in Mossel Bay, Western Cape

• Five units peaking plant - 740MW

• Started commercial operation June 2007

• Expansion project complete

Ankerlig – located in Atlantis, north of Cape Town

• Nine units peaking plant - 1 340MW

• Started commercial operation June 2007

• Expansion project complete


Coal-fired power stations

•Execution partner:

•Coal supply

•Boiler

•Turbine

•Enabling Civils

•Main Civils

•Generator

•transformers

Execution partner:

Coal supply

Boiler

Turbine

Enabling Civils

Infrastructure B&E Quanza

Dam

construction

Concor- WBHO-Edwin-Silver Rock

•Medupi Power Station Kusile Power Station Ingula Power Station

Main Civils

Generator

transformers

Medupi • First unit to be commissioned April 2012

• Tallest structure on site (lift shaft) completed

• HV yards, boiler and turbine foundations underway

• The project will see:

- Enough concrete being used to build four Greenpoint stadiums

- 22nd largest power plant in the world

- About 18 000 employment opportunities

- More steel than the world’s tallest buildingwill be used (the Burj in Dubai)


Coal-fired power stations

Execution partner:

Coal supply

Boiler

Kusile Power Station Ingula Power Station

Kusile

• Six units that will generate approximately 4 800MW

• 8 000 employment opportunities between 2009 and 2017

• R16 billion will be spent in the country


Pumped storage power station

Ingula

• Four units that will generate approximately 1 352 MW

• To be commissioned 2013

• First concrete on the dam wall of the upper reservoir was poured in July 2009

• Potential of about 6 000 employment opportunities


Transmission projects

5-year plan for transmission lines:

765kV: 8 122km

400kV: 7 768km

275kV: 310km

132kV: 293km

• Power delivery projects installed since build programme inception: 2 645km

• Transformers installed to date (since build programme inception): 11 415 MVA


Medupi Coal: 4 788MW

Bravo (coal)4 818MW

Lima Pumped storage scheme:

1 500MW

Summary – build programme

• 12 476MW under construction

• 4 453MW power station capacity

• 2 645km power lines

• 11 415 MVA in transformers completed

• Eskom 5-year capital programme R385bn, primarily committed projects

• Current projects required to improve reserve margin and prepare South Africa for the economic upturn

• Significant job growth in South Africa (direct and indirect)

• Performance of projects currently under construction is monitored by consequent project assurance

Climate change


• The climate change agenda is real and it is here

• Medium to long-term plans aligned to Government plans to mitigate and reduce relative emissions by 2025 and thereafter will see real reduction

• We must change our CO2 footprint

• We will diversify our plant mix to reflect our climate change mitigation

Eskom’s climate change strategy


• Diversification of the generation mix to lower carbon emitting technologies

• Energy efficiency measures to reduce demand and greenhouse gas and other emissions

• Innovation through research, demonstration and development

• Investment through carbon market mechanisms

• Adaptation to the negative impacts of climate change

• Progress through advocacy, partnerships and collaboration

Eskom’s climate change strategy


Energy efficiency

• There is a need to remove a certain amount of energy from the system before 2012, when the supply side options will assist in energy supply.

• Demand Side Management (DSM) needs to be accelerated to achieve the required 10 000GWh saving by 2011/12. This requires 3 800MW of energy saving devices to be installed over the next four years

• Current DSM initiatives include roll-out of compact fluorescent lights, solar heating and load management projects

• Verified DSM savings of 916MW were achieved for the year against the Eskom target of 645MW. The mass rollout of compact fluorescent lights (CFLs) in early 2008 contributed 389,9MW to these savings.


Renewable energy

• Policy and strategy in place

• Extensive research programme for more than 10 years

• Focus of research is on overcoming barriers and building local capacity

• Klipheuwel wind farm – Western Cape - now commercial

• Committed to expand to 1 600MW over the next 20 years

• Involved in ongoing policy discussions with Department of Energy

Contribution to society


Eskom Development Foundation

New classrooms for Bester Primary School near Ladysmith

• Eskom Development Foundation (“Foundation”) is a wholly owned subsidiary of Eskom Holdings Limited. It is an association incorporated on 12 December 1998 under section 21 of the Companies Act.

• The Foundation provides support to economic and social projects through grants and donations, targeting communities where Eskom implements its “new build” programme and the communities in which it operates, and in broad terms supporting the theme of energy.

• Annually the Eskom Small Business Expo stimulates entrepreneurship and contributes to the development of small, medium and micro enterprises – 89 exhibitors in 2009


Contribution to society

• Corporate social investment (CSI) forms an integral part of the way Eskom does business.

• Various CSI programmes are executed through Eskom’s support to government’s rural development programme, its contribution to the Accelerated Shared Growth Initiative for South Africa (Asgisa) and through the development work done by the Eskom Foundation


• 112 965 new connections in 2007/8

• Electrified more than 3,7 million households since 1991

• Free Basic Electricity

• 99% of municipalities participating

• Improved the lives of more than one million people

Connections 2008/9 2007/8

Farm worker connections 1 062 1 347

Schools and clinics 494 751

Other direct 111 409 166 413

Total 112 965 168 511*

Electrification

Electrification

3 751 153

1,500,000

1,750,000

2,000,000

2,250,000

2,500,000

2,750,000

3,000,000

3,250,000

3,500,000

3,750,000

'2004/5 '2005/6 '2006/7 '2007/8 '2008/9

Cumulative number of homes electrified


Our value proposition

• Providing power to South Africa is fundamental

• Power is like oxygen to the economy

• This is fundamental to the aspirations of our country

• The current operations have a substantial macro-eco nomic footprint

• The total value chain of Eskom is like a “mini” economy

• The capital expansion programme is a major economic stimulus

• Growing the economy

• Mitigating the global economic crisis

• Ensuring adequate power for the future

• Confidence in future supply key for economy to grow

Thank you

Documents

Eskom Holdings Ltd Welcomes the SARIE Delegation...2010/02/19 Eskom Holdings Limited Reg No 2002/015527/06 7 Board duties Eskom has a unitary board structure with a majority of non-executive