City Power (PTY) LTD

BUSINESS PLAN 2009 – 2014

City Power Draft Business Plan 09/14

TABLE OF CONTENTS SECTION 1: EXECUTIVE SUMMARY 6 1.1 Highlights and Challenges of the business 6 1.2 Structure of the document 7 SECTION 2: COMPANY OVERVIEW 8 2.1 Vision, Mission and Mandate 8 2.1.1 Vision 8 2.1.2 Mission 8 2.1.3 Aspired values 8 2.1.4 Business Operations Principles 8 2.1.5. Company Details 8 2.1.6 Operating History 9 2.1.7. Organisational Management and Structure 9 2.2 Description of day-to-day operations 14 2.3 Quantitative Indicators 15 2.3.1 Provide Network Infrastructure 15 2.3.2 Distribute Electricity 16 2.3.3. Network Restoration 18 2.3.4 Suppliers of Materials 18 2.3.5 Quality of key customer Relations 19 2.4. Support Processes 23 SECTION 3: STRATEGIC AGENDA 24 3.1 Strategic Agenda Priorities 24 3.2 Strategy Management Processes 24 3.4 Strategic Goals 24 3.5 Mayoral Priorities 25 3.6 Company Strategic Priorities 25 3.7 Strategic Issues 26 3.8 Top 10 Priorities for 08/09 and 09/10 26 3.9 Five year strategy, IDP and delivery agenda 27 SECTION 4: OPERATIONS AGENDA 34 4.1. Service Delivery 34 4.1.1. Key Operations and Financial Impact 34 4.1.2 Core Processes 59 SECTION 5: PERFORMANCE FRAMEWORK 60 5.1 Balanced Scorecard Perspectives 60 5.2 Key Performance Indicators 60 5.2.1. Financial Perspective 60 5.2.2 Customer Perspective 62 5.2.3 Internal Process Perspective 64 5.2.4 Learning and Growth Perspective 65 5.2.5 Community Value Perspective 66 SECTION 6: RISK MANAGEMENT AND INTERNAL CONTROLS 70 6.2 Risk Management Process 71 6.2.1 Background 71 6.2.2 Broad Definition 71 6.2.3 Risk Management Process 71 6.3 City Power’s Top 13 Risks 75 SECTION 7: FINANCIALS 79 7.1. Capital Expenditure 79 Continuous Strategy Improvement - Rev 17 – Page 2 of 131 Approved by Board on 6 Aug 2009

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7.1.1 Infrastructure & Service Delivery Capital Plan 79 7.1.2 Major Infrastructure Initiatives 93 7.1.3 Sources of Funding 97 7.2. Operational Expenditure 98 7.2.1 Financial Planning Assumptions 98 7.2.2 Income Statement 99 7.2.3 Cash Flow 104 7.2.4 Balance Sheet 106 7.3 Tariff Plan (NERSA and Mayoral approvals are not align, the tariff may change subject to Mayoral approval) 108 7.3.1 Tariff Assumptions 108 7.3.2 Tariff Objectives 108 7.3.3 Proposed tariff increase 108 7.3.4. Structural changes per rate category 109 SECTION 8: WARD PRIORITIES 113 SECTION 9: HUMAN CAPITAL 121 9.1. Human Capital Plans 121 9.1.1 Human Capital Achievement: Performance Management 121 9.1.2 Employee Productivity 121 9.1.3 Human Capital Salary Costs 122 9.1.4 Other Human Capital Related Costs 122 9.1.5 Human Capital Ratios 123 9.1.6 Human Capital Staffing Levels 123 9.1.7 EE Report 126 9.1.8 Skills Development 127 9.2 BEE 128 9.2.2 Training and Capacity Development 128 9.2.3 Supplier Summit 128 9.2.4 Supplier Audits 128 9.3 HIV and AIDS 129 9.3.1 HIV/Aids Structures 129 9.4.2 Education 129 9.4.3 Monitoring and measuring of performance 129 9.4.4 Case Management 129 SECTION 10 DEPENDENCY MATRIX 130

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BUSINESS ACRONYMS AA – Affirmative Action AMR – Automated Meter Reader AMP -Amperes ASGISA –Accelerated and Shared Growth Initiative BEE – Black Economic Empowerment BSC – Balanced Score Card CAIDI – Customer Average Interruption Duration Index CAIFI – Customer Average Interruption Frequency Index CAPEX – Capital Expenditure CBD – Central Development District CFL – Compact Fluorescent Light COJ – City of Johannesburg DIFR- Disabling Injury Frequency DME – Department of Mineral and Energy DSM – Demand Side Management EDI – Electricity Distribution Industry EE –Energy Efficiency EPWP – Expanded Public Works Programme GAAP – Generally Accepted Accounting Principles GDS – Growth Development Strategy GE – Gender Equity HV- High Voltage IDP –Integrated Development Plan IEP – Integrated Energy Planning ISD - Infrastructure and Services Department IT – Information Technology JDA – Johannesburg Development Agency JMPD – Johannesburg Metro Police Department JRA – Johannesburg Road Agency KPI – Key Performance Indicator KVA- Kilo Volt Ampere KWH- Kilowatt Hour LPU – Large Power Users LV- Low Voltage MD – Managing Director MV- Medium Voltage MVA – Mega Volt Amperes MFMA- Municipal Finance Management Act MOE – Municipal Owned Entity MSA – Municipal Systems Act NERSA – National Energy Regulator of South Africa NPR – Network Performance Ratio OPEX – Operating Expenditure RACI – Responsible Accountable Consulted and Informed RDP – Reconstruction and Development Programme RED – Regional Electricity Distributor R & D – Research and Development SAIDI –System Average Interruption Duration Index SAIFI - System Average Interruption Frequency Index Continuous Strategy Improvement - Rev 17 – Page 4 of 131 Approved by Board on 6 Aug 2009

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SBA -Sale of Business Agreement SCADA – Supervisory Control and Data Acquisition SDA- Service Delivery Agreement SHER – Social Health Environmental Responsibility SHU – Shareholder’s Unit SPU –Small Power Users STI – Small Ticket Item

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SECTION 1: EXECUTIVE SUMMARY

This document spells out City Power’s expected course of action for the period 2009/2014. It provides an analysis of the day-to-day operations, the financial and budgetary environment, the people, inter-governmental initiatives as well as information on collaboration with other sectors.

City Power has been in existence since January 2001, as an electricity distributor. Its mandate is to purchase, distribute, and sell electricity in the City of Johannesburg, as well as managing the City’s street and public lights.

The City of Johannesburg has developed a strategic thrust which acts as a central theme of principle guiding the direction that City Power should follow. This includes the following: • Maximising access to electricity • Reducing maintenance backlogs • Reducing losses • Infrastructure upgrading • Implementation of Demand side Management (DSM) 1.1 Highlights and Challenges of the business

During the past financial year, City Power has made significant progress. Some examples of this are: • Prompt response to the energy efficiency crisis in the country; • Leading in the implementation of a detailed demand side management programme; • Exceeding target on a number of performance measures, including payment levels for both key customers, on bulk outages, query resolution times, Expanded Public Works Programme (EPWP), employment equity, gender equity, Black Economic Empowerment and Engendered expenditure; • 98% of the capital budget was spent on improving and upgrading of the network, and, • Compliance to the NRS 048 standards and SHER

In order to realise our vision, of being a “World-class electricity distributor”, City Power is striving to become a customer-focused organisation by incorporating the voice of the customer as part of our business analysis. This effort will help us ensure that we deliver the right service to our customers in the most efficient and effective manner. One of the major opportunities for the company to practice the above has been presented by the 2010 FIFA World cup, to be hosted by South Africa. As we build on the previous year’s accomplishments, we are continuing to address the following challenges: • Funding of infrastructure upgrade and refurbishment; • Energy supply constrains; • Increase in the price of primary energy and other resources; • Expedite research and deployment of renewable energy technologies; • Skills constraints; and, • Uncontrollable increase in theft and vandalism

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This plan highlights the methodology which City Power will use to ensure continuous performance improvement in the business and improving service to its customers.

1.2 Structure of the document

Section1 is the Executive Summary.

Section2 provides a detailed description of the company Overview by outlining what the core business of the company is, the various types and number of customers to whom we provide our services.

Section3 is the Strategic agenda which provides the company goals, Mayoral priorities, strategic priorities, as well as the company’s response to the IDP & GDS.

Section 4 discusses the Operational agenda: which provides a progress report on various projects that the company has embarked on, with special focus on the 2010 FIFA World Cup and the City of Joburg strategic agenda.

Section 5 is the Departmental Balanced Scorecard, a framework for performance monitoring.

Section 6 gives a detailed description of the methodology used to assess and analyse risks holistically. The top business risks are listed, along with information on their background, the control measures in place, and actions that will be followed to mitigate and manage these risks (how they will be addressed).

Section 7 has the financials and is divided into CAPEX, OPEX and Tariff Plan. The CAPEX section presents a comprehensive overview of the long-term capital budget and a skeleton of the five-year capital budget. It also shows what funds are used by the company to acquire or upgrade physical assets, such as plants and equipment, in order to provide sustainable, affordable, safe and reliable electricity; and how these funds are deployed. At the end of this subsection, the impact of not receiving sufficient funds is discussed.

Section 8 gives a profile of the Ward priorities. It provides details of various projects which will be undertaken per ward enlisting the following: ward number, issues, the corresponding action, who and when, as well as budget resources

Section 9 provides the analysis of such aspects as employee satisfaction, skills development, employee productivity, salary costs, staffing, capital outflow and employment equity, together with the plan which has been developed to address these aspects.

Section 10 provides a table of the Dependency Matrix, which lists the processes or projects that require support from the other departments within the city of Johannesburg.

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SECTION 2: COMPANY OVERVIEW

2.1 Vision, Mission and Mandate

2.1.1 Vision To be a world-class electricity distributor

2.1.2 Mission The mission of City Power Johannesburg (Pty) Ltd is to meet the expectations of our customers and stakeholders by: • Providing a sustainable, affordable, safe and reliable electricity supply • Providing prompt and efficient customer services • Developing and incentivising our employees • Being the preferred equal opportunity employer • Undertaking our business in an environmentally acceptable manner 2.1.3 Aspired values City Power aspires to be: • Resourceful • Resilient • Reliable • Respectful Always with Integrity

2.1.4 Business Operations Principles The company endeavours to operate its business in accordance with the following principles: • Customer-centric organisation • Seamless value chain driven organisation • Maximum technology enablement • Zero tolerance for poor performance • Business case driven investment decisions • One stop service, doing it right the first time 2.1.5. Company Details Company Name: City Power Johannesburg (Pty) Ltd Company Registration Number: Reg 2000/030051/07 Physical Address: 40 Heronmere Road, Reuven Postal Address: PO Box 38766, Booysens, 2016 Phone Number: (+27) 011 490 7000 Fax Number: (+27) 011 490 7590 E-mail: [email protected] Website: www.citypower.co.za Customer Contact Centre: JoConnect at (+27) 011 375 5555

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2.1.6 Operating History Following the first democratic elections that took place in 1994, and the local election that followed in 1995, eleven local authorities were amalgamated to form the Greater Johannesburg Metropolitan Council. By mid 1997 it became apparent that the new structures were not optimally effective and the Councils of Greater Johannesburg were facing a severe financial crisis. It was then agreed that a unified, metropolitan-wide initiative was necessary to focus specifically on the critical problems facing the city. This led to the inception of the iGoli 2002 plan (iGoli 2002 was essentially a three- year strategic plan). It involved the structural transformation of Metro functions with the view to ensuring enhanced and more cost effective service delivery. It achieved this by reducing fragmentation, eliminating duplication, improving accountability, focussing on human resource development and improving performance incentives. From an organisational perspective the iGoli 2002 Plan put in place “sensible” structures that delivered at greater levels of efficiency.

The iGoli 2002 Plan envisaged that the City would work through a combination of new political governance structures, agencies and corporatised entities. A key element of the iGoli 2002 strategy for service delivery was the establishment of utilities, agencies and corporatised entities now called the municipal own entities (MOEs). One of the entities established was City Power Johannesburg (Pty) Ltd, 100% owned by the City of Johannesburg, and established in terms of the Companies Act, on 1 November 2000.

In line with the establishment of City Power Johannesburg (Pty) Ltd, the Council utilises an Infrastructure and Services Department (ISD) to oversee the performance and a Shareholder Unit (SHU) to oversee the governance of the company, as well as to regulate it. In this regard various agreements in principle were concluded during the establishment of the companies. These included the Sale of Business Agreement (SBA) and the Service Delivery Agreement (SDA).

The relationship maintained with the Greater Johannesburg Metropolitan Council is one of Service Authority and Service Provider. City Power Johannesburg (Pty) Ltd is the preferred Service Provider for the Service Authority, the Council.

2.1.7. Organisational Management and Structure 2.1.7.1 Board of Directors

City Power has a unitary board, which consists of executive and non-executive directors. The Board is chaired by a non-executive director; Ms Getty Simelane. The Board meets regularly, at least quarterly, and retains full control over the company. The Board remains accountable to the City of Johannesburg Metropolitan Municipality (the company’s sole shareholder) and its stakeholders, the citizens of Johannesburg. A Service Delivery Agreement (SDA), concluded in accordance with the provisions of the Municipal Systems Act (MSA) governs the company’s relationship with the City of Johannesburg. The Board provides monthly, quarterly, bi-annual and annual reports on its performance and service delivery to its parent municipality as prescribed in the SDA, the MFMA and the MSA. Such reports are submitted within the stipulated timeframes.

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Non-executive directors contribute an independent view to matters under consideration and add to the depth of experience of the Board. The roles of Chairperson and Managing Director of the company are separated, with responsibilities divided between them. The Chairperson has no executive functions. Members of the Board have unlimited access to the Company Secretary, who acts as an advisor to the Board and its committees on matters including compliance with company rules and procedures, statutory regulations and best corporate practices.

The Board, or any of its members, may, in appropriate circumstances and at the expense of the company, obtain the advice of independent professionals. A director and peer review as well as a Board evaluation is undertaken on an annual basis. The Articles of Association provide that the directors of the company will be elected by the shareholder and appointed by the Board of Directors. The Managing Director is appointed by the Board.

Board members

The Board currently consisted of six non-executive directors and two executive directors as indicated in table 1.1 below.

Table 1.1: Board members Member Portfolio 1 Ms Getty Simelane Chairperson of the Board 2 Mr Silas Zimu (MD)Executive Director 3 Prof. Tshilidzi Marwala Non -Executive Director 4 Ms Joyce Kumbirai Non-Executive Director 5 Adv Klaus Garlipp Non-Executive Director 6 Mr Honey Mateya Non-Executive Director 7 Mr Ghandi Badela Non-Executive Director 8 Ms Doris Dondur Non -Executive Director 9 Dr Yondela Ndema Non-Executive Director 10 Mr Brain Hawksworth Non -Executive Director Executive directors are regarded as contract employees in terms of the company’s conditions of service.

Board Sub-Committees and their Members

The following committees have been formed, each of which is chaired by a non-executive director. • Audit Committee • Human Resources and Remuneration Committee • Pricing and Regulatory Committee • Oversight Committee • Ad Hoc EDI Working Group

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Audit Committee Members

The Audit Committee consists of the following directors:

Table 1.2: Audit Committee members Member Portfolio 1 Ms Doris Dondur Chairperson of the Audit Committee 2 Adv Klaus Garlipp Non-Executive Director 3 Mr Brian Hawksworh Non-Executive Director 4 Mr Haroun Moolla Independent Member of the Audit Committee 5 Mr Waldo Hattingh Independent Member of the Audit Committee 6 Mr Harry Molokomme Independent Member of the Audit Committee 7 Mr Silas Zimu In attendance

The role of the Audit Committee is to assist the Board by performing an objective and independent review of the functioning of the company’s finance, accounting and risk control mechanisms. It exercises its functions through close liaison and communication with senior management and the internal and external auditors. The Audit Committee met once during the period under review.

The Audit Committee operates in accordance with a written charter authorised by the Board, and provides assistance to the Board with regards to: • Ensuring compliance with applicable legislation and the requirements of regulatory authorities; • Matters relating to financial accounting, accounting policies, reporting and disclosures; • Activities, scope, adequacy and effectiveness of the internal audit function and audit plans; • Reviewing and recommending the approval of external audit plans, findings, reports and fees; • Reviewing and recommending the approval of strategic risks and mitigating strategies; • Compliance with the Code of Corporate Practices and Conduct; and • Compliance with the Code of Ethics. HR & Remuneration Committee Members

The Human Resources and Remuneration Committee consists of the following directors:

Table 1.3: Human Resources and Remuneration Committee members Member Portfolio 1 Mr Honey Mateya Chairperson of the Committee 2 Ms Getty Simelane Non-Executive Director 3 Ms Joyce Kumbirai Non-Executive Director 4 Ms Doris Dondur Non-Executive Director 5 Mr Ghandi Badela Non-Executive Director 6 Mr Silas Zimu Executive Director

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The Human Resources and Remuneration Committee advises the Board on remuneration policies, remuneration packages and other terms of employment for all directors and senior management. Its specific terms of reference also include recommendations to the Board on matters relating to general staff policy remuneration, profit bonuses, executive remuneration, director remuneration and fees and service contracts.

Pricing & Regulatory Committee Members

The Pricing and Regulatory Committee consists of the following directors:

Table 1.4: Pricing and Regulatory Committee members Member Portfolio 1 Joyce Kumbirai Chairperson of the Committee 2 Prof. T Marwala Non -Executive Director 3 Mr Honey Mateya Non-Executive Director 4 Dr Yondela Ndema Non -Executive Director 5 Mr Silas Zimu Executive Director

The Pricing and Regulatory Committee advises the Board on strategic direction on electricity pricing strategies and policies, addresses regulatory changes in the Electricity Supply Industry that affects the company, ensures that the company complies with the regulatory requirements on tariffs, recommends structural tariffs changes to the National Electricity Regulator, and ensures compliance with NRS 047 (Quality of Service) and NRS 048 (Quality of Supply) regulations.

Board Oversight Committee Members

The Oversight Committee consists of the following directors:

Table 1.5: Oversight Committee members Member Portfolio 1 Adv Klaus Garl ipp Chairperson of the Committee 2 Ms Getty Simelane Non-Executive Director 3 Prof. T Marwala Non -Executive Director 4 Mr Ghandi Badela Non-Executive Director 5 Dr Yondela Ndema Non-Executive Director 6 Mr Silas Zimu Executive Director The Oversight Committee advises the Board on the oversight responsibilities set out in the supply chain management policy and procedures, which are in line with the Municipal Finance Management Act regulations on supply chain management. • The Oversight Committee operates in accordance with a mandate authorised by the Board, and provides assistance to the Board with regards to: Maintaining oversight over the implementation of the supply chain management policies as contained in the supply chain management manual; • Monitoring and reporting on the implementation of the supply chain management policy and procedures and the performance of supply chain management; • Assessing deviations and exceptions from policy and procedures;

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• Advising on the multi-year business plan and annual budget plan; • Monitoring and reporting on company spend against the approved budget and business plan; • Assessing the achievements of output on projects. The Oversight Committee is informed of all emergency procurement and considers the following; • Approving any spending outside the approved plans; and • Pro-active approval of deviations/amendments from policy. (Ad Hoc) Edi Working Group Members

The Ad Hoc EDI Working Group consists of the following directors:

Table 1.6: EDI Working Group Member Portfolio 1 Prof. T Marwala Chairperson of the Committee 2 Adv Klaus Garlipp Non-Executive Director 3 Ms Getty Simelane Non-Executive Director 4 Dr Yondela Ndema Non-Executive Director 5 Mr Silas Zimu Executive Director The Ad Hoc EDI Working Group is an ad hoc joint executive and Board working group formed to consider and advise the company of EDI restructuring developments and to prepare City Power for transition into the RED.

(Ad Hoc) Turnaround Strategy Working Group Members

The Ad Hoc Turnaround Strategy Working Group consists of the following directors:

Table 1.7: Turnaround Strategy Working Group Member Portfolio 1 Mr Honey Mateya Chairperson of the Committee 2 Mr Brian Hawksworth Non-Executive Director 3 Ms Doris Dondur Non-Executive Director The Turnaround Strategy Working Group is an interim working group formed to work with management on the development of a turnaround strategy for the company.

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2.2 Description of day-to-day operations

City Power Johannesburg (Pty) Ltd is the Electricity Distribution Service Provider to the Service Authority, Johannesburg Council. The core competency of the business is to purchase, distribute and sell electricity within its geographical footprint of business. The National Energy Regulator of South Africa (NERSA) granted City Power Johannesburg (Pty) Ltd a licence to trade on 19 December 2001. The City of Johannesburg is the sole Shareowner. The Council, by means of a Service Delivery Agreement, regulates the service in respect of the following: financial issues (such as tariffs and capital expenditure), human resource issues (such as skills development), delivery targets (maintenance of assets and addressing assets), and standards of customer care.

City Power Johannesburg (Pty) Ltd is accountable to provide network services to all its customers. Network services include: • the purchasing and distribution and sale of electricity • constructing networks • connecting customers • repair and maintenance of networks • installation and maintenance of public lighting

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The City of Johannesburg provides retail customer services for all domestic customers, i.e. processing of applications, customer queries, customer complaints, customer accounts and revenue management. City Power Johannesburg (Pty) Ltd provides retail customer services for the key customers, top customers and pre-paid customers only.

2.3 Quantitative Indicators

The business model designed to execute the company mission is given in Figure 2.1 below. The subsequent paragraphs provide high level information on the characteristics/dimensions of each business model element.

Figure 2.1 Business Model

2.3.1 Provide Network Infrastructure City Power Johannesburg (Pty) Ltd projected network infrastructure status is given in Table 2.1

Table 2.1: Network Infrastructure Measure Indicator Unit 07/08 08/09 09/10 Plan Plan Plan Eskom Supply Points No 39 39 42 High voltage Substations (Bulk Intake No 5 5 5 Points) Medium voltage Substations (Major No 82 82 82 Continuous Strategy Improvement - Rev 17 – Page 15 of 131 Approved by Board on 6 Aug 2009

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Measure Indicator Unit 07/08 08/09 09/10 Plan Plan Plan Substations) excluding Bulk Intake Substations Low voltage Substations (Devices) No 14252 14764 15276 High voltage Overhead Transmission km 811 811 811 Lines > 44kV) High voltage Transmission Cables > km 93.68 93.68 93.68 44kV Medium voltage Overhead Lines km 11.2 11.2 11.2 >20.5kV and < 44kV Medium voltage Cables >20.5kV and km 123.3 123.3 123.3 <44kV Ripple Relays Installed No. 183 000 232 000 281 000 Ripple Relays In-service No. 92 000 167 000 242 000 2.3.2 Distribute Electricity City Power Johannesburg (Pty) Ltd operates six independent networks, representative of the former Municipal Transmission Systems. Figure 2.2 depicts the independent systems:

Figure 2.2: City Power Johannesburg (Pty) Ltd Networks

Figure 2.3 below gives the schematic representation of City Power Johannesburg (Pty) Ltd’s Johannesburg transmission system and bulk power nodes:

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Figure 2.3 City Power Johannesburg (Pty) Ltd’s Johannesburg Transmission and Bulk Power Nodes

DELTA 2*250MVA 88kV Transmission Circuits

KELVIN PS ESKOM 275kV 600MW Firm capacity Rosebank, Ridge, 250 MVA Fort,Parkhurstand MD 200 MVA MD 419 MVA Roosevelt Park Marlboro Cydna, Gresswold, Eskom Observatory, Bellevue, Orchards, Alexandra Proposed and Westfield. ESKOM 275kV Sebenza 275kV Alexandra Intake from Firm capacity township 750 MVA Eskom MD 512 MVA

Braamfontein, John Ware, Bree, Mayfair, Selby, and Central (20kV).

Eldorado, Nancefield, Pritchard, Siemert, Central, Nirvana, Hursthill, Robertsham, Mondeor, Industria, Eikenhof, FORDSBURG Mulbarton, Moffat, Cleveland, and Soweto. Kazerne, Wemmerand Van 4*250MVA PROSPECT Beek. 4*250MVA

ORLANDO 88kV SWITCHYARD ESKOM 275kV Proposed Firm capacity Proposed Mondeor 88kV 750 MVA Quattro 275kV Bus MD 869 MVA Eskom Intake Lenasiafrom Eskom

This simplified operational diagram depicts the Johannesburg portion of City Power’s transmission network. Bulk power is received from Eskom at three bulk intake points (Prospect, Fordsburg and Delta) at a voltage of 275kV. At these stations the voltage is transformed down to 88kV for onward transmission via City Power’s transmission grid to over 30 major step-down substations.

In addition, the 88kV transmission network is supplemented by a power input from the independently operated Kelvin Power Station.

There are also two smaller substations which receive an in-feed directly from the Eskom networks, which supply a small number of City Power customers.

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2.3.3. Network Restoration Table 2.2 below gives the network restoration times for the past three financial years. Restoration times have improved over the years. The actual restoration times for faults in the 3.5, 7.5 and 24hrs categories are better than specified in NRS 047; however, the restoration times for faults in the 1.5 hours category do not meet the NRS 047 target. Therefore, on average, City Power’s performance is better than the targets set.

Table 2.2 Restoration Times 2005/6 2006/7 2007/8 08/09 09/10 Indicator Unit Actual Actual Actual Plan Plan Restoration % (Supply restored within 1,5 hours) % 26.32 24.73 25.86% 30% 30% Restoration % (Supply restored within 3,5 hours) % 66.97 64.56 66.23% 60% 60% Restoration % (Supply restored within 7,5 hours) % 86.97 91.18 91.20% 90% 90% Restoration % (Supply restored within 24 hours) % 95.53 98.68 98.84% 98% 98% Based on the restoration times of 1.5, 3.5, 7.5 and 24 hours, the plan is to meet all four restoration times KPI’s by 2009.

2.3.4 Suppliers of Materials City Power’s Supply Chain strategy is configured using a stock classification model that places importance on the variables of network criticality, cost and market availability. All materials requirements are intended to be sourced through supplier agreements based on strategic sourcing principles, with strategic long term agreements focusing on equipment that is of particular importance to the business. Supply Chain Management has implemented a number of contracts based on strategic sourcing principles. The commodity groups, to which this process has been applied are Switchgear, Transformers, Cable, Cable Accessories and STI’s (Small Ticket Items).

In materials management stock items are classified as “A”, “B” or “C”. “A” materials are the most “important” items. This is determined by factors such as usage value, lead time, quantity used, the consequences of being out of stock, etc. “C” items are the least important items. These are typically items where a stock out is not critical to operations and/or they can be obtained quickly and easily. The materials spend profile is significantly skewed with a large proportion of expenditure directed to more strategic items classified as “A” items. Supplier expenditure on materials likewise features this profile as illustrated in the table below.

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Table 2.3: Top 15 Suppliers of stock materials by value 2007/08 Rank Vendor Value 1 CBI ELECTRIC : AFRICAN CABLES R 280,929,128.88 2 DESTA POWER MATLA (PTY) LTD R 38,867,096.19 3 ELECTRO INDUCTIVE INDUSTRIES R 28,992,981.29 4 LANDIS + GYR R 20,232,700.00 5 PCB POWER TRANSFORMERS R 11,092,763.00 6 ALSTOM DISTRIBUTION TRANSFORMERS R 10,108,651.52 7 RAYTECH ENERGY - A DIVISION OF R 9,897, 976.97 8 ALSTOM SWITCHGEAR R 9,587,525.47 9 BEKA (PTY) LTD R 9,245,008.50 10 ABB POWER TECHNOLOGY MEDIUM VOLTAGE R 8,561,603.00 11 HAWKER SIDDELEY TRANSFORMERS R 7,601,939.00 12 INDUSTRIAL POLES & MASTS (PTY) LTD R 6,825,489.10 13 MEDUPE DISTRIBUTORS R 6,758,967.88 14 TANK INDUSTRIES (PTY) LTD R 6,724,218.71 15 STEELCOR POWER R 5,098,720.00 Rest R 55,258,341.06 Grand Total R 515,783,110.57 2.3.5 Quality of key customer Relations 2.3.5.1 Customer Base

City Power’s customer base as at June 2008 was 300,013. Initiatives are currently underway to convert conventionally metered (‘credit’) domestic customers to prepaid metering. This, compounded with the unprecedented growth in the domestic market segment, will lead to a large increase in the number of prepaid customers. A breakdown per customer segment is given in Graph 2.4 below:

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Graph 2.4.Customer Base

The City of Johannesburg provides retail customer services for the domestic customer segment whilst City Power Johannesburg (Pty) Ltd provides retail customer services for the remaining segments. Graph 2.5 below depicts the customer base distribution:

Graph 2.5: Customer Base Distribution

Key Customers Large Power Users 0.05% 1.45% Business Users Agricultural 0.01% 4.17%

Prepaid Customers 31.62%

Conversional Customers 62.70%

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The Top 20 customers, based on revenue in the 2007/08 financial year are given in Table 2.6 below:

Table 2.6: Top 20 Customers Contract No.: Account Customer Name Annual Amount (R'000)

1 220063623 Rand Water 69,707,875 2 220063905 Standard Bank 20,822,461 3 220078683 SABC 19,308,998 4 220062010 Carlton Centre 16,121,773 5 220070589 Pareto Limited (Cresta) 15,874,330 6 220068999 Johannesburg Hospital 15,412,281 7 220055870 Haggie Son & Love 14,040,614 8 220007516 Westgate Shopping Mall 12,764,993 9 221005656 Ekurhuleni-Phomolong Viola 12,669,804 10 220063824 Bank City Facilities 12,297,843 11 220028474 Chris Hani Baragwaneth Hospital 11 ,922,156 12 221042489 Vodacom 11,117,911 13 220076252 Gold Star Yeast (Pty) Ltd 10,662,133 14 220026639 R.M.S Southgate Management Co. 9,273,971 15 220058278 Rycklof Beleggings EDMS Bpk 6,994,235 16 220021060 ABSA 6,622,762 17 220028192 Akani Egoli (Pty) Ltd 6,388,260 18 220097750 Killarney Mall 5,910,523 19 220021101 ABSA Prop Gauteng West 5,715,258 20 220028273 DE Beers Group Services (Pty) Ltd 3,536,150 287,164,331 The Manage Customer Interface Value Chain is aimed at fostering a superior customer experience at the point of contact until customers’ needs are met. The successful implementation of this value chain is not only fully dependent on the other four value chains, but also on the proper implementation of outbound services, such as customer education and communication.

The following are the main challenges:

City Power Johannesburg (Pty) Ltd is not the only place where customers can log their queries, and does not exercise control on how customers are handled at other customer interface points. That makes it difficult to provide acceptable customer service to all customers at all customer interface points. • The interface between the PEGASUS system and e-Respond is not optimally used. • No full CRM solution - Pegasus system is only a call-take system • Non –adherence to the KPI ‘s as stipulated in the other four key value chains • Limited Call Centre service offerings

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2.3.5.2 Call Take

Table 2.7 below provides information on customer contacts made to the company’s call centre and the call centre’s performance:

Table 2.7: Company Call Centre Performance January 2008 – September 2008 Jan Feb Mar Apr May June Jul Aug Sep 2008 Unit 08 08 08 08 08 08 08 08 08 Total Calls 9593 5180 10980 9992 65883 10709 1212 6805 6055 Offered No 9 6 8 0 6 34 6 3 Total Calls 6468 4381 56906 6761 56252 60092 7672 6136 5862 Answered No 1 1 0 1 5 5 Answer Rate % 67% 85% 52% 68% 85% 56% 63% 90% 97% Calls Answered 52% 80% 73% 61% 77% 58% 66% 79% 90% in 30sec % Lost Call Rate % 33% 15% 48% 33% 15% 44% 37% 10% 3% Average Wait 01:32 37 1:03 1:20 :39 01:49 01:20 00:18 00:09 Time of Answered Calls Sec Max Wait Time of 33:57 34:26 21:25 30:43 17:32 27:16 24:11 17:52 10:29 Answered Calls Min Average Talk 02:09 02:16 2:05 01:55 01:56 01:57 01:58 02:14 02:17 Time Min Calls per Agent No 2131 1295 1387 2253 1562 1820 1826 1427 1363 There is a fluctuating trend of customer contact due to seasonality. The trend is highly influenced because the majority of customer contacts are power related. High increase in call volumes are due to load shedding.

2.3.5.3 Network Related Contacts

There has been an increase in network-related complaints. A significant portion of these calls can be attributed to repeated calls in the event of prolonged outages and load shedding.

Typical network call types that the company receives are: power loss, earth leakage, damaged cables, illegal connections, sparks on poles, trees touching lines, shocks on taps, voltage fluctuation, lines down, phases out, street light calls, prepaid queries regarding units or no power, vandalism, size of supply and quality of supply, meters burnt out, no hot water, stolen overhead lines and temporary supply queries.

2.3.5.4 Non-Network Related Contacts

There has been a steady increase in account related queries. These queries are caused mostly by estimated accounts and customers applying for clearance certificates.

Typical types of calls include: final readings, reprint of accounts, balance enquiries, final accounts, payments not credited, adjustments, account too high, account not received, information requests, change of details, reconnections, disconnection requests, meter boxes not installed, meters not read, meters not turning, as well as tariff queries.

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2.3.5.5 Quality Customer Information

The utilisation of multiple systems that are not integrated poses a challenge in the quest to providing quality information. The company does not have one view of a customer, or a history of the customer, as the information resides in different systems. Data cleanup initiatives will result in the refinement of customer data.

2.3.5.6 Provide Services

Table 2.8 below shows the City Power Johannesburg (Pty) Ltd network of service outlets:

Table 2.8: Network of Service Outlets Jul’07 to June’08 Service Range Area Walk-in Service Centres

Range: Randburg Hursthill Reuven Lenasia Midrand Alexandra Roodepoort and Siemert Quotations to Customers 496 1803 1073 366 993 282 1235 Providing Supply 496 1141 1047 322 847 253 1050 Account Queries 6254 9551 18704 4402 1866 12903 7861 Meter Reading Queries 5949 4260 8869 3165 269 6152 6398 Complaints 7834 8439 19172 7311 2905 22793 9316 Enquiries 8 270 816 8 424 59 79 Requests Received 68 1041 2215 2851 2562 461 1916 Communication Sessions 230 35 308 65 38 34 17 Payments handled 0 123 13953 650 4 19 81

2.4. Support Processes

• The following support processes are also deployed in the company: • Providing corporate services • Providing financial and procurement services • Providing public relations services • Providing legal services • Providing internal audit services • Providing strategy development and execution management services

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SECTION 3: STRATEGIC AGENDA

3.1 Strategic Agenda Priorities

The strategic agenda of City Power Johannesburg (Pty) Ltd is:

“To enhance the value proposition of the company to become the model for and leader of future developments in the electricity distribution field.”

3.2 Strategy Management Processes

The company has successfully deployed the strategy focused business planning methodology by developing and implementing a strategy management value chain, depicted below in Figure 3.1. Furthermore, it has succeeded in deploying a strategy focused governance structure to facilitate the development, execution and performance monitoring of the company strategy. A performance scoring appraisal is currently under review in an endeavour to improve and align it to the CoJ performance scoring system.

Figure 3.1: Strategy Management Value Chain

3.4 Strategic Goals

In pursuance of its strategic intent City Power Johannesburg (Pty) Ltd has identified its strategic goals as given in Table 3.1:

Table 3.1: Company Strategic Goals Perspective Goal CoJ Stakeholder Sustain COJ stakeholder satisfaction Perspective Community Perspective Sustain community satisfaction Financial Perspective Increase the profit base without compromising the viability of the business Customer Perspective Sustain customer satisfaction Internal Processes Align processes and practices to support the vision and enhance our value proposition Learning and Growth Maximise employee productivity and provide enabling information

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systems

3.5 Mayoral Priorities

City Power is a municipal entity and thus has to align itself with the mayoral priorities of the City of Johannesburg. In Johannesburg there are six mayoral priorities as depicted in table 3.2:

Table 3.2: Mayoral Priorities Mayoral Priority City Power’s response with regards to outcome Economic Growth and Job Align supply and demand: BEE, Engendered spend, EPWP, Creation Free Basic Electricity, Providing product and price range, etc Health and Community Compliance to basic services delivery programme Development Housing and Services Adherence to the housing requirements, compliance to service reliability programme Safe, Clean and Green City Compliance to SHER, address the demand side management Well Governed and Managed Compliance to legislation, regulatory and governance policies City HIV/AIDS Compliance to the HIV/AIDS programme

3.6 Company Strategic Priorities

After due consideration, based on past performance and future challenges, the company determined the following three strategic priorities, in order of priority, to ensure sustained business performance:

Figure 3.1 below shows the company’s strategic priorities

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• Prioritize social SERVICE transformation (public lighting/electrification) • Seek more revenue • Loss reduction

WORLD CLASS ELECTRICITY DISTRIBUTOR

PEOPLE INFRASTRUCTURE • Management style • Replacement & upgrades • Improve climate • Expand network • Right people in right places • Maintenance • Training in key areas • Outsourcing • Demand-side management • Alternative energy sources

Strategic Issues

The following are the strategic issues that the company has to take into account during 2008/09 and 2009/10 • 2010 FIFA World Cup • Regional Electricity Distributors • Phakama • Managing new growth o Regulation for new developments o ASGISA o Regulation for existing homes • Improve service delivery/maximising profit • Reduce outages and improve restoration • Energy crisis o Reduce consumption by 10% o Energy generation capacity for Joburg • Theft and vandalism • Improving the working environment • Eskom tariff changes o Create scenarios

Top 10 Priorities for 08/09 and 09/10

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• One team/structure • Strategic clarity at all levels • Skills o Analyse vacant posts & fill where necessary o Improve retention of high performers o Training & development • Asset management o Clear maintenance plan o Replace some contractors with full-time staff (budget needed) • Funding • Develop aggressive anti-theft strategy • Effective performance management o Revenue/gross margins o Clean audit o 30-day reviews o Deal with non-performance • Value chains o Clarify roles and operational processes o Corporate Services o IT o Improve procurement • Improve communication (internal & external) • Improve call centre performance

Five year strategy, IDP and delivery agenda

The City of Johannesburg has a Growth and Development Strategy (GDS), which is a 20 year plan for the city. The GDS is made up of sectors, and is governed by six developmental principles. The six developmental principles are: • Proactive absorption of the poor • Balanced and shared growth • Facilitated social mobility • Settlement restructuring • Sustainability & environmental justice • Creative governance solutions Table 3.3 Developmental Principles GDS City Power’s response 08/09 plan 09/10 Plan Principles Proactive Basic Service: 3000 planned, final target TBD 3000 planned, final target TBD absorption of electrification and public and is dependant on housing and and is dependant on housing and the poor lighting funding funding Public Lighting: Public Lighting: • 63 of the formal areas 64 of the formal areas • 14% of the informal areas 16% of the informal areas Effective roll-out of Planned Upgrade and Planned Upgrade and infrastructure Refurbishment: Refurbishment: Continuous Strategy Improvement - Rev 17 – Page 27 of 131 Approved by Board on 6 Aug 2009

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GDS City Power’s response 08/09 plan 09/10 Plan Principles programmes Bulk Bulk Distribution Distribution Implement social Roll out of prepaid meters Roll out of prepaid meters package in multi- Provide FBE Provide FBE dwelling households, Dependant on housing and Dependant on housing and funding particularly in residential funding flats and inner city buildings

Balanced & Network upgrading Planned Upgrade & Planned Upgrade & Refurbishment shared growth programme /Asset Refurbishment on both Bulk and on both Bulk and Distribution refurbishment and Distribution CAIDI maintenance programme; CAIDI CAIFI CAIFI SAIDI Implement infrastructure SAIDI SAIFI maintenance SAIFI The planned/unplanned ratio to programmes to improve The planned/unplanned ratio to 75:25 efficiencies and utility 75:25 Planned R&M Cost: costs Planned R&M Cost: R128m

Facilitated Implement basic Electrification: 3000 dependant Electrification: 3000 dependant on social infrastructure on housing and funding housing and funding mobility programmes to support/facilitate housing delivery programmes/strategy Develop, implement and Tariff plan and implementation Tariff plan and implementation review tariff policies that support developmental state objectives Support female and EPWP: EPWP: youth business Permanent: 0 (CP contracts are Permanent: 0 (CP contracts are 3rs development 3rs as per MFMA) as per MFMA) programmes with Temporary: 2600 Temporary: 2600 Community BEE spent: 74% BEE spent: 75% Development Engendered spent: 22% Engendered spent: 23%

Settlement Support the new strategy Electrification: 3000 dependant Electrification: 3000 dependant on restructuring to formalise informal on housing and funding housing and funding settlements

Sustainability Demand side Identify and implement DSM Identify and implement DSM and management programme; projects depending on projects depending on availability environmental availability of funds of funds justice Infrastructure Turbines reinstated subject to Turbines reinstated subject to modernisation funding funding programme; AMR roll out AMR roll out Continuous Strategy Improvement - Rev 17 – Page 28 of 131 Approved by Board on 6 Aug 2009

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GDS City Power’s response 08/09 plan 09/10 Plan Principles Solar light and solar water Solar lighting and solar water heating heating DSM roll out DSM roll out Network Protection Technology Network Protection Technology Implementation of prepaid Implementation of prepaid Resource conservation Investigation of energy usage Investigation of energy usage programme patterns, including the Inner patterns, including the Inner City; City; Investigation of the relationship Investigation of the relationship between usage per capita and between usage per capita and usage per consumer unit; usage per consumer unit; Identifying areas where a revised Identifying areas where a revised approach is necessary (e.g. Tariff approach is necessary (e.g. Tariff model to suite specific areas); and model to suite specific areas); Recommendations for Tariff and adjustments for 2009/10 will be Recommendations for Tariff prepared. adjustments for 2008/09 will be prepared. Implement education and Customer Education forums Customer Education forums awareness programmes Key customer: 1 Key customer: 1 in energy LPU: 10 LPU: 10 Domestic: 84 Domestic: 84

Creative Proactive community Customer Education forums Customer Education forums governance engagement through on- Key customer: 1 Key customer: 1 solutions site inspections – LPU: 10 LPU: 10 improved turnaround Domestic: 84 Domestic: 84 times The GDS is translated into the Integrated Development Plan (IDP). City Power influences the GDS’s many sectors and principles, but most of it’s influence is on the infrastructure sector. The company priorities will be in line with the GDS, IDP and the strategic framework of the shareholder. The table, 3.4 below, shows how the City Power’s strategic agenda is in line with the GDS:

Table 3.4: City Power’s strategic agenda and GDS Long-term Long-term 5-year strategic Delivery agenda for Delivery agenda for Goals Strategic Objectives 2008/09 2009/10 Interventions 1. Extend a Eliminate all Distribute 3000 dependant on 3000 planned, final differentiated backlogs electricity to at housing and funding target TBD and is package of In access to least 95% of dependant on housing service that is basic services formalised and funding fit for purpose, households affordable and Provide street The target for 08/09 The target for 08/09 is reliable, in lighting to 95% of is 1% which means it 1%, this means it will be accordance formal areas in will be moving from moving from 62% to with national Johannesburg but 61% to 62% 63% cumulative and is policy City Power will cumulative. This dependant on funding.

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Long-term Long-term 5-year strategic Delivery agenda for Delivery agenda for Goals Strategic Objectives 2008/09 2009/10 Interventions commitments only achieve 65% means the total This means the total and an agreed because of number of public number of public light local definition continued lights will be 182000 will be 186000 of appropriate budgetary levels of constraints service Provide street The target is 13% in The target is 2% in lighting to 60% of targeted high crime targeted areas, this informal areas means it will be moving settlements from 13 to 15% cumulative and is dependant on funding. Increase allocation Provide households Provide households that of free basic that consume up to consume up to 500kWh electricity to poor 500kWh with FBE. with FBE households and those with special needs 2. Extension Within a Reduce losses by 11.9% total losses. 11.4% total losses and competitive 3% to 1% maintenance of industry Reduce electricity Implement and Implement and improve reliable and environment, outages by 50% by improve on the asset on the asset maintenance competitively contribute to year 2010 (bulk, maintenance management strategy priced services meeting the medium and low management strategy CP to reduce bulk required by management voltage) but City CP to reduce bulk outages to 75 commercial and needs of the Power will only outages to 80 and MV outages to 1000. institutional city achieve 30% and MV outages to Implement infrastructure consumers because of the 1100. The refurbishment Budgetary planned/unplanned programmes constraints ratio to 75:25; To be CAIDI experienced in able to reduce CAIFI 07/08 electricity outages by SAIDI 30% in 2010, CP and SAIFI future energy distribution and The planned/unplanned demand requirement ratio to 75:25; will be evaluated and a strategy developed to secure supply. This will also include examining supply capacity from various supply points. Within the Reduction on Investigation of Investigation of energy framework of energy usage/ energy usage patterns usage patterns in low- the RED meet Improve energy in low-income income residential areas, the electricity efficiency (ISD) residential areas, including the Inner City;

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Long-term Long-term 5-year strategic Delivery agenda for Delivery agenda for Goals Strategic Objectives 2008/09 2009/10 Interventions needs of all including the Inner Investigation of the commercial and City; relationship between bulk electricity Investigation of the usage per capita and users in the city relationship between usage per consumer unit; usage per capita and Identifying areas where a Through usage per consumer revised approach is efficiency unit; necessary (e.g. Tariff improvements, Identifying areas model to suite specific reduce the cost where a revised areas); and per capita approach is Recommendations for operating necessary (e.g. Tariff Tariff adjustments for expenditure for model to suite 2009/10 will be running and specific areas); and prepared. maintaining all Recommendations service for Tariff networks adjustments for 2008/09 will be prepared.

3. Service Ensure Reduce illegal Implement a Implement a delivery is integrated electricity comprehensive comprehensive strategy secured through design and connections strategy on the on the reduction of well designed, maintenance reduction of illegal illegal connections well-integrated planning for all connections subject subject to funding and well- infrastructure to funding availability. This maintained with a view to availability. This includes: Generation manageable includes: • Continued customer /supply, recurrent costs • Continued education processing and and extended customer programmes in distribution life of service education targeted areas; networks networks programmes in • Working with JMPD targeted areas; to remove illegal • Working with connections JMPD to remove *Continuous roll-out illegal of protective connections structures in order to Continuous roll- reduce tampering out of protective with conventional structures in meters and street order to reduce light poles; tampering with • Promote alignment conventional with the City’s debt meters and street write-off and light poles; indigence support • Promote programmes; alignment with • Continue installation the City’s debt of prepayment meters

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Long-term Long-term 5-year strategic Delivery agenda for Delivery agenda for Goals Strategic Objectives 2008/09 2009/10 Interventions write-off and indigence support programmes; • Continue installation of prepayment meters

4. Leadership in Ensure Implement at least Turbines reinstated Turbines reinstated sponsoring and investments to five innovative new subject to funding subject to funding adopting extend the technologies in Solar heating, Solar heating, lighting innovative , yet service life of service delivery lighting and other and other technologies locally relevant infrastructure technologies technologies are within cost Solar Water heating Solar Water heating and delivery effective Roll out AMR/Smart Roll out AMR/ Smart capabilities that thresholds and Metering metering enable new technical DSM/EE DSM/EE service tolerances Roll out CFL Roll out CFL offerings and Network Automation Network Automation ongoing Network Protection Network Protection efficiency Technology Technology improvement Contribute to Develop and Development and Development and across all Research and implement implementation of a implementation of a service areas industry comprehensive demand side energy demand side energy development by demand side management management programme, sponsoring and management programme. in conjunction with CP. where programmes for By–law support for Enforce by–law for appropriate energy installation of ripple installation of ripple adopting new relays in hot water relays in hot water technologies geysers in new geysers in new that enable developments. developments. service Environmental Environmental efficiency and Management Unit Management Unit will quality will continue to continue to address the improvements, address the conservation awareness especially those conservation program in the 08/09 that are awareness program financial year. relevant to in the 07/08 financial developing year. world/city contexts

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Long-term Long-term 5-year strategic Delivery agenda for Delivery agenda for Goals Strategic Objectives 2008/09 2009/10 Interventions 5. Maintain a Maintain and Support the Assist in the Assist in the regime of improve service establishment of establishment of establishment of RED responsible delivery the RED RED service delivery efficiency regulation and levels through stakeholder progressive and interaction continuous improvement

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SECTION 4: OPERATIONS AGENDA

4.1. Service Delivery

4.1.1. Key Operations and Financial Impact The Strategic priority objectives are: • Electrification • Public lighting • Reduction of losses • Reduction of outages • Demand side management programme • Inner-city rejuvenation • 2010 FIFA World Cup • EPWP • Revenue Maximization

Electrification City Power has electrified over 59 000 previously-disadvantaged dwellings over the past five years. Graph 4.1 below indicates the number of connections achieved annually from 2002/3 to 2007/8 financial years.

Graph 4.1: Electrification Programme

Electrification Programme

70000 59076 60000

50000

40000

30000

20000 13606 11464 8929 10350 9057 10000 5670 No. No. Connections of

03 / Total 2004/05 2005/06 2006/07 2007/08 2002 2003/04

Financial Years

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Table 4.1 below shows the areas that have been electrified:

Project Name Number of Political Stands Region

Electrification of Klipfontein View 336 Region E Electrification of Lombardy East (River Park) 454 Region E Electrification of Braleyview Ext. 14 & 16 102 Region E Electrification of Matholesville 705 Region G Electrification of Tshepisong Proper 6000 Region D

Electrification of Vlakfontein Proper 1600 Region G

Electrification of Vlakfontein Extension 4500 Region G

Replacement of metering system at Tsutsumane 1800 Region E Normalisation of Lawley Proper 1553 Region G

Electrification of additional stands within City Power area of 400 All Regions supply Electrification of Far East Bank Ext.8 200 Region E

Electrification of Golden Triangle 7000 Region D Alexandra Normalisation Phase 1 and 2 11000 Region E Electrification of Infills in Alexandra area of Normalisation 400 Region E Replacement of Metering system at Mayibuye 2500 Region E Replacement of metering system in Far East Bank 2000 Region E Electrification of Tshepisong East 1054 Region D Normalisation of Alexandra Phase 3 5000 Region E Electrification of Leratong Village 540 Region C Electrification of Ernadale Ext.8 70 Region G Total 47214 These programmes have positively contributed towards poverty alleviation, as the following have emerged in the townships: • Establishment of “Spaza” shops • Back yard mechanics • Informal restaurants • Employment of local community during project execution (EPWP) • Community Phones (Cell C, Vodacom and MTN); and • Improved living standards

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Current projects

Table 4.2 illustrates the townships that have been proclaimed recently, where the electrification process is currently underway. Though the majority of these projects are at the construction stage, however, others are still at the planning stage.

Table 4.2: Electrification projects to be completed Project Name Number of Stands Political Region

Electrification of Far East Bank Ext.7 1700 Region E Electrification of Tshepisong West (Ebumnandini) 3000 Region C Electrification of Lawley station 7775 Region G Electrification of Pennyville (Zamimpilo) 2800 Region B Electrification of Kliptown RDP houses Phase 1 1221 Region G Electrification of Clermont (Kathrada) 500 Region B Lehae Village Phase 1 2500 Region G Alexandra Normalisation (Phase 4.1) 8500 Region E Total 27996

Future Plans

Table 4.3 shows the projects that have been identified as part the electrification master plan, which is derived from the housing plan. It is envisaged that the following townships will be proclaimed and developed in the near future.

Table 4.3 Projects included in the master plan Project Name Number of Stands Political Region Electrification of Lehae Phase 2 2500 Region G Electrification of Mountain View 5000 Region G Alexandra Far East Bank Ext.10 900 Region E Electrification of K206 (Alexandra) 9000 Region E Electrification of Sol Platjies Phase 1 2500 Region C Electrification of Bushkoppies 1500 Region G Electrification of Motswaledi (Bara-Link) Phase 1 3500 Region D Electrification of Kapok 2000 Region G Normalisation of Alexandra Proper (Phase 4.2) 52000 Region E Electrification of Doornkop 22000 Region D Electrification of Fleurhof ext 2&3 6524 Region D Total 197824

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Electrification specification City Power has improved its electrification specification in order to cater for proper revenue collection, make provision for public lighting infrastructure, network protection and future upgrades by providing the following:

• Split Prepaid metering • Street Lighting • Concrete Poles • Auto Reclosers • Path Finders • 60Amp breakers • Underground MV bulk infrastructure

Due to the above specification, the cost per connection has increased to an average of R5600 per stand.

Typical electrification layout

Bulk Infrastructure

The majority of the above mentioned townships are located on the outskirts of Johannesburg, far from serviced areas. Their locality has posed a large challenge in terms of bulk infrastructure availability.

Electrification of Lawley Bulk Infrastructure

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• 20MVA transformer and associated switching infrastructure at Hopefield Substation to cater for the additional capacity requirements. • 88kV breakers on each of the existing incomers before the 20MVA transformers and it’s associated protection upgrades for the additional works. • 11kV Medium Voltage (MV) underground cable with associated joints and terminations to transfer load from Hopefield Substation to Lawley Township boundary. 6x185, 3 core MV cable for approximately 7.5Km. The funding requirements for Lawley are in table 4.5 below:

Table 4.4: The funding requirements for Lawley

LAWLEY BULK SUPPLY Expenditure: Cash Flow SUBSTATION Cost 2007/8 2008/9 2009/10 Material R 8,356,283.03 R 6,685,026.42 R 1,671,256.61 Labour R 3,581,264.15 R 2,865,011.32 R 716,252.83 Eng Fees R 954,220.64 R 763,376.51 R 190,844.13 Sub Total R 12,891,767.82 R 10,313,414.26 R 2,578,353.56 11KV BULK LINK Material R 20,099,000.00 R 20,099,000.00 Labour R 2,891,100.00 R 2,891,100.00 Eng Fees R 1,666,747.48 R 1,666,747.48 Sub Total R 24,656,847.48 R 24,656,847.48 TOTAL R 37,548,615.30 R 34,970,261.74 R 2,578,353.56

Electrification of Pennyville and Associated 88/11kV Substation

The scope of this project is to design, supply, install, commission and hand over an 88/11kV, 2 x 45MVA Substation at Pennyville. The substation will cater for an installed capacity of 90MVA, with a firm capacity of 45MVA, later providing for additional capacity up to 135MVA, with a firm capacity of 90MVA.

This substation will primarily supply the newly built Pennyville Housing Development comprising approximately 2800 residential units requiring an initial bulk supply of 10MVA and later providing supply to neighbouring areas. The funding requirements for Pennyville are in table 4.5 below

Table 4.5: The funding requirements for Pennyville PENNYVILLE BULK SUPPLY Expenditure: Cash Flow Cost 2007/8 2008/9 2009/10 88/11kV Substation Material R 21,000,000.00 R 6,000,000.00 R 15,000,000.00 R 10,994,371.20 Labour R 9,000,000.00 R 9,000,000.00 R 7,329,580.80 88KV interconnector Material R 1,890,0 00.00 R 0.00 R 0.00 R 1,890,000.00 Labour R 810,000.00 R 0.00 R 0.00 R 810,000.00 ROAD Material R 2,240,000.00 R 0.00 R 0.00 R 2,240,000.00 Labour R 960,000.00 R 0.00 R 0.00 R 960,000.00 11KV BULK LINK

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PENNYVILLE BULK SUPPLY Expenditure: Cash Flow Cost 2007/8 2008/9 2009/10 Material R 3,800,000.00 R 0.00 R 3,800,000.00 Labour R 715,000.00 R 0.00 R 715,000.00 Eng Fees R 3,870,000.00 R 2,500,000.00 Sub Total R 44,285,000.00 TOTAL R 88,570,000.00 R 8,500,000.00 R 24,000,000.00 R 28,738,952.00

Electrification of Kliptown and Associated Bulk Supply

The scope of this project is to design, supply, install, commission and hand over the complete electrical reticulation network for Kliptown RDP Development and provide Bulk supply infrastructure to transfer capacity from Orlando Ekhaya Substation to the Kliptown RDP boundary which is approximately 8km. The development consists of 5700 residential units and a bulk load of 17.5MVA will be required using an ADMD of 3kVA/stand. Bulk Supply to the development will be transferred via 3 x 300mm2; XLPE cables from the Orlando Ekhaya Substation to the development boundary. The funding requirements for Kliptown are in table 4.6 below.

Table 4.6: The funding requirements for Kliptown Switching station and connecting supply Expenditure: Cash Flow BULK SUPPLY Cost 2007/8 2008/9 2009/10 Material R 65,676,000.00 R 19,702,800.00 R 45,973,200.00 R 1,010,400.00 Labour+ Professional services R 16,840,000.00 R 3,368,000.00 R 13,472,000.00 R 673,600.00 Sub Total R 84,200,000.00 R 23,070,800.00 R 59,445,200.00 R 1,684,000.00 To conclude, bulk infrastructure is becoming increasingly critical in the roll out of the electrification programme. The total funding requirements to allow bulk to address the electrification are in table 4.7 below:

Table 4.7: Total funding requirements for bulk supply

Project Name 2007/8 2008/9 2009/10 Total Lawley Bulk 34,970,261.74 2,578,353.56 0 37,548,615.3 Pennyville Bulk 8,500,000.00 24,000,000.00 0 32,500,000.0 Kliptown Bulk 23,070,800.00 59,445,200.00 0 82,516,000 Mountainview Bulk(Lunar N/A N/A 6 750 000.00 6 750 000.00 Substation) Hospital Hill Bulk(Supplied from N/A NA 6 250 000.00 6 250 000.00 Lotus Substation) Alexandra ext 9 & 10 Bulk 10 000 000.00 10 000 000.00 (supplied from Alexandra substation) Fleurhof Substation 85 000 000.00 85 000 000.00 Total 66,541,061.74 86,023,553.56 108 000.000.00 260,564,615.3

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Challenges

The following are the challenges currently faced by City Power in rolling out the electrification projects:
Lack of funding, for both internal reticulation and bulk infrastructure requirements
Slow allocation of beneficiaries by housing to their respective RDP houses
Slow pegging and re-location of beneficiaries to their demarcated stands
Lack of coordination between departments and spheres of government e.g. Local and provincial housing
Unavailability of Housing Master Plan to guide the electrification future project plans Public lighting

Public lighting is one of the mayor’s strategic priorities. Table 4.8 below shows the amounts that have been spent so far on public lighting per annum.

Table 4.8: Funds spent on public lighting per annum Project object 2004 2005 2006 2007 2008 PLL1 Diepsloot / Midrand / Ivory PL 675,000.00 3,676,000.00 5,100,000.00 3,650,000.00 5,686,219.00 PLL03 Northcliff / Rosebank 588,500.00 2,600,000.00 1,800,000.00 1,360,000.00 2,552,365.00 PLL05 Roodepoort Public Lighting 650,000.00 2,860,000.00 3,850,000.00 4,450,000.00 3,841,404.00 PLL06 Soweto Public Lighting 4,400,000.00 8,840,000.00 5,950,000.00 8,710,000.00 8,161,689.00 PLL05 Alex Randburg Sandton PL 1,820,000.00 8,380,000.00 4,900,000.00 4,960,000.00 6,010,745.00 PLL08 Johannesburg South / CBD PL 1,000,000.00 6,443,000.00 3,600,000.00 2,120,000.00 6,519,639.00 PLL11Orange Farm Lenasia Ennerdale PL 1,100,000.00 1,040,000.00 3,400,000.00 3,750,000.00 7,984,864.00 TOTALS 10,233,500.00 33,839,000.00 28,600,000 25,250,000.00 40,756,925.00 Analysis of current backlog for new streetlights has been done. Table 4.9 below is the backlog of streetlights per administrative region.

Table 4.9: The backlog of streetlights per administrative region. No of Streetlights per No of Streetlights required Budget Required Region area per area % Backlog (Present day cost A 9 934 26 393 73% R 263,930,000.00 B 37 430 500 1% R 5,000,000.00 C 23 596 12 555 35% R 125,550,000.00 D 29 028 26 677 48% R 266,770,000.00 E 25 934 28 025 52% R 280,250,000.00 F 39 762 1 789 4% R 17,890,000.00 G 14 166 22 305 61% R 223,0 50,000.00 Total 179 850 118 244 40% R 1,182,440,000.00

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For City Power to eradicate its street lighting backlog it will require a budget of R160m per annum. The graph below indicates that at the current provision the backlog for street lighting will reduce at a very low rate. Graph 4.1 below shows the projection for Public Lighting within proclaimed areas;

Graph 4.1: The projection for Public Lighting within proclaimed areas

Projection for Public Lighting backlog within proclaimed areas

R 800,000,000 R 700,000,000 R 600,000,000 R 500,000,000 R 400,000,000 R 300,000,000 R 200,000,000 R 100,000,000 R - 20 07 2008 2009 2010 2011 2012

Financial Year

Funds @ R30m p.a Funds @ R160m p.a.

The current public lighting budget is R30m per annum. The R30m per annum is 4000 street lights per year which equates to a 1% reduction rate of the backlog. At this rate City Power will only achieve 1% backlog reduction rate per annum.

4.1.1.3 Reduction of losses

The City of Johannesburg has a 5 year objective of reducing losses by 2 percent. This target is moving from 12.5% total losses in June 2008 and should be at 11.5% by 2010. Total losses are made up of technical and non-technical losses. The technical losses are at 9% and the non technical losses were at 3.5% at the end of June 2008. The programme to reduce losses includes: • Continued customer education programmes in targeted areas; • Continuous roll-out of protective structures in order to reduce tampering with conventional meters and street light poles; • Promote alignment with the City’s debt write-off and indigence support programmes; • Provide clear criteria to inform where and when prepayment meters will be used; • Installation of prepayment meters.

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4.1.1.4 Reduction of outages

Outages can be classified in the HV, MV and LV categories. Table 4.10 and 4.11 below show the number of outages over the past four years. It can be seen that the outages have decreased over the years.

Table 4.10: HV outages 04/05 04/05 05/06 05/06 06/07 06/07 07/08 07/08 08/09 08/09 Month All NPR All NPR All NPR All NPR All NPR Jul 6 6 13 13 5 5 2 2 14 14 Aug 5 4 14 12 6 6 9 9 4 4 Sep 13 9 8 6 5 5 5 5 5 5 Oct 10 10 9 8 6 6 8 8 5 5 Nov 10 9 16 13 10 9 9 9 3 3 Dec 12 11 8 8 7 6 7 7 11 11 Jan 16 16 13 10 10 10 7 7 5 4 Feb 13 13 9 8 1 1 10 9 14 13 Mar 13 13 16 15 5 5 4 4 4 3 Apr 22 19 0 0 5 5 3 3 4 3 May 12 11 6 5 11 11 12 12 2 2 Jun 12 12 5 4 9 9 5 5 4 4 Total 144 133 117 102 80 78 81 80 75 71 Ceiling 85 80 80

Table 4.11: MV outages

04/05 04/05 05/06 05/06 06/07 06/07 07/08 07/08 08/09 08/09 Month All NPR All NPR All NPR All NPR All NPR Jul 121 105 97 70 112 98 134 96 164 73 Aug 71 59 86 61 152 143 95 59 190 87 Sep 115 97 83 62 88 77 77 56 143 54 Oct 126 102 114 92 114 94 95 73 149 59 Nov 114 100 104 76 102 77 100 62 135 73 Dec 130 98 94 87 100 87 78 64 129 75 Jan 152 134 132 122 93 73 106 85 103 64 Feb 108 81 106 99 62 45 89 67 120 78 Mar 92 60 107 95 85 44 134 91 123 62 Apr 135 111 106 83 79 59 142 88 96 53 May 106 88 116 104 118 87 132 83 117 63 Jun 70 60 86 70 79 57 152 92 146 103 Total 1340 1095 1231 1021 1184 941 1334 916 1615 844 Ceiling 1000 950 1050 Going forward, City Power will be using CAIDI, CAIFI, SAIDI and SAIFI figures to measure interruptions on the network.

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• CAIDI = Customer Average Interruption Duration Index. This measures, on average, how long a customer was out. • CAIFI = Customer Average Interruption Frequency Index. This measures, on average, how often a customer was out. • SAIDI = System Average Interruption Duration Index. This measures, on average, how long a system was out. • SAIFI = Customer Average Interruption Frequency Index. This measures, on average, how often a system was out. The current year will be use as a baseline for these measures. Table 4.12 below shows the actual figures for the quarter

Table 4.12: Actual performance for the quarter

Indicies Unit Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 CAIDI Min 341.01 317.03 193.57 351.4 342.1 359.58 250.96 303.27 175.54 386.54 CAIFI Times 1.64 1.41 1.3 1.59 1.49 1.51 1.54 1.48 1.44 1.63 SAIDI Min 25.85 15.19 10.35 22.08 21.08 23.07 14.35 19.52 9.12 6.84 SAIFI Times 0.12 0.07 0.07 0.1 0.1 0.1 0.09 0.1 0.07 0.03

Demand side management programme (DSM)

Table 4.13: DSM programme

Project / Intervention Title Gas Turbine Refurbishment

Objective To refurbish the John Ware, Durban Street and Cottesloe Gas Turbine sets to their original design capacity and establish operational capacity for the purpose of improving the security of supply

Potential Yield – Energy Dependent on operating Project timeline Start:: Jan 08 savings GWh hours – 8 hrs per weekday day = 19.68 GWh per month End: Dec 2009

Potential Yield - Demand 120 MW Budget Estimate R49,6 for 2007/8 MW (R mil) R12 - 2008/9

R30 – 2009/10

Finance Source CAPEX - DSM Levy

Progress Report 100 of 120Mw has been restored to service, 1.2 million litres of fuel recovered

Issues Raised In terms of fuels supply, application is being made to DME for exemption from certain fuel taxes and levies.

In order to avail the generating capacity in times of emergency, a means of passing the fuel cost on to consumers needs to be established. Several models

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are being investigated and documented for assessment.

Actions to be taken Operational structures to be established. Control system refurbishment is still required (R30 million).

Project / Intervention Title Project - Ripple Control Audit and Reinstatement (Existing Areas)

Objective To refurbish and restore capacity to existing ripple geyser control systems in the area of supply, by auditing and re-instating the 140 000 installations in the areas where it was previously installed, and install receivers in the Cleveland and Observatory substation areas where new transmitters have been installed.

Potential Yield – Energy Project Start date savings per annum timeline Completion target

Potential Yield - Demand 150 MW at morning and Budget R5m for 08/09 Reduction evening peak periods, (geyser Estimate load only) R5mfor 09/10 (R mil)

Finance Source DSM levy

Progress Report 40 000 ripple control units have been purchased and are in storage. Contractors to provide area audits and installations in new areas have been short-listed and the procurement process to appoint them continues.

Risk / Issues Raised

Actions to be taken

Project / Intervention Title Project - Load Management Expansion into New Areas (Conventional Ripple or Smart Metering systems)

Objective To expand geyser control throughout the area of supply, (areas never previously equipped, or where discontinued radio systems were installed), where it is estimated an additional 150 000 residences will be connected. The project may include time of use or demand response (smart) metering in conjunction with active load switching.

Potential Yield – Energy Project Start date savings per annum timeline Completion target

Potential Yield - Demand 150 MW at morning and Budget R 90 for 08/09 Reduction evening peak periods, (geyser Estimate load only) R 100 for 09/10 (R mil)

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Finance Source DSM Levy

Progress Report Following the evaluation of the RFP (closed April 08) the need to clarify cost effective and sustainable telecommunications platforms for bi-directional metering communications became apparent.

35 respondents were evaluated, however no new appointments have been made over and above two existing suppliers involved in pilot projects at City Powr.

Risk / Issues Raised At the time of RFP issue, the NRS049 advanced metering specification was also not finalized. Suppliers were subsequently asked to state the degree of compliance of their offers to the specification, verification of such compliance would be required

Actions to be taken Evaluation presentation sessions to be set up on 8 and 9 May, ISD to be invited.

Project / Intervention Title Solar Water Heating Installation - Pilot project.

Objective To install 42 solar water heating systems at approximately 40 residences on a measured, trial basis to test the viability of City Power acting as an implementer for a large scale SWH roll-out project. The objective is also to identify the potential difficulties of SWH installation and secure the endorsement of participants following success of pilot. (CoJ Mayoral Committee participating.)

Potential Yield – Energy Estimated 3212 kWh per Project Start date: 25/3/2008 savings per annum installation per annum, based timeline on 200 litres hot water used Completion target: July 2008 per day.

Potential Yield - Demand Estimated 0,7 kW per Budget R 1 for 07/08 Reduction installation Estimate (R mil)

Finance Source 50% DBSA and 50% CAPEX

Progress Report Project framework and charter developed. In terms of identifying suppliers, the procurement process

Risk / Issues Raised DBSA Financial year end – request to extend or move to next year.

Actions to be taken Site identification (Mayoral Committee members) to be concluded.

Project / Intervention Title Solar Water Heating Installation - Mass Roll-out.

Objective To act in the capacity of an implementer and operator, on a fee-for-service basis (revenue generation), of solar water heating systems across the area of supply. To diversify the region’s energy mix to include renewable energy on a significant scale. 220 000 residences are estimated to be suitable for installation.

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Potential Yield – Energy Estimated 3212 kWh per Project Start date: August 2008 savings installation per annum, based timeline on 200 liters hot water used Completion target: August 2010 per day. 706,6 GWh per annum

Potential Yield - Demand Estimated 0,7 kW per Budget R 1200 for 09/10 Reduction installation Estimate (R mil) R 2000 for 10/11 154 MW diversified

Progress Report An RFP for a Transaction Advisor and arranger was issued by City Treasury and closed 3 Nov 08. Bidder presentations were invited and conducted for all interested parties. Two offers have been short-listed and negotiations are to be conducted with both.

An RFP for solar water heater suppliers and installers was issued by CP and closed 30 January 09. Bidder presentations were invited and conducted for all interested parties in the week of 23 to27 March. The procurement process continues.

Risk / Issues Raised The pre-requisite for ‘off balance sheet’ funding was stipulated by Council. However, this may not be entirely possible both in terms accounting practices / regulations applicable to municipal entities and guarantees that potential investors are likely to include in funding arrangements.

Supplier capacity needs to be cross-checked across bidders as equipment commitment made to the various installing companies.

Actions to be taken The procurement processes as well as the exact roll-out strategy will be decided and applied following the evaluation of both arranger and supplier offers.

Project / Intervention Title Building Energy Efficiency, EE lighting retro-fit,

Objective To reduce the energy consumption of City Power’s offices and depot facilities by:

Replacing inefficient incandescent and older fluorescent lighting with EE lighting and control gear. Installation of motion sensors to control lighting and air conditioning load of unoccupied facilities.

Potential Yield – Energy Subject to RFP assessments Project Start date: April 09 Savings per annum per site. 15% minimum timeline targeted Completion target: June 09

Potential Yield - Demand Subject to RFP assessments Budget R 6 for 08/09 Reduction per site Estimate

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(R mil)

Finance Source CAPEX - DSM Levy

Progress Report RFP to be advertised and issued in April

Risk / Issues Raised Risk of delivery / installation after end June (financial year end)

Actions to be taken Installation of metering systems for the purpose of measurement and verification to be concluded prior to implementation

Project / Intervention Title Street Lighting Control – Replacement of electro-mechanical clocks

Objective To replace all electro-mechanical street lighting clocks that are affected by supply interruptions due to load shedding activities with battery backed up electronic clocks. Specifically applies to street light strings controlled from chambers inside buildings and transformer houses where it is impractical to install photocells.

Potential Yield – Energy Avoids wasted day time Project timeline Start: April 08 Savings per annum energy consumption due to mechanical clock drift Completion target: Dec 09

Potential Yield - Demand Budget Estimate R 1 for 07/08 Reduction (R mil)

Finance Source CAPEX (From R 100 m CoJ additional DSM allocation 07/08 )

Progress Report The replacements are done as part of maintenance as well as in response to reports of cases of street lighting being on in daytime.

Risk / Issues Raised

Actions to be taken

Project / Intervention Title Installation of Pre-paid metering and Protective Structures

Objective To reduce non-technical losses in the Naturena area, thereby reducing uncontrolled energy consumption and revenue loss, as well as associated demand that is exacerbating the need for load shedding of paying customers.

Potential Yield – Energy Project timeline Start date: March 08 Savings per annum Completion target

Potential Yield - Demand Budget Estimate R 10 for 2007/8 Reduction

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(R mil) R 11 for 2008/9

Finance Source CAPEX ( From R 100 m CoJ additional DSM allocation 07/08, CAPEX 08/09 )

Progress Report Completed

Risk / Issues Raised

Actions to be taken

Project / Intervention Title Customer Energy Efficiency Awareness and Education

Objective Identify effective communication methods and media, and use these to provide Energy Efficiency information to custo mers. The aim is to create awareness and educate customers on the need (avoiding load shedding) and benefits (financial savings) of energy conservation and efficiency measures that can be implemented. Create an energy efficient culture and promote investment in EE interventions.

Potential Yield – Energy Target 10% reduction of Project This is a continuous exercise Savings domestic and light timeline commercial load – (1260 GWh per annum)

Potential Yield - Demand Variable Budget R 3.4 for 2007/8 Reduction Estimate R2.7 for 2008/9 (R mil) R 3.5 for 2009/2010

Finance Source OPEX, allocation from DSM Levy

Progress Report Pamphlets and material created and distributed, and a broad PR campaign planned.

Risk / Issues Raised Additional, professional advice to be sought from industry leaders – best methods to get effective messages across must be found. Include animated ads, industrial theatre, City Buzz and inserts into billing statements

Actions to be taken Coordination with the NERT Communications work group.

Project / Intervention Title Compact Fluorescent Lighting (CFL) Residential Roll-out

Objective To replace one million incandescent light bulbs, (nominally three per domestic/residential customer premises). Establish a CFL bulb replacement scheme via our customer walk-in centres to ensure sustained use of CFLs and provide an environmentally acceptable method of bulb disposal. (Partner with Pikitup)

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Potential Yield – Energy 67,5 GWh per annum Project timeline Start: April 2008 Savings Completion: Dec 2008

Potential Yield - Demand 45 MW, 5 hours Budget Estimate R 15 for 08/09 Reduction covering evening peak period. (R mil)

Finance Source National DSM funding.

Progress Report UNFCC funding with the supplier partner was effectively abandoned as the likelihood of success reduced considerably. Agreements to work with the NEEA / CEF / Eskom are being negotiated.

Risk / Issues Raised

Actions to be taken

Project / Intervention Title Energy Efficient Street Lighting. (Mercury Vapour bulb replacement)

Objective To replace 7638 Mercury vapour 400 Watt street light lamps with 250 Watt high pressure sodium lamps as well as replace 10 000 mercury vapour 125 Watt with 70 Watt high pressure sodium lamps.

Potential Yield – Energy 6.3 GWh per annum Project April 2008 Savings per annum timeline Completion: Oct 2008

Potential Yield - Demand 1.65 MW Budget R 19.4 Reduction Estimate

(R mil)

Finance Source National DSM funding.

Progress Report Project framework completed.

Risk / Issues Raised

Actions to be taken The process of accessing National DSM funding and establishing a co-operation agreement with CEF to continue

Project / Intervention Title Distributed Generation Plant Installation / Partnering

Objective To identify the capacity of privately-owned standby generation that may be available for utilisation by means of generation partner agreements. (On an interruptible or load displacement basis where a peaking tariff is used to offset private generation fuel costs). Also determine the stan dby generation capacity that Municipal Owned Entities (MOEs) require, that may be installed and used on the

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same principle.

Potential Yield – Energy Not applicable Project Start date: April 2008 Savings per annum timeline

Potential Yield - Demand To be determined by survey to Budget R 1for 2007/8 Reduction identify customers with installed Estimate generation capacity and capacity R 80 for 2008/9 requirements of MOEs requiring (R mil) backup power.

Finance Source CAPEX

Progress Report The generator requirements of the Civic Centre have been specified and the procurement process started. Other municipal entity requirement assessments are continuing

Risk / Issues Raised The concept of aggregating privately owned is at risk if the single buyer model as currently proposed for all independent power producers (IPPs) is finally legislated by NERSA.

Actions to be taken Options of establishing CP as an IPP broker, in a position to sell aggregated premium cost power to Eskom on a pass-through basis, to avoid load shedding to be investigated

4.1.1.6 Inner city rejuvenation

City Power is participating in the Inner City development programme. Currently the Inner City has old network that has passed it useful life span and needs to be refurbished. Most of the 2010 projects are in the Inner City and will assist in the upliftment of the Inner City. There are a number of projects planned for the inner city but due to budget constraints, City Power will only be concentrating on 2010 FIFA World Cup related projects.

4.1.1.7 2010 FIFA World Cup Projects

City Power has developed a comprehensive 2010 strategy which is outline below.

FIFA infrastructure Requirements

The following is an extract referring to the electrical requirements for stadia from the published FIFA document: Technical Recommendations and Requirements for the Construction or Modernisation of Football Stadium (Published by Federation Internationale de Football Association)

Clause 27: Lighting and Power Supply

“For all matches played at the top level of the game in the evening, the entire surface of the playing area must be evenly lit, to a standard which guarantees clarity of vision for match participants and spectators, and which enables the match to be relayed on television. It is imperative that power failure should not lead to the cancellation or postponement of a match or television broadcast.” Continuous Strategy Improvement - Rev 17 – Page 50 of 131 Approved by Board on 6 Aug 2009

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“To guard against this a stadium should have two sources of power, each one completely independent of the other. The power system should be such that in the event that any failure of the primary supply should occur, the second independent supply would instantly and automatically cut in and provide an uninterrupted flow of current.” “This twin supply system must be available to all areas of the stadium whether it is the playing field, spectator areas, internal rooms, corridors, etc.

“Additionally, a back-up generator should be available to provide power for emergency public evacuation purposes in the unlikely event that both of the independent power supplies should fail.”

“It is quite unacceptable that power failure should in any way inhibit any part of the normal activities within the stadium.”

Given the vast interconnected overhead network that forms part of the electrical grid in South Africa and the environment in which this grid operates, there is a significant probability of momentary outages or dips due to remote faults on the network. One of the key characteristics of the lights used for stadium illumination is the required dead time between being switched off and being ready for reuse which is of the order of 7 - 10 minutes. In addition to this cool down period, the lights also take several minutes after being switched on before they reach full illumination. In the event of a dip or momentary outage causing the lights to trip and reset, the game could be interrupted for 10 - 15 minutes.

Electricity Infrastructure

The reliability and quality supply of electricity will form the basis of the successful hosting of the event. The City has to ensure an uninterrupted supply to various areas and facilities such as radio and TV broadcasting centres, stadia (day and night games), hotels (FIFA family and fans), training and practice venues, public viewing sites (live feed and entertainment).

Any service breakdown to the service facilities will be disastrous to the hosting of the event. It is also expected that the winter peak demand (June/July) on the network will be increased to higher levels, much higher than historical levels as a result of the number of visitors and extended hours of use at public facilities, hotels etc.

This unusual consumption will put extensive demand on the existing networks. The department, together with City Power, has identified various projects that have to be implemented to increase network capacity and/or ensure reliability of supply. These programmes broadly include upgrade and/or replacement of obsolete infrastructure and installation of lights at public spaces. Also, the projects, particularly around stadia precincts are aimed at providing back-up supplies and independent sources of power.

City Power together with JDA has analysed all the load requirements to each stadium precinct and adequate power provision is being catered for through a series of projects, either from new supply points or from existing networks.

Operational Readiness The preparatory work on identification of 2010 electrical infrastructure requirements has started. Consultants with relevant expertise have been brought in to assist with drawing up the project plan and ensuring that the FIFA requirements, in terms of quality and reliability of supply, are met.

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The construction contracts for Crown and Siemert Road Substations have been awarded. Both substations are key supply points for the main stadia, namely Soccer City (Nasrec Precinct) and Ellis Park. The transformers have been purchased to expedite the process.

All street lighting requirements in the stadia precincts and major access roads to the main stadia are being renewed and reviewed by City Power

The following is the list of projects identified for the Ellis Park Precinct, Nasrec Precinct, Major intake points and the Training Venues. These projects exclude any standby facilities at the stadia. These facilities will be provided in conjunction with the stadia management.

Table 4.14: Ellis Park Stadium Projects

Substation / Township Description Status

Ellis Park Precinct Upgrade Street Lighting Construction

Ellis Park Precinct LV and MV upgrade Construction

Upgrade MV switchgear & distributors to 185 mm due Construction Siemert to increase in load for Soccer World Cup

Third transformer plus switchboard. Refurbish 11 kV Construction Siemert breakers and reconfigure bus bar.

Upgrade MV distributors and sub rings from Final Design Observatory Observatory sub station.

New distributors from Siemert sub station to proposed Final Design Siemert hotel and other developments

Upgrade and extend the Doornfontein/Fort standby Construction Siemert distributors

Establish 132kV/11kV substation comprising of 2 x Construction Crown 30MVA transformers

Crown Sub station New distributors from new Crown sub station to Construction Master Plan Nasrec Precinct.

City Power is running a pilot project on the installation of monitoring devices at critical points to combat crime like cable theft and vandalism. The project will ensure the quick response of security personnel to the scenes of crime. This technology will be used on all supply points to major venues and those critical points identified as critical to the event.

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The networks are designed to cater for redundancy from two independent sources. If one circuit fails the other circuit should be able to kick in immediately without any power loss to the venue. For extra caution, City Power will provide 24 hour standby teams to all major venues. Depending on criticality of the venue, some standby teams will spend 24 hours on the supply point to cover for any unforeseen emergencies. If need be, City Power and neighbouring Electrical Utilities will share resources to ensure an adequate number of operational personnel during the event and, if necessary, outside contractors will brought on board.

City Power is working with stadia management to see how the uninterruptible power supply will be connected to ensure maximum power availability, especially at the stadium itself and broadcasting centres.

City Power depends mostly on Eskom and Kelvin supply, and these two entities will form part of the dedicated team that will ensure supply reliability during the event.

Training Venues

The city has identified 16 potential training venues within it’s boundaries. Among the 16 venues only 4 will be chosen as the final venue to accommodate the 8 teams that will be playing matches within CoJ’s match boundaries.

Below is the list of venues that fall within the City Power area of supply boundaries: • Rand Stadium The supply has been assessed and deemed to be adequate to supply the basic facilities for training purposes. • Ruimsig Stadium The supply has been assessed and deemed to be adequate to supply the basic facilities for training purposes.

• Dobsonville and Orlando Stadiums are in the Eskom supply area.

Capital Projects

The projects identified as part of this initiative will be motivated and detailed in an Implementation Plan, but initially for the purposes of this report will be summarised in the table 4.15 below:

Table 4.15: Capital projects identified for 2010 Project Funding Funding Available R Required R New distributors from new Crown sub station to Nasrec Precinct. Yes 5,000,000 Rationalisation of supply in Aeroton to provide the standby facility No 8,000,000 to the stadium Establish 132/11kV Crown substation. Yes 16,000,000 Upgrade and provide new street lighting on routes leading to No 7,500,000 Nasrec Mondeor 88kV Switchyard No 32,500,000 Quattro 275/88kV Substation @ Orlando No 250,000,000

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Project Funding Funding Available R Required R Quattro 88kV lines re-route No 3,000,000 Eikenhof – Mondeor 88kV Lines No 2,045,328 Quattro 1 – Mondeor 88kV lines No 2,045,328 Delta – Quattro 88kV lines 0 No 29,533,200 Fordsburg – Quattro 88kV lines No 16,214,592 Prospect – Mondeor 88kV lines No 16,214,592 Quattro – Etna 275kV lines No 100,000,000 Quattro 2 – Mondeor 88kV lines No 2,045,328 Esselen – Sebenza 275kV lines No 100,000,000 Sebenza 275/88kV Substation @ Kelvin No 250,000,000 Kelvin – Delta 88kV lines No 40,214,592 Prospect – Sebenza 275kV lines No 30,000,000 Milpark/Wits – (Milpark) No 1,000,000 Rabie Ridge - (Rabie Ridge) No 1,000,000 RAU – (Melville/Westdene) No 1,000,000 Ruimsig – (Ruimsig) No 1,000,000 Cecil Payne – (Florida) No 1,000,000 Rand - (Turfontein) No 1,000,000 Wanderers – (Illovo) No 1,000,000 Upgrade Street Lighting at Ellispark No 7,852,000 LV and MV upgrade phase 1 at Ellispark Yes 12,500,000 Observatory Sub. Bus bar reconfigure and refurbishment. No 12,500,000 Install third 45MVA transformer plus switchboard. Refurbish 11 Yes 35,000,000 kV breakers and reconfigure 88kV bus bar at Siemert Road substation Rebuild parking bay at Siemert Rd Depot, to accommodate Yes 2,000,000 Siemert Rd substation upgrade. (Spac e constraints) Upgrade MV distributors and sub rings from Observatory sub No 5,500,000 station. New distributors from Siemert sub station to proposed hotel and No 7,200,000 other developments Upgrade and extend the Doornfontein/Fort standby distributors No 1,700,000 Provide stable temporary connections for Fan Parks (lighting, No 3,000,000 equipment supplies and catering) Ensure reliable supplies for traffic lights to avoid congestion No 1,000,000 caused by local power failures CAPEX TOTAL City Power 1,010,364,960 Note: • The above CAPEX requirements will generate future operational budget requirements to maintain them and to service any loans – this has not been taken into account at this stage. • Timelines and lead times are critical, and in many cases projects must be agreed to immediately if they are to be completed and commissioned in time for 2009/2010.

Capital Budget Requirements

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As part of it’s operational readiness City Power has identified the upgrading and new installation projects as indicated elsewhere. A budget of R 1,010 bn is solely for the designated areas of the 2010 SWC in order to meet FIFA compliance as defined in section 4 of this document

Environmental Factors

Alternative sources of energy such as solar and gas are being investigated to provide power at facilities such as stadia, public viewing sites and temporary commercial areas to reduce the demand and strain on the network. Alternative energy sources are aimed at providing power for ‘low consumption’ requirements such as water heating and lighting.

The upgrade of official venues is targeted for these options also as part of the FIFA ‘Green Goal’ programme.

Stakeholder Involvement

The key stakeholders in respect of energy services are Eskom and Kelvin Power, who are the major suppliers of electricity generation and are therefore crucial to ensuring generating capacity. Kelvin Power provides a very small amount of generating capacity. Eskom, being the national supplier, is under pressure to meet the capacity requirements for 2010. It has been recognised that generation capacity is an issue for the country in that there currently is insufficient generation capacity to meet demand. To address this Eskom have obtained approval for restarting the previously mothballed generation plants and have initiated this programme already. They hope to supply the requirements by 2009.

City Power have indicated their expected maximum demands to Eskom and Kelvin during the event and the two entities are making means to ensure those requirements are met. The event coincides with the country’s winter peak, so one needs to carefully analyse the impact of the event on the already expected higher peak.

Through the AMEU intervention, City Power is engaging with all the host cities’ electrical departments and Eskom to standardise all designs and engage other stakeholders with experience of previous events, to ensure proper estimation of load requirements and general experience of hosting a similar event.

Other key stakeholders include neighbouring municipalities such as Ekurhuleni and Mogale who have substations that can be tapped into if need be. There will have to be an agreement in place between the City and the other municipalities. Due consideration will have to be given in respect of the negotiating strategy in this regard.

Legacy Projects

All the projects identified above will form part of the legacy projects. This is because the projects that will be implemented will go on to serve the rest of the community and the stadiums which sorely needed such an upgrade.

.4.1.1.8 EPWP (Expanded Public Works Programme)

The EPWP is one of the governments short to medium-term programmes aimed at reducing unemployment and thereby alleviating poverty. For the past three years, a number of projects have been identified, which has created more than 6 500 temporal jobs. The table below indicate the exact number of temporal jobs created through EPWP programme for specific period;

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Table 4.16 Jobs Created through EPWP Description 2005/6 2006/7 2007/8 2008/9 2009/10 Number of 2600 3000 temporal Jobs 1515 2455 3098 (Depending on (Depending on the Created the available available projects) projects) Note: The number of jobs created is limited by the projects availability, which is also informed by the budget/ availability of funds.

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The graph below shows the number of temporal jobs created through EPWP from 2005/6 to 2007/08.

4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2005/06 2006/07 2007/08 EPWP 1,515 2,455 3828

4.1.1.9. Revenue Maximization

Revenue target is driven from units (kWh) sold informed by the units purchased, tariffs charged and non- technical losses percentage. Revenue targets are depended on meters to be installed correctly and their accessibility to be read. Reduction in time between customer consumption to billing is integral to measure revenue completeness.

The customer acquisition process has been automated to reduce loss of new customer application forms and to ensure that feedback is given to Customer Service. However, the system is not fully utilised thus a gap in using manual capturing, resulting in lost documents and this affects completeness of revenue.

Current prepaid meters make it difficult to accurately report on prepaid revenue completeness. The proposed installation of automated metering including prepaid meters will make it easy for reporting on actual consumption, which will address completeness of revenue. Challenges are: • By-passed meters • Faulty CT & VT • Un-metered supplies o Billboards, traffic lights, direction boards o Premises without a meter • Faulty meters • Meter Readings • Reduction of non technical losses • Cash management o Payment levels o Summary on Collections Future Plans City Power’s response to the above mentioned challenges is a comprehensive strategy that will include: • Removal of illegal connections • Re-commissioning of by-passed meters • Intensifying data and technical audits • Continuing with meter installations for un-metered customers • Intensifying credit control measures

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• Converting to pre-payment meters • Automated metering The projects are explained on more detail below of these project is Remove illegal connections City Power will continue to pursue legal recourse to eliminate illegal connections. Potential benefit is improvement in customer safety, an increase in revenues and a reduction in losses. The estimated cost of implementation is R30 million in the medium term and another R30 million in the longer term. In addition City Power will continue to strengthening security in hot spot areas. Re-commissioning of by-passed meters City Power will continue to pursue the re-commissioning of approximately 14 000 bypassed meters. Again it is expected that potential benefit is improvement in customer safety, an increase in revenues and a reduction in losses. The estimated cost of implementation is R23 million in the medium term. Intensify data and technical audits City Power will intensify its efforts to audit its customer data sets with a view to increase the accuracy of its information. This will lead to higher customer satisfaction and improved collections. The cost of implementation is estimated at R95 million. Following on the short term interventions City Power will continue with technical audits to identify and replace faulty meters, VT’s and CT’s. These initiatives should contribute to an improvement in customer safety, an increase in revenues and a reduction in losses. Continue with meter installations for un-metered customers City Power plans to continue with the installation of meters for un-metered customers. The aim of the project is to reduce non-technical losses and improve revenues. The potential benefit of R77 million Intensify credit control measures Stricter enforcement of City Power’s cut-off policy will improve payment discipline and lead to an increase of around R30 million in revenues. Convert to pre-payment meters In addition to the initiatives described under the short term strategic interventions, City Power’s ongoing massive roll-out of prepayment metering will reduce the number of meters that have to be read manually; this will eliminate estimations and accounts queries which should improve cash flow. Automated metering Automated metering means all meters will be read automatically. The benefits are improved cash flows and increased customer service. The estimated cost of implementation is R750 million in the medium term and another R750 million in the longer term.

To positively contribute towards the revenue, it is also recommended that more capital should be allocated towards revenue generation and protection type projects.

Funding Requirements for Revenue Maximization Projects

Revenue Maximization projects Unit Type 2009/10 2010/11 Re-commissioning by-passed meters Rm Opex 23 Removal of illegal connections Rm Opex 30 30 Data and technical audits: CT's and VTs for LPUs Rm Capex 95 Continuous Strategy Improvement - Rev 17 – Page 58 of 131 Approved by Board on 6 Aug 2009

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Intensify credit control measures Rm Opex 30 30 Convert to pre-payment smart meters Rm Capex 750 750 Convert to pre-payment smart meters Rm Opex 50 50 Protective structures Rm Capex 100 100 Roll out Automated metering Rm Capex 20 20 TOTAL Rm 1098 980

4.1.2 Core Processes There are currently 7 main value chain processes within the organisation which are shown on table 4.1 below:

Table 4.17: The core value chain processes within the organisation Value Proposition Driver: Company Value Chain: Service Delivery Processes Manage Customer Interface Product Delivery Processes Manage Availability of Supply Maintain Network Network Asset Creation Supply Chain Management

Revenue Collection Processes Revenue Management

Human Capital Delivery Processes Manage Human Resources

The following has been rolled out in terms of the optimisation of the Value Chains. It must be noted that all processes are at different stages: • Job Profiles and Compacting of Value Chain Teams • Value Chain forums • Evaluation and validation of current processes • Re-mapping and updating of processes • Compilation of updated KPI’s and measurements • RACI documents • Communication of Value Chains • Business Process Automation and Workflows The following is what still needs to be done on the value chains: • Visual dashboards of measurements and progress of all value chains • Training of all levels of employees • Intranet Site • Monitoring progress and bottlenecks • Benchmarking • Continuous Improvement and sustainability of processes A business process automation and document management project is in progress. It will implement automation in phases for each of the value chains. The Value Chains need to still be fully operationalised and effectively deployed across all levels of the organisation. Regular monitoring and reporting must be more disciplined.

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SECTION 5: PERFORMANCE FRAMEWORK

5.1 Balanced Scorecard Perspectives

Figure 5.1 below depicts the company’s balanced scorecard framework:

Figure 5.1 Company Balanced Scorecard Framework

Our Strategic Destination

COJ Stakeholder Perspective Community Perspective

“How do we attract resources and “How do we have a social impact with authorisation for our mission” citizens/constituents”

Financial Perspective

“How should we manage and allocate resource for maximum return”

Customer Perspective

“To achieve our vision, how must we look to our customers”

Internal Process Perspective

“To satisfy our customers and shareholders, at which processes must we excel”

Learning & Growth Perspective

“To excel at our critical processes, how must our organisation learn and improve”

5.2 Key Performance Indicators

5.2.1. Financial Perspective The company’s financial value proposition is depicted in Figure 5.2 below. In particular the value drivers, in order of importance, are: • Sustained cash flow • Low operating costs • Sustained profit • Sustained revenue growth • High asset productivity

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Figure 5.2: Financial Value Proposition

The BSC financial indicators are given in Table 5.1 below

Table 5.1: BSC Financial Indicators Measure Indicator Unit 07/08 08/09 Plan 09/10 Plan Actual Turnover RM 4,199 5,564 6,909 Direct Cost c/kWh 21.43 1 = above 32, 1= above 38 2 = 30 to <32 2= 36 to <38 3 = 28 to <30 3= 34 to <36 4 = 26 to <28 4= 32 to <34 5 = 26 and below 5= 32 and below Gross Margin % 35.7 35,49 33,87

Bad Debts Contribution RM 108 1 = above 250 252 2 = 247 to <250 3 = 245 to <247 4 = 243 to <245 5 = below 243 OPEX RM 1307 1 = Plan +2% = 1,647 1,806 2 = Plan +1% = 1,646 3 = Plan =1,644 4 = Plan -1% =1,643 5= Below 1,643 Net Profit RM (48,508) 105,587 250,731 CAPEX - Controllable RM 757.39 1= Above Plan +/-3 1= Above Plan +/-3 (745) (820) 2 = Plan +/-3% (738) 2 = Plan +/-3% (812) 3 = Plan +/-2% (730) 3 = Plan +/-2% (804) 4 = Plan+/-1% (723) 4 = Plan+/-1% (795) 5 = Plan = 745 5= Plan =787 CAPEX - Non- Controllable RM 277.5 1= Above Plan +/-3% 1= Above Plan +/-3% 2 = Plan +/-3% 2 = Plan +/-3% 3 = Plan +/-2% 3 = Plan +/-2%

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Measure Indicator Unit 07/08 08/09 Plan 09/10 Plan Actual 4 = Plan+/-1% 4 = Plan+/-1% 5 = Plan = 262,703.00 5 = Plan = Subject to funding Subject to funding Payment Levels – Key Customers % 100.38 1 = below 96 1 = below 96 2 = 96 to < 99 2 = 96 to < 99 3 = 99 to < 100 3 = 99 to < 100 4 = 100 to < 101 4 = 100 to < 101 5 = 101 & above 5 = 101 & above Payment Levels – LPU Customers % 99.42 1 = Below 96 1 = Below 96 2 = 96 to < 98 2 = 96 to < 98 3 = 98 to < 99.5 3 = 98 to < 99.5 4 = 99.5 to < 100 4 = 99.5 to < 100 5 = 100 & above 5 = 100 & above Payment Levels - Domestic % 93.42 1 = Below 90 1 = Below 90 Customers 2 = 90 to < 92 2 = 90 to < 92 3 = 92 to < 94 3 = 92 to < 94 4 = 94 to < 95 4 = 94 to < 95 5 = 95 & above 5 = 95 & above Total Losses % 12.5 1 = 12.5 & above 1 = 12.4 & above 2 = 12.1 to <12.5 2 = 11.7 to <12.4 3 = 11.8 to < 12.1 3 = 11.3 to <11.7 4 = 11.5 to < 11.8 4 = 10.5 to <11.3 5 = below 11.5 5 = below 10.5 Technical % 9 1 = 9.4 & above 1 = 9.4 & above 2 = 9.1 to < 9.4 2 = 9.1 to < 9.4 3 = 9 to < 9.1 3 = 9 to < 9.1 4 = 8.5 to < 9 4 = 8.5 to < 9 5 = 8.5 below 5 = 8.5 below Non -Technical Losses % 3.5 1 = 3.4 & above 1= 3 & above 2 = 3.1 to < 3.4 2= 2.6 to <3 3 = 3 to < 3.1 3= 2.3 to <2.6 4 = 2.5 to < 3 4= 2 to <2.3 5 = 2.5 below 5= below 2 5.2.2 Customer Perspective The company’s customer value proposition is depicted in Figure 5.3 below. In particular the value drivers, in order of importance, are: • Quality of supply • Quality of revenue collection • Quality service experience • High product availability • Affordable product price • Positive company image • Quality of customer information • Quality of key customer relations

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Figure 5.3 Customer Value Proposition

The BSC customer indicators are given in Table 5.2 below:

Table 5.2 BSC Customer Indicators Measure Indicator Unit 07/08 08/09 Plan 09/10 Plan Actual 1= Below 80 1= Below 80 2= 80 to <84 2= 80 to <84 Customer satisfaction - Domestic 79 3= 84 to <85 3= 84 to <85 Customers 4= 85 to <87 4= 85 to <87 Index 5= 87 & above 5= 87 & above 1 = Below 70 1 = Below 70 2 = 70 to <75 2 = 70 to <75 Customer satisfaction – LPU Customers Index 74 3 = 75 to <81 3 = 75 to <81 4 = 81 to <85 4 = 81 to <85 5 = 85 & above 5 = 85 & above 1 = Below 70 1 = Below 70 2 = 70 to <75 2 = 70 to <75 Customer satisfaction - Key Customers Index 78 3 = 75 to <81 3 = 75 to <81 4 = 80 to <85 4 = 80 to <85 5= 85 & above 5= 85 & above 1 = 114 and above 1= 95 & above 2 = 105 to < 114 2= 85 to <95 Bulk Outages No 80 3 = 90 to < 105 3= 75 to <85 4 = 80 to < 90 4= 70 to <75 5 = 80 below 5= below 70 1 =105 and above 1= 85 & above 2 = 95 to < 105 2= 80 to <85 Bulk Outages - NPR No 78 3 = 80 to < 95 3= 75 to <80 4 = 60 to < 80 4= 65 to <75 5 = 60 below 5= below 65 1 = 1130 and above 1 = 1050 & above 2 = 1120 to < 1130 2 = 1000 to < 1050, Medium voltage Outages No 1309 3 = 1000 to < 1120 3 = 900 to < 1050, 4 = 980 to < 1000 4 = 850 to < 900, 5 = 980 below 5 = Below 850 Continuous Strategy Improvement - Rev 17 – Page 63 of 131 Approved by Board on 6 Aug 2009

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Measure Indicator Unit 07/08 08/09 Plan 09/10 Plan Actual 1 = 1130 and above 1= 1000 & above 2 = 1120 to < 1130 2= 930 to < 1000 Medium voltage Outages – NPR No 916 3 = 1000 to < 1120 3= 880 to < 930 4 = 980 to < 1000 4= 820 to <880 5 = 980 below 5= below 820 CAIDI No 323.57 TBD CAIFI No 1.43 TBD SAIDI No 24.16 TBD SAIFI No 0.11 TBD As Per NRS Faults restoration within the specified 1=Below 22.5; 52.5; time frame as a percentage of the total 82.5; 90.5 As Per NRS number of faults reported (NRS 047) 2= 22.5; 52.5; 82.5; 1=Below 22.5; 52.5; Within 1.5 Hrs % 98.84 90.5 82.5; 90.52= 22.5; 52.5; Within 3.5 Hrs 3 = 25; 55; 85; 93 82.5; 90.5 Within 7.5 Hrs 4= 27.5; 57.5; 87.5; 3 = 25; 55; 85; 93 Within than 24 Hrs 95.5 4= 27.5; 57.5; 87.5; 95.5 5 = 30; 60; 90; 98 5 = 30; 60; 90; 98 5.2.3 Internal Process Perspective The company’s internal process value proposition is depicted in Figure 5.4 below. In particular the value drivers, in order of importance, are: • Product delivery processes • Revenue collection processes • Service delivery processes • Governance and compliance processes • Product pricing processes • Strategy management processes

Figure 5.4: Internal Process Value Proposition

The internal processes indicators are given in Table 5.3 below:

Table 5.3: BSC Internal Process Indicators Measure Indicator Unit 07/08 Actual 08/09 Plan 09/10 Plan

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1= Below 90% 1= Below 90% NR S 048 2= 90 to < 95% 2= 90 to < 95% Compliance % 100 3= 95 to < 97 % 3= 95 to < 97 % Category 4 – 4= 97 to < 98% 4= 97 to < 98% Domestic 5= 98% & above 5= 98% & above 1= Below 90% 1= Below 90% NRS 048 2= 90 to < 95% 2= 90 to < 95% Compliance % 100 3= 95 to < 97% 3= 95 to < 97% Category 2 – 4= 97 to < 98% 4= 97 to < 98% Industrial 5= 98% & above 5= 98% & above 1= Below 90% 1= Below 90% NRS 048 2= 90 to < 95% 2= 90 to < 95% Compliance % 100 3= 95 to < 97% 3= 95 to < 97% Category 3 – Rural 4= 97 to < 98% 4= 97 to < 98% 5= 98% & above 5= 98% & above 1 = Below 17% 1 = Below 21% 2 = 17% to < 20% 2 = 21% to < 22% Engendered % 22 3 = 20 to < 23% 3 = 22 to < 23% Company Spend 4 = 23% to < 24% 4 = 23% to < 24% 5 = 24% & above 5 = 24% & above 1 = Below 65% 1 = Below 68% 2 = 65% to < 68% 2 = 70% to < 72% BEE Spend (Opex % 73 3 = 68% to < 73% 3 = 72% to < 75% plus Capex) 4 = 73% to < 75% 4 = 75% to < 77% 5 = 75% & above 5 = 77% & above 5.2.4 Learning and Growth Perspective The company’s learning and growth value proposition is depicted in Figure 5.5 below. In particular the value drivers, in order of importance, are: • Human Capital Utilisation • Information Capital Utilisation • Organisational Capital Utilisation

Figure 5.5: Learning and Growth Value Proposition

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The Learning and growth indicators are given in Table 5.4 below:

Table 5.4 BSC Learning and Growth Indicators Measure Indicator Unit 07/08 08/09 Plan 09/10 Plan Actual 1= Below 66% 1= Below 67% 2= 66% to < 70% 2= 67% to < 70% Affirmative action % 70 3= 70% to < 73% 3= 70% to < 73% 4= 73% to < 75% 4= 73% to < 76% 5= 75% and above 5= 76% and above 1= Below 15% 1= Below 20% 2= 15% to < 20% 2= 20% to < 23% 3= 20% to < 24% 3= 23% to < 25% Gender Equity % 24 4= 24% to < 26% 4= 25% to < 27% 5= 26% and 5= 27% and above above 1= below 14 1= below 15 2= 14 to <16 2= 15 to <17 Number of Employees with Disabilities No 16 3= 16 to <18 3= 17 to <19 4= 18 to <20 4= 19 to <21 5= 20 and above 5= 21 and above 1= 1.5 and above 1= 1.5 and above 2= 1 to < 1.5 2= 1 to < 1.5 Disabling Injury Frequency Ratio Ratio 0.87 3= 0.5 to < 1 3= 0.5 to < 1 (DIFR) 4= > 0 to < 0.5 4= > 0 to < 0.5 5= Equal to 0 5= Equal to 0 1=above 0 1=above 0 *Employees fatalities No 3 5=0 5=0 5.2.5 Community Value Perspective The company’s community value proposition is depicted in Figure 5.6 below. In particular the value drivers, in order of importance, are: • Minimum environmental impact • Sustained social investment • Sustained learnerships • Sustained job creation • Public safety

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Figure 5.6: Community Value Proposition Public safety Public Sustained Job Job Sustained creation Sustained social social Sustained investment Sustained Sustained learnerships Minimum Minimum environmental impact

20 % 20 % 20 % 20 % 20 %

IDP Scorecard

The IDP Scorecard is given in table 5.5 below: Measure Indicator Unit 07/08 Actual 08/09 Plan 09/10 Plan Total Number of Customers No 313092 321,637 Prepaid No 120,000 350,000* No 9057 1 = Below 2800 1 = Below 2800 2 = 2800 to <2900 2 = 2800 to <2900 Number of new electrification 3 = 2900 to <3000 3 = 2900 to <3000 customers 4 = 3000 to <4000 4 = 3000 to <4000 5 = 4000 & above 5 = 4000 & above Dependent on funding Dependent on funding No 18458 1= Below 14000 1= Below 14000 2= 14000 to <14500 2= 14000 to <14500 Number of potential 3= 14500 to <18000 3= 14500 to <18000 electrification connection 4= 18000 to < 19000 4= 18000 to < 19000 5= 19000 & above 5= 19000 & above Total number of customer % 95 1= less than 75% 1= Below 89 complaints CLOSED versus 2= 76% to 89% 2= 89 to <92 Total number of customer 3= 90% to 95% 3= 92 to <95 complaints RAISED (during a 4= 96% to 99% 4= 95 to <98 defined period) 5= above 99% 5= 98 & above % 61 1 = Below 62 1 = Below 63 2 = 62 to <63 2 = 63 to <64 Provision of Public lights in 3 = 63 to <64 3 = 64 to <65 formal Areas 4 = 64 to <65 4 = 65 to <66 5 = 65 & above 5 = 66 & above Depending on funding Depending on funding % 95 1 = below 90, 1 = below 90, 2 = 90 to < 95, 2 = 90 to < 95, Public lights working in high 3 = 95 to <97, 3 = 95 to <97, crime areas 4 = 97 to <98, 4 = 97 to <98, 5 = 98 & above 5 = 98 & above Depending on funding Depending on funding

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Measure Indicator Unit 07/08 Actual 08/09 Plan 09/10 Plan No 5 1 = Below 2 1 = Below 2 No. of tasks undertaken to 2 = 2 2 = 2 comply with environmental 3 = 3 3 = 3 management systems (ISO 4 = 4 4 = 4 14001) by target date 5 = 5 & above 5 = 5 & above % 100 1 = No programme, 1 = No programme, 2 = Programme, 2 = Programme, HIV/Aids workplace 3 = Programme + 1 interv, 3 = Programme + 1 interv, programmes in place 4= Programme + 2 interv, 4 = Programme + 2 interv, 5 = Programme + 3 interv 5= Programme + 3 interv No 3828 1 = 1000 below 1 = 1000 below Job creation as per EPWP 2= 1000to <2000 2= 1000to <2000 policy 3= 2000 to <2600 3= 2000 to <2700 Temporary 4= 2600 to <3000 4= 2700 to <3200 5= 3000 & above 5= 3200 & above *Fatalities (Public) Controllable No 0 0 0 Fatalities (Public) Non- No 4 0 0 Controllable Days 3.37 As per NRS As per NRS 1 = above 4 Days 1 = above 4 Days Average time taken for City 2 = 4 Days 2 = 4 Days Power to resolve queries that 3= 3 Days 3= 3 Days are referred to them 4= 2 Days 4= 2 Days 5= Below 2 Days 5= Below 2 Days % New indicator 1 = below 7 1 = below 7 2 = 7 to < 9 2 = 7 to < 9 % Reduction in electricity 3 = 9 to < 11 3 = 9 to < 11 consumption 4 = 11 to < 13, 4 = 11 to < 13, 5 = 13 & above 5 = 13 & above Opex spent on maintenance % 15.8 13.04 12.6 programmes as a percentage of overall Opex budget Capex spent on network as a % 98 95 95 percentage of the overall Capex budget % of ME’s capital budget spent % 100 100 100 % Variance against ME’s % 0 0 0 operating budget Reconciliation of inter company % 100 100 100 balances with the CoJ Reconciliation of intra company % 100 100 100 balances with other ME’s Fully SA GAAP compliant % 100 100 100 register of assets 1= unqualified audit report = unqualified audit report % Attainment of clean audit with matters of emphasis, with matters of emphasis, report attained by MOE material adjustment and material adjustment and other matters other matters Continuous Strategy Improvement - Rev 17 – Page 68 of 131 Approved by Board on 6 Aug 2009

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Measure Indicator Unit 07/08 Actual 08/09 Plan 09/10 Plan 2=Unqualified audit with 2=Unqualified audit with matter of emphasis and other matter of emphasis and matters other matters 3= Unqualified audit with 3= Unqualified audit with matters of emphasis matters of emphasis 4= Unqualified audit with 4= Unqualified audit with other matter other matter 5=Unqualified audit report 5=Unqualified audit report with no matters (Full with no matters (Full Compliance) Compliance) * Controllable fatalities, any thing more than 0 = no score for that KPI

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SECTION 6: RISK MANAGEMENT AND INTERNAL CONTROLS

6.1 Overview

Effective risk management is integral to the company’s objective of consistently adding value. Management is continuously developing and enhancing its risk and control procedures to improve the mechanisms for identifying and monitoring risks.

Operating risk is the potential for loss to occur through a breakdown in control, information, business processes and compliance systems. Key policies and procedures are in place to manage operating risk and involve segregation of duties, transaction authorisation, supervision, monitoring and financial and managerial reporting. Financial risk management is dealt with in the financial statements.

In order to meet its responsibility with respect to providing reliable financial information, City Power maintains financial and operational systems of internal controls. These controls are designed to provide reasonable assurance that transactions are concluded in accordance with management authority, that the assets are adequately protected against material loss or unauthorised acquisition, use or disposal and the transactions are properly authorised and recorded. The system includes a documented organisation structure and divisions of responsibility, established policies and procedures, including a code of ethics to foster a strong ethical climate. The system also includes the careful selection, training and development of people.

Internal auditors monitor the operation of the internal control systems, risk management, governance and report findings and recommendations to management and the Board of Directors. Corrective actions are taken to address control deficiencies and other opportunities for improving the system. The Board, operating through its audit committee, provides supervision of the financial reporting process and internal control systems.

There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Even an effective internal control system can, accordingly, provide only reasonable assurance with respect to the preparation of financial statements and the safeguarding of assets. The effectiveness of internal control systems can furthermore change with circumstances.

A documented and tested business continuity plan exists to ensure the continuity of business-critical activities.

The company assessed its internal control systems in relation to the criteria for effective internal control over financial reporting described in its internal control manual. The internal control process has been in place up to the date of approval of the annual report and financial statements. Based on its assessment, the company believes that, as at 30 June 2008, it’s system of internal control over financial reporting and the safeguarding of assets against unauthorised acquisitions, use or disposition, met the requisite criteria.

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6.2 Risk Management Process

6.2.1 Background City Power is a Municipal Owned Enterprise (MOE), owned by the City of Johannesburg (COJ) and as such City Power is continuously ensuring alignment and compliance to COJ requirements. City Power’s Risk Management process is aligned and has adopted the COJ Risk Management Framework.

6.2.2 Broad Definition ‘Risk’ is defined as an event that may have an impact on the ability of the company to achieve its business objectives.

6.2.3 Risk Management Process City Power's Risk Management process has four broad steps: • Risk identification • Risk Assessment and treatment • Monitoring and Reporting • Auditing

Figure 6.1: Risk Management Process

Risk Risk Identification Assessment and treatment

Monitoring and reporting Auditing

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6.2.3.1 Risk Identification

The City Power risk identification process is aligned to the COJ framework. The company risks are identified annually and they form part of the risk register. These risks are influenced by the executive committee, taken for the Audit Committee of the board and then approved by the board. The approved risks are then incorporate in the business plan.

6.2.3.2 Risk Assessment and Treatment

Once risks have been identified, they must then be subjected to a consistent assessment process to ensure that City Power achieves an objective and holistic result that can inform its risk profile.

Risk is measured in two ways: • By the likelihood or frequency of the risk occurring • By the severity / impact on City Power of the risk occurring The City of Johannesburg has developed a two-stage assessment process to assess and quantify the identified risks.

6.2.3.2.1 Stage One – Impact and likelihood

The first stage involves an assessment of the potential impact (or severity) of each risk, and then the likelihood of the event actually occurring. Each risk is scored on a scale of one to five. Table 6.1: shows the criteria used to assess the potential Impact / Severity of each risk occurring

Table 6.1 : The criteria used to assess the potential Impact / Severity of each risk occurring

Assessment of Impact / Severity

Financial Reputation Stakeholders Customers

Event would Contained within the individual Employees may have Customers may have been have little service area. From a regulatory suffered minor first minimally impacted. Event financial perspective, minor fines or penalties aid injuries. Event may impact minimally on a 1 impact on may have been suffered. may have resulted in performance target either income localised staff morale achievement. or budget problems. Not significant

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Assessment of Impact / Severity

Financial Reputation Stakeholders Customers

Event would Affects a significant number of the Employees may have Event may impact on a have moderate service areas but with likely short- suffered temporary performance target financial term impact on public memory. disabling injuries. achievement where a major impact (> 2% From a regulatory perspective fines Event may have milestone was missed by 2 – on or penalties > R50k may have been resulted in staff loss, more than 1 month 3 budget/income suffered. Customers may have been causing minor to impacting on a client on either impacted so that complaints result in moderate segment. income or media coverage (suburban consequences. budget. newspaper). Minor Event would Regulator inquiry with medium term Employees may have Event may impact on a have serious impact on public memory. From a suffered multiple performance target financial regulatory perspective fines or temporary disabling achievement where a major impact (> 4 - penalties > R100k may have been injuries. Event may milestone was missed by 4 – 6% on suffered. Customers may have been have resulted in staff more than 3 months and 5 budget/income impacted so that complaints result in loss, causing serious subsequent interruption over

on either media coverage (local newspaper consequences. several days to customers. income or not front page). budget. Moderate Event would Medium term public impact with Employees may have Event may impact on a have very minor political implications. From a suffered multiple performance target serious regulatory perspective fines or permanent disabling achievement where a major financial penalties > R150k may have been injuries. Event may milestone was missed by 6 – impact (> 8% suffered. Customers may have been have resulted in staff more than 6 months, 7 on impacted so that complaints result in loss, causing very resulting in a major customer budget/income media coverage (national TV serious consequences. impact. on either headlines) and loss of service >1 income or month.

ajor ajor budget. M Event would Long term impact on public Employees may have Event may impact on a have memory and major political suffered fatalities. performance target Catastrophic implications. From a regulatory Event may have achievement where a major financial perspective fines or penalties > resulted in staff loss, milestone was missed by 8 – impact (> 15 to R500k may have been suffered. causing catastrophic more than 8 months to over 1 9 25% on Customers may have been impacted consequences. year. budget/income so that complaints result in media on either coverage (national TV headlines) income or and loss of service >6 month. budget. Catastrophic

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Table 6.2 shows the criteria used to assess the likelihood of the risk occurring:

Table 6.2: The criteria used to assess the likelihood of the risk occurring

Likelihood Description Probability Descriptor

Almost Certain – Event has occurred within the last year The event is certain to occur within 8-9 repeatedly. this financial year.

Event has occurred within the last financial The event is likely to occur within this Likely – 6-7 year. financial year.

The event has a probability of occurring at Event has been recoded within Possible – 4-5 some time, in the next year. organisation as well as within the sector in the last 2 years.

Very few recorded or known incidents. The event may occur at some time, Reasonable opportunity to occur or has within the next 2 years. Unlikely – 2-3 occurred within other organisations within sector.

Event may occur in exceptional circumstances. No event recorded in the last 3 years. No recorded incidents or little opportunity for Rare - 1 occurrence.

The product of this stage one assessment of impact and likelihood is an " Inherent Risk Score ", which can range from a minimum of 1 to a maximum of 25, by multiplying the frequency and impact scores.

6.2.3.2.2 Stage two – Development of Risk Drivers and Risk Casual Model Risk drivers are those elements which tend to be the cause of the risk occurring. Risk drivers are a key process in risk management as they provide an in-depth understanding of the risk. Analysis of the drivers’ lead to the effective monitoring of the risk, as well as the development of controls to mitigate or manage the risk. These will be measured and monitored as per the next phase of this project. The formulation of risk drivers is to assist with the understanding of the risk (i.e. make the risk more tangible) and in the formulation of controls, both pre- and post and to manage / minimise the risk drivers, which in turn reduces the overall headline risk. If the drivers are not identified, then the process only provides a snapshot of the risks at a point in time. 6.2.3.3 Monitoring and Reporting • Monthly, quarterly and annual reporting on progress with status of action items. 6.2.3.4 Auditing • This process will be audited continuously.

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6.3 City Power’s Top 13 Risks

Using the above process City Power has identified to 13 risks and developed mitigating strategies for each of the risks on table 6.2 below.

Table 6.3: City Power’s Top 13 Risks

Strategic Risk Actions to improve risk Background to the risk Current controls Description management of the risk Number

1 Cable theft Increase in copper price Beefed up security in hot Invest more in information led to increase in spot areas. Increase in the technology solutions. network tempering and rollout of CCTV cameras. vandalism

2 Kelvin Power • High pass through Penalties on poor Management of the current costs as a result of delivery. Hold monthly controls. poor efficiencies - meetings relates to fixed and variable costs.

• Inability of Kelvin Power Substation to supply at required levels in terms of the PPA

3 Eskom's • Eskom’s failure to City Power has applied Investigating alternative sources Capacity supply (generation for increased capacity of energy e.g. Piloting Solar problems and transmission) from Eskom. Powered Streetlights. Investigating distributed • Ability of the Eskom generation options. network to sustain the Implementing DSM new capacity demand. Programme. Resuscitate Gas Turbines.

4 Business's • Unable to meet the Looking at Alternative KFW (German Bank)'s inability to GDS , IDP ,and sources of funding. PPP, consultant in South Africa has fund high Business Plan Revenue generating met with Treasury. The City's capital and targets including projects, Additional Grant CFO has agreed to isolate this operational electrification, 2010, Funding. issue to the rest of the City's requirements Inner city project, process. Awaiting approval at out of current public light, etc the next Lekgotla. cash flows nor future tariff • Unable to refurbish applications the aging network at an acceptable rate

• Not enough funds to

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Strategic Risk Actions to improve risk Background to the risk Current controls Description management of the risk Number upgrade the network e.g 4th and 5th intake points . Compliance to MFMA requirements.

5 • Alignment with the Reinforcing partnership Capacitation of the Wellness Mayoral Priority. with COJ. Increase access Department. Increased to their Helpline. Provision of immune Impact of • Absenteeism due to boosters and nutrition. HIV/AIDS on sick leave, impacting Dispense and administer productivity in on overall ARV's the company performance.

6 Non - • Meter tampering. Meter Tampering - Semi Established a Revenue technical AMR and Tamper Proof Protection Department to ensure losses • Illegal Connections. meters with protective the implementation and structures have been effectiveness of the Controls. • Faulty Meters and installed. Illegal no-access, therefore Connections have been unable to bill removed and replaced customers with tamper proof meters with protective structures. Currently utilising JMPD to enforce by-laws. Continuous Audits.

7 Customer Causes include: outages, The Call Centre and Improved Shift Roster, Call satisfaction capacity demanded Walk-In Centres have Resolution and Navigation. levels resulting in low level of been capacitated. Increased the number of Service positive public opinion Ongoing training for Call Providers to allow for a better (company image ) Centre, Walk-In Centre footprint. ( Vending Machines ) and Billing employees. More accessibility to customers and increased number of vending stations.

8 Management Issues relating to the Conversion from Management of the SLA and the of Domestic management of credit conventional to pre- paid. conversion from conventional to Revenue control for domestic Manage the Service Level pre-paid. Collection accounts. Agreement with the City.

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Strategic Risk Actions to improve risk Background to the risk Current controls Description management of the risk Number

9 Network • Age of the network • Capital investment • Crime Intelligence needs to interruptions programme in place be improved. • Uncontrollable events such as • Crime Intelligence • Access controls to be insufficient capital (Risk Control). Way increased on the Load for upgrading and leave processes and Centres. refurbishment of implementation of the MV and LV network Asset Management • Penalties to be put in place Maintenance system. for 3rd parties damaging our network.

10 Organisational Establishment of Engage relevant Engage relevant stakeholders change due to Phakama and the stakeholders and staff and staff communication. restructuring implications thereof on communication staff morale and productivity

11 Not achieving Previous Years Qualified Actively addressing all Corrective action implemented an unqualified Audit Report. Mayoral issues raised in the and monitored on a monthly audit report Priority. previous year's basis. Management Report.

12 Impact of the • New areas of supply EDI Restructuring Implementing the current Restructuring – the burden new workgroups has been controls. of the areas of supply will established. Electricity put on existing Industry resources

• Impact of new areas of supply on profitability

• Employee productivity about implications of EDI restructuring. Different standards and tariffs.

13 Insufficient • Ineffective talent Prioritisation of skills Formulating a training strategy Skills capacity management. focus. Create a pool for that supports core functions of to support the Insufficient skills talent release. the business. Centralisation of business. pool. Capacitating the skills the budget. Implementation of level. the Retention Strategy. Definition of critical skills.

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SECTION 7: FINANCIALS

7.1. Capital Expenditure

7.1.1 Infrastructure & Service Delivery Capital Plan Background

City Power is currently faced with the enormous task of addressing the following challenges: • Reducing the average age of our transmission and distribution network where it is in excess of 40 years through refurbishment and replacement • Obsolete and unreliable equipment for which we are no longer able to obtain spares • Addressing and improving safety on the network i.e. replacement of high risk equipment • A network that, due to densification, has in many areas exceeded its firm capacity and in some instances reached its installed capacity • Reduction in outages and restoration times to restore power following outages • Increased economic activity which will lead to increased demand on our networks • Extending the transmission and distribution networks in support of new development, the electrification programme and projected 9% growth rate • Dramatic increase in the cost of key resources i.e. labour and materials • Meeting the Mayoral priorities i.e. Inner City, BRT, • Alignment with the City GDS • Upgrading of the networks to ensure a reliable supply for 2010 • Provision of capacity in support of the Gautrain • Increasing backlogs due to insufficient capital Long Term Capital Budget Indicatives Table 7.1 below shows the capital budget for City Power. Table 7.1: Long Term Capital budget 06/07 07/08 08/09 09/10 10/11 11/12 12/13 Measure Indicator Unit Actual Actual Plan Plan Plan Plan Plan Network Assets R m 886.7 1009.4 957.5 786.37 753.02 731.04 731.04 Other Assets R m 42.6 25.4 43.00 39.50 39.50 37.50 37.50 Total R m 929.3 1034.9 1001.2 825.87 792.52 768.54 768.54 5 year Capital Requirements

City Power developed a 5 year rolling capital plan, table 7.2 below outlines the five (5) year requirements based on the projects identified from the five year master plan.

Table 7.2: 5 year capital requirements Five (5) year Capital Plan Financial Year 2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 R'000 RX1000 RX1000 RX1000 RX1000 RX1000 RX1000 Requirements 3,394,000 3,714,744 2,504,000 1,289,035 569,935 570,000

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Funding Requirements for Revenue maximization Projects

Revenue Maximization projects Unit Type 2009/10 2010/11 Re-commissioning by-passed meters Rm Opex 23 Removal of illegal connections Rm Opex 30 30 Data and technical audits: CT's and VTs for LPUs Rm Capex 95 Intensify credit control measures Rm Opex 30 30 Convert to pre-payment smart meters Rm Capex 750 750 Convert to pre-payment smart meters Rm Opex 50 50 Protective structures Rm Capex 100 100 Roll out Automated metering (LPU) Rm Capex 20 20 TOTAL Rm 1098 980 Funding Requirements 2009/10

Table 7.3 below outlines the budget requirements for 2009/10 financial based on the projects already committed and projects which are critical for sustainability of the company going forward.

Contractually committed, Funding requirements 2009/10 directly linked to and Urgent Important Total Critical

X R1000 X R1000 X R1000 X R1000

Bulk Infrastructure 374,800 361,500 523,500 1,259,800 Bulk Infrastructure - Electrification 177,174 0 0 177,174 Electrification 95,100 0 0 95,100 Fire and Security 0 30,500 0 30,500 DSM/Load Management 239,500 0 0 239,500 Meters 102,000 0 150,000 252,000 Network Development 15,000 3,200 153,310 171,510 Network Development - Electrification 20,000 0 0 20,000 Operating Capital 37,500 0 24,760 62,260 Plant and Equipment 30,000 0 3,000 33,000 Protection 20,000 5,000 0 25,000 Public Lighting 97,500 0 20,000 117,500 SCADA 15,000 0 7,000 22,000 Service Connections 105,580 0 0 105,580 Telecommunication 2,500 0 3,150 5,650 Township Reticulation 0 0 18,000 18,000 Upgrading of the Network 222,500 19,200 629,970 871,670 Buildings (OMC) 0 0 45,000 45,000 Support Services 20,000 0 30,000 50,000

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Contractually committed, Funding requirements 2009/10 directly linked to and Urgent Important Total Critical

X R1000 X R1000 X R1000 X R1000

Other (Fencing, Hostels, COJ Bdg's, etc) 0 0 109,000 109,000 Total 1,574,154 419,400 1,716,690 3,710,244 2009/10 Allocation of budget

Table 7.4 highlights the comparison of the total budget requirements for 2009/10 vs. the proposed indicative budget allocation. If only the indicative budget is allocated, it must be noted that a further R3.1bn backlog will be created which will put more pressure on 2010/11 financial year budget requirements and might result in some commitments not being honoured by City Power.

Table 7.4: 2009/10 allocations Description Budget (R'000) Total Requirements 3,710,244 Indicatives budget allocation 825,871 Deficit 2,884,373 CAPEX Fund Allocation

The allocation of funding is largely driven and prioritised by the City’s Capital Investment Management System (CIMS). This looks at Mayoral initiatives i.e. Inner City, Bus Rapid Transport (BRT), 2010, Gautrain, Social Projects etc.

From a City Power perspective we also use the following criteria: • Quality of Supply • Safety • Return on investment • Interdependence • Increasing network availability – visible reduction in outages • Decrease in maintenance costs • Social benefits of project • Revenue generation CAPEX Allocation impact

The City of Joburg has indicated a budget allocation of R 825.871m including non-controllable and City Power’s own funding for the 2009/10 financial year. Once the above indicative budget has been approved at a budget Lekgotla, a further prioritisation will be done to fit the critical projects within the final budget allocation. The business plan will be amended accordingly. Based on the indicative budget allocation the following projects will have to be deferred. The table below indicates projects to be deferred and the associated risks.

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Bulk Infrastructure

Table 7.5: shows the deferred bulk infrastructure projects.

Table 7.5: Deferred bulk infrastructure projects Substation/ Description 2009 / 2010 Motivation / Risk Township Transmission: Orlando Switching Station - Replace all 88kV switchgear with compact Voltage instability of the 88 kV grid will Quattro 100,000,000 gas insulated switchgear and introduce prevail by 2010. 275kV Voltage instability of the 88 kV grid will prevail by 2010 compounded by the Transmission: Kelvin - Build a new 275/ unreliable Kelvin PS supply. Development Sebenza 88kV yard at Sebenza and demolish existing 100,000,000 in the Greater Modderfontein, Alexandra yard and Johannesburg Northern suburbs (Atholl Inanda, Houghton etc) will have to be curtailed. We will not be able to proceed with the refurbishment and replacement of high risk Tranformer Capital Programme to eliminate All 10,000,000 transformers. A commitment was made to high risk transformers. Exco and the Board to improve system performance and to reduce outages. We will not be able to proceed with the refurbishment and replacement of high risk Switchgear Capital Programme to replace All 25,000,000 and aged switchgear. A commitment was aged and critical switchgear made to Exco and the Board to improve system performance and to reduce outages. We will not be able to acquire servitude The acquisition of servitudes and sub station timeously for future transmission lines and Servitudes 20,000,000 sites sub stations. This will have a cost implication. Replacement of obsolete 88 kV surge Safety risk, continuity of supply an d risk of All 2,500,000 arresters at major sub stations damage to equipment due to lightning. The HV equipment in the sub station is Earthing and lightning protection at all major prone to lightning damage which can result All 5,500,000 sub stations in unnecessary outages and equipment failure. Mondeor Finalise Riverlea servitude 3,000,000 switch yard Beyers Sub Install two additional 88/11 kV transformers Unable to deload Christiaan de Wet Station phase 25,000,000 and one 11 kV feederboard Rooseveld sub stations. 2. New 88/11 kV substation, 2 X 40 MVA Fourteenth Unable to support new developments in transformers, feeder board and 88 kV cables 110,000,000 Avenue Constantia area. from Beyers sub station. Transmission: Install 3 rd transformer, Exceed fim capacity, Busbar must be extend the existing switchroom and install created to accept 88 kV supply from Eskom Nirvana 30,000,000 additional 11kV switchgear. Install 88 kV to improve the system stability to Orlando busbar to accommodate infeed from Etna. switching station. Unable to transport transformers in case of Lotus Construct Access Road 5,000,000 a fault. Unable to transport transformers in case of Lunar Construct Access Road 2,000,000 a fault. Continuous Strategy Improvement - Rev 17 – Page 82 of 131 Approved by Board on 6 Aug 2009

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Substation/ Description 2009 / 2010 Motivation / Risk Township Devland sub - New 88/11 kV 2 X 45 MVA substation to replace Baragwanath, Soweto Devland and Soweto Local and acquire substation 12,000,000 servitude (Required to feed JDA Ikhaya Project) Lenasia South Sub. Do away with Jericho Lenasia Firm capacity exceeded and unable to scheme. Additional 40 MVA transformer. 17,000,000 South supply new electrification projects. Extend 11 kV feederboard. Transmission: Establishment of 88/11kV Isidleke 1,000,000 substation Phase 1 Laying of 11kV from Westfield to Isidleke Isidleki and provision of 17 x panel 11kV 15,000,000 switchroom & switchboard Transmission: Provision of servitudes and Unable to support new developments in Newmarket 6,000,000 establish of new 2x45MVA 88/11kV S/S Kyasands. Transmission: Establish new 88/11 kV S/S Oakdene 55,000,000 Columbine off the M2 Motorway Phase 1 Transmission: Establish new 88/11kV S/S (2 Edgardale 5,000,000 x 45MVA TRX's) The firm supply to Rand Water Board New Mondeor Switching Station if fourth supply at risk. Also to provide Mondeor 75,000,000 intake point is at Orlando. interconnectivity between Prospect and Orlando. Transmission: Replace "Dumpy" feeder Wilro Park 2,000,000 Safety risk. board Transmission: Provision of servitudes, build new 88 kV Zebra line from the existing Princess New developments in the area cannot be Roodetown - Kloofendal circuit and Build 49,000,000 Crossing supplied. new 88/11 kV 2 X 40 MVA sub station with 1x11kV feederboard. Transmission: Install 1X40MVA New developments in the area cannot be Robertville 30,000,000 transformer and feeder board. supplied. Roodepoort Sub - replace 5x33kV CB Roodepoort replace 10x33kV IL replace 15x6,6kV 15,000,000 switchgear, refurbishment. Construct the interconnecting lines. The Lutz - Dalkeith. New twin Zebra lines from Lutz 54,000,000 transmission lines between Kloofendal and Peter Road to Lutz and Dalkeith sub station. Peter Road are at risk (over firm capacity).

Lutz Sub Construct new 88/11 kV 3 X 45 MVA sub 55,000,000 station station.

Cleveland Sub - Busbar reconfiguration, replace I high risk transformer and install Aged 20 kV transformers and switchgear Cleveland 25,000,000 additional 45MVA transformer and feeder cannot be decommissioned. board. Decommission 20 kV networks. Kelvin- Upgrade the existing 88 kV lines between Cannot take full load at Alexandra sub Alexandra- Kelvin, Alexandra and Cydna from 100 80,000,000 station. Cydna MVA to 200 MVA Consultants cannot be appointed to design All Pre Engineering design of sub stations 6,000,000 new sub stations

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Meters

Table 7.6 shows the deferred meters projects.

Table 7.6: Deferred meters projects Substation/ Description 2009 / 2010 Risk Township Metering: Replace obsolete energy kwh All areas meters & purchase of energy meters for new 30,000,000 installations (single, three phase and prepaid) The routers have been purchased and Revenue Generation Efficiency Project. Pre- installed at the customer's mini subs. All paid system installation of Semi automated 30,000,000 Communication has been done. pre-paid & automated pre-paid There are customers on free mode in both Dainfern and Eagle Canyon. The installation of statistical meters on All 20,000,000 distributors All areas City wide pre paid roll out 70,000,000 All areas Domestic AMR roll out 30,000,000 Reduced from R 30 M to R 10 M Eldorado Park and Installation of pre paid meters and protective 40,000,000 Reduced from R 40 M to R 10 M Lenasia structures. Installation of pre paid meters in Naturena Naturena 20,000,000 Reduced from R 20 M to R 10 M and sectional title flats.

Upgrade of Network

Table 7.7: shows the deferred network upgrade projects.

7.7: Deferred network upgrade projects Substation/ Description 2009 / 2010 Motivation / Risk Township The MV networks must be upgraded to accommodate new Alexandra Alexandra Upgrading of MV infrastructure 2,000,000 developments. This affects revenue generation. Can be postponed to 2010/11. Temporary relief was achieved Load relief interconnectors between Vasco through another project. There are Alexandra 12,000,000 Da Gama and Rooseveld however a number of developments in the area which must be supplied. Khanyisa sub station in Bryanston will be complete by February 2010. The 6.6 kV network in the Replace feeder cables and 6.6kV load centres area must be converted to 11 kV Bryanston with dual ratio mini's and transfer load to 33,000,000 and transferred to the new sub Khanyisa sub station. station. This will relieve load off Brynorth sub station where we exceed the allocated capacity from Eskom. Rembrand Park Build new switching station and feed 4,000,000 The existing sub station is at full Continuous Strategy Improvement - Rev 17 – Page 84 of 131 Approved by Board on 6 Aug 2009

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Substation/ Description 2009 / 2010 Motivation / Risk Township & Lyndhurst existing distributors from new switching stn. capacity and no new East developments can be supplied. Replacement of 95 mm (0.15") cables The existing distributors are between N694 & Bramley G TSS (Erf 157 derated due to the 95 mm cable in Gresswold 1,500,000 New Av & Helen Rd) in Kew Central with the circuit. This limits the load 185 mm due to overload transfer. The existing distributors are Replacement of 95 mm (0.15") feeders with derated due to the 95 mm cable in Hyde Park 185 mm between Hyde Park 6th Road and 2,000,000 the circuit. This limits the load Hyde Park TSS transfer. Elton Hill Replace bare OHL with ABC 2,500,000 Large trees makes line Waverley Replace bare OHL with ABC 1,000,000 maintenance difficult. Hyde Park Underground bare overhead mains. 4,500,000 No double earthing on the lines Large trees makes line Bramley Park Underground bare overhead mains. 2,500,000 maintenance difficult. The overhead lines must be Kew Underground bare overhead mains. 7,000,000 undergrounded to reduce theft of electricity. Replacement of link cabinets in the Kew Public and operator safety is a Alexandra 4,000,000 Depot area. serious concern. These pillar boxes are on the pavement and have been Siemert Elimination of MV pillar boxes 3,000,000 damaged. They pose a serious safety risk to the public. New developments and upgrading of supply is not possible in Third Leg required between Fabric City and Richards Drive and Old Pretoria Halfway House 2,100,000 Midas std 365 Road south of Le Roux Drive. This has an impact on revenue generation. Split back to back feed cables between This is a critical part of the Bekker St and Boulders S/S at James James Crescent 2,000,000 feedback system and restoration Crescent. Install additional feeder between times are affected. Grand Central and James Crescent Unable to cater for new developments. The existing Upgrade the MV and LV network in system is severely overloaded and Kyalami Estates 8,000,000 Kyalami Estates. excessive outages occur in winter. There are a number of sensitive customers in this area. Northern Closing of spurs 3,000,000 Region Northern Re inforcement of overloaded MV 12,000,000 Region infrastructure (winter load readings) Turnkey project to replace LV open wire Northern overhead systems with ABC in problematic 15,000,000 Region areas. Road widening affects the safety Complete U/G of LV OHL Bryanston Drive of our overhead lines. This Bryanston 2,000,000 (Theft of O/H mains prevalent in this area) project also contributes to the general upliftment of the area. Maroeladal Upgrading single phase LV networks 1,500,000 The LV networks are overloaded, Continuous Strategy Improvement - Rev 17 – Page 85 of 131 Approved by Board on 6 Aug 2009

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Substation/ Description 2009 / 2010 Motivation / Risk Township Maroeladal resulting in damage to equipment and customer appliances. Selkirk Feeder overlo aded - reconfiguration Randburg 3,000,000 Same as Kelland & upgrade Garden feeder Overloaded - strengthen Unable to cater for new Bordeaux 1,320,000 feeder developments. We do not have N-1 Contingency on the 6.6 kV network which Westminster and Brynorth Main feeders Bryanston 3,800,000 result in extended restoration overloaded - reconfiguration and upgrade times under fault conditions. New developments are also curtailed. We do not have N-1 Contingency on the 6.6 kV network which Kingswood & Country Life feeders Bryanston 6,000,000 result in extended restoration overloaded - reconfiguration & upgrade times under fault conditions. New developments are also curtailed. Bryanston Borrowdale feeder ring not firm - upgrade 5,000,000 Extended restoration time Belgrave & Chesterfield Ring not firm - Bryanston 3,200,000 Extended restoration time upgrade St Audley & Cresant Flats ring not firm - Bryanston 2,500,000 Can be postponed to 2010/11 upgrade Baker & Portman feeders overloaded - Brynorth 7,000,000 Can be postponed to 2010/11 reconfiguration and upgrade Goede Hoop/Culemburg Ring not firm - Hurlingham 5,000,000 Extended restoration time strengthening Morningside Parkmore feeder overloaded - upgrade 4,134,000 Extended restoration time River Club feeder overloaded - Morningside 3,871,000 Extended restoration time reconfiguration and upgrade Alon feeder overloaded - reconfiguration and Randburg 4,300,000 Can be postponed to 2010/11 upgrade Randburg Conrad Feeder overloaded - Randburg 4,000,000 Can be postponed to 2010/11 upgrade Malanshof and Annie feeder overloaded - Randburg 2,500,000 Can be postponed to 2010/11 upgrade Underground LV overhead lines in Robindale 4,000,000 Can be postponed to 2010/11 Robindale/Hills Underground LV overhead lines in Bord eaux Bordeaux 5,000,000 Can be postponed to 2010/11 & Blairgowrie Underground LV overhead lines in Malanshof 2,600,000 Can be postponed to 2010/11 Malanshof and Fontainebleau The sub station and feeder loads are above firm capacity and Bordeaux Bordeaux 11 kV conversion. 5,000,000 constitutes a safety risk and extensive restoration times for customers under fault conditions. Underground 11 kV OHL in Northumberland Critical part of feedback system - Northriding 3,000,000 Ave with 1600 m 185 x 3 cable restoration time Northriding Close Ascot & Hans Strydom ring 11,000,000 Restoration time Establish standby supply, Conduit, Northriding Amsterdam & Johannesburg North from 19,000,000 Restoration time School Street Reinforce and reconfigure Kelland N-1 will not be reinstated on the Randburg 6,200,000 distributor 6.6 kV distributors which may Continuous Strategy Improvement - Rev 17 – Page 86 of 131 Approved by Board on 6 Aug 2009

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Substation/ Description 2009 / 2010 Motivation / Risk Township result in extended restoration times under fault conditions. Additional capacity is required for new developments. Preparation of MSS's and Load Centres for Central 8,250,000 11kV conversion ( 0 MSS & 71 L/C) Preparation of MSS's and Load Centres for Van Beek 11kV conversion ( 5 MSS & 75 L/C) plus 12,000,000 upgrade cables Ellis Park LV and MV upgrade phase 1 12,500,000 Precinct New Jeppe standby distributor for Cleveland 3,000,000 Jeppestown and Troyville Replace 95mm (0.15 inch) on Houghton Dx Cydna 1,000,000 with 185mm and close spur. Replacement of 95 mm (0.15") cables with Orchards 1,000,000 185 mm - Norwood Dist. Overload Bruma Upgrade LV networks 1,100,000 Bez Valley Upgrade LV networks 10,000,000 Cyrildene Upgrade LV networks 6,400,000 Bellevue Upgrade LV networks 3,000,000 Oaklands Upgrade LV networks 1,000,000 Fordsburg Upgrade LV networks 2,000,000 Fairwood Upgrade LV networks 1,800,000 Fairview Upgrade LV networks 540,000 Cleveland Upgrade LV networks 3,500,000 Upgrade and reinforce various distributors in Cleveland 9,000,000 Cleveland Cydna Upgrade Houghton Golf Course network 4,200,000 Fort Upgrade Girton Road distributor 1,800,000 Siemert Project to reduce outages by 50% 10,000,000 Replace 50 mm cable between MSS N401 & MSS N562 and between TSS Oxford Road & Melrose 3,000,000 Cecil Road on the North Distributor from Cydna sub station Fordsburg Establish new Fordsburg Central distributor 1,000,000 Herriotdale Upgrade MV network 3,600,000 Denver Upgrade MV network 8,000,000 Cleveland Establish RMU's and reconfigure distributors 7,000,000 Establish standby distributor for Parktown Parktown 2,000,000 West Upgrade MV distributors and sub rings from Observatory 20,000,000 Observatory sub station. Reinforce Richrds Drive ring from Halfway Halfway House House 41 by installing a RMU in the K101 600,000 41 traffic light circuit. All areas Replace Service Cables 2,000,000 Elimination of spur feeds to reduce outage All areas 4,000,000 restoration time Substations & Install maximum demand meters 1,000,000 Satelite S/S's Vrededorp Decommision Vrededorp Satellite sub station 6,000,000

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Substation/ Description 2009 / 2010 Motivation / Risk Township and replace with outdoor switchgear. Upgrade of MV and LV infrastructure: Hursthill 10,000,000 Master plan Replacement of cable sections with 185 mm Dunkeld 2,000,000 - Dunkeld W Dist Replace 0.06 cable between TSS Norman Cres & TSS Joseph Ave (6 MSS's) and Northcliff North 3,000,000 between HVC2 & TSS Joseph Ave on Berrario standby distributor with 185 mm Install new distributors to strengthen the MV Newlands 2,500,000 network in Newlands. Strengthening of MV network in Craighall Craighall Park 4,500,000 Park Vlakfontein - Provision of Sectionalisers and Vlakfontein 3,000,000 backfeed Eldorado Park Klipspruit West Ext 2 Dist backfeed req 1,200,000 Ennerdale Unaville O/H line Backfeed req 600,000 Preparation of MSS's and Load Centres for Lenasia 5,000,000 11kV conversion ( 48 MSS & 52 L/C) Lotus Kiasha Park Distributor overloaded 4,000,000 Relocate MV cable between MSS 3 and Nirvana 1,500,000 HVC 54 Preparation of MSS's and Load Centres for Baragwanath 11kV includind Baragwanath 25,000,000 Hospital.conversion ( 1 MSS & 8 L/C) LV Pole and overhead line replacement (with Lenasia 4,000,000 ABC) Upgrade overloaded 315 kVA MSS's to 500 Lenasia 2,000,000 kVA (32) Install sectionalisers, autoreclosers & Unaville pathfinders on Lenasia/Unaville overhead 2,000,000 line. Eldorado Replace loop in system 4,000,000 Lenasia X 5 Replace pillar boxes and loop in system 5,000,000 Lenasia X 2 Replace loop in system 5,000,000 Preparation of MSS's and Load Centres for Selby 11,000,000 11kV conversion ( 2 MSS & 95 L/C) Kibler Park 11k V overhead line to Concrushers 5,000,000 Meredale. Preparation of MSS's and Load Mondeor Centres for 11kV conversion (18 MSS & 16 6,500,000 L/C) Upgrade overloaded load centres. TSS 112, Forest Hill 2,000,000 TSS 114 & MSS 42 Rosettenville Relieve ov erload on Zinnia/Prairy sub ring. 4,000,000 1. TSS 82 overloaded, upgrade from 2 X 315 kVA to 1 MVA. 2. Data Cres distributor Robertsham overloaded, install extra distributor. 3. 5,000,000 Complete ring to MSS 93 on Ridgeway distributor. Ross etenville, Haddon & Turffontein South Wemmer distributors overloaded. Install extra 5,000,000 distributors.

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Substation/ Description 2009 / 2010 Motivation / Risk Township Install new 185 mm distributor from Wemmer 6,000,000 Wemmer to the Hill (South Rand Hospital) Upgrade and reconfigure network to allow Robertsham 1,500,000 additional capacity at Evans Park. Upgrade and reconfigure network to allow Mulbarton 5,000,000 for new service connection Replace MSS with no switchgear at strategic Roodepoort 2,000,000 points initially Local rings need to be stre ngthened due to Penny Street 1,200,000 loading Penny Street General Pienaar sub Distributor 600,000 Penny Street Witpoortjie Gardens 450,000 Penny Street Barbara Flats distributor 450,000 Transmission: Dumpy feeder board needs Panorama 4,000,000 replacement Poortview Upgrade / underground MV OH line 10,000,000 Florida, Discovery, Replace oh lines with ABC 3,000,000 Georginia Short str ss Replace switchgear & transformer 1,000,000 Maraisburg park Replace existing circuit breakers 1,500,000 6,6 kv ss Replace existing feeder from Florida Glen Florida Glen Switcing station to Drakens switching stn, 7,180,000 7th Avenue & Banfield Florida North switching ss to Replace existing feeder cables 3,000,000 Maraisburg Park Florida Replace existing MV areas < 70mm al 365,000 Replace 70 mm Al from Fredenharry to Lone Florin 1,500,000 creek with 95 mm cu Refurbish Honeydew North and Bothma Str Honeydew 4,000,000 OHL Maraisburg Replace OHL with underground cable. 1,500,000 Park Capacity of OHL exceeded and unreliable. Install 4 MV cables from Kloofendal sub Kloofendal 4,000,000 station to Helderkruin switching station. Close spur between Progress No 3 MSS and Penny Street 500,000 Elm Street MSS - Station distributor Geldenhuis Upgrade LV network. Low voltage during 4,000,000 Street Winter Roodepoort Replace all overhead service connections 4,000,000 Replace the 11 kV OCB's at Helderkruin Helderkruin 1,000,000 switching station with vacuum breakers Install a 3rd 11 kV cable from JG Str ydom JG Strydom switching station to reinforce the ring with 2,000,000 31 MSS's. Protect exposed MV cables. Wilgeheuwel, Roodepoort 5,000,000 Christiaan de Wet & Bergbron Replace unreliable 35 mm PEX cables in the Bergbron 8,000,000 Bergbron area.

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Substation/ Description 2009 / 2010 Motivation / Risk Township Up grade the supply to Spokeshave switching Spokeshave station by installing a 300 mm Cu cable from 25,000,000 Robbertville to Spokeshave CBD 11 kV conversion 8,000,000 Southern Closing of spurs 3,000,000 Region Southern Reinforcement of overloaded MV 12,000,000 Region infrastructure (winter load readings) Turnkey project to replace LV open wire Southern overhead systems with ABC in problematic 15,000,000 Region areas. Preparation of MSS's and Load Centres for John Ware 4,000,000 11kV conversion (5 MSS & 88 L/C) Inner City MV master plan for the Inner City 1,500,000 Ebury & Cowley Feeders ring not firm - This project forms part of the Brynorth 6,310,000 upgrade Bryanston Master plan. Van Beek Transmission: Decommission 20,5/6,6kV 5,000,000 Siemert Provis ion to close spurs 2,000,000 Siemert 1,000,000 Upgrade 50 mm cable between Melrose TSS Cydna 2,500,000 Cr Oxford Rd & Cecil Ave and MSS N405 Install 2 X 300 mm Cu XLPE cables from Halfway House Waterval to Halfway House 41 satellite sub 5,000,000 41 station Other Critical Projects

Table 7.8: shows other deferred projects.

Table 7.8: Other deferred projects Substation/ Description 2009 / 2010 Risk Township City Power to take over the This is in line with the City's commitment to maintenance of all COJ buildings. All areas 40,000,000 reduce power consumption and to align with the Install DSM, Solar geysers and National PCP initiative. lighting, CLF's, pre paid meters etc City Power to take over the This is in line with the City's commitment to maintenance of all hostels. Install All areas 50,000,000 reduce power consumption and to align with the DSM, Solar geysers and lighting, National PCP initiative. CLF's, pre paid meters etc The control centre is the "heart" of City Power's network. The existing arrangement consists of separate rooms with severe space and noise Establishment of a Control and All areas 45,000,000 challenges posing serious safety risks, and it's Outage Management Centre not scalable in terms of future expansion. In fact, it is totally unacceptable as a control centre for City Power. All Purchase three standby generators 3,000,000 A large amount of theft and vandalism occurs in Install alarm systems in load All 1,500,000 City Power's load centres. An alarm system centres. linked to the Risk Control room will reduce this. CBD Tunnel security alarm and 9,000,000 This is an important project to reduce vandalism

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Substation/ Description 2009 / 2010 Risk Township surveillance system and the theft of cables in the tunnels City Powers depots and major sub stations does Integrated security, fire detection not have a reliable security and fire detection & suppression systems for major system to protect against illegal entry, theft or All areas 20,000,000 substations. Including fibre optic severe damage due to fire. The work will be links (+- 50 % of budget). phased over a number of years to reduce the impact per financial year. This project can be deferred until Sandringham Establish a new standby distributor Sandringham 1,000,000 sub station is built or until capacity can be made for the Linksfield area. available from an alternative source. New distributor from Cydna to Cydna HVC130 due to North street feeder 3,000,000 Will be done in 2008/9 overload New feeder from Alex sub (clean Gresswold Lombardy East standby 1,000,000 distributor) Add 1x new ring to relief overload Unable to support new developments resulting Bordeaux 3,200,000 from existing feeders in loss of revenue. Randburg Add 1x new ring to relief overload The project started in 2008/ 9 will not give full 3,200,000 11kV from existing feeders benefit without the second phase being done. Reinforcing master plan for the N-1 isc not available which result in extended Kyasands area. Supply to and restoration times under fault conditions. Kyasands 23,900,000 between the various switching Additional capacity is required for new stations not firm developments.. Create new standby dist from No N -1 contingency resulting in extended Orchards 2,500,000 Orchards to HVC109 restoration time under fault conditions. Replace 95 mm (0.15") sections To optimise the capacity of this distributor, the Cleveland 1,610,000 with 185 mm- Jeppe East Dist 95 mm sections must be replaced. The existing distributors are severely overloaded Observatory Upgrade Bruma distributor 4,500,000 resulting in insulation damage. This will result in an increase in faults in future. Reinforce and install various distributors from Beyers sub Beyers 50,000,000 station to Berario and Fairlands. Phase 2. Carina/ Mss 203 Dist complete the ring 700,000 Lenasia To be fed from Beyers on completion of Transformer Without upgrade. Cables previously 11,500,000 installed to be checked if still intact Bridal Veil - Lone Creek ring not firm - Create two new rings from Florin 1,500,000 Florin ss, connect at Wasbank & Weiling mini subs. Boloop - Almond Rock Ring not firm - replace70 Al from Fredenharry to Lone Creek with 95 Florin 1,600,000 mm Cu. Create two rings from Florin when load increase sufficiently. Florin Minisubs on spur feed - install 95 800,000 Continuous Strategy Improvement - Rev 17 – Page 91 of 131 Approved by Board on 6 Aug 2009

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Substation/ Description 2009 / 2010 Risk Township mm Cu cable from Witwa tersrand 3 to Pennyweight 2 and Fredenharry to Witwatersrand 1 to extend ring. Yacht feeder overload - install new Ridge Road 185 Cu ring to take load off Yacht 2,000,000 feeder. Substation supply not firm. Install Ruimsig 2 185 Cu cables from Peter Road 6,500,000 to Ruimsig. Constantia Establish temporary 6.6/11 kV sub 33,000,000 Kloof station Install earth fault indicators on MV All areas 5,000,000 load centres We made a commitment to Exco and the Board to replace obsolete equipment to improve system Replace obsolete relays and performance and to eliminate unnecessary provision for protection on All areas 5,000,000 outages and damage to plant. The existing relays various feeders in existing cannot accommodate SCADA and also cannot substations record system disturbances making it difficult to do proper fault investigations. All SCADA: RTU Installations 15,000,000 MV Load Centre and mini sub All 7,000,000 monitoring system Alexandra Establishment of new townships 2,000,000 Midrand Establishment of new townships 2,000,000 Randburg Establishment of new townships 2,000,000 Siemert Establishment of new townships 2,000,000 Hursthill Establishment of new townships 2,000,000 Lenasia Establishment of new townships 2,000,000 Reuven Establishment of new townships 2,000,000 Roodepoort Establishment of new townships 2,000,000 Roodepoort Establishment of new townships 2,000,000 From the above tables it can be seen that a major contribution comes from the network related projects which, in turn, impose a significant contribution towards service delivery. Therefore, there is no doubt that this reduction will have significant impact in service delivery and, due to the nature of these projects, natural load growth and network deterioration, the required investment will have to be made sooner or later. It is most likely that this reduction will put pressure on future capital budget allocations.

The following are some of the areas which will see the impact in the near future: • Impact in the reduction of unplanned outages • Impact in the improvement of restoration times • Provision of new service connections will be negatively impacted • There will be an increase in OPEX (R&M) due emergency repairs • Stock Levels will be impacted negatively (most likely to be high) • Township developments will slow down due to capacity constraints • N-1 contingency will be violated, impacting negatively on network reliability • Deferred budgets will place additional burden on future financial year budgets

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Focus Areas • The construction / upgrading of substations to alleviate loading problems and the elimination of non-standard voltages • Upgrade of all transmission and / distribution equipment in order to alleviate the current overloading situations • Upgrade all equipment where safety of personnel is jeopardised • Upgrade / replace all un-maintainable cable networks • Upgrade of protections systems with modern technology equipment • The expansion of the SCADA system to make it possible to monitor / operate substations remotely • Roll out of DSM / Load Management 7.1.2 Major Infrastructure Initiatives Major Intake Points

The upgrading of Delta 275/88kV intake point in the North West which commenced in 2007/08 will be completed mid 2009. Two new Eskom intake points are being planned to provide security of supply for 2010 and to provide the capacity required to support development into the future. These are major projects, and will take approximately two to three years to complete. “Sebenza” will be situated in the North-East of Johannesburg adjacent to Kelvin Power Station and “Quattro” in the South West of Johannesburg adjacent to the old Orlando power station site. The identification of funding for these two projects is now critical, so tenders can be placed to ensure that long lead items can be ordered.

Eskom Upgrades

To support of our immediate and future capacity upgrades our load projections have been communicated to Eskom. Eskom have indicated that to provide the capacity required they will have to upgrade their transmission networks. Initial payments have been made to Eskom for some of these upgrades. Upgrades to support development in the Randburg, Midrand and Roodepoort areas are currently in progress and are planned for completion at the end of 2009. Further upgrades are necessary to support the planned growth across the city.

Eskom’s transmission networks will also need to be extended to supply our planned 275/88kV intake points at both Quattro and Sebenza.

Project Status

This section highlights the status of payments for applications made to Eskom for the upgrade of their substation and backbone infrastructure in order to cater for additional backbone capacity requirements.

Table 7.9: Project status Eskom payments towards the Infrastructure upgrade for additional capacity Project Name Total(Budget quote) Amount Paid Outstanding Harley 9,466,823.76 2,366,706 7,100,117.82 North Riding 3rd Trx 17,504,047.95 6,902,823 10,601,224.95 Olivedale 13,016,886.06 3,254,222 9,762,664.54 Randburg 11kV 14,493,238.81 10,869,929 3,623,309.70 Lutz 32,078,703.95 16,039,652 16,039,051.97

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Eskom payments towards the Infrastructure upgrade for additional capacity Project Name Total(Budget quote) Amount Paid Outstanding New Road 16,121,522.53 12,091,142 4,030,380.63 Khanyisa (Brywest) 32,883,291.00 8,220,823 24,662,468.25 Randburg Backbone 20,000,000.00 8,078,386.56 11,921,613.44 Crown 580,253.00 580,253.00 0 Delta Upgrade 19,662,000.00 4,787,866.60 14,874,133.40 Noordwyk 19,000,000 0 19,000,000 194,806,767.06 73,191,805.16 121,614,964.70 Totals

Substations

Upgrade of Existing Substations

The upgrading of eight substations which commenced in 2007/08 and 2008/9 will continue, and be completed in 2009/10. The planning and design for a further seven upgrades is at an advanced stage, and these upgrades will commence towards the end of 2008/9 and be completed in 2009/10. The upgrading of Siemert Road, Crown and Braamfontein Substations, which support 2010 and Gautrain respectively, have commenced. New Substations The construction of two substations which commenced in 2007/08 will continue and be completed in the latter part of 2008.

The planning and design of four new substation has been completed, three of which are pending GDACE approval. The construction of Crown Substation which will supply Soccer City, host to both the opening and closing ceremonies for 2010, and will be completed during 2009/10. Project Status Table 7.10 below indicate the status of upgrade and new substation projects, aimed at addressing capacity constraints and refurbishment backlog as alluded to above. No. Substation Area to Benefit Progress 1 Khanyisa Substation, Bryanston area Construction sta ge 2 New Road Substation, Midrand area Construction stage 3 Crown Substation, Nasrec Area Construction stage 4 Nirvana Substation Lenasia Area Design Stage 5 Westfield Substation, Modderfontein Area Construction stage 6 Fort Substation, Inner City Are a Tender Stage 7 Wemmer Substation, Turfontein, Rosettenville Area Planning Stage 8 Grand Central Substation Midrand Construction Stage 9 Rooseveldt Park Substation North Cliff, Rooseveldt Park Area Final Design Stage 10 Delta Substation Rosebank, Parkhurst Area Construction Stage 11 Greswol rd Substation Greswo rld Area Tender Stage 12 Pennyville Substation Pennyville, Noordgesig Area Tender Stage 13 Hope sfield Substation Lawley, Ennerdale Area Commissioned 14 Hursthill Substation Hursthill Construction Stage 15 Randburg Substation Randburg Construction Stage 16 Olivedale Substation Olivedale Construction Stage Continuous Strategy Improvement - Rev 17 – Page 94 of 131 Approved by Board on 6 Aug 2009

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17 Rosebank Substation Rosebank Construction Stage 18 Crown Substation Crown Construction Stage 19 Siemert Rd Doornfontein Construction Stage 20 Eikenhof Eikenhof Tender Stage 21 Parkhurst Parkhurst, Hyde Park, Rosebank Tender Stage 22 Ennerdale Ennerdale, Lenasia South Tender awarded 23 Christiaan de Wet Strubens Valley, Weltenvreden Final Design Stage Park 24 Peter Road Ruimsig, Honey Dew Final Design Stage 25 Noordwyk Noordwyk, Randjiespark, Final Design Stage It should be noted that the committed budget requirements for the 2009/10 financial year includes some of the above projects.

Overhead and Underground Transmission networks

We are currently experiencing transfer capacity problems on our transmission line networks and significant upgrades are required to support capacity upgrades at existing and new substations being planned. These upgrades need to be undertaken before the load reaches a critical level, whereby we will no longer be able to take these lines out of service to do the upgrades. In areas where we are no longer able to get servitude corridors, underground cables are being planned. The cost of underground networks in comparison to overhead lines is approximately five fold.

Where new overhead lines are being planned the acquisition of land and the environmental process that has to be followed has proven to be a major challenge and is delaying projects.

Refurbishment of the Transmission Networks

The refurbishment of existing substations and replacement of high risk transformers and switchboards will continue to be implemented, in order to bring the network within the acceptable average age. In many instances these transformers are replaced as part of planned upgrades.

Upgrading & Refurbishment of the Medium & Low Voltage networks

This still presents a major risk and is where the majority of outages occur. However, due to limited funds being made available and the need to first upgrade the transmission networks with the majority of the available funds, the backlog on refurbishment and upgrading of these networks is growing each year. As soon as the transmission networks have been upgraded the focus will change to the refurbishment and upgrading of the medium and low voltage networks.

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Township Establishment, Densification and New Service Provision

This remains our single biggest risk, and a source of frustration for City Power staff, developers and Consultants. Considering that City Power has seen an overall natural growth in maximum demand of approximately 5% over the last few years, our networks in a growing number of areas have been placed under severe strain and have become overloaded. This has been further compounded by the demand for housing which has resulted in an exponential boom in many areas due to densification and natural load growth. In many areas, particularly the Midrand, Randburg and Roodepoort areas, the growth has been in excess of 30%. As a consequence we have no capacity to support further development, and have for some time now been forced to turn down applications for densification, township establishment and the provision of new service connections. This will have to continue until these networks have been upgraded. This will ensure that our networks are not further overloaded and will protect the existing customer base.

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7.1.3 Sources of Funding Table 7.11 below gives the breakdown of the anticipated Budget allocation and sources of funding for 2008/09:

Table 7.11: Budget allocation and Sources of Capital Funding Engineerin Public g Service Other and Contributi Adopt-a- Contributi DSM 2009 / 2010 Loans Own funds ons light DME ons CMIP/MI Province Surcharge) Type of project RX1000 RX1000 RX1000 RX1000 RX1000 RX1000 RX1000 G RX1000 RX1000 RX1000 Buildings 2,000 2,000 Bulk Infrastructure 291,928 268,928 23,000 Bulk Infrastructure Electrification 40,000 20,000 20,000 Electrification 50,150 50, 150 DSM/ Load Management 55,000 55,000 Emergency Generators 0 Fire and Security 15,000 15,000 Meters 12,000 12,000 Meters - Revenue Protection 30,000 30,000 Network Development 15,000 15,000 Network Development Electrification 13,000 13,000 Operating Capital 37,500 37,500 Plant and Equipment 0 Protection 20,000 20,000 Public Lighting 60,093 17,072 5,000 38,021 SCADA 5,000 5,000 Service Connections 89,700 89,700 Support Services 0 0 Telecommunications s 5,000 5,000 Township Reticulation 0 Upgrading of network 84,500 84,500 TOTAL 825,871 600,000 0 89,700 5,000 70,150 23,000 38,021 0 0

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7.2. Operational Expenditure

7.2.1 Financial Planning Assumptions Table 7.12: Financial Planning Assumptions

Details Notes Budget Forecast Budget Budget Budget 2008-2009 2008-2009 2009-2010 2010-2011 2011-2012

Revenue Tariff Increase % 30.60% 30.60% 28.20% 18.00% 15.00% Income Split Key Customers % 46.00% 46.00% 46.00% 46.00% 46.00% Income Split City Power % 15.00% 15.00% 15.00% 15.00% 15.00% Income Split Prepaid 2.00% 2.00% 2.00% 2.00% 2.00% Income Split COJ % 37.00% 37.00% 37.00% 37.00% 37.00% Other Income 5.00% 5.00% 4.5% 4.0% 4.0%

Direct Costs Kelvin Power Station Increase % 47.60% 47.60% 6.00% 5.38% 12.50% ESKOM Increase % 35.60% 35.60% 25.00% 25.00% 25.00% % Growth in units purchased % 2.00% 2.00% 1.00% 1.00% 1.00%

Payment Levels Key Customers % 99.0% 99.0% 99.0% 99.0% 99.0% City Power Top Customers % 99.0% 99.0% 99.0% 99.0% 99.0% City Power Prepaid 100.0% 100.0% 100.0% 100.0% 100.0% COJ Domestic Customers % 93.0% 93.0% 93.0% 93.0% 93.0%

Expenditure

Inflation CPIX % 6.2% 6.2% 6.8% 5.6% 5.2% Salary Increases: Salaries % 8.30% 8.30% 11.00% 7.0% 5.9% Allowances % 8.30% 8.30% 11.00% 7.0% 5.9% General Expenses % 6.2% 6.2% 7.3% 5.6% 5.2% Repairs and Maintenance % 6.5% 6.5% 8.8% 7.6% 7.2% Repairs and Maintenance Other % 50.0% 50.0% 8.8% 7.6% 7.2%

Capital Expenditure R000 1,043,352 1,043,352 825,871 792,516 768,540 Loan funded projects R000 595,649 595,649 450,000 400,000 400,000 Internal Sources R000 150,000 150,000 150,000 150,000 100,000 Other R000 297,703 297,703 225,871 242,516 268,540

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7.2.2 Income Statement Table7.13: Income statement

Details Actual Budget Forecast Budget Budget Budget Budget 2007-2008 2008-2009 2008-2009 2009 -2010 2010-2011 2011-2012 2012-2013 Total Operating Income 4,328,037 6,011,917 5,916,539 7,302,326 8,715,411 10,188,539 11,419,620 Turnover 4,164,040 5,620,324 5,564,857 6,909,043 8,253,902 9,704,009 10,912,746 Other Income 163,997 391,593 351,682 393,283 461,509 484,530 506,874 Cost of Sales 2,795,652 3,890,654 3,816,539 4,830,710 5,960,500 7,323,700 8,468,100 Gross margin 1,532,385 2,121,263 2,100,000 2,471,616 2,754,911 2,864,839 2,951,520 Gross margin % 35.41% 35.28% 35.49% 33.85% 31.61% 28.12% 25.85%

Operating overheads 1,314,282 1,627,682 1,643,621 1,793,382 1,964,730 2,137,608 2,295,636 Employee Related Costs 444,270 500,968 500,968 556,074 594,999 630,104 662,870 Salaries Gen.exp - Other 421,865 435,567 495,001 518,019 546,327 575,304 605,220 Repairs and maintenance 209,273 205,000 205,000 223,040 243,991 267,558 286,823 Contribution bad debts 111,769 285,029 243,827 252,042 301,102 354,002 398,097 Depreciation and amortisation 127,105 201,118 198,825 244,208 278,310 310,640 342,628

Operating Profit before 218,103 493,581 456,380 678,234 790,181 727,231 655,883 interest and taxes Operating Profit % 5.04% 8.21% 7.71% 9.29% 9.07% 7.14% 5.74%

Net interest (266,614) (283,700) (309,738) (326,996) (273,603) (215,848) (171,881) Interest income/(Expense -ve) 56,306 76,484 28,400 54,592 95,224 139,367 179,138 Interest on COJ shareholder (109,904) (109,617) (109,617) (109,617) (109,617) (109,617) (109,634) loans (-ve) Interest on Mirror conduit (65,121) (50,784) (50,784) (34,308) (14,723) (490) loans (-ve) Interest on Capex loans (-ve) (167,405) (233,764) (216,803) (271,694) (288,228) (294,433) (297,276) Interest on outstanding Debtors 19,510 33,981 39,066 34,030 43,740 49,325 55,890

Add Back Prior year adjustments Profit before fair value -48,511 209,881 146,642 351,238 516,578 511,382 484,003 adjustments Net Fair Value Adj Profit before tax -48,511 209,881 146,642 351,238 516,578 511,382 484,003 Taxation (58,767) (41,060) (98,347) (144,642) (143,187) (135,521) Attributable income -48,511 151,114 105,582 252,891 371,936 368,195 348,482 Retained income at beginning of 808,966 722,571 760,455 866,037 1,118,928 1,490,864 1,859,060 period Retained income at end of 760,455 873,685 866,037 1,118,928 1,490,864 1,859,060 2,207,541 period

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7.2.2.1. Forecast for 2008/2009

The forecast profit for the year has reduced from the original budget of R151,114 million to R105,6 million. The main reasons for this reduction in profit are set out below:

Turnover

Turnover has decreased from R5,620 million to R5,564 million. The forecast volumes are lower.

Other revenue • Deferred income has reduced by R23,5 million because of the change in the amortisation period of the deferred income from 30 to 53 years as requested by the auditors. • DSM levy has decreased from R230 million to R200 million because of the late implementation of the levy and the decrease in units purchased

• Cut off fees and new connections have increased against the original budget. These increases are because of credit control and new developments. Direct Cost • Direct Cost has decreased by R74 million. This is because of the decrease in units purchased, that also affected our revenue. The unit price at June 08 was 45c/kWh, at September 08 81c/kWh and at December 68c/Kwh. An energy consultant has been appointed to monitor the coal purchases at Kelvin and it starting to bear fruit resulted in a decrease of R74 million. . Gross Profit

As a consequence of the decrease in other revenue for the year, gross profit has decreased by R21 million.

Operating Expenditure

The decrease in the operating expenditure amounts to R88 million. The reasons for this decrease are the following: (i) Contributions to Bad Debts: Decrease of R41 million The provision for bad debts has been decreased by R41 million because of the decrease of the DSM levy (an additional R80 million was added to the provision when the final budget was approved). The collection rate needs to improve to ensure outstanding debtors are collected. The current provision for bad debt is sufficient to cover all debt older than 90 days.

(ii) Financing Charges – Increase of R28,8 million Net expenditure on financing charges shows an increase of R28,8 million mainly as a result of the interest earned on the favourable bank balance which is less than budget because of the decreased cash position of City Power by R48,1 million. The interest received on debtors is R5,1 million less because of the adjustment of the DSM levy and the current collection rates. Interest on Capex loans is also less by R17 million because of the late payments of capex claims.

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(iii) General expenses – Increase of R59,4 million General expenses have increased from R435 million to R495 million because of the increase in security cost, meter readings, cut off cost, commission paid to third parties as well as illegal connections and meter audits. (iv) Attributable Income Attributable income has been reduced by 45,5 million to R105,6 million for the reasons detailed above.

7.2.2.2 Budget 2009/2010

Overview

The budget for 2009/10 has been prepared on the following basis: • The forecast for 2008/09 has been used as the base period. • For expenditure the CoJ indicatives have been followed: • CPIX - - 6,8% • Salary increases - 11% • Repairs and maintenance increase - 8,8% • Other expenditure - 7,3% • Growth in consumption - 1%

The following increases in direct costs were utilised • Eskom - 27% (25% in 2010/11 and 25% thereafter) • Kelvin - 6% Revenue Tariff Increase

A standardised tariff model was utilised for the CoJ entities utilising a Rate of Return methodology. This methodology is also in line with recent NERSA initiatives.

A key driver of the required revenue increase is the capital base. A risk weighted return on the asset base is incorporated into the required tariff increase calculation to ensure there is adequate investment in the network infrastructure. This is influenced by the level of capital expenditure required by the entity.

7.2.2.2.1 Income Statement Explanations for the amounts provided in the income statement are set out below. Reasons for the increases between the original budget for 2008/2009 and the budget for 2009/2010 are also included where necessary.

7.2.2.2.2 Turnover

Turnover has increased from R5,620 million to R6,909 million compared to the original budget, an increase of 22,9% or an increase of 24.15% based on the forecast.

In addition to the growth and reduction in non-technical losses, the details of which are contained elsewhere in the business plan, provision has been made for a tariff increase of 28,2%.

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7.2.2.2.3 Other Income

The main components of other income and the budget provision made for 2009/2010 include the following: DSM Levy - R230 million New Service Connections - R52,8 million Deferred Income - R20,8 million Reconnection Fees - R41 million Water Meter Reading - R11,3 million Sale of Scrap - R4,5 million Other income has generally been increased by the CPIX of 6,8%.

7.2.2.2.4 Direct Costs

The forecast of R3,891 million has been used as the base figure on which the budget for 2009/2010 has been calculated.

In addition to the growth in units purchased an increase in Eskom costs of 27% has been included in the budget. The overall budget provision for 2009/2010 therefore amounts to R4,831 million, which is an increase of 24,2% when compared to the budget. The increase of 24,2% is also attributable to the change in the mix in units purchased from Eskom and Kelvin Power Station, since it is to City Power’s advantage to take additional units from Eskom during the summer months and extra units from Kelvin Power Station during winter. Provision is also made for utilising the Gas turbines during load shedding periods to the amount of R14 million.

7.2.2.2.5 Gross Margin The gross margin for the 2009/2010 financial year of 33,85% is less than the original budget of 35,28%, due to the fact that provision has been made for a tariff increase of 28,2,% while Eskom costs are budgeted to increase by 27% and Kelvin Power Station by 6% and other income is only increasing by 6,8%. Provision is also made for additional cost for the gas turbines.

There is a decrease of 1,6% in the gross margin for the 2009/2010 financial year compared to the forecast for 2008/2009.

7.2.2.2.6 Operating Expenditure Total operating expenditure for 2009/2010 financial year amounts to R1,793 million compared to the original budget for 2008/2009 of R1,628 million, which represents an increase of 10,1% or R168 million. This increase is analysed below.

Salaries and Allowances:

Salaries and allowances have increased by 11% from R501 million to R556 million. The increase of 11% is due to the following:

A general annual increase of 11% has been provided for, which amounts to R55 million.

General Expenses: Increase of R82 million

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• Overall General expenses forecasted budget in 2008/09 of R495 million has increased by R23 million to become R518 million for 2009/10. The R23 million represents only a 4,6% increase on all General expenses.

Repairs and Maintenance: Increase of R18 million (8,8%)

The increase is based on the parameters as set.

Contribution to Bad Debts: Decrease of R33 million based on the budget 2008/2009 or R9million increase based on the forecast.

Turnover has increased from R5,620 million to R6,909 million which represents an increase of R1,289 million. Payment levels have been set at 99% for City Power debtors and 93% for City of Johannesburg debtors. With the additional revenue generated, the unrecovered portion must be provided as an additional contribution to the bad debts provision. It must be noted that this is a potential risk area based on the historical and current CoJ collection levels.

Depreciation: Increase of R43,1 million based on the budget 2008/2009 or R46 million based on the forecast.

The increase in capital expenditure is the reason for the high increase in depreciation.

Net Interest: Increase of R42,3 million

Net interest shows an increase of 14,9% from R283,7 million to R326,9 million based on the 2008/2009 budget, or 3,1% more based on the forecast.

Although the interest on the Shareholders Loans remains constant, and the interest on Mirror Loans is decreasing as the loans are repaid, interest on new capital project loans has increased from R234 million to R272 million.

This increase is due to the increase in capital spending and, specifically, the loan funded projects where expenditure financed from loans will amount to R450 million.

Profit

The original budgeted profit for 2008/2009 amounted to R151,1 million. The profit after tax for 2009/2010 amounts to R252,9 million which represents an increase of 67% based on the budget or R147,3 million based on the forecast.

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7.2.3 Cash Flow Table 7.14 below shows the cash flow statement for the five year budgetary period.

Table 7.14: Cash Flow statement

Details Actual Budget Forecast Budget Budget Budget Budget 2007 -2008 2008 -2009 2008 -2009 2009 -2010 20 10 -2011 2011 -2012 2012 -2013

Profit Before Interest and 218,103 493,581 456,380 678,234 790,181 727,231 655,883 Taxes add: Depreciation and 127,105 201,118 198,825 244,208 278,310 310,640 342,628 amortisations Add loss on disposal of assets Add Exceptional items Less: Interest (paid)/ received (266,614) (283,701) (309,738) (326,996) (273,603) (215,848) (171,881) Less: Taxes paid/fair Value (58,767) (41,060) (98,347) (144,642) (143,187) (135,521) Adjustments

Cash gene rated from 78,594 352,231 304,407 497,099 650,246 678,835 691,109 operations

Increase/decrease in net (82,777) 540,547 360,623 430,860 225,325 150,732 303,428 current assets Less : (Increase) -decrease in 13,088 (2,031) (1,750) (2,038) (1, 793) (1,758) (1,849) stock ( Increase) -decrease in (94,361) (1,286) (2,493) (2,996) (2,559) (2,509) (2,640) debtors (Increase) -decrease in (64,540) 208,585 52,948 260,264 (69,089) 5,529 12,128 other current assets add: Increase -(decrease) in -65,306 98,067 215,159 83,601 230,650 235,870 239,393 creditors Increase - (decrease) in 9,593 7,612 (16,283) 11,331 7,648 6,897 6,437 accruals and provisions Increase -(decrease) in 71,204 204,242 106,687 50,7 41 34,512 -122,368 17,398 short term portion of LTL Increase -(decrease) in 23,737 25,359 31,703 29,957 25,957 29,072 32,560 consumer deposits Increase -(decrease) in 23,808 -25,347 0 0 0 0 other current liabilities Prior year adjustments Net cash g enerated / -4,183 892,779 665,030 927,959 875,571 829,567 994,537 (absorbed) from operations

Cash impact from investing (1,036,730) (1,043,352) (941,511) (827,901) (800,618) (755,155) (815,346) activities Increase in intangible assets (695) 2,814 Acquisition / (realisation (1,036,035) (1,043,352) (944,325) (827,901) (800,618) (755,155) (815,346) proceeds) of fixed assets Proceeds on disposal of Assets Cash impact from financing 451,032 651,126 62,640 443,573 329 ,912 456,803 285,733 activities Increase -(decrease) in 0 0 0 0 0 0 0 shareholder loans Increase -(decrease) in long term (87,460) (190,869) (103,409) (103,936) (143,024) 113,179 4,518 liabilities Increase -(decrease) in Capex 340,756 544,015 102,781 298,490 184,257 49,229 (1,494) Loans Increase -(decrease) in Deferred 197,736 256,007 13,771 207,046 225,428 225,626 147,188 Income Increase in Deferred Tax 0 41,973 49,497 41,973 63,252 68,770 135,521

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Details Actual Budget Forecast Budget Budget Budget Budget 2007 -2008 2008 -2009 2008 -2009 2009 -2010 20 10 -2011 2011 -2012 2012 -2013

Net movement in cash (589,881) 500,553 (213,841) 543,631 404,865 531,216 464,923 position

Opening cash position 956,062 665,317 366,181 152,340 695,971 1,100,836 1,632,052

Closing net cash position 366,181 1,165,870 152,340 695,971 1,100,836 1,632,052 2,096,975

The closing net cash position for City Power for the 2009/2010 financial year amounts to R695 million. This is based on a forecast cash flow balance for the 2008/2009 financial year of R152 million plus a net inflow of cash for 2009/2010 of R543 million.

The reasons for the net inflow of R543 million are given below: • Cash generated from operations amounts to R497 million of which R678 million relates to profit before interest and tax • Net current assets reflect an increase of R430 million mainly as a result of the decrease in current assets of R260 million. In addition the creditors has increased by R83 million and the short term portion of the long term debt by R50 million. • The cash impact from investing activities amounts to R826 million. This capital expenditure is made up of R450 million in respect of loans, R150 million in funding from City Power’s own cash resources and R226 million by way of public contributions and government grants. • The cash impact from financing activities amounts to R443 million the bulk of which relates to the increase in new capital loans refunded to City Power by the City of Johannesburg. Deferred income has also increased by R207 million resulting from the capital projects funded from public contributions and government grants.

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7.2.4 Balance Sheet Table 7.15 shows the company’s Balance Sheet.

Table 7.15: Balanced sheet

Details Actual Budget Forecast Budget Budget Budget Budget 2007-2008 2008-2009 2008-2009 2009 -2010 2010-2011 2011-2012 2012-2013 Assets

Non Current Assets Em ployment of Capital Fixed assets (net book values) 4,339,600 5,104,981 5,085,100 5,675,951 6,205,416 6,657,088 7,136,963 Land and buildings 125,229 104,280 104,280 81,020 57,924 34,644 11,327 Plant & equipment 4,107,205 4,761,388 4,761,388 5,312,398 5,819,772 6,258,054 6,727,101 Motor vehicles Fixtures and fittings 5,026 4,169 4,169 2,533 1,360 1,360 1,468 Office equipment 4,488 17,443 17,578 23,336 29,159 32,898 35,549 Other fixed assets 97,652 217,702 197,686 256,664 297,201 330,131 361,518

Other non -Current Assets 71,569 62,975 68,755 61,598 54,441 47,284 40,127 Other Long Term Assets 71,569 62,975 68,755 61,598 54,441 47,284 40,127

Current Assets 1,665,387 1,945,944 1,402,840 1,691,241 2,169,547 2,699,501 3,156,785 Debtors 1,903,377 1,959,283 2,106,383 2,358,425 2,659,527 3,013,529 3,411,626 Less :Provision for Bad Debts(-ve) (1,087,015) (1,336,643) (1,290,021) (1,542,063) (1,843,165) (2,197,167) (2,595,264) Sundry Debtors 40,204 21,445 42,697 45,692 48,251 50,760 53,400 Stock / Projects in progress 28,225 34,786 29,975 32,013 33,806 35,564 37,413 Cash & equivalents 366,181 1,165,870 152,340 695,971 1,100,836 1,632,052 2,096,975 COJ 414,415 101,203 361,467 101,203 170,292 164,763 152,635

Total Emp loyment of Capital 6,076,556 7,113,901 6,556,696 7,428,790 8,429,404 9,403,873 10,333,876

Equities and Liabilities

Capital and Reserves 872,921 986,151 978,503 1,231,394 1,603,330 1,971,526 2,320,007 Share Capital and Premium 112,466 112,466 112,466 112,466 112,466 112,466 112,466 Retained Income 760,455 873,685 866,037 1,118,928 1,490,864 1,859,060 2,207,541

Non -Current Liabilities 3,689,497 4,334,656 3,752,136 4,195,709 4,525,621 4,982,424 5,268,157 Mirror Conduit External Loans 232,673 129,263 129,263 25,327 -117,697 -4,518 0 Shareholders Loans 624,793 624,793 624,793 624,793 624,793 624,793 624,793 Other External Loans 1,878,670 2,279,941 1,981,451 2,279,941 2,464,198 2,513,426 2,511,932 Deferred Income 953,361 1,209,190 967,132 1,174,178 1,399,605 1,625,231 1,772,419 Deferred Tax Liability 0 91,470 49,497 91,470 154,722 223,492 359,013

Current Liabilities 1,514,138 1,793,093 1,826,057 2,001,687 2,300,453 2,449,923 2,745,711 Trade creditors 924,725 1,112,198 1,139,884 1,223,485 1,454,135 1,690,004 1,929,397 Accruals and provisions 114,205 95,888 97,922 109,253 116,901 123,798 130,235 Short term portion of long term liabilties 295,214 401,901 401,901 452,641 487,153 364,785 382,182 Consumer Deposits 154,648 183,106 186,351 216,308 242,264 271,336 303,897 Other UAC's of COJ 25,346 0

Total Equities and Liabilities 6,076,556 7,113,901 6,556,696 7,428,790 8,429,404 9,403,873 10,333,876 The main items contained in the Balance Sheet for the period 2009/2010 that warrant comments are detailed below.

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7.2.4.1 Fixed Assets

The net book value of fixed assets amounts to R5 676 million, and has increased by R571 million when compared to the original budget for 2008/09, and R591 million compared to the forecast. This is attributed to the increased capital spending during the 2008/09 financial year and the impact of the proposed capital spending for the 2009/10 financial year.

7.2.4.2 Current Assets

Changes to current assets include the following: • Debtors have increased to R2,358 million compare to the budget of R1,959, and an increase of R252 million compare to the forecast, while the provision for bad debts amounts to R1,542 million. • City of Johannesburg inter-company debtors amount to R101 million. This includes capital claims on the City which are outstanding at the end of the financial year and are raised as debtors. • The cash balances amounts to R695 million. 7.2.4.3 Capital and Reserves

Capital and reserves amount to R1,231 million compared to R986 million reflected in the 2008/09 budget or R978 million based on the forecast. This increase is due to the budgeted profit of R253 million for the 2009/10 financial year.

7.2.4.4 Non-Current Liabilities

Non-current liabilities amount to R4,196 million. The main changes from the 2008/2009 budget are: • Other capital loans, for new capital projects have increased by R297 million owing to increased capital spending financed from loans. Capital repayments to be made during the year amount to R452 million. • Deferred income has increased from R1,209 million in the 2008/2009 budget or R967 million on the forecast to R1 174 million as a result of public contributions and government grants. These grants include R40 million from Municipal Infrastructure Grant funds for Street lightning. A further R25 million in respect of funding of bulk infrastructure from Engineering Service Contributions has been provided. 7.2.4.5 Current Liabilities

Current liabilities for the 2009/2010 financial year amount to R2,001 million and consist of the following: • Trade Creditors amount to R1,223 million and consist of energy purchases from Eskom and Kelvin Power Station as well as normal trade creditors. The increase in capital spending especially in the last month of the financial year also has a substantial impact on creditors. • The short term portion of the long term debt has increased from R402 million reflected in the 2008/2009 to R453 million. This increase is due to the increase in loan funded capital projects. • Consumer deposits have been increased to R216 million based on the average of previous years trends.

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7.3 Tariff Plan (NERSA and Mayoral approvals are not align, the tariff may change subject to Mayoral approval)

The long term tariff plan is critical for financial objective planning and strategic planning. This explains the need to develop such a plan.

7.3.1 Tariff Assumptions  Cost of Supply are:  Growth by 1%  Energy Purchase by 31%  Eskom by 30%  Kelvin by 8%  Gas turbine  R 9.214 /litre  80,000 kW  5 hours per day (during peak)  10 days a month  Volumes  Eskom (88 %)  Kelvin (11 %)  Gas turbine (0.36%)  Salaries, Wages & allowance by 11%  Repairs & maintenance by 8.8%  General expenses by 0.5 % 7.3.2 Tariff Objectives The key objectives of the tariff plan are:  To sustain company viability;  To align tariffs with national benchmarks;  To meet the requirements of National Energy Regulator of South Africa (NERSA);  To meet the requirements of the Shareholder;  To minimise the impact of tariff increases in order to meet customer needs;  To move towards cost reflective prices in all categories in a phased approach;  To maximise customer tariff choice;  To send the right signal for DSM. 7.3.3 Proposed tariff increase The proposed average tariff increase is 30%, with the detail of the increase as outlined in table 7.12 below.

Table 7.12 is the proposed long term tariff increase Tariff Actual Plan Tariff structure 08/09 09/10 Domestic Lifeline 14.2% 7.5 % Domestic Single phase 20.60% 49% Domestic Three phase 42.0% 30% Agricultural Three phase 43.0% 32% Business Three phase 43.0% 32%

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7.3.4. Structural changes per rate category Domestic Tariffs

The tariff is applicable to existing, as well as new customers, in the City Power area of supply. These tariffs are applicable for the following supplies: private households, flats, boarding houses and hostels, charity residences and caravan parks. Domestic customers have a choice of three tariffs. Customers not exercising their particular choice will default to the life-line tariff. All domestic tariffs are assumed to have Ripple Control facilities built in (Domestic tariffs are discounted for the ability to do ripple control). There is no option for customers to opt out of ripple control.

Life-Line Tariff • Cut-off at 500 kWh • There will be alignment with the City of Johannesburg social package • The tariff to be more cost reflective and transparent, yet taking affordability into consideration • 100 kWh per month of free basic electricity. • Pre paid policy allows for anyone within the City Power area of supply Recommendation  Proposed increase of 7.5%

Single-Phase Domestic Tariff • Starts from 500kWh upwards • There will be alignment with the City of Johannesburg social package • The tariff to be more cost reflective and transparent, yet taking affordability into consideration • Customers on this tariff do not qualify for 100 free kWh/month • It has an option of Prepaid or conventional accounts Recommendation  Proposed increase of 49%

Three-Part Seasonal Domestic Tariff • Winter period (May to August, 4 months) and Summer period (Sept to April, 8 months) • If customers have the ability to reduce winter consumption (e.g. space heating by gas, anthracite etc) then the three part seasonal tariff would be the cheaper option. Also customers who have high consumption in Summer months (air conditioner load) will also benefit by being on this tariff • Encourage customers to migrate to this tariff, migrate costs will be waived (zero charge) • Increase seasonal differentiation (Summer to Winter energy rate) • Seasonal energy rates of single and 3 phase will remain the same • Customers on this tariff do not qualify for 100 free kWh/month • Customers on this tariff need to remain on the tariff for a minimum period of 12 months before they can migrate to another domestic tariff (To avoid moving between tariffs) Recommendation:  Proposed increase of 30%

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Agricultural Tariff • Applicable to supplies not exceeding a capacity of 40 kVA • The property or portion must be zoned for agricultural purposes • Not for business purposes • Service charges need to be reviewed in line with cost reflectivity and will remain the same charge during Winter and Summer months • Winter period (May to August, 4 months) and Summer period (Sept to April, 8 months) • Increase seasonal differentiation (Summer to Winter energy rate) • It will be assumed (service charge calculation) that all supplies will be three phase. Recommendation:  Proposed increase of 32 %

Business Tariff • Applicable to supplies not exceeding capacity of 100kVA • Applicable for business purposes, industrial purposes, nursing homes, clinics, hospitals, hotels, recreational halls and clubs, educational institutions (including schools and registered crèches), sporting facilities, bed and breakfast houses, mixed domestic and non-domestic loads, welfare organisations of a commercial nature and premises used for public worship and religious purposes. • Service charges need to be reviewed in line with cost reflectivity and will remain the same charge during Winter and Summer months • Winter period (May to August, 4 months) and Summer period (Sept to April, 8 months) • Increase seasonal differentiation (Summer to Winter energy rate) • It will be assumed (service charge calculation) that all supplies will be three phase, no provision for basic charge single phase • The tariff to be cost reflective and transparent, energy rates need to be reviewed as this particular customer category rates are high compared to the industry average Recommendation:  Proposed increase of 32%  Customers who have changed their tariff with installed capacity above 100 kVA will be limited to only 75 kVA

Large Power Tariff • Demand Charge needs to be reviewed as it is comparatively high compared to the industry norm • Possible migration of demand charge to a network based charge • Service charges need to be reviewed in line with cost reflectivity and will remain the same charge during Winter and Summer months • Winter period (May to August, 4 months) and Summer period (Sept to April, 8 months) • Increase seasonal differentiation (Summer to Winter energy rate) • The tariff to be cost reflective and transparent, energy rates need to be reviewed upward, as this particular customer category rates are extremely low compared to the industry average • Reactive energy charges need to be applied to all customers where the power factor is consistently below 0.96 • Voltage differentiated tariffs to remain Continuous Strategy Improvement - Rev 17 – Page 110 of 131 Approved by Board on 6 Aug 2009

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Recommendation:  Proposed increase of 32 % Time of Use Tariff (TOU) • Voltage categories to remain • Customers who meet the TOU criteria need to be encouraged to migrate to this tariff, customers who have the ability to influence the load consumption can go on this tariff and ultimately reduce their purchase costs • A conversion surcharge will be charged. • A conversion cost (meters etc) will need be billed equal to the actual cost of the meter conversion, etc • Service charges would be differentiated according to the supply voltage level • A monthly R/kVA maximum demand charge need to be applied, possible migration to network based charges and a demand charge instead of a demand charge • A revenue neutral conversion surcharge to limit the negative revenue impact on City Power when customers migrate tariffs without shifting load. Surcharge is based out the difference between existing customer tariffs and TOU tariffs, taking into account the customers load profile. • Surcharge to phase out over a five year period viz. o 90% surcharge 1 st year o 75% surcharge 2 nd year o 60% surcharge 3 rd year o 45% surcharge 4 th year o 30% surcharge 5 th year • Demand clauses need to be reviewed in line with the issues raised by the NERSA. • Service charges need to be reviewed in line with cost reflectivity and will remain the same charge during Winter and Summer months • Winter period (May to August, 4 months) and Summer period (Sept to April, 8 months) • Reactive energy charge needs to be applied to all customers where the power factor is consistently below 0.96 • Voltage differentiated tariffs to remain Recommendation:  Proposed increase of 32% Special Pricing Agreement • Customised pricing agreements for large customers meeting City Power and the NERSA qualifying criteria are available • Based on customer by customer application • Application needs to be made via City Power’s Key Customer Division Green Energy Tariff (Optional add-on to existing tariff)

In support of the draft Energy White paper and Renewable Energy Policy, City Power will be offering a green energy tariff option in conjunction with the NERSA Green Energy Certificate process as utilised by the World Summit on Sustainable Development. The additional cost associated with a Green Energy Certificate would be an added cost to the customer’s existing tariff. Application needs to be made via the City Power Key Customer Division.

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Other Charges

All other charges (incl. connection charge etc) need to be reviewed inline with cost reflective tariff principle

Recommendation:  To increase the miscellaneous charges to be in line with actual cost .

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SECTION 8: WARD PRIORITIES

Table 8.1 below outlines the City Power projects that have been committed, and the duration of the project. The ward allocation will be done per project. Administration Ward Projects 2009 / 2010 Start End Region 1 E Normalisation: Continuation of the 35,000,000 Multi normalisation programme 5000 year stands - Alexandra project 2 F Electrification of 1800 Houses in 12,600,000 2009/10 2009/10 Mountain View - Ennerdale South 3 D Electrification of 3000 erven and 21,000,000 2008/9 2009/10 the provision of the bulk infrastructure - Pennyville 4 E Installation of new service 2,300,000 Multi connections - Alexandra year project 5 E Install dual ratio devices on 5,500,000 2007/8 2009/10 Norwood - Houghton distributor to prepare for 11 kV conversion. Allow for the replacement of joints and cables - Cydna 6 A Installation of new service 20,200,000 Multi connections - Midrand year project 7 A 1. Complete 185 Al ring in New 8,000,000 2009/10 2009/10 Road along Looper str back to New Road SS. 2. Install new 185 Cu Ring in New Road and return via planned road north of new rd - Erand Gardens 8 A Install 300 mmCu XLPE cable 15,000,000 2009/10 2009/10 from Grand Central sub station to Stauch Vorster and New Road - Stauch Vorster 9 E Change supply to James Crescent 10,000,000 2009/10 2009/10 satelite sub station from Waterval to Grand Central. Install additional cable - James Crescent 10 A Upgrade the MV network in the the 12,000,000 2009/10 2009/10 New Road/Halfway Gardens area - New Road 11 All Emergency Work - Northern 10,000,000 Multi Region year project 12 B Additional distributor required to 2,000,000 2008/9 2009/10 relieve overloaded distributors -

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Administration Ward Projects 2009 / 2010 Start End Region Harley Street 13 B Installation of new service 26,800,000 Multi connections - Randburg year project 14 B Replace feeder cables and 6.6kV 33,000,000 2007/8 20010/11 load centres with dual ratio mini's - Bryanston 15 F Preparation of MSS's and Load 32,000,000 2008/9 2009/10 Centres for 11kV conversion -Jeppe 16 F Installation of new service 14,200,000 Multi connections - Siemert year project 17 F Forest Town Satelite s/s to be 1,000,000 2007/8 2009/10 replaced. Install MSS and join cables through - Forest Town 18 B Installation of new service 7,450,000 Multi connections - Hursthill year project 19 G Installation of new service 11,230,000 Multi connections - Lenasia year project 20 F Installation of new service 11,600,000 Multi connections - Reuven year project 21 B New distributors from new Crown 5,000,000 2008/9 2009/10 sub station to Nasrec area - Crown sub station 22 C Installation of new service 11,800,000 Multi connections - Roodepoort year project 23 All Emergency Work - Southern 10,000,000 Multi Region year project 24 E Transmission: Extend building and 50,000,000 2008/9 2009/10 install new switchboard. Reconfigure 88 kV busbar and install additional transformer - Alexandra 25 All Repair of HV/MV Transformers - 20,000,000 Multi All Regions year project 26 All Upgrade 88 kV lines from Delta to 2,000,000 2009/10 2009/10 Delbank feeding Rosebank - Delta - Delbank 27 All Installation of Sergie fire protection 10,000,000 2008/9 2009/10 system on major transformers - All Regions 28 B Busbar reconfiguration, replace 3 X 5,000,000 2009/10 2009/10 Continuous Strategy Improvement - Rev 17 – Page 114 of 131 Approved by Board on 6 Aug 2009

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Administration Ward Projects 2009 / 2010 Start End Region 30 MVA transformers with 3 X 45 MVA. Replace 40 X 11 kV panels switchgear refurbishment - Roosevelt Park 29 All Delta sub - busbar reconfiguration, 2,000,000 2008/9 2009/10 install additional 250 MVA transformer - Delta 30 G Ennerdale Sub - Upgrade the 55,000,000 2008/9 2009/10 existing 3 X 10 MVA transformers to 3 X 40 MVA. Build new building and control room to accommodate 2 X 17 panel feeder boards.Upgrade the 88 kV yard - Ennerdale 31 D (A) Establish new 88/11 kV sub 95,000,000 2009/10 2010/11 station - Doornkop 32 D Extend 88 kV transmission lines to 12,174,000 2009/10 2010/11 supply two new sub stations - Doornkop 33 A Transmission: Upgrade Noodwyk 20,000,000 2009/10 2009/10 sub station by replacing 2 x 20 MVA transformers (two of the three) with 40 MVA (Eskom). Build new switchroom and install two new feederboards -Noordwyk 34 A Establishment of 88/11 kV , 5,000,000 2008/9 2009/10 45MVA S/S (2 x 45 MVA transformers and 11kV switchroom and feederboard) (also see P0563) - New Road 35 B Construct new 88/11 kV 2 X 40 2,000,000 2007/8 2009/10 MVA sub station at Bryanston Country club - Khanyisa 36 C Northriding sub. Install additional 4,000,000 2007/8 2009/10 40 MVA transformer, construct switchroom and additional 11kV switchboard - Northriding 37 D Transmission: Replace 88/22.5kV 6,000,000 2009/10 2009/10 transformers with the recovered transformers from Cydna - Soweto, Soweto/Orlando Local & Baragwanath 38 B & F Establish 132kV/11kV substation 16,000,000 2008/9 2009/10 comprising of 2 x 45MVA trx's - Crown 39 F Mulbarton Sub - Install additional 25,000,000 2009/10 2009/10 45MVA transformer,refurbishment and bus bar reconfiguration - Continuous Strategy Improvement - Rev 17 – Page 115 of 131 Approved by Board on 6 Aug 2009

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Administration Ward Projects 2009 / 2010 Start End Region Mulbarton 40 F Transmission: Install (replace) 3,000,000 2009/10 2009/10 1X45MVA transformer - Eikenhof 41 C Transmission: Provision of 12,000,000 2008/9 2010/11 servitude for proposed 88kV transmission lines: Dalkeith / Lutz / Peter Rd T-point - Lutz 42 C Construct Access Road - Christiaan 5,000,000 2009/10 2009/10 de Wet 43 C C de Wet sub - busbar 12,000,000 2009/10 2009/10 reconfiguration, additional 40MVA transformer, expand 11x11kV switchgear, refurbishment - Christiaan de Wet 44 C Lutz Substation. New 88/11 kV 3 X 55,000,000 2009/10 2010/11 45 MVA sub station - Lutz 45 C Install 3rd 88/11 kV 40 MVA 25,000,000 2009/10 2009/10 transformer - Peter Road 46 B New 88/11 kV substation, 2 X 40 20,000,000 2008/9 2009/10 MVA transformers and feeder board - Pennyville 47 F Braamfontein Sub. Reconfigure bus 17,000,000 2008/9 2009/10 bar, Extend switchroom and install - 8x11kV switches - Braamfontein 48 F Fort Sub. Replace 4 X 30 MVA 5,000,000 2008/9 2009/10 transformers with 4 X 45 MVA. Replace 46x11kV switchgear, refurbishment. Install additional 11 kV breakers - Fort 49 F Third transformer plus switchboard. 55,000,000 2008/9 2009/10 Refurbish 11 kV breakers and reconfigure bus bar - Siemert 50 E Reconfigure the 88 kV double 25,000,000 2009/10 2009/10 busbar - Cydna 51 All Computer Software - All Regions 7,500,000 2009/10 2009/10 52 All Protection: Replacement of 16,000,000 2009/10 2009/10 Obsolete Relays and cables, build new control room - Kelvin 53 B Load Management: Transmission 40,000,000 2009/10 2010/11 Equipment(Recievers) Randburg system replacement - Randburg 54 All Metering; Replacement of obsolete 6,000,000 Multi pre-paid meters - All Regions year project 55 All Roll out of AMR. Replacement of 6,000,000 Multi obsolete demand meter and year purchase of demand meters for new project installations to large power users - Continuous Strategy Improvement - Rev 17 – Page 116 of 131 Approved by Board on 6 Aug 2009

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Administration Ward Projects 2009 / 2010 Start End Region All Regions 56 All Refurbish transmitters and control 10,000,000 2009/10 2009/10 systems - All Regions 57 All 20 year service for 88 kV 8,000,000 2008/9 2009/10 switchgear - All Regions 58 All Demand Side Management in all 100,000,000 Multi areas - All Regions year project 59 All Refurbishment of public lights 15,000,000 2009/10 2009/10 2010 - All Regions 60 G Load management expansions - 5,000,000 2009/10 2009/10 Ennerdale 61 E Load management expansions - 40,000,000 2009/10 2009/10 Sandton/Bryanston 62 All Replacement of obsolete relays and 4,000,000 2008/9 2009/10 cables + refurbishment of bay control and interlocking units - Prospect 63 F Energy efficient buildings - 4,500,000 2007/8 2009/10 Reuven-Central 64 F Load management expansions - 40,000,000 2009/10 2009/10 Johannesburg 65 All Powerline communications - All 2,500,000 2009/10 2009/10 Regions 66 All Operating Capital - All Regions 30,000,000 2009/10 2009/10 67 F 2000 houses - Hospital Hill - 14,000,000 2009/10 2009/10 Lenasia ext 28 68 E Electrification of 3000 Houses in 40,000,000 2009/10 2009/10 Alexandra. (Hybrid reticulation) - Alexandra Far East Bank ext 9 69 E Electrification of 500 Houses in 7,500,000 2009/10 2009/10 Alexandra. (Hybrid reticulation) - Alexandra Far East Bank ext 10 70 F Transfer of capacity from Lunar 6,500,000 2009/10 2009/10 sub station to Mountain View - Lunar 71 F Transfer of capacity from - Doornkop sub station to Lufhereng 72 E Transfer of capacity from 7,000,000 2009/10 2009/10 Alexandra sub station to Alexandra Far East Bank exrensions 9 & 10 73 F Transfer of capacity from Lotus sub 6,500,000 2009/10 2009/10 station to Hospital Hill TOTAL 1,296,854,000

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Table 8.2 below outlines City Power’s critical projects and the duration per project. The ward allocation will be done per project. Administration Ward Projects Budget Start End Region 1 Northern Installation of double earthing Multi year Region on MV and LV overhead 4,000,000 lines and the installation of SEF and ARC Relays to meet statutory and safety requirements - Northern Region 2 Northern Refurbishment of MV Multi year Region infrastructure (Switchgear 2,000,000 and transformers) - Northern Region 3 Northern Replacement of aged and/or Multi year Region faulting MV cables - 10,000,000 Northern Region 4 Northern Upgrading of Load Centres - Multi year Region Northern Region 2,500,000 5 Northern Refurbishment of LV Multi year Region infrastructure - Northern 9,000,000 Region 6 B 68 Reconfigure network to 2009/10 2009/10 provide a service connection 4,000,000 to Central Rand Gold Mines. - Industria 7 Southern Installation of double earthing Multi year Region on MV and LV overhead 4,000,000 lines and the installation of SEF and ARC Relays to meet statutory and safety requirements - Southern Region 8 Southern Refurbishment of LV Multi year Region infrastructure - Southern 9,000,000 Region 9 Southern Refurbishment of MV Multi year Region infrastructure(Switchgear and 2,000,000 transformers) - Southern Region 10 Southern Replacement of aged and/or Multi year Region faulting MV cables - 10,000,000 Southern Region 11 Southern Upgrading of Load Centres - Multi year Region Southern Region 2,500,000 12 C 70 Build barrier walls between 2009/10 2009/10 transformers - Sentraal 800,000 13 E Public Lighting: New and 2009/10 2009/10 Continuous Strategy Improvement - Rev 17 – Page 118 of 131 Approved by Board on 6 Aug 2009

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Administration Ward Projects Budget Start End Region Additions - Alexandra 7,000,000 14 All SCADA: RTU Installations - 2009/10 2009/10 All Regions 15,000,000 15 All Domestic AMR roll out - All 2009/10 2009/10 Regions 30,000,000 16 G Installation of pre paid meters 2009/10 2009/10 and protective structures. - 40,000,000 Eldorado Park and Lenasia 17 D&F 24 Installation of pre paid meters 2009/10 2009/10 in Naturena and sectional title 20,000,000 flats. - Naturena 18 D Public Lighting: New and 2009/10 2009/10 Additions - Meadowlands 8,500,000 19 A Public Lighting: New and 2009/10 2009/10 Additions (Ivory Park) - 10,500,000 Midrand 20 G Public Lighting: New and 2009/10 2009/10 Additions - Orange 14,500,000 Farm/Lenasia 21 A Public Lighting: New and 2009/10 2009/10 Additions - Diepsloot 6,200,000 22 B 90 Public Lighting: New and 2009/10 2009/10 Additions - Rosebank 4,000,000 23 B 88 Public Lighting: New and 2009/10 2009/10 Additions - Northcliff 2,200,000 24 F Public Lighting: New and 2009/10 2009/10 Additions - JHB South 3,000,000 25 C Public Lighting: New and 2009/10 2009/10 Additions - Roodepoort/ 9,800,000 Dobsonville 26 C Install public lighting - 2009/10 2009/10 Cosmo City 2,000,000 27 F Public Lighting: New and 2009/10 2009/10 Additions - JHB Inner City 2,800,000 28 D PB Public Lighting: New and 2009/10 2009/10 Additions - Soweto 12,000,000 29 ALL The provision of emergency 2008/9 2009/10 generators for MOE's - All 30,000,000 Regions TOTAL 277,300,000

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SECTION 9: HUMAN CAPITAL

9.1. Human Capital Plans

9.1.1 Human Capital Achievement: Performance Management City Power Johannesburg (Pty) Ltd has a two-tiered performance management system, that is a strategy based and output based system. The performance management system links congruently with the business plans and business planning process of the organisation. Performance management is an ongoing integrated process aimed at guiding and managing the employee’s efforts at work to achieve individual and corporate objectives. Great emphasis is being placed on an ongoing process to create a performance driven culture. The elements of the performance management system are: • Company performance compacts • Group performance compacts • Managing Director’s performance compact • Directors/Departmental Head performance compacts • Individual performance compacts • Personal development plans • Business performance measurement system • Business deliverable programme management systems • Four performance discussions per cycle • Two performance assessments per cycle • Two formal business reviews per cycle • Performance management training and support systems • Quality performance compact audit systems 9.1.2 Employee Productivity Table 9.1 below depicts the leave types for the cycle - 1 July 2007 to 30 June 2008 Type of leave No of days % of Total Annual leave days 31544 79.29% Exam Leave 4138 0.81% Family responsibility leave 460 1.16% Long service 0 0% Maternity leave 1538 3.87% Paternity Leave 54 0.14% Sick leave days 4877 12.26% Special leave Court / Summons 3 0.01% Special leave days – IOD 82 0.21% Special leave days other 0 0% Sport & Cultural 0 0% Study leave days 232 0.58% Unpaid leave days 672 1.69% Total 39784 Continuous Strategy Improvement - Rev 17 – Page 121 of 131 Approved by Board on 6 Aug 2009

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9.1.3 Human Capital Salary Costs Table 9.2 below gives a breakdown of the total salary costs for 2007/08, and Graph 9.1 depicts the cost driver distribution

Table 9.2: Salary cost for 2007/08 Salaries 226,335,495 Pension Fund Contributions 34,576,203 Medical Aid 29,241,368 Service & Incentive bonus 21,906,616 Car allowance 25,914,936 Overtime 47,963,316 Group Life Assurance 13,745,763 Leave Provision 14,942,403 Standby Allowances 10,278,515 Other 6,164,460 TOTAL 431,069,076

Graph9.1: Salary cost driver distribution

Salaries

Pension Fund Contributions

TOTAL Medical Aid

Service & Incentive bonus

Car allowance

Overtime

Group Life Assurance

Leave Provision Other Standby Allowances

9.1.4 Other Human Capital Related Costs Table 9.3 below gives a breakdown of the other human capital related costs for 2007/08

Table 9.3: Other Salary Costs 2007/08 Cost Driver R m Hostel / Housing 1,183,554 Training Courses 3,100,329 Skills Development Levy 3,618,777 Conferences / Seminars 3,793,052 Long Service / Special Awards 3,814,806

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Cost Driver R m Bargaining Council 33,794 UIF 2,306,914 Recruitment Cost 868,024 Medical Examinations 355,833 Travelling & subsistence 676,165 Other 1,474,227 Total 21,225,475 9.1.5 Human Capital Ratios A summary of the key human capital ratios is given in Table 9.5 below

Table 9.4: Key Salary Cost Ratios for 2007/08 Indicator Ratio Average salary cost per employee 106,951.70 Average total remuneration cost per employee 208,931.51 Salary versus total remuneration costs 51.19 Overtime as a percentage of salaries 16.56 Training cost per employee: External training 3,314.35 9.1.6 Human Capital Staffing Levels The total staff complement of 2007/08, including permanent and contract employees, is 1924. The complement for permanent employees as on 30/06/2008 is 1908 compared to 1890 at the corresponding date in the previous financial year. A total of 16 contract employees were on the payroll as of 30/06/2008 versus a total of 31 contract employees on the same date in 2007. Tables 9.5 and 9.6 below give the manpower staffing status as at 30 June 2008.

Table 9.5: Manpower staffing status per levels as on 30 June 2008

Occupational Levels Male Female TOTAL African Coloured Indian White Total African Coloured Indian White Total Male Female Top Management 10113100014 Senior Management 14 1 2 724 4 0 0 1 5 29 Professionally qualified 103 9 4 82 198 78 3 2 10 93 291 Skilled technical and 90 12 7 32 141 28 2 0 3 33 174 academically qualified workers, junior management, supervisors, and Technicians Artisans (All types) 188 21 4 82 295 13 1 0 0 14 309 Administrative 108 8 1 13 130 173 13 2 37 225 355 Semi-skilled and 354 8 1 11 374 31 0 0 3 34 408 discretionary decision making Elementary positions 338 4 0 0 342 12 0 0 0 12 354 TOTAL (Permanent 1196 63 20 228 1507 340 19 4 54 417 1924 and Contract)

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Graph 9.2: The deployment of manpower per group

CORPORATE FINANCE, 2.49% SERVICES, 6.03%

OFFICE OF THE MD, 2.91%

CUSTOMER SERVICES, 15.59% ENGINEERING OPERATIONS, 55.87%

ENGINEERING SERVICES, 17.10%

The human capital staffing trend, including temporary workers, is given in Graph 8. 4 below:

Graph 9.3: Human Capital Staffing Trends

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2020

2000

1980

1960

1940

1920

1900

1880

1860 30.06.01 30.06.02 30.6.03 30.06.04 30.06.05 30.06.06 30.06.07 30.06.08 Series1 1988 1980 1990 1952 2003 1954 1909 1924

Graph 9.3: Human Capital Outflow:

160

140

120

100

80

60

40

20

0 30.06.01 30.06.02 30.06.03 30.06.04 30.06.05 30.06.06 30.06.07 30.06.08 Early retirements / voluntary 0 0 0 0 12 2 2 3 seperations Normal retirements 16 9 65 46 14 15 13 18 Natural attrition 10 22 91 99 103 138 155 63 Dismissal 2 3 26 11 5 4 8 7 Medical Boardings 1 1 2 1 1 3 5 2

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9.1.7 EE Report City Power achieved the submission of an Employment Equity Report dated ‘1 October 2006’ as part of it’s compliance with the country’s legislative requirement in terms of the Employment Equity Act.

The company target on affirmative action (AA) for 2007/8 financial year end was 70%. The Company achieved a 72.69% affirmative action rate for supervisory levels and above)m and 85.34% for all levels. The company target on gender equity (GE) for 2007/8 financial year end was 20%. The Gender Equity ratio for the whole Company by 30 June 2008 was 21, 67% (all levels – bottom up). The numbers for ‘people with disability (PWD’s) the target for 2007/8 was 15 and by the 30 June 2008 we went to 16.

It is, therefore, clear that the company has delivered in terms of Employment Equity. Numbers, structures and policies are in place in order to govern this area; however, these aspects still require some improvement and enhancement because the organisation is dynamic. Even though the Electricity Distributions Skills Base has been dominated by males, the current profile reflects that there has been an improvement in the achievement of targets that the company set for itself over past years.

The target set for affirmative action has been exceeded. Targets set for gender equity and people with disabilities were influenced by the scarcity of skills, as well as competition for scarce skills, in the labour market. To show its commitment to implementation of the Act the company has established the following official forums; • Employment Equity Forum • Skills Development Forum and • Women’s Forum 9.2.1 EE Plan for 2008/09

Table 9.7 below shows the EE targets for the company:

Table 9.7: EE targets for the company Measure Unit 05/06 06/07 07/08 08/09 09/10 10/11 Indicator Actual Actual Actual Plan Plan Plan Affirmative action % 67.65 73 72.69 70 70 70 Gender Equity % 19.28 23.53 21,67 20 20 20

Tables 9.8 to 8.10 below illustrate the group AA targets

Table 9.8 AA targets for the groups

ACTUAL PLAN PLAN MEASURE UNIT 2006/7 2007/8 2008/9 Customer Services % 81.72 82 82 Engineering Services % 47.86 70 70 Engineering Operations % 64.33 70 70 Financial Services % 78.57 69 70 Corporate Services % 81.81 91 90 Office of the MD % 73.10 80 80

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Table 9.9: GE targets for the groups ACTUAL PLAN PLAN MEASURE UNIT 2006/7 2007/8 2008/9 Customer Services % 45.08 45 50 Engineering Services % 18.43 20 20 Engineering Operations % 7.48 20 20 Financial Services % 49.00 53 55 Corporate Services % 57.48 56 58 Office of the MD % 50.00 60 60 Table 9.10: PWD (People with Disability) targets for the groups ACTUAL PLAN PLAN MEASURE UNIT 2006/7 2007/8 2008/9 Customer Services No 2 3 4 Engineering Services No 3 4 5 Engineering Operations No 4 5 7 Financial Services No 2 2 3 Corporate Services No 2 2 3 Office of the MD No 0 1 1 9.1.8 Skills Development A total of 2,713 employees were trained during the 2005/06 financial year compared to 2,093 employees during the same period in the 2006/07 financial year. These figures are inclusive of employees that have attended more than one training session. A substantial portion of these numbers represents employees in ABET. Table 9.11 below illustrates training per employee:

Table 9.11: Training per employee Summary of Training per employee for the financial year July 2006 - June 2007 Month Staff No. of Percentage of Training no. of NQF aligned compliment employees employees days training programmes trained trained programmes Jul ‘07 1935 118 6% 915 6 4 Aug ‘07 1910 116 6% 941 8 5 Sep ‘07 1903 113 6% 764 7 5 Oct ‘07 1924 170 9% 1049 9 5 Nov ‘07 1926 67 3% 494 8 4 Dec ‘07 1928 14 1% 36 2 0 Jan ‘08 1937 0 0 0 0 0 Feb ‘08 1931 80 4% 665 5 4 Mar ‘08 1934 100 5% 626 5 4 Apr ‘08 1911 78 4% 594 5 4 May ‘08 1906 111 6% 556 12 7 June ‘08 1924 127 7% 629 9 4 Annual actual 1,922 1094 7269 76 46

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9.2 BEE 9.2.1 BEE and Engendered Spend Spend on BEE and an Engendered company has been gradually rising since 2005 to present as shown in table 9.12 below:

Table 9.12 BEE and an Engendered FINANCIAL YEAR BEE SPEND ENGENDERED SPEND 2005/6 R804, 880, 904 R164, 733, 707 2006/ 7 R1, 003, 758, 485 R177, 840, 980 2007/8 R1, 363, 077, 928 R300, 537, 777 2008/9 R1, 452, 033, 721 R322, 027, 231 2009/10 R1, 541, 734, 646 R344, 858, 791 The BEE target for 2007/8 was 70%, and City Power has exceeded this target by achieving 73%. The Engendered spend target has, over the years, proven to be a difficult target to meet as there are few companies who can render projects with high value spend. However, for 2007/8 City Power has managed to achieve the 22% target that was set.

9.2.2 Training and Capacity Development For developmental purposes, the BEE unit has coordinated training programmes to address the capacity needs of BEE, Engendered and Emerging companies.

Training took place was on: • Cable Jointing (LV, MV, SOPS and Access) - 46 contract workers have been trained • Tendering Processes- 22 suppliers were trained. This training targeted those companies that have been tendering with City Power, but not being awarded any tenders for various reasons. The training was focused on the whole process, from bid specification to award, and how bid documents should be completed. 9.2.3 Supplier Summit City Power hosted a supplier summit on the 10 th of April 2008, with a view to create a platform for interaction, to build sound relationships and open up communication channels with its supplier base. And also encourage inter-supplier communication. The summit was organised internally, unlike the years where it was outsourced.

The speakers for the day were from the Department of Trade and Industry (DTI) and City Power. Suppliers were very pleased about the topics which covered the understanding of the Preferential Procurement scorecard, electricity service delivery, City Power procurement processes, demand side management and energy efficiency.

9.2.4 Supplier Audits Supplier audits are done to evaluate the BEE status of companies that City Power has contracts with, and those suppliers that want to do business with City Power. This is proving to be successful as some of the companies that are manipulating our BEE objectives are being removed.

In the 2007/8 financial year, two (2) companies were suspended due to fronting practices, and they are no longer rendering their services to City Power. Continuous Strategy Improvement - Rev 17 – Page 128 of 131 Approved by Board on 6 Aug 2009

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9.3 HIV and AIDS

9.3.1 HIV/Aids Structures A comprehensive support structure aided this project, which includes comprehensive case management, an HIV/Aids Steering Committee, the availability of trained Peer Educators, voluntary counselling and testing, 24 Hour Employee Help Line, etc.

9.4.2 Education The Company has a fully-fledged clinic, which is manned by Professional Health Practitioners (1 Doctor, Social Workers and Occupational Health Nurses). The clinic was also extended to other geographical areas within the Company. An ongoing education programme has been instituted with the assistance of these Practitioners, amongst other duties. This initiative is progressing well.

9.4.3 Monitoring and measuring of performance • Monthly, quarterly and annual reporting to SHER Committee & Board • Case management of infected employees • Quality assurance by the City Power HIV/Aids Steering Committee • Alignment with the National Policy and World Health Organisation • Networking with Non-Governmental Organisations • Benchmarking with prominent and well established Organisations • Aligning the City Power HIV/Aids policy & strategy with CoJ policy 9.4.4 Case Management Employees that have declared their status have been put on a treatment regime i.e. immune boosters & ARV’s, nutrition support, depending on the stage of their infection.

HIV/AIDS PROGRAMME PLAN : JULY 2008 – JUNE 2010

Table 9:14 HIV/AIDS Programme Plan

Task/ Deliverable Objective

1. Disease Management Provision of: o Ongoing case management o Ongoing one on one VCT o Provision of ARV’s, immune boosters, supplements such as insta-meal and post exposure prophylaxis o Treatment of sexually transmitted infections, opportunistic diseases and TB supervision o Compliance counseling and support o Assessment tests o Monitoring tests o Male and female condom distribution o Healthy lifestyle management o Laboratory monitoring o Top up funding for extended family/community support o HIV Test kits o Healthy lifestyle management Continuous Strategy Improvement - Rev 17 – Page 129 of 131 Approved by Board on 6 Aug 2009

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Task/ Deliverable Objective

2. Care & Support Provide care and support for infected and affected employees, as well as their next of kin.

Identify and adopt a school or orphanage home within the City Power region with the view of extending our service to the community.

3. Education & Training Conduct ongoing HIV/Aids workshops (preventative and educational), knowledge and information sharing sessions to the business via group meetings, intranet, hand-outs, flyers, posters, portable banners. Engage PLWA (Person Living with Aids) as well as establish a support group.

Conduct lunch hour talks.

Participate and observe national and international health awareness days.

Market the HIV & Aids programme with the view of ensuring programme visibility and utilisation thereof.

Train management and engage them in campaigns.

Create online education and website.

4. Peer Educators Training Training of newly appointed Peer Educators. Advance and refresher and advanced/refresher courses for existing Peer Educators. courses

5. Campaigns Conduct campaigns such as VCT , reproductive health, cost impact study, condom distribution, TB and other opportunistic infections programmes etc.

6. Internal Helpline Information dissemination and telephone counseling for infected and affected employees as well as their next of kin.

7. Empowerment of staff Attendance of educational courses seminars ans conferences.

8. Programme governance Continuous monitoring and evaluation of programmes, policy review and benchmarking with other companies.

SECTION 10 DEPENDENCY MATRIX

Table 10:1 Dependency Matrix No Inter-Departmental Dependency Department/ME and Departmental Response Description Individuals Assigned Responsibility 1 Housing Department(Local and Infrastructure Alignment of Electrification Continuous Strategy Improvement - Rev 17 – Page 130 of 131 Approved by Board on 6 Aug 2009

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provincial) coordination with housing master plan committee(ICC) 2 Provision of grant funding for Electrification Sourcing of funding from DME Electrification & public lighting And Public lighting from & MIG by City Power DME & DPLG 3 Approval environmental impact Gauteng dept of Compliance with the assessment for infrastructure Agriculture GDACE Environmental impact projects Assessment (EIA )act 4 Way leave applications JRA Processing of Way leaves prior to project execution 5 Approval of township Township Planning Participate in the commenting establishment/subdivisions department process for township establishment(compliance to turnaround times)

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