Eskom Audited Annual Results Presentation for the Year Ended 31 March 2011

Eskom Audited Annual Results Presentation for the year ended 31 March 2011

Select Committee on Labour and Public Enterprises

9 May 2012 Disclaimer

This presentation does not constitute or form part of and should not be construed as, an offer to sell, or the solicitation or invitation of any offer to buy or subscribe for or underwrite or otherwise acquire, securities of Eskom Holdings Limited (“Eskom”), any holding company or any of its subsidiaries in any jurisdiction or any other person, nor an inducement to enter into any investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This presentation does not constitute a recommendation regarding any securities of Eskom or any other person.

Certain statements in this presentation regarding Eskom’s business operations may constitute “forward looking statements.” All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding the financial position, business strategy, management plans and objectives for future operations of Eskom are forward looking statements.

Forward-looking statements are not intended to be a guarantee of future results, but instead constitute Eskom’s current expectations based on reasonable assumptions. Forecasted financial information is based on certain material assumptions. These assumptions include, but are not limited to continued normal levels of operating performance and electricity demand in the Distribution and Transmission divisions and operational performance in the Generation and Primary Energy divisions consistent with historical levels, and incremental capacity additions through our Group Capital division at investment levels and rates of return consistent with prior experience, as well as achievements of planned productivity improvements throughout our business activities.

Actual results could differ materially from those projected in our forward-looking statements due to risks, uncertainties and other factors. Eskom neither intends to nor assumes any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

In preparation of this document we used certain publicly available data. While the sources we used are generally regarded as reliable we did not verify their content. Eskom does not accept any responsibility for using any such information.

In support of 2 Today’s agenda

1. Overview

2. Eskom’s triple bottom line

3. Results of operations

4. Financial position

5. Cash flows including funding

6. Operating highlights and challenges

7. Outlook

In support of 3 Overview

Brian Dames

Chief Executive

Remember your power In support of 4 Overview

• No load shedding since April 2008, despite an extremely tightly balanced energy system • We initiated the 49M campaign to educate South Africans about the importance of saving electricity and to help create a culture of energy efficiency • Eskom kept the lights on during the last year when South Africa hosted a successful 2010 FIFA World CupTM • Safety remains a major concern and will be of primary focus going forward • Posted a second consecutive year of strong financial performances – these financial surpluses will be reinvested in the business, helping to fund the capacity expansion programme • With government’s guarantees and explicit support, Eskom has put a funding plan in place for the next seven years from 1 April 2010 • First year in the electricity market for Independent Power Producers • Milestone reached of 4 million households electrified since inception of the electrification programme • Eskom build programme is on track • R41.9bn spent on Broad-based Black Economic Empowerment

In support of 5 Eskom at a glance

• Strategic 100% state-owned electricity utility, strongly Eskom electricity sales by customer for the supported by the government year ended 31 March 2011 (31 March 2010)

• Supplies approximately 95% of South Africa’s electricity and more than 40% of Africa’s electricity

• 41 778 employees as at 31 March 2011

• Serves 2 857 industrial, 1 110 mining, 49 090 commercial, 84 393 agricultural and more than 4.5 million residential customers

• 27 (including 1 nuclear) operational power stations with a net maximum capacity of 41 194MW as at 31 March 2011

• Total electricity sales of 224 446GWh and gross electricity revenues of R90.38bn for the year ended 31 March 2011 (R69.83bn for the year ended 31 March 2010)

• Infrastructure includes 395 419km of power lines and cables (all voltages) as at 31 March 2011 Eskom’s net capacity mix – 31 March 2011

• Committed to build 17.1GW new generation capacity expected by 31 March 2018. This includes 5.2GW already commissioned as at 31 March 2011

• Baa2 (Stable)/ BBB+ (Stable) rating by Moody’s and S&P

In support of 6 Partnering for sustainable growth

No load shedding since April 2008 Securing Reserve margin at 14.9% energy supply Successful 2010 FIFA World CupTM Strategic plans developed to secure supply over the next three years

R55.5 billion capital expenditure (including capitalised interest) Driving Medupi: First unit expected late 2012: we are doing a detailed assessment of the schedule ensuring that contractors meet timelines as the schedule is at risk generating Kusile: Recommenced full construction. First unit comes on stream late 2014

capacity Commissioned 315MW of additional capacity, 443km of high-voltage transmission lines and 5 940MVA of new transformer capacity

Surplus of R8.4 billion (2010: R3.6 billion) 100% to be reinvested in the business Improving Tariffs move towards cost-reflective levels financial health Funding plan well advanced and more than 70% of sources of funds secured One of the last two remaining commodity-linked power agreements re-negotiated with negotiations on the remaining one continuing

6 employee, 18 contractor and 43 public fatalities The actual lost-time incident rate (LTIR) performance was 0.47 per 200 000 man-hours Safety worked against a target of 0.31 for 2011

The safety of our people remains fundamental to our business

In support of 7 Partnering for sustainable growth

Cabinet approved the Integrated Resource Plan (IRP) 2010, which outlines South Africa’s power supply requirements until 2030 The plan for restructuring the electricity distribution industry in South Africa was formally revoked by Cabinet Regulatory An independent system operator will be established as a mechanism to support the changes introduction of independent power producers (IPPs) A ring-fenced buyer office has been established within Eskom to operate as the interim single buyer of electricity from independent power producers Environmental levy increased by 0.5 cents/kWh to 2.5 cents/kWh with effect from 1 April 2011. This has no effect on the electricity tariff

79% local content in new build contracts placed in current year New growth Learner pipeline of 5 283 learners and bursars path More than R41.9 billion sourced from B-BBEE compliant companies The focus now is to target B-BBEE spend at all levels not just major projects

Financial support provided by government to deliver the capacity expansion programme: A supportive R60 billion subordinated shareholder loan (fully drawn) shareholder R350 billion guarantees (R174 billion extension; R106 billion committed)

In support of 8 Overview of Eskom business

41 194MW net maximum capacity Demand 36 600MW national demand

395 419km of lines Network 150 transmission substations 2,696 distribution substations

4.6 billion customers

Customers Residential 97% of customers Municipalities 0.02% of customers 2.93% is industrial, mining, commercial and agricultural customers

Western Cape KZN Free State Business Eastern Cape Limpopo North West locations Northern Cape Mpumulanga Gauteng

R90.38 billion Mining 14%, Environmental Levy 5%, Revenues Municipalities 38%; Commercial 5% Traction 1% Industrial 21%; International Sales 4% Other 1% Residential 7%; Agriculture 4%

9 Overview of Eskom business

Total Employees = 41 178 Generation = 11 734 Eskom GCD&ED = 3 080 Staff Transmission = 1 924 Eskom Subsidiaries = 2744 Distribution = 18 881 Support Services = 2 815

Demand-side management savings of 354MW against a target of 301MW Demand-side 199MW saved from Residential Lights management Spent R545m on Demand Side Management initiatives R225m of this on Solar Water Heating.

Since inception in 1991, a total of 4m homes, more than 11 000 schools and close Electrification to 400 clinics have been electrified 124,241 connections done in 2010/11 at a cost of R1.59 bn. 89,428 connections planned for 2011/12 at a cost of R1.5 bn.

Free Basic Electricity 1,132,936 indigents identified by municipalities (FBE) 99.9% of indigent customers configured to collect FBE 74% of customers collecting FBE on average over three months

10 Overview of Eskom business

Experience residential loss ranges from 14% to 86% in townships Energy losses Vandalism and theft costing the business Social marketing campaign to address energy losses

R3.4 billion as at end March 2011 Soweto debt 92% of Eskom small power user (residential) debt > 90 days Less than 20% payment levels monthly

Total Overdue Debt R122.8 million as at March 2011 Municipal Debt Improvement from R141 million overdue as at March 2010 More than 60% of overdue debt in Free State Province

Introduction of Inclining Block Tariff to protect low income households Unintended consequences: Inclining Block Tariff Consumers experienced high electricity cost Inadequate education drive on IBT and its impact to customers Multiple dwellings per stand

11 Eskom’s triple bottom line

If we all save as much as we can, we’ll all have as much as we need

In support of 12 Our business model balances three aspects

In support of Eskom plays a central role to support the New Growth Path 13 Triple bottom line: socio-economic

• Eskom is a major driver of the South African economy – estimated that approximately 3% of the country’s GDP can be attributed to Eskom • Eskom enables all South Africans to take part in the development of the country • B-BBEE attributable spend amounted to 52.36% (2010: 28.6%) or R41.9 billion (2010: R20.8 billion) • Significant job creation as a direct result of the build projects • Over 50% local content for major projects • The new build programme sources over 50% of the workers from local communities • A large share of the Medupi, Kusile and Ingula spend will be benefitting local construction companies • Many skills are being developed as local content requirements kick-start whole new industries in South Africa • Eskom leads by example in corporate governance, contributes to the country's leading position in anti-corruption performance within Africa and supports the realisation of South African development goals set out by the government

In support of 14 Triple bottom line: socio-economic

• Eskom is supporting the government's objective of advancing electrification • Since the inception of the electrification programme in 1991, a total of 4 050 968 homes, more than 11 000 schools and close to 400 clinics have been electrified • Training and development has always been a major focus in Eskom – to the extent that outside organisations make use of Eskom’s training facilities • Investment in training for the year was R998 million (2010: R758 million) • Eskom’s learner pipeline consists of 5 283 (2010: 5 255) learners. This includes 4 240 (2010: 3 780) engineering/technical learners • Eskom Development Foundation invested R62m in corporate social initiatives during 2010/11 which impacted 254 organisations with some 303 983 project beneficiaries during the year

In support of 15 Triple bottom line: environmental

• Water • Water use performance stabilised. Water used as part of the process to generate electricity increased slightly from 1.34 to 1.35 litres/kWh • Net raw water consumption increased • Atmospheric emissions

• Installed gaseous emission monitoring systems

• Carbon dioxide (CO2) emissions increased from 224.7 Mt in 2010 to 230.3 Mt in 2011

• Sulphur dioxide (SO2) emissions reduced from 1 856 kt in 2010 to 1 810 kt in 2011

• Nitrogen oxide (NOx) emissions increased from 959 kt in 2010 to 977 kt in 2011 • Relative particulate emissions performance improved from 0.39 kg/MWh in 2010 to 0.33 kg/MWh sent out. Although performance has improved, it is still not achieving the target of 0.26 kg/MWh • Entered into a strategic water research partnership with the Water Research Commission (WRC) • Finalising funding for the first large wind and solar plants for Eskom

In support of 16 Triple bottom line: safety

Causes of fatalities 1 April – 31 March 2011 Year to Year to Year to Fatalities March March March Employees and contractors 2011 2010 2009

Employees 6 2 6

Contractors 18 151 21

Public 43 41 28

Public

Lost-time Year to Year to Year to March March March incident rate: 2011 2010 2009

Index (target:0.31) 0.47 0.54 0.50

1 Restated due to the late notification of a fatality by a contractor

In support of 17 Triple bottom line: financial highlights

31 March 2011 31 March 2010 31 March 2009 R million Audited Audited Audited

Income statement for the year

Revenue 91 447 71 130 54 177

Growth/(reduction) in GWh sales, % 2.7 1.7 (4.2)

Profit for the year after tax 8 356 3 620 (9 668)

Return on average total assets, % 2.91 1.63 (5.29)

Revenue per kWh, cents per kWh (1) 40.3 31.9 24.7

Operating costs per kWh, cents per kWh (2) 32.8 28.2 25.9

Capital expenditure 55 457 57 003 47 099

As at end of year

Average days coal stock, days 41 37 41

Debt securities issued/borrowings 160 310 105 973 74 184

Debt: equity 1.62 1.62 1.22

In support of (1) Includes environmental levy 18 (2) Includes depreciation and amortisation costs

Shareholder compact for year ended 31 March 2011

Company level performance 2011 Goal Performance area 2009 Actual 2010 Actual 2011 Actual 2011 Target indicator achieved

Generation capacity (MW) 1 770 452 315 625

Provision of Transmission lines (km’s) 418 600 443 446 electricity

Transmission MVA installed 1 255 1 630 5 940 3 565

National load shedding 641.5mins None None None Reliability of supply DSM energy efficiency n/a n/a 1 339 994 (annualised GWh)

Cost / kWh (1) (cents/kWh) 23.7 25.5 29.6 32.7

Internal energy efficiency n/a n/a 26.2 24.0 (annualised GWh) Business sustainability Water usage (L/kWh sent out) 1.35 1.34 1.35 1.35

Debt: equity (not greater than) 1.32 1.69 1.67 2.5

Interest cover (not less than) (4.72) 0.72 1.48 1.0

% Local content in new build n/a 73.9% 79.7% 50.0% projects (contracts placed)

Skills Eskom trainees 5 907 5 255 5 283 4 500 development, procurement Engineering trainees 3 535 3 780 4 240 3 500

Non-Eskom learners n/a 236 550 450 19 1.Cost excludes depreciation, fair value, forward exchange cost, embedded derivatives and other income

Executive remuneration

• Eskom links executive management remuneration to the performance of the organisation and an individual’s contribution

• Eskom strives to employ and retain talented executives

• International and local benchmarks are considered to ensure executive packages are in line with the median in the market. In comparison to similar entities, Eskom’s executive compensation is towards the lower end of the norm

• Basic salaries are augmented by short- and long-term bonuses • Short-term incentives reward the achievement of individual predetermined performance objectives and targets as set by the chief executive in performance contracts • Long-term incentives are designed to attract, retain and reward the Exco members for meeting the organisational objectives as set by the shareholder over a three year period • Bonuses are only awarded if the qualifiers are met: no load shedding and cost saving targets met • Bonuses are based on both company and division specific priorities (KPA and KPI’s) which link directly to the Shareholder Compact and Corporate Plan • Bonuses are not linked to Eskom’s financial performance or profit

• Housing loan scheme – allow Exco members access to housing loans at a variable rate (currently 7.25%) offered by the Eskom Finance Company (Pty) Ltd. The loans are granted on arms length terms and are repayable over a maximum period of either 20 or 30 years depending on the applicant’s age

In support of 20 Executive remuneration – 2011 financial year

• Eskom filled many vacancies on its Financial year 2010 Financial year 2011 Number of Number of Year on Exco over the past 21 months Total months in Total months in year % R ('000) service R ('000) service change • The 109.2% increase in Exco pay Executive Directors (1) and 34.9% overall increase in BA Dames 5 690 12 5 741 12 0.9% PJ Maroga (2) 4 767 7 0 0 -100.0% executive remuneration in 2011 can PS O'Flaherty (3) 1 114 3 4 986 12 347.6% be attributed to filling these Non executive directors 6 434 6 997 8.8% vacancies 18 005 17 724 -1.6%

Exco members other than executive directors • Four executives listed in the table BE Bulunga (4) 501 2 3 040 12 506.8% only joined Eskom during the 2011 CAK Choeu (5) 0 0 2 488 10 n/a financial year, or towards the end of EL Johnson 4 615 12 4 838 12 4.8% the 2010 financial year SJ Lennon 3 707 12 3 938 12 6.2% DL Marokane (6) 0 0 4 155 12 n/a 8 823 18 459 109.2% • On a like for like basis, executive pay packages increased by 6.59% Totals: 26 828 36 183 34.9%

Notes relating to the table above: 1)BA Dames appointed as chief executive in June 2010 2)PJ Maroga resigned in October 2009 3)Eskom’s finance director, PS O’Flaherty, joined Eskom in January 2010. His remuneration for the full 12 months of the 2011 financial year was R5.0 million, compared to R1.1 million for three months of the 2010 financial year 4)Divisional executive for Human Resources, BE Bulunga, joined Eskom in February 2010. His remuneration for the full 12 months of the 2011 financial year was R3.0 million, compared to R0.5 million for two months of the 2010 financial year 5)Divisional executive for Corporate Affairs, CAK Choeu, joined Eskom in June 2010 6)DL Marokane joined the executive committee in September 2010 when he was promoted to Chief Commercial Officer In support of 21 Eskom’s reputation

• Each year we measure our reputation by using the globally recognized RepTrak score as measured through the Reputation Institute’s RepTrak process

• We noted a steady improvement in our reputation

Our current RepTrak Pulse is 54.4 points - up 12.1 points from last year and 13.9 points from 2008/9

In support of 22 Results of operations

Remember, we’re all connected

In support of 23 Income statement for the year ended 31 Mar 2011

• Electricity sales of 224 446 GWh, an ZAR m Audited Audited Audited Year ended Year ended Year ended increase of 2.7% when compared to 31 March 2011 31 March 2010 31 March 2009

the 218 591 GWh reported in the Revenue 91 447 71 130 54 177

2010 financial year Other income 587 552 610

Primary energy (35 795) (29 100) (24 884) • Group revenue of R91.4 billion (31 Opex (including depreciation (36 772) (31 719) (29 626) March 2010: R71.1 billion), an & amortisation)

increase of 28.6% Net fair value loss on financial (3 691) (5 943) (2 392) instruments Operating profit before • Revenue growth driven primarily by 15 776 4 920 (2 115) 24.8% tariff increase granted by embedded derivatives Embedded derivative (loss) / (1 261) 2 284 (9 514) NERSA effective from 1 April 2010 gain

Operating profit 14 515 7 204 (11 629)

• Effective tax rate of 27.9% (2010: Net finance costs (2 866) (1 234) (1 167) 34.8%) Share of profit of equity - 24 14 37 accounted investees

• Net profit increased from R3.6 billion Profit before tax 11 673 5 984 (12 759) to R8.4 billion Income tax (3 261) (2 080) 3 786

Loss from discontinued ( 56) ( 284) ( 695) operations

Net profit for the year 8 356 3 620 (9 668) In support of 24 Key performance ratios

Year ended Year ended Year ended Unit 31 March 2011 31 March 2010 31 March 2009

EBITDA R m 21 734 12 920 (6 711) Funds from operations (FFO) R m 17 019 2 356 13 865 Gross debt/ EBITDA ratio 8.19 9.50 (13.00) FFO/ gross debt % 9.56 1.92 15.89 Debt service cover ratio ratio 1.97 2.53 0.75 Return on average total assets % 2.91 1.63 (5.29) Return on average equity % 10.61 5.58 (16.02) Working capital ratio ratio 0.87 0.91 0.78 Revenue per kWh (electricity sales)(1) cents per kWh 40.3 31.9 24.7 Costs per kWh (electricity business)(1) cents per kWh 32.8 28.2 25.9 Bad debt as percentage of revenue % 0.75 0.83 1.54 Average debtor days: Distribution days 22.2 22.0 20.8 Average debtor days: Transmission days 16.0 16.1 18.1 Average days of coal stock days 41 37 41

(1) Including environmental levy

In support of 25 Net operating profit

R million

14 515

7 204

In support of 26 Return to profitability

Total revenue Free funds from operations (FFO)

ZAR m ZAR m

Net profit • Revenue growth is primarily driven by an increase in tariffs ZAR m • Electricity sales are subject to seasonal fluctuations and are higher in the first two quarters of Eskom’s reporting cycle

• Large power user prices higher in winter compared to summer prices

• Eskom has held a moratorium on dividend payments since 2008 due to In support of its capacity expansion programme 27 EBIT before embedded derivatives

Company EBIT (before embedded derivatives)

Cents/kWh *

In support of * Numbers represent the Eskom Company results Note: Total revenue includes non-electricity revenues 28 Revenue growth driven by tariff increase

• 2.7% increase in GWh sales mainly due to improved economic conditions: Electricity sales (GWh) • Industrial customer GWh sales increased by 6.8%

• Sales growth hampered by a slower than anticipated recovery, the downscaling of certain mines and lower demand from certain smelters

• 26.0% increase in electricity revenue per kWh, predominantly due to the 24.8% tariff increase granted by NERSA effective from 1 April 2010

• Industrial customer prices increased by 27.0% whereas prices to residential customers only increased by 3.9% due to the inclining block tariff

• International sales remained static but prices increased by 38.9% Revenue growth components Electricity revenue (c/kWh)

In support of 29 Operating expenses(1)

Primary Energy Costs Employee Benefit Expenses

ZAR m Cents/ KWh ZAR m Cents/ KWh

Depreciation & Amortization Expenses(2) Other Operating Expenses(3)

ZAR m Cents/ KWh ZAR m Cents/ KWh

(1) Cents/KWh figures are calculated based on Total Electricity Sales numbers (2) Including Net Impairment Loss (3) Including managerial, technical and other fees, R&D, operating lease expense, auditor’s remuneration, repairs and maintenance In support of 30 Analysis of primary energy costs

Primary Energy Costs Primary energy cost increased by ZAR m 19.8% from 13.31 c/kWh for the

35 795 previous year to 15.95 c/kWh for the current year. 29 100 The 2.64 c/kWh increase is made up of the following: •the increased cost of coal burnt (12.8% per ton) contributed 1.09 c/kWh •the environmental levy increase (only in effect for nine months in the prior year) contributed 0.62 c/kWh •the cost of using IPPs (R1.3 billion) contributed 0.57 c/kWh •the increases in the cost of coal Coal burnt handling, coal-fired start-ups, gas-fired start-ups and nuclear fuel costs made 2010 2011 % Change up the remainder of the increase of 0.36 c/kWh Coal burnt (Mt) 122.7 124.7 1.6%

In support of 31 Hedging policy

Primary Energy Hedging: Embedded Derivatives (Loss) / Gain • Eskom does not formally hedge against

increases in coal prices ZAR m • Coal purchased as follows:

• 47% cost plus contracts • 24% fixed price or indexed contracts

• 29% short/medium - term contracts

• Limited correlation with International Coal

Prices

• Approximately 80% of the cumulative coal

supply until 2020 is contracted Commodity Derivatives Hedging: • Hedging in place to mitigate potential losses on the embedded derivatives since 1998 Net Fair Value Loss on Financial Instruments • Renegotiating the last remaining commodity- ZAR m linked power agreement Foreign Currency Hedging: • Eskom’s policy is to hedge all foreign currency exposure over ZAR50 000 once commitment has been made

• Uses inter-alia forward exchange contracts with short maturities and roll over at maturity as well as cross currency and interest rate swaps

• Note that 90% of our total debt as at 31 March 2011 has a fixed interest rate component In support of 32 Financial position

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In support of 33 Statement of financial position

31 March 2011 31 March 2010 31 March 2009 R million Audited Audited Audited Assets

Non-current assets 265 183 203 162 154 160

Property, plant and equipment 236 724 187 905 138 642

Future fuel supplies 4 089 3 768 3 510

Investment in securities 13 259 1 923 3 558

Payments made in advance 2 396 2 856 5 081

Other 8 715 6 710 3 369

Current assets 62 258 42 953 41 106

Inventories 8 904 7 378 6 581

Trade and other receivables 10 953 9 391 8 191

Investment in securities 24 546 2 148 4 360

Other 5 768 8 495 3 592

Cash and cash equivalents 12 087 15 541 18 382

Non-current assets held for sale 704 20 4 036

Total assets 328 145 246 135 199 302

In support of 34 Statement of financial position

31 March 2011 31 March 2010 31 March 2009 R million Audited Audited Audited Equity 87 259 70 222 59 578 Non-current liabilities 196 270 132 700 95 349 Debt securities issued 84 396 59 322 44 253 Borrowings 63 380 34 628 12 796

Derivatives held for risk management 4 576 3 626 786

Embedded derivatives 5 357 4 583 8 219 Provisions 11 203 8 494 8 883 Other 27 358 22 047 20 412 Current liabilities 43 756 43 213 42 362 Trade and other payables 18 876 16 331 16 701 Borrowings 9 654 9 143 13 811

Derivatives held for risk management 1 404 4 644 2 626

Embedded derivatives 516 139 43 Other 13 306 12 956 9 181

Non-current liabilities held for sale 860 - 2 013

Total equity and liabilities 328 145 246 135 199 302

In support of 35 Debt maturity and leverage

Gross Debt/ EBITDA ratio Debt Securities & Borrowings Maturity Profile(1)

Target

Interest Cover ratio FFO as a % of Gross Debt

Target

(1) As at 31 March 2011 Target

In support of 36 Total debt maturity profile

Debt maturities as at 31 March 2011 R m

In support of 37 Eskom capacity expansion programme

Mpumalanga Return-to-service (RTS) New coal Peaking & renewables refurbishment Transmission

Komati (1 000 MW) Medupi (4 764 MW) Ankerlig (1 338.3MW) Arnot capacity increase 765kV projects (300 MW) Camden (1 520 MW) Kusile (4 800 MW) Gourikwa (746 MW) Central projects Matla refurbishment Grootvlei (1 200 MW) Ingula (1 352 MW) Northern projects Kriel refurbishment Sere (100 MW) Cape projects Duvha refurbishment

3 720 MW 9 564 MW 3 536.3 MW 300 MW ~ 4 700 km

Commissions of new stations

First Unit Last Unit ~ 17 120MW of new capacity (5 222MW installed and Medupi 2012 2015 commissioned ) Kusile 2014 2018 Ingula 2014 2014 ~ 4 700km of required transmission network (3 268km installed) Medupi is the first coal-generating plant in Africa to use supercritical power generation technology

In support of 38 Build progress to date

To date, a large amount of construction work has been completed, adding ~5 221.8 MW, ~3 268 km of transmission network, and ~17 670 MVA of sub-station transformers Megawatts MW of capacity

Transmission Km line

Substations MVAs

In support of 39 Significant progress in build programme – began in 2005 with completion in 2017/18

• The first Medupi unit is expected in late 2012; we are doing a detailed assessment of the schedule ensuring that contractors meet timelines as the schedule is at risk • We are focusing systematically on supplier performance, so we can pick up and mitigate any risk factors early on; also understanding impact of labour situation on the project % of estimated total cost spent as at 31 March 2011

R billion spent and to be spent on the capacity 20.6% expansion programme (excluding borrowing costs capitalised) 121.0 42.4% 98.9 In addition, we plan to spend more than R10bn over each of the next 6 years to strengthen, refurbish and expand our Distribution network.

52.0% 36.7% 88.7% 28.8 21.4 24.0

23,7 In support of 40 Current planned capacity expansion plan

Project 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY Total

Grootvlei (return to service) 200 200

Komati (return to service) 225 400 625

Arnot capacity upgrade (coal fired) 30 30

Medupi (coal fired) 794 1 588 1 588 794 4 764

Kusile (coal fired) 800 800 800 800 1 600 4 800

Ingula (pumped storage) 338 1 014 1 352

Sere wind farm (renewable) 100 100

TOTAL 455 1 194 2 026 3 402 1 594 800 800 1 600 11 871

In support of 41 Cash flows including funding

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In support of 42 Group cash flow statement

2011 2010 2009 Audited Audited Audited Rm Rm Rm Cash flows from operating activities Cash generated from operations 28 275 15 999 5 155 Net cash flows from financial trading assets 2 925 (4 908) 1 616

Net cash flows from financial trading liabilities (1 456) 3 040 (2 330) Other operating activities (7 460) (5 013) 7 323

Net cash from operating activities 22 284 9 118 11 764

Cash flows from investing activities Acquisitions of intangibles, property, plant and equipment (44 325) (44 882) (43 632) Other investing activities (1 670) (2 642) 687

Net cash used in investing activities (45 995) (47 524) (42 945)

Cash flows from financing activities Debt raised 78 758 60 107 53 959 Debt repaid (18 756) (20 351) (23 492) (Increase)/ decrease in investment in securities (33 693) 3 924 7 366 Net interest repayments (5 916) (4 065) (752) Other financing activities (63) (4 115) 1 790

Net cash from financing activities 20 330 35 500 38 871

Net (decrease)/ increase in cash and cash equivalents (3 381) (2 906) 7 690 Cash and cash equivalents at beginning of the year 15 541 18 382 10 893 Cash and cash equivalents at beginning of the year transferred (to)/ from non-current assets held-for-sale (73) 65 (201)

Cash and cash equivalents at the end of the year 12 087 15 541 18 382 In support of 43 Summary of cash flows

R m Ops Financing Investing

In support of 44 From funding gap to funding plan – R300 billion funding plan to 2017

Draw-downs Amount Funding sourced Currently secured Source of funds to date supported by Rbn Rbn Rbn Government Rbn

Bonds 90.0 26.7 26.7 15.0 Commercial paper 70.0 70.0 10.0 0.0 Export Credit Agency 32.9 32.9 7.5 0.0 backed World Bank loan 26.1 26.1 2.6 26.1 AFDB loan 21.0 21.0 3.9 21.0 DBSA loan 15.0 15.0 1.0 0.0 Shareholder - Loan 20.0 20.0 20.0 20.0 Other sources 25.0 0.0 0.0 0.0

Totals 300.0 211.7 71.7 82.1 Percentages 70.6% 33.9%(1) 38.8%(1)

(1) As a percentage of the currently secured total

In support of 45 Operating highlights and challenges

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In support of 46 Generation Business

• Operates Eskom’s power stations Key figures • 27 power stations: 13 coal, 4 gas / Financial Financial Financial liquid fuel turbines, 6 hydro electric, Year 2011 Year 2010 Year 2009 2 pumped storage, 1 nuclear and 1 Net Capacity (MW) 41 194 40 870 40 506 wind Capacity from Coal (MW) 34 952 34 658 34 294

• Total net capacity of 41 194MW as Coal Share in Total Capacity 84.9% 84.8% 84.7%

at Capacity from Nuclear (MW) 1 830 1 800 1 800 31 March 2011 Nuclear Share in Total Capacity 4.4% 4.4% 4.4% • Approximately 85% of net capacity is coal-fired Total Output (TWh) 237 233 229 • Koeberg nuclear power station Production from Coal (TWh) 220 216 212 • 1 830MW net capacity Coal Share in Total Output 92.8% 92.7% 92.6% • 12.1TWh electricity produced Production from Nuclear (TWh) 12.1 12.8 13.0 from nuclear in year ended 31 Nuclear Share in Total Output 5.1% 5.5% 5.7% March 2011 Reserve margins • Approximately 17 120MW of new capacity plans committed and 15% international norm expected by 2018 (this includes 5 and Eskom target 222MW already commissioned since 2005) • Reserve margin of 14.9% for FY 2011, up from 5.6% for FY 2008 but below Eskom’s target of 15% In support of 47 Generation Business – operational performance

Highlights

• No load shedding in the past financial year

• Successfully powered the 2010 FIFA Soccer World CupTM over the winter period when the highest ever peak in demand was recorded

• Water utilisation across the fleet of power stations is within target

• The Integrated Generation Control Centre (IGCC) was successfully commissioned to centrally monitor the performance of all power stations

In support of 48 Generation Business – operational performance

Challenges

• The return to service of Duvha Unit 4 turbine and generator which was extensively damaged in February 2011 - estimated recovery period is greater than 12 months • Constrained power system as we balance the need for planned maintenance on ageing plant with the demand of a growing economy • Particulate emissions performance is unfavourable and requires focussed attention • Coal-related energy losses have increased substantially since 2008, contributing to the reduction in the availability of some coal-fired plant to meet demand • Improved performance of Koeberg nuclear power station curtailed by two significant forced outages immediately following a refuelling outage • Original equipment suppliers’ impact on power plant performance

In support of 49 Generation Business – technical performance

Actual Actual Actual Year-end Year-end Year-end Measure Description March March March 2011 2010 2009

Unit capability factor UCF measures the plant availability and indicates how 85.9% 85.9% 86.1% (UCF) well the plant is operated and maintained.

Energy availability EAF measures plant availability (UCF above), plus energy 84.6% 85.2% 85.3% factor (EAF) losses not under the control of plant management

UCLF measures the lost energy due to unplanned Unplanned capability production interruptions resulting from equipment failures 6.1% 5.1% 4.4% loss factor (UCLF) and other plant conditions. GLF indicates the extent to which the generation fleet was Generation Load loaded on average over the year to produce the energy 66.4% 66.2% 67.0% Factor (GLF) demanded. PCLF - planned energy loss is energy not produced Planned capability loss during the period because of planned shutdowns or load 8.0% 9.0% 9.5% factor (PCLF) reductions due to causes under plant management control. Unplanned automatic UAGS/7000 indicates the amount of unplanned unit trips grid separations / 7000 3.6 2.8 2.9 per 7000 operating hours hours (UAGS/7000) Difference between net system capability and the Reserve margin system’s maximum load requirements (peak load or peak 14.9% 16.4% 10.6% (including imports) demand) as a percentage of the peak demand In support of 50 Generation Business – technical performance

• EAF indicates the energy availability on the grid, taking into Generation account the planned, unplanned, and other capability losses due to elements beyond management control

Energy availability factor (EAF) % • The actual EAF for 2011 was 84.6% which is below the target of 86.5%. This was affected by the total unplanned unavailability of 7.4% at YE against a target of 5.5% (UCLF and OCLF). The planned unavailability target of 8% was met

• The poor performing power stations are in their mid-life and require more maintenance. With the low reserve margin less time is available to carry out essential maintenance. The quality of coal has deteriorated over the past few years and has greatly affected the performance of some stations. This situation directly contributed to the high particulate emissions

• The generation recovery process in 2008/9 resulted in improved availability and reliability of those plant areas that were given priority then. However subsequently, other plant areas like coal handling, milling plant, air heaters and flue gas cleaning plant (affecting particulate emissions) have shown a significant deterioration in performance mainly due to poor coal quality

• Despite these challenges, we have managed to avoid load shedding since April 2008

• Eskom requires an aspirational PCLF (maintenance ratio) of 10%, but the tightness of the system meant that we could achieve a ratio of only 8%. There is a growing maintenance backlog that will Actual Annual target require plant shutdowns, and this must be addressed over the coming year.

In support of 51 Primary Energy – operational performance

Coal Factors influencing Primary Energy Costs (c/KWh) (1) • Largest primary energy source in South Africa Cents/ KWh • Average coal stock of 41.4 days as at 31 March 2011; Burnt 16 0.36 124.7 million tonnes of coal in the year ending 31 March 2011 0.57 (2010: 122.7 million tonnes) 15 0.62 • Coal purchased as follows: 14 1.09 • 47% cost plus contracts 15.95 • 24% fixed price or indexed contracts 13 • 29% short/medium - term contracts 13.31 • Limited correlation with International Coal Prices 12 • Approximately 80% of the cumulative coal supply until 11 2020 is contracted Primary Co s t o f Environmental IPP's Other Primary Ener gy Co s t coal levy Energy Cost Water 2010 burnt 2011 • 327 252 million litres of water used in year ended 31 March 2011 Primary Energy Costs as % of Electricity Revenues • Relative water consumption to generate electricity increased from 1.34 l/kWh sent out as at 31 March 2010 to 1.35 l/kWh sent out as at 31 March 2011

Nuclear • Sourced mainly on international market • Uses on average ~ 30 tonnes of enriched uranium (equivalent to ~270 tons natural uranium) fabricated into ~ 70 fuel elements per year • Government authorizes all nuclear fuel contracts and Eskom’s Net Capacity Mix – 31 March 2011 importation of nuclear fuel in accordance with the Nuclear Energy Act

Gas / Liquid Fuel • Sourced locally with regulated price • No take or pay obligations in place except for tank rental obligations • Eskom does not hedge against diesel price fluctuations due to the uncertainty around the timing and quantity of usage In support of

(1) Cents/KWh figures are calculated based on Total Electricity Sales numbers 52 Primary Energy – operational performance

Highlights

• For the year ended 31 March 2011 coal cost maintained below budget • Dam levels are higher than expected, resulting in lower pumping costs • In partnership with Transnet: • Implemented the Camden containerised rail solution • Improved the rail performance for coal supplies to Majuba power station from 5.6Mt in 2010 to 6.9Mt in 2011 • Some successes in the roads repair program: • Havenga Street in Ermelo (R47.7 million) • The pothole repair program started (with approximately 50% expenditure against the approved R106.5 million) • Signed a number of medium-term coal supply agreements (to 2019) to ensure continuity of supply • Komati water scheme and Mokolo – Crocodile water augmentation project agreements signed

In support of 53 Primary Energy – operational performance

Challenges

• Delays in spending on the road repair programme • Poor performance of some mines has resulted in the purchasing of more coal from the short/medium-term market, resulting in higher coal and transport costs • Reducing defunct mine liability • Road fatalities among both the public and coal transporters despite a number of safety initiatives • Supply risk exposure to disruptions in mining operations due to legal non-compliance

In support of 54 Customer Network Business

• Total electricity sales of 224 446GWh and Key figures – 31 March 2011 more than 4.65 million customers (including transmission customers) as at 2011 Gross Electricity 31 March 2011 2011 Sales Split Revenue Split Customers Total: 224 446GWh Total: ZAR90.375m Total: 4.65 million • Directly provides electricity to 45% of all end users in South Africa • Two main types of customers: • Redistributors: Mainly municipalities that sell electricity to residential customers. • Direct customers: Industrial, commercial, mining, agricultural and residential consumers • Key Sales and Customer Service unit Energy Losses deals with customers using ≥100GWh of Budget 2011 2010 2009 energy per year / Target • At 31 March 2011, KSACS had Distribution losses <= 6.00% 5.68% 5.87% 5.46% approximately 139 customers Distribution accounting for 34.9% of total - 3.98% 4.11% 3.82% Technical losses revenues Distribution - 1.70% 1.76% 1.64% • Some customers have supply contracts Non-technical losses indexed to commodity prices Transmission losses <= 3.40% 3.27% 3.27% 3.08% • A member of Southern African Power Pool (“SAPP”) Total Eskom losses <= 8.75% 8.25% 8.45% 7.94%

In support of 55 Customer Network Business – operational performance

Highlights

• Successful partnership with local authorities to ensure incident-free electricity supply for the 2010 FIFA Soccer World Cup™

• Launch of Operation Khanyisa as part of the Energy Losses Management Programme

• Schools connections (special projects) higher than target

• Total energy losses of 8.25% lower than target of 8.75% • The system minutes lost < 1 performance of 2.63 system minutes is exceptional against the target of 3.4

• No major incidents recorded on the Transmission grid during 2010/11, a performance last achieved in 2004/05

• Demand-side management savings of 354MW against a target of 301MW

In support of 56 Customer Network Business – operational performance

Challenges

• High levels of theft of equipment and electricity is affecting plant performance and increasing cost

• Sadly three Distribution employees and ten contract workers passed away

• Sales growth lower than budget and projection

• Municipal debt payments – improved, R123 million overdue as at 31 March 2011

• Non-payment by large and residential customers, including a large customer liquidation case; and some contractual payment disputes experiencing lengthy resolution delays

• Employee security is becoming a concern

• Collisions and electrocutions of birds on distribution power lines

• Not meeting the target of 158 430 overall electrification connections in 2010/11 (149 914 made) In support of 57 Customer Network Business – Transmission technical performance

Transmission The system minutes lost < 1 of 2.63 system minutes was Number of Supply Severity of Interruptions Interruptions (System minutes lost ≤ 1) exceptional when compared to the target of 3.4 and the historical performance. It is also a substantial improvement on the 4.09 recorded for the previous financial year.

The number of Transmission supply interruptions target was achieved and the measure showed a modest improvement year on year.

No major incidents were recorded on the Transmission Actual Annual target network during the year, which is a significant achievement based on historical performance. In support of 58 Customer Network Business – Distribution technical performance

• Average customer interruption duration of 53 hours per year • SAIDI performance showed a marginal improvement, while SAIFI performance deteriorated slightly • Network-related constraints, the impact of increased theft and vandalism on resources and adverse weather conditions have affected performance

SAIDI (Hours/annum) SAIFI (number/annum) System average interruption duration index System average interruption frequency index

Actual Annual target Actual Annual target

In support of 59 Customer Network Business – Integrated Demand Management performance

Evening peak demand savings of 354MW achieved against a target of 301MW in the financial year to 31 March 2011

Expenditure incurred Programme category Savings achieved (MW)(1) (R million) Residential lighting 199.1 47 Water heating load management 31.7 25 Compressed air systems 41.9 98 Industrial process optimisation 73.1 70 Commercial and industrial lighting and air-conditioning 2.1 40 Solar water heating 5.9 225 Heat pumps 0.3 40 Total 354.1 545

Verified cumulative demand savings (MW) against the accumulated Eskom target per year (2)

(1) Includes 345MW verified for NERSA and Department of Energy funded projects & 9MW for a project implemented through the DSM advisory service policy. The 9MW saving is expected to be verified by NERSA and the Department of Energy in the coming year. (2) Verified for NERSA and Department of Energy funded projects. In support of 60

Outlook

Watch out for Power Alert and switch off appliances you don’t need

In support of 61 Keeping the lights on

In support of 62 We took action to address the challenges we identified at the beginning of the year

What we said What we did

Demand would be back at 2007 levels and would increase Demand is up 1.4% compared to 2010 by 2% in 2011

We would improve coal handling and coal quality to reduce Coal-related production losses were reduced by 26% for the load losses first 5 months of the year compared to 2010; coal stockpiles being rebuilt after coal industry strike.

We targeted to improve generation output by 1%-2% over Although the plant availability improved over the last four three years months, year to date deteriorated compared to the previous year from 91.9% to 90.6%. The Duvha unit 4 incident contributed to this deteriorating performance. A sustainable availability improvement requires execution of more planned maintenance: every opportunity for maintenance is utilised

We would sign up about 400 MW of co-generation and own 891MW contracted of which 376 MW from IPP’s and about generation by April 515 MW of municipal generation

We needed to undertake significant maintenance during Critical maintenance has been prioritised , with lower than summer expected winter demand enabling some maintenance to be done during winter

We would execute the demand side programme Reduced demand by 113 GWh during the first quarter

We would communicate with our stakeholders on the state Extensive programme of engagement with stakeholders of the system

In support of 63 Our focus is on:

Value chain Industry value driver Availability & reliability Portfolio management Generation Efficiency of operations Capacity Environment

Capacity Transmission Efficiency of operations & Distribution Availability & reliability Regulatory management

Customer segmentation Customer Sales channels Customer satisfaction Service Efficiency / Costs to serve Reputation

Cost reduction Value maximisation Efficiency Procurement Back to Basics In support of 64 Eskom fully supports government's priorities

Government's priorities Eskom's contribution

• Provide apprenticeship training to 10 000 young people by 2015 Improving • Train 5 000 young people p.a. by 2015 education • R998 million investment in training and 300 000 days of training in 2010/11 • Partner with universities to develop engineering skills

• Enhance employee health and wellness practices - being more proactive Improving • Provide effective psycho-social support healthcare • Roll out key HIV/AIDS initiatives

• Provide employment opportunities for 100 000 in Eskom's cloud by 2015 Creating decent work • Secure 50% of local content for our build program and helping to build local industries

Fighting • Review and introduce anti-fraud and anti-corruption initiatives crime and • Major projects – proactive involvement by Eskom’ Assurance & Forensic corruption Department

Rural develop- • Electrify rural areas as part of the government’s electrification program ment and • Reached the 4 million electrifications mark since inception land reform

In support of 65 Please partner with us

• Embrace energy saving as a national culture, joining the global journey towards a sustainable future

• 49M campaign aims to create a culture of energy efficiency in SA

• Remember the three Ps: save power, save your pocket and save our planet . If you’re not using it, switch it off!

In support of 66 Thank you BACK-UP SLIDES

68 Overview of Eskom Business in Free State

69 Free State Province

Demand and 1 719 MW of 36 970 MW national demand Lethabo Power Station Capacity 4.65% of national demand Generation: 3 558 MW

44 480 km of lines Network 11 transmission substations 284 distribution substations

233 115 customers in Free State Customers Residential 91.04% of customers Municipalities 0.09% of customers 8.87% is industrial, mining, commercial and agricultural customers

Business Bloemfontein Kroonstad locations Welkom Bethlehem

R3.4 billion Mining 42% Revenues Municipalities 35%; Commercial 4% Agriculture 9%; Industrial 2%; Residential 5%; Other 3%

70 Free State Province

Generation = 808 Staff Distribution = 1 555 Transmission = 104

R128 million invested in 2010/11 (excluding CFL costs = R10 million) Demand-side Energy efficient light bulbs 2.1 million units, solar water geysers 13 598 units management and 24 897 ripple control units from inception to date

Distribution R200 million spent in 2010/11 and R1.08 billion planned for the next 5 Capital expansion years. and refurbishment Transmission R1.498 billion spent in 2010/11 and R1.4 billion planned for the next 5 years.

Inception to date 194 602 household connections Electrification 6 559 connections in 2010/11 1 454 planned for 2011/12

Strategic donations: R 698 360 Corporate Social Investment Philanthropic donations: R 404 100 Various asset donations 71 Free Sate Province

116 744 indigents identified by municipalities Free Basic Electricity (FBE) 100.0% of indigent customers configured to collect FBE 83.3% of customers collecting FBE as at March 2011

Experience residential loss ranges from 19% to 31% in townships Energy losses Vandalism and theft costing the business Operation Khanyisa and Rev Protection audits to address energy losses

R254m > 30 days as at 17 Jan 2012. Municipal debt 35% of debt mentioned above is > 90 days

Take over of areas (ex-TBVC) Network Legal compliance dealt with in terms of networks taken over, now normalisation normalisation is next

73 Gauteng Province

11,000 MW of 36,600 MW National Demand Demand and 30% of National Demand Capacity 3x Municipality Power stations deliver on average 350MW

27,500km of a total 395,000km of Lines Network 35 Transmission Substations 562 Distribution Substations

757,000 Customers in Gauteng

Customers Residential 98% of Customers Municipalities 0.02% of customers 1.98% is Industrial, Mining, Commercial and Agricultural

Ekurhuleni Soweto SunningHill Business Vereeniging Locations Randfontein Johannesburg Tshwane

R23.7 billion Mining 7%, Municipalities 59%; Revenues Commercial 7% Industrial 16%; Other 3% Residential 8%;

74 Gauteng Province

Distribution = 2,965 Staff Transmission = 962

R237 million invested in 2010/11 Demand Side 63 Projects in Gauteng during 2010/11 Management Energy Efficient Light Bulbs 4,099,678 Units Solar Water Geysers 5,888 Units

Capital Expansion Distribution R1.1 billion spent in 2010/11 and R1.4 billion planned for 2011/12 and Refurbishment Transmission R2.1 billion actual in 2010/11 and R2.4 billion planned for 2011/12

Inception To Date 437,435 Connections 8,233 Connections in 2010/11 at R60 million Electrification 13,319 planned for 2011/12 at R61 million

75 Gauteng Province

Free Basic 159,000 indigents identified by Municipalities Electrification (FBE) 99.8% of indigent customers configured to collect FBE 67% of customers collecting FBE on average over three months

Experience residential losses ranges from 14% to 86% in townships Energy Losses Vandalism and theft costing the business Social Marketing Campaign to address Energy Losses

R3,4 billion as at end March 2011 Soweto Debt 92% of Eskom Small Power User (Residential) Debt > 90 days Less than 20% payment levels monthly

Installation of Split metering supported by the community Chiawelo Pilot Losses down from 60% to 10% Payment Levels up to 90% Experienced significant reduction in outages

Introduction of Inclining Block Tariff in order to protect low income households Unintended consequences: Inclining Block Tariff Consumers experienced high electricity cost Inadequate education drive on IBT and its impact to customers Multiple dwellings per stand. 76 Overview of Eskom Business in North West

77 North West Province

3 447MW of 36 970MW national demand Demand 9.3% of national demand

33 624 km of a total 395 000km of lines nationally Network 11 transmission substations 352 distribution substations

620 679 customers in North West Province 95.77% - Residential Customers 0.03% - Municipalities 4.15% - Industrial, Mining, Commercial and Agricultural & Other

Mahikeng Vryburg Delareyville Business Locations Rustenburg Taung Potchefstroom Klerksdorp Zeerust Wolmaranstad

R12.1 billion Revenues Dominated by Mining, Industrial and Re-Distributors

78 North West Province

Distribution = 864 Staff Transmission = 59

Demand Side R47.8 million invested in 2010/11 Management (DSM) 12 projects during 2010/11

Distribution R414 million spent in 2010/11 and R435 million planned for 2011/12 Capital Expansion Transmission R159 million spent in 2010/11 and R671 million planned for 2011/12

Inception to date 550 724 connections Electrification 10394 connections in 2010/11 at R115 million 10162 connections planned for 2011/12 at R141 million

R1,8 million on Education projects Corporate Social Investment R232 000 on skills development R200 000 on job creation and poverty alleviation 79 North West Province

75 035 indigents identified by municipalities Free basic Electricity 99.9% of indigent customers configured to collect FBE (FBE 74 % of customers collecting FBE as at March 2011

Experienced Residential losses as high as 60% in some townships Energy losses Vandalism and theft costing the business Social marketing campaign to address energy losses

Municipal Debt Total Overdue Municipal Debt R64 Million

Introduction of Inclining Block Tariff (IBT) to protect low income households Unintended consequences: Inclining Block Tariff Consumers experienced high electricity cost Inadequate education drive on IBT and its impact to customers Multiple dwellings per stand

80 Overview of Eskom Business in Mpumalanga

81 Mpumalanga Province

3 820MW of 36 970MW national demand Demand 10,3% of national demand Eskom purchasing contracts with three private power stations

3 724 km of Transmission lines and 41 041km of HV, MV and LV Lines Network 22 Transmission substations 227 Distribution substations

625 661 Customers in Mpumalanga Customers Residential 97,5% of customers 2,5% is redistributors, industrial, mining, commercial and agricultural customers

Emalahleni Middelburg Mbombela Majuba P/Station Business Duvha P/Station Matla P/Station Tutuka P/Station Grootvlei P/Station locations Kriel P/Station Kendal P/Station Arnot P/Station Kusile Construction Site Hendrina P/Station Camden P/Station Komatie P/Station

R12,2 billion Mining 16%, Revenues Municipalities 12% Commercial 3% Industrial 58% Prepaid 3% Residential 2% Other 6%

82 Mpumalanga Province

11 Coal fired Power Stations Generation 27 704 MW Generation Capacity 67,3% of total Eskom Generation Capacity

Generation = 7 218 employees Employees Transmission = 181 employees Distribution = 1752 employees

R55,1 million invested during 2010/2011 Demand-side 9 Projects for 2010/2011 management 3,19 million energy efficient light bulbs have been rolled-out

Generation Capital R4,045 billion actual for 2010/2011 Expenditure R6,945 billion planned for 2011/2012

Capital Expansion and Distribution R374 million spent in 2010/11 and R620,1 million planned for 2011/12 Refurbishment Transmission R535 million actual in 2010/11 and R1 000 million planned for 2011/12

Inception to date 385346 connections Electrification 12877 connections in 2010/11 at R108,7 million 7710 connections planned for 2011/12 at R111,4 million 83 Mpumalanga Province

95 957 Indigents identified by municipalities Free Basic 100% Of indigent customers configured to collect FBE Electricity (FBE) 78% Of customers collecting FBE on average over three months

Experience residential loss ranges from 5 to 60% in townships Energy losses Vandalism and theft costing the business Social marketing campaign to address energy losses

R200,4 million in arrears on 30 September 2011 Municipal Debt 3 Municipalities continuously paying late Increased bulk supply applications Concern about several Municipalities who have applied for increased bulk supplies, but could not accept quotations due to lack of funds

Introduction of Inclining Block Tariff to protect low income households Unintended consequences: Inclining Block Consumers experienced high electricity cost Tariff Inadequate education drive on IBT and its impact to customers Multiple dwellings per stand

84 Overview of Eskom Business in Limpopo

85 Limpopo Province

2 090 MW of 36 970 MW national demand Demand 5.7 % of national demand There is no Municipality power station in Limpopo

38 447 km of Electricity lines Network 11 Transmission substations 179 Distribution substations

1 045 903 customers in Limpopo Customers Residential 98.3% of customers Municipalities 0.01% of customers 1.7% is industrial, mining, commercial and agricultural customers

Polokwane Belabela Groblersdaal Business Phalaborwa Lephalale Mokopane locations Thohoyandou Giyani Louis Trichardt

R3.3 billion Mining 20%, Revenues Municipalities 21%; Commercial 9% Industrial 17%; Other 8% Residential 25%; 86 Limpopo Province

1 Operating coal fired Power Station (Matimba) with 3 690 MW Generation Capacity Generation 8.96% of the National Capacity Medupi Power Station under construction – New Coal Fired Power Station

Distribution = 2 122 Staff Generation = 744 Transmission = 93

R19.8 million invested in 2010/11 Demand-side management 3 projects in Limpopo during 2010/11 Energy efficient light bulbs 4.77 million since inception

Distribution R481 million spent in 2010/11 and R599.9 million planned for 2011/12 Capital expansion and refurbishment Transmission R1.041 billion spent in 2010/11 and R1.976 billion planned for 2011/12 Generation R245.7 million actual in 2010/11 and R649.9 planned for 2011/12

Inception to date 876 930 connections Electrification 24 795 connections in 2010/11 at R189 million 17 322 planned for 2011/12 at R 185 million

87 Limpopo Province

137 047 indigents identified by municipalities Free Basic Electricity (FBE) 100% of indigent customers configured to collect FBE 83% of customers collecting FBE as at March 2011

Experience residential losses as high as 45% in some townships Energy losses Vandalism and theft costing the business Social marketing campaign to address energy losses

Municipality & Only 1 Municipality account was overdue at end of June 2011 Residential Customer Debt Only 4% of Eskom Residential debt > 90 days as at June 2011

Introduction of Inclining Block Tariff to protect low income households Inclining Block Unintended consequences: Tariff (IBT) Consumers experienced high electricity cost Inadequate education drive on IBT and its impact to customers Multiple dwellings per stand

Corporate Social R1.7 million has been spent in the last financial year benefiting 11 202 people. Investment Handed over grade 12 revision DVD’s to assist learners with the final exam in year 2010

88 Overview of Eskom Business in Northern Cape

89 Northern Cape Province

Demand 725 MW of 36 970 MW national demand Approximately 2% of national demand

30 139 km of line Network 207 substations

71 239 customers in Northern Cape Residential 90.8% of customers Customers Municipalities 0.06% of customers 8.9% is industrial, mining, commercial and agricultural customers

Kimberley & Upington Distribtion Zones Main 15 Customer Network Centres from Springbok, Calvinia, De Aar, to Jan Kemdorp. locations VanderKloof (Generation)

R1.3 billion per annum Mining 15 %, Municipalities 42 %; Revenue Commercial 11 % Agriculture 20 %; Other 2% Residential 10 %;

90 Northern Cape Province

Distribution = 652 Staff Generation = 17 Transmission = 31

R 19.2 million invested in 2010/11 Demand-side Energy efficient light bulbs 672 974 units and 2018 solar water geysers were management rolled out inception to date

Capital expansion Distribution R161 million spent in 2010/11 and R126 million planned for 2011/12 and refurbishment R329 million spent in 2010/11 and R662 million planned for 2011/12 on Transmission infrastructure, and R7.6billion over t

67 601 customers connections to date Electrification 4 383 connections done in 2010/11 at R39 million 5 922 planned for 2011/12 at R58 million

Vanderkloof Power Station is located at the Vanderkloof Dam wall. Generation It has a generating capacity of 240 MW (2 X 120 MW) into the Eskom Grid.

91 Northern Cape Province

43 270 indigents identified by municipalities Free Basic Electricity (FBE) 99.1% of indigent customers configured to collect FBE 72.9% of customers collecting FBE as at March 2011

Experience residential loss ranges from 13% to 28% in townships Energy losses Vandalism and theft costing the business Operation Khanyisa and revenue protection audits rolled out

Servitudes between Vryburg to Kathu Land rights Boom of mining activities in the manganese basin

Refurbishment of aging networks Refurbishment of Networks Legal compliance measures completed, now focussing on refurbishment the networks in the townships

Upington Solar Park Grid Access Applications Solar – De Aar & Kimberley Windfarm at Port Nolloth & Cuprum

92 Overview of Eskom Business in Western Cape

93 Western Cape Province

3 675 MW of 36 970 MW national demand Demand 10% of national demand 3x municipality power stations deliver on average 260MW

40 087 km of lines Network 13 transmission substations 269 distribution substations

324 000 customers in Western Cape Customers Residential 93% of customers Agriculture 4% of customers 3 % is industrial, mining and commercial customers

Belville Palmiet Ankerlig Business locations George Acacia Gourikwa Koeberg

R10.0 billion Agricultural 8%, Municipalities 57%; Commercial 6% Revenues Industrial 15%; Other 4% Residential 10%;

94 Western Cape Province

Distribution = 2 253 Staff Transmission = 163 Generation = 2 136

1 nuclear, 3 gas power stations, 1 pumped storage and 1 wind warm Generation 4 471 MW Generation Capacity 10,85% of total Eskom Generation Capacity

Generation R1.4 billion spent in 2010/11 and R16 billion planned over five years Capital expansion Distribution R682 million spent in 2010/11 and R7 billion planned over five years and refurbishment Transmission R 604 million actual in 2010/11 and a further R14 billion planned over five years

84 applications with potential of generating 6 504 MW in initial phase Renewable Energy Wind energy accounts for 96% of renewable energy generating potential Sufficient proposals received to support 20 plus years development

R19.6 million invested in 2010/11 Demand-side management 7 projects in Western Cape during 2010/11 Energy efficient light bulbs 6 million units; solar water geysers 5 031 units; 38 450 ripple control units rolled out inception to date 95 Western Cape Province

115 702 indigents identified by municipalities Free Basic 100% of indigent customers configured to collect FBE Electricity (FBE) 91% of customers collecting FBE as at March 2011

Experience residential loss as high as 10% in some townships Energy losses Vandalism and theft costing the business Social marketing campaign to address energy losses

Inception to date 177 531 connections Electrification 10 223 connections in 2010/11 at R75.4 million 6 314 planned for 2011/12 at R 90.3 million

R2.8 million social investment was approved in 2011/12 on a College and Social Investment Primary school with 1 454 beneficiaries. R4.6 million spent in 2010/11 for donations and 37 440 people benefited.

97 Eastern Cape Province

1285 MW of 36970 MW national demand Demand 3.5% of national demand 4x Hydro Stations with 61.4 MW rated capacity managed by operating unit.

42 286km of a total 395 000km of lines Network 11 transmission substations (includes traction substations) 173 distribution substations

638 187 customers in Eastern Cape Customers Residential 98% of customers Municipalities 0.01% of customers 1.99% is industrial, mining, commercial and agricultural customers

East London Mthatha Top Business Port Elizabeth locations Queenstown

R3.8 billion Mining 0.1%, Revenues Municipalities 65.6%; Commercial 6.5% Industrial 2%; Other 20.6% Residential 5.1%;

7 Eastern Cape Province

Distribution = 2 215 Staff Transmission = 128 Generation (Peaking) =07

R96.2 million invested in 2010/11 Demand-side 14 projects in Eastern Cape during 2010/11 management Inception to date 5.33 million Energy efficient lamps, 10,352 solar water geysers and 11,250 geyser control units in current year Capital expansion and Distribution R1.18 billion spent in 2010/11 and R1.4 billion planned for 2011/12 refurbishment Transmission R98.4 million spent in 2010/11 and R1.5 billion planned for 2011/12 Inception to date 748 532 connections Electrification 25 651 connections in 2010/11 at R476.6 million 24 942 planned for 2011/12 at R572.4 million

Experience residential loss of 21.32% on average in townships and rural areas Energy losses Vandalism and theft costing the business Social marketing campaign to address energy losses

138 480 indigents identified by municipalities Free Basic 100% of indigent customers configured to collect FBE Electricity (FBE) 74% of customers collecting FBE on average over three months 8 Overview of Eskom Business in Kwa-Zulu Natal

100 Kwa-Zulu Natal Province

Drakensberg Pumped Storage with 1000MW installed capacity Generation Ingula Pumped Storage under construction - planned capacity 1332MW

Total contracted local content – R3.68 bn (36.72%)

R1.8 bn to B-BBEE, R134m to BWO and R224m to SMME

6105 MW of 36970 MW national demand

Demand 16.5% of national demand

Ethekwini Metro takes 31% of KZN’s total demand

56,610 km of lines of total 395,000 km 21 Transmission substations

nationally Network 443 Distribution substations Phase 1 of First 765kV line (350km)

from Majuba to Empangeni completed

101 Kwa-Zulu Natal Province

770216 customers in KwaZulu-Natal Customer Residential 748348 (97.16%) Profile Municipalities 55 (0.01%) 2.83% is industrial, mining, commercial and agricultural customers

Empangeni Pietermaritzburg Ingula Business Ladysmith Westville Drakensberg locations New Germany Newcastle Margate

R13.6 billion Mining 1%, Revenues Municipalities 46%; Commercial 5 % Industrial 34%; Other 6% Residential 8%;

102 Kwa-Zulu Natal Province

Distribution = 2 966 Staff Transmission = 198 Generation = 85 R60.33 million invested in 2010/11 (excluding Solar Water Heating Projects) Demand-side 12 projects in KwaZulu-Natal during 2010/11 management Energy efficient light bulbs 8.98 million since inception Solar water geysers 2200 units since inception

Distribution R1.6b spent in 2010/11 Strengthening and Distribution R1.87b planned for 2011/12 refurbishment Transmission R427m actual in 2010/11 and R846m planned for 2011/12

Inception to date 641 167 connections Electrification 18 260 connections in 2010/11 at R475.3 million 16 306 planned for 2011/12 at R424.3 million

103 Kwa-Zulu Natal Province

124 647 indigents identified by municipalities Free Basic Electricity (FBE) 97.8% of indigent customers configured to collect FBE 57.9% of customers collecting FBE as at March 2011

Experienced Residential losses as high as 57.7% in some townships

Energy losses Vandalism and theft of equipment costing the business Social marketing campaign to address energy losses

R863 104 debt > 90 days out of total debt of R4.1 million as at end March 2011 Edendale and Total number of customers 51279; 94.3% prepaid customers Imbali township challenges Split metering piloted for 3672 customers Monitoring pilot before mass rollout

Introduction of Inclining Block Tariff to protect low income households Inclining Block Queries from customers have been mostly on explanation of IBT Tariff Further education and communication needed to improve customer awareness Costs for multi-dwellings does not appear to be an issue in this province

104 Electrification, free basic electricity, energy losses and municipality debt

105 Electrification per Province 2010/11

Number of Connections Capital Spent 2010/11 = 124,241 2010/11 = R1.594bn

2012/05/11 106 Electrification backlog per Province 2010/11

2012/05/11 107 FBE Collection rate per Province 2010/11

National Average = 74%

Number of Indigents identified per Province

PROVINCE EC FS GP KZN LP MP NW NC WP TOTAL Indigents per

Province 145,745 116,744 276,749 124,647 1,370,471 95,957 75,035 44,770 115,702 1,132,396 2012/05/11 108 Energy losses

Residential losses of between 14% and 86% in townships. Due to:

• Illegal connections • Tampered, by-passed and broken meters • Purchasing from “ghost vendors” • Multiple dwellings Results in: • High revenue losses • Safety risk to public • Overloading of networks leading to unreliable supply Social marketing campaign • Speak out against electricity theft; • Criminalize electricity theft and deal with illegal cable theft • Key partners: Business Against Crime, Business Unity of SA, and all three spheres of Government

109 Residential Energy Losses per Province 2010/11 (12MMA)

National Average = 20.15%

2012/05/11 110 Municipality Debt per Province – March 2011

TOTAL DEBT R124 mill.

No debt in LIMPOPO

Number of Municipalities overdue Per Province PROVINCE EC FS GP KZN LP MP NW NC WP TOTAL Number Munics Overdue 11 5 6 13 0 4 7 2 8 51 2012/05/11 111 Soweto Revenue Management challenges

112 Soweto Revenue Management Challenges

Impact Root Causes Challenges High revenue loss Estimations and Debt: off in excess of R1.3 billion threatening the inaccurate bills financial Debt accumulated to R4.5 bn (95% of national Small sustainability of Power User debt ) Old infrastructure Eskom that is easily accessible and Payment levels currently 16% - R9m out of potential billed of R56m on average Fatalities due to susceptible to electrical contact illegal connections Debtors days for Soweto at 3,839 days incidents

Easy access to Culture of non payment Low payment meters leading to levels vandalism and Current Eskom infrastructure is not geared to apply bypassing effective consequences or punitive measures to illegal/ defaulting customers Frequent outages due to overloading People still Losses embrace the Negative impact on culture of non 54% (916GWh) costing R416m annually Eskom’s image payment Safety – Public and employee High maintenance Presence of Negative perceptions around pre-payment technology and operational pressure groups costs Economic realities – unemployment and affordability Majority of prepaid Low customer customers buy Poor quality of supply mainly due to overloaded network. satisfaction index from Ghost CDUs Poor energy Our main objective: efficiency 2012/05/11 113 In support of Install split meter technology with protective enclosures to Curb growing debt and reduce energy losses Soweto sales and payments

Large Power Users Small Power Users

Payment Levels Payment Levels 100% 16%

114 Success of Chiawelo pilot project

Increased operational efficiency through remote meter reading and disconnections Only area in Soweto where customers are unable to bypass meters or buy from ghost CDUs Payment levels increased to 90% Increased revenues

Total losses down to 20% (includes 10% technical losses)

Improved public and employee safety Improved quality of supply due to reduced outages Remote monitoring of access to the steel enclosure securing meters and circuit breakers

115 Inclining Block Tariffs

116 Inclining Block tariff (IBT) – overview/implemented April 2011

• Average electricity price 40.3c/kWh for 2010/11

• Introduction of Inclining Block Tariff in order to protect the low income households

• Unintended consequences: • Consumers experienced high electricity cost compared to previous financial year; • Inadequate education drive on IBT and its impact on customers • Multiple dwellings per stand. • IBT on prepaid on sale and not on usage

Monthly level consumption c/kWh c/kWh c/kWh

Including environmental levy 2010/11 2011/12 2012/13

Block 1 <= 50 kWh 62.4 65.7 69.3 Block 2 51 – 350 kWh 66.7 75.4 85.6 Block 3 351 – 600 kWh 87.0 109.5 137.9 Block 4 > 600 kWh 95.5 120.1 151.2

2012/05/11 117 Inclining Block Tariffs overview

Residential tariffs 2010/11 and 2011/12 R/month R 900

R 800

R 700 2009/10 R 600

2010 /11* R 500

R 400 2011/12 R 300

R 200

R 100

R 0 kWh 50 150 300 500 600 800 1000 2009/10 R 30 R 89 R 177 R 296 R 355 R 473 R 591 2010 /11* R 26 R 78 R 155 R 259 R 311 R 414 R 518 2011/12 R 29 R 95 R 194 R 371 R 467 R 678 R 889

Nationally 89% of Eskom residential customers on average consume 350kWh or less per month 118 Example of prepaid customer purchases in Chiawelo - actual customer bill

Transaction date R kWh c/kWh 27-06-2011 150 127.6 118 24-06-2011 100 91.4 109 23-06-2011 20 18.3 109 13-06-2011 120 109.6 109 09-06-2011 120 158.5 76 04-06-2011 20 26.6 75 02-06-2011 120 165.6 72 TOTAL 650 697.6 95.4 27-05-2011 100 86.7 115 27-05-2011 20 18.3 109 21-05-2011 120 109.6 109 19-05-2011 100 95.1 105 18-05-2011 20 26.6 75 10-05-2011 120 159.2 75 07-05-2011 60 79.6 75 04-05-2011 50 72.8 69 TOTAL 590 647.9 91.5

2012/05/11 119