Group interim results for the six months ended 30 September 2021 14 December 2020 15 December 2021 The results presentation The is available at www.eskom.co.za/IR2020/interim results presentation is available at www.eskom.co.za/IR2021/interim Disclaimer This presentation does not constitute or form part of and should not be construed as, an offer to sell, or the solicitation or invitation of any offer to buy or subscribe for or underwrite or otherwise acquire, securities of Eskom Holdings SOC Ltd (Eskom), any holding company or any of its subsidiaries in any jurisdiction or any other person, nor an inducement to enter into any investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This presentation does not constitute a recommendation regarding any securities of Eskom or any other person. Certain statements in this presentation regarding Eskom’s business operations may constitute “forward looking statements”. All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding the financial position, business strategy, management plans and objectives for future operations of Eskom are forward looking statements. Forward-looking statements are not intended to be a guarantee of future results, but instead constitute Eskom’s current expectations based on reasonable assumptions. Forecasted financial information is based on certain material assumptions. These assumptions include, but are not limited to continued normal levels of operating performance and electricity demand in the Distribution and Transmission Divisions and operational performance in the Generation Division consistent with historical levels, and incremental capacity additions through the Group Capital Division at investment levels and rates of return consistent with prior experience, as well as achievements of planned productivity improvements throughout the business activities. Actual results could differ materially from those projected in any forward-looking statements due to risks, uncertainties and other factors. Eskom neither intends to nor assumes any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In preparation of this document certain publicly available data were used. While the sources used are generally regarded as reliable the content has not been verified. Eskom does not accept any responsibility for using any such information. 1 PERFORMANCE OVERVIEW Key points Improve the income statement Looking ahead Operations recovery Generation performance  Net profit after tax  4 178% EBITDA  58% Legal separation Loadshedding required R9.2 billion (Sep 2020: R0.2 billion) R44.8 billion (Sep 2020: R28.3 billion) Eskom’s deliverables 427GWh (Sep 2020: 443GWh) Financial results have improved across due to higher revenue are on track, but all key profitability metrics and improved cost control delays in external Transmission and distribution decisions and dependencies network performance stable ✔ Sales volumes  8% 15.06% tariff increase  place Transmission separation by 31 December 2021 at risk Progress on new build programme 100 901GWh for the 2022 financial year due to and correcting new build defects ✔ (Sep 2020: 93 388GWh) favourable High Court judgments, due to easing of lockdown restrictions and RCA and MYPD 4 decisions March 2022 outlook Particulate emissions  Forecast net loss after tax 0.32kg/MWhSO Strengthen the balance sheet (Sep 2020: 0.35kg/MWhSO) R9.1 billion  (Mar 2021: loss of R18.9 billion) despite ongoing challenges at Kendal Gross debt and borrowings Net interest-bearing debt Historically lower revenue R392.1 billion  15% R360.3 billion  14% (tariffs and volumes), higher People and culture (Sep 2020: R463.7 billion) (Sep 2020: R420.6 billion) maintenance and RE-IPP use in the second half of the year, Headcount 42 325  Capital repaid Interest paid Government support received as well as significant spend (from a high of 48 628 in 2018) expected on OCGTs due to mainly due to natural attrition & VSPs R24.4 billion R16.3 billion R31.7 billion ✔ low EAF 2 OPERATING PERFORMANCE Generating plant and network performance GENERATION PERFORMANCE Generation performance NETWORK AND NEW BUILD • Unplanned load losses increased to 23.14% 35 % • Transmission system minutes performance (Sep 2020: 18.64%), with plant availability 30 deteriorated to 2.01 minutes (Sep 2020: declining to 65.27% (Sep 2020: 67.86%) 25 1.32 minutes), due to one large incident of 20 • Loadshedding implemented on 21 days 0.86 minutes 15 (Sep 2020: 19 days) 10 • Distribution network performance • Gas turbine usage remained high, at a cost of 5 remained stable 0 energy (Eskom and IPP-owned OCGTs) of Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar • Medupi Unit 1 achieved commercial R4.5 billion (Sep 2020: R2.6 billion), with Planned losses FY2021 Unplanned losses FY2021 operation on 31 July 2021 Planned losses FY2022 Unplanned losses FY2022 almost 80% being driven by volume increase • Boiler modifications completed at all six Network performance • Generation recovery plan and reliability Medupi units and Kusile Unit 1, and in Minutes maintenance recovery programme continue 5,0 Events/hours 40 progress at Kusile Unit 2 • Major incidents at Medupi Unit 4 on 4,0 • Good progress on Kusile Unit 4, targeting 30 8 August 2021 (generator explosion), and at 3,0 synchronisation by January 2022 and 20 Kendal Unit 1 on 11 September 2021 2,0 commercial operation by June 2022 (generator transformer fire) 1,0 10 • World Bank approved Medupi FGD • Koeberg Unit 1 tripped on 30 August and 24 0,0 0 implementation extension to June 2027; Sep 2017 Sep 2018 Sep 2019 Sep 2020 Mar 2021 Sep 2021 October 2021, but was safely returned technology selection to be completed System minutes lost for events <1 minute SAIFI SAIDI • Average coal stock reduced to 47 days SAIFI = System average interruption frequency index • First Majuba coal train (since the fire in SAIDI = System average interruption duration index (Sep 2020: 57 days), well within Grid Code December 2019) successfully offloaded in requirements early October 2021 3 OPERATING PERFORMANCE Environmental performance, people and society ENVIRONMENTAL PERFORMANCE Environmental performance PEOPLE AND SOCIETY • Relative particulate emission performance kg/MWh l/kWh • Headcount continued to decline to 42 325 sent out sent out improved to 0.32kg/MWh sent out 0.50 1,45 (Sep 2020: 43 795), primarily due to natural (Sep 2020: 0.35kg/MWhSO) 0.45 1,40 attrition and voluntary separation packages 0.40 • Poor performance at Matla, Lethabo, Tutuka, 0.35 1,35 • Group lost-time injury rate remained stable Kendal, Hendrina and Grootvlei, mainly due to 0.30 1,30 at 0.25 (Sep 2020: 0.24) 0.25 poor coal quality and poor performing dust 1,25 • Sadly, three employee and two contractor handling and SO3 plant 0.00 1,20 Sep 2017 Sep 2018 Sep 2019 Sep 2020 Mar 2021 Sep 2021 fatalities were recorded (Sep 2020: two • Emissions performance at Kendal has employees and seven contractors) Relative particulate emissions Water consumption improved, but challenges continue • Racial and gender equity continued to • Kendal pre-trial hearing postponed to Safety performance improve, with racial equity at professional/ January 2022 Number Index middle management level at 80.87% 20 0,40 • Water consumption at power stations (Sep 2020: 79.17%) 15 0,30 deteriorated slightly to 1.45l/kWhSO • Disability equity declined to 2.91% 10 0,20 (Sep 2020: 1.41l/kWhSO) (Sep 2020: 2.97%) 5 0,10 • A total of 31 environmental legal • 38 256 electrification connections contravention incidents recorded (Sep 2020: 0 Sep 2017 Sep 2018 Sep 2019 Sep 2020 Mar 2021 Sep 2021 0,00 completed (Sep 2020: 63 909) 37), 24 were water-related Fatalities (employees & contractors) LTIR • Achieved preferential procurement spend of 67.65% (Sep 2020: 64.62%) 4 UNBUNDLING Progress on legal separation ESKOM ACTIVITIES • Functional separation has been achieved, with support staff relinked to operations ✔ • Divisional boards and separate financial statements in place ✔ • National Transmission Company South Africa SOC Ltd (NTCSA) incorporated as wholly owned subsidiary ✔ • Interim directors in place until permanent directors are appointed ✔ • External due diligence completed ✔ • Measures in place to start trading between NTCSA and the Generation and Distribution Divisions ✔ • Asset transfer agreement, with suspensive conditions, being prepared for signature by 31 December 2021. PFMA approval awaited from DPE and National Treasury ➔ EXTERNAL DEPENDENCIES • NTCSA is expected to be operational during the 2022 calendar year • Licences to be granted → NERSA • We continue to work on delivering those items under our control • Lender consent required • Amendment of the Electricity Regulation Act, 2006 Timelines according to the DPE Roadmap to support the ultimate industry structure → DMRE Transmission to be separated by 31 December 2021 Generation and Distribution to be separated by 31 December 2022 5 FINANCIAL PERFORMANCE Key financial indicators Unaudited Restated Profitability Gearing Financial indicator Sep 2021 Sep 2020 1 Debt/equity Gross debt/EBITDA R billion % 4.0 20 50 35 Revenue, R million 134 982 108 723 40 30 3.0 15 30 25 EBITDA, R million 44 836 28 336 20 20 2.0 10 10 15 EBITDA margin, % 33.22 26.06 0 10 1.0 5 -10 5 Operating profit (EBIT), R million 29 253 14 515 -20 Sep-17 Sep-18 Sep-19 Sep-20 Mar-21 Sep-21 0 0.0 Sep-17 Sep-18 Sep-19 Sep-20 Mar-21 Sep-21 0 Net profit after tax, R million 9 241 216 EBITDA, R billion EBITDA margin, % Gross debt/EBITDA, ratio Debt/equity ratio Net profit after tax, R billion Pre-tax nominal return on assets, % 4.88 2.45 • Financial indicators improved significantly despite navigating a challenging and uncertain Solvency Cash interest cover, ratio 2.20 1.00 operating environment R billion Ratio • Increase in tariffs and recovery of sales Debt service cover, ratio 0.88 0.44 40 2,5 2,0 volumes contributed to enhanced profitability 30 Net debt/EBITDA, ratio 9.12 16.65 and improved operating cash flows 1,5 Debt/equity (including long-term 20 • Gearing ratios improved due to Government 1.59 2.52 1,0 provisions), ratio 10 equity support and enhanced profitability 0,5 Gearing, % 61 72 0 0,0 • Solvency ratios improved due to a recovery in Sep-17 Sep-18 Sep-19 Sep-20 Mar-21 Sep-21 Free funds from operations (FFO) operating cash flows, although cash flows 10.35 6.48 Cash from operations, R billion Debt service cover ratio remained inadequate to meet debt servicing as % of gross debt Cash interest cover ratio requirements on a standalone basis Performance improved Performance declined 1. Restatements are disclosed in note 17 of the interim financial statements 6 FINANCIAL PERFORMANCE Group income statement for the period ended 30 September 2021 Unaudited Restated FINANCIAL COMMENTARY R million Sep 2021 Sep 2020 1 % • Revenue: 15.06% tariff increase for 2022, supported by an Revenue 134 982 108 723 24▲ 8% growth in sales volumes Other income 849 637 33▲ • Primary energy cost: higher production required to meet Primary energy (61 766) (54 318) 14▲ the recovery in demand, particularly by OCGTs and IPPs, Net employee benefit expenses (16 762) (16 415) 2▲ coupled with substantial diesel price increase Net impairment (loss)/reversal (214) 102 • Employee benefit cost: higher contract labour and Other expenses (12 253) (10 393) 18▲ overtime costs; costs controlled through headcount reduction EBITDA (before net fair value) 44 836 28 336 58▲ and no managerial salary increases Depreciation and amortisation expenses (15 583) (13 821) 13▲ • Other expenses: R1.9 billion increase in repairs and maintenance to address plant performance, coupled with Operating profit (EBIT) 29 253 14 515 102▲ write-offs due to damage at Medupi Unit 4 and Kendal Unit 1 Net fair value and foreign exchange gain on 373 1 091 • Depreciation: increase due to commissioning of new plant financial instruments and embedded derivatives Net finance cost (16 621) (15 354) 8▲ • Net finance cost: less finance costs capitalised as new build Share of profit of equity-accounted investees 36 47 units are completed; gross finance costs were contained Profit before tax 13 041 299 through an overall reduction in debt Income tax expense (3 800) (83) Based on preliminary assessments, R0.9 billion written off Net profit for the period 9 241 216 4 178▲ relating to the explosion at Medupi Unit 4 and R86 million ▲ Income/gain increased ▼ Income/gain declined written off relating to the transformer fire at Kendal Unit 1 ▼ Expense/loss declined ▲ Expense/loss increased 1. Restatements are disclosed in note 17 of the interim financial statements 7 FINANCIAL PERFORMANCE Sales and revenue Sep Sep Sales and revenue • Recovery of 7.5TWh (8%▲) in sales Revenue, R million 2021 2020 % R billion TWh volumes due to the phased easing of Local 133 748 108 923 23▲ 140 110 COVID-19 lockdown restrictions and 130 International 6 219 5 163 20▲ 105 the return to operations of many 120 sectors of the economy Gross electricity 110 100 139 967 114 086 23▲ • Improvement in sales seen across revenue 100 95 Net revenue not 90 nearly all customer categories, with (5 480) (4 639) 18▲ recognised (IFRS 15) 0 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 90 the industrial (17%▲) and mining Capitalised (404) (1 373) 71▼ (11.8%▲) sectors most positively Sales, TWh Electricity revenue, R billion affected by the recovery of global Net electricity 134 083 108 074 24▲ commodity markets revenue Sales volumes per Sep Sep category, GWh 2021 2020 % Other revenue 899 649 39▲ • While electricity demand has Distributors 44 071 41 760 5.5▲ increased when compared to level 5 Total revenue 134 982 108 723 24▲ Residential 1 5 489 5 661 3.0▼ and level 4 lockdown restrictions in Commercial 5 006 4 737 5.7▲ the prior year, sales are not expected Sales volumes, GWh 2021 2020 % Industrial 21 610 18 473 17.0▲ to recover to pre-COVID-19 levels Local Mining 14 316 12 807 11.8▲ for the foreseeable future 94 087 86 903 8▲ Agriculture 2 592 2 549 1.7▲ International 6 814 6 485 5▲ Rail 1 003 916 9.5▲ Total sales 100 901 93 388 8▲ International 6 814 6 485 5.1▲ ▲ Revenue/sales increased ▲ Non-recognition/capitalisation increased Total 100 901 93 388 8.0▲ ▼ Revenue/sales declined ▼ Non-recognition/capitalisation declined 1. Prepaid electricity and public lighting are included under the residential category 8 FINANCIAL PERFORMANCE Primary energy analysis COST PRODUCTION UNIT COST • Controllable costs such as coal-fired and nuclear production contained below inflation BASE-LOAD R39 929 million 99 658GWh R401/MWh COAL 1 (Sep 2020: R36 227 million) (Sep 2020: 94 047GWh) (Sep 2020: R385/MWh) 4%▲ • Average coal purchase price is down (0.7%▼), which will help further control future coal R616 million 6 205GWh R99/MWh generation costs NUCLEAR (Sep 2020: R461 million) (Sep 2020: 4 374GWh) (Sep 2020: R105/MWh) 6%▼ • Improved availability of nuclear plant led to increased production R2 464 million 772GWh R3 118/MWh ESKOM OCGTs 2 15%▲ • Diesel production sources account for 7.4% of DIESEL (Sep 2020: R1 391 million) (Sep 2020: 496GWh) (Sep 2020: R2 722/MWh) total cost but only 1% of total GWh produced; it is unsustainable to continue to rely on diesel R2 102 million 463GWh R4 107/MWh IPP OCGTs 3 (Sep 2020: R1 259 million) (Sep 2020: 291GWh) (Sep 2020: R3 648/MWh) 13%▲ • Average diesel purchase price increased (21.3%▲) to R14.41/ℓ (Sep 2020: R11.88/ℓ), driving around 20% of diesel cost increase R14 205 million 6 998GWh R2 030/MWh RENEWABLE IPPs (Sep 2020: R12 456 million) (Sep 2020: 5 551GWh) (Sep 2020: R2 244/MWh) 10%▼ • Total energy produced (excluding pre-comm production) increased by 8.9TWh (8.2%▲) to R2 450 million 4 061GWh R603/MWh meet higher electricity demand IMPORTS (Sep 2020: R2 524 million) (Sep 2020: 4 474GWh) (Sep 2020: R564/MWh) 7%▲ • Total primary energy costs increased (13.7%▲) due to increased use of more expensive R61 766 million 118 157GWh R523/MWh OCGT and IPP sources to alleviate supply TOTAL (Sep 2020: R54 318 million) (Sep 2020: 109 233GWh) (Sep 2020: R497/MWh) 5%▲ constraints experienced during the period, ▼ Unit cost declined ▲ Unit cost increased and to avoid or minimise loadshedding 1. Excluding Medupi and Kusile pre-commissioning production of 571GWh (Sep 2020: 1 845GWh) for units synchronised to the grid, but not yet commissioned 2. OCGT unit cost is calculated on fuel and start-up cost, and excludes storage and demurrage charges. Storage and demurrage of R58 million (Sep 2020: R41 million) is included in the total cost shown 3. The IPP OCGT unit cost is calculated on fuel cost (variable cost) only, and excludes maintenance and capacity charges. Maintenance of R202 million (Sep 2020: R198 million) is included in the total cost shown 9 FINANCIAL PERFORMANCE Investment in infrastructure Repairs and maintenance expenditure Eskom funded capital expenditure R billion R billion +31% 20 +27% 25 20 15 15 10 24,2 24,0 17,4 10 16,4 5 14,1 7,3 8,8 5 10,4 10,8 6,6 6,7 6,9 0 0 Sep-17 Sep-18 Sep-19 Sep-20 Mar-21 Sep-21 Sep-17 Sep-18 Sep-19 Sep-20 Mar-21 Sep-21 Repairs and maintenance Sep Sep per division, R million 2021 2020 % • Capital maintenance spend, relating to outage and refurbishment Generation 6 760 5 133 31.7▲ projects, increased to R4.1 billion (Sep 2020: R2.9 billion) Transmission 301 330 8.8▼ • Total capital expenditure has declined since 2017 due to the Distribution 1 744 1 454 19.9▲ ramping down of projects as new build units are commissioned Total 8 805 6 917 27.3▲ • Liquidity constraints and procurement challenges have resulted in delays in the release of capital funds and procurement of long-lead • Net repairs and maintenance comprised planned maintenance items, leading to the deferral of projects, thereby exacerbating of R6.7 billion and unplanned maintenance of R2.1 billion operational challenges (Sep 2020: R5.4 billion and R1.5 billion, respectively) • Capital savings and enhanced management of the capital portfolio • Typically, higher repairs and maintenance are carried out in the are being implemented to deliver improved capital efficiency second half of the year, during the summer months 10 FINANCIAL PERFORMANCE Group statement of financial position at 30 September 2021 Unaudited Restated FINANCIAL COMMENTARY R million Sep 2021 Sep 2020 1 % • Liquidity: improved largely due to Government 1▲ support and enhanced profitability, although cash Property, plant and equipment and intangible assets 667 554 659 959 remained constrained due to debt servicing and Working capital – inventory and current receivables 73 627 66 352 11▲ working capital requirements Liquid assets – cash and cash equivalents and • Working capital: growth in municipal and metro investments 36 396 24 929 46▲ debt, coupled with an increase in inventories (coal Derivatives held for risk management 14 693 36 856 60▼ stock, maintenance spares and consumables) Other assets 2 19 448 16 379 19▲ • Derivatives: derivatives used in hedging activities Total assets 811 718 804 475 1▲ declined due to strengthening of the Rand 258 603 187 036 38▲ • Equity: share capital of R31.7 billion issued in exchange Equity 3 for Government support, coupled with the profit Debt securities and borrowings 392 109 463 703 15▼ recorded for the period Working capital – current payables 53 007 51 300 3▲ • Debt: focused reduction, with repayments exceeding Derivatives held for risk management 3 310 5 475 40▼ debt raised. Foreign-denominated borrowings declined due to the strengthening of the Rand Other liabilities 4 104 689 96 961 8▲ USD/ZAR exchange rate EUR/ZAR exchange rate Total equity and liabilities 811 718 804 475 1▲ R15.10 (Sep 2020: R16.82) R17.48 (Sep 2020: R19.67) ▲ Asset increased ▼ Asset declined ▼ Liability declined ▲ Liability increased The largest movement was the reduction of 1. Restatements are disclosed in note 17 of the interim financial statements R71.6 billion in debt securities and borrowings 2. Mainly comprises future fuel and non-current receivables 3. Includes Government support of R31.7 billion received for the period (Sep 2020: R6 billion) 4. Mainly comprises non-current provisions, employee benefit obligations, contract liabilities and lease liabilities 11 FINANCIAL PERFORMANCE Net interest-bearing debt and net finance cost overview Unaudited Restated • Efforts to reduce Eskom’s debt burden were possible R million Sep 2021 Sep 2020 1 % through Government support, leading to an overall Debt securities and borrowings 392 109 463 703 15▼ reduction in gross debt of R71.6 billion (15%▼) Net market making liabilities 2 20 • Foreign-denominated borrowings (approximately 40% of portfolio) impacted by the strengthening of the Rand, Cash and cash equivalents 2 (20 411) (11 774) 73▲ with derivatives held for risk management similarly Net derivatives held for risk management 2 (11 383) (31 381) 64▼ impacted by exchange rate movements • Despite a reduction (6%▼), gross finance costs remain Net interest-bearing debt 360 317 420 568 14▼ the second largest cost after primary energy ▼ Asset declined ▼ Liability declined Unaudited Restated R million Sep 2021 Sep 2020 1 % Debt securities and borrowings, R billion (Sep 2020 to Sep 2021) 3 Gross finance cost 21 777 23 181 6▼ Opening balance 463.7 Finance income (1 050) (1 091) 4▼ Debt raised (net of 13.2 commercial paper) Borrowing costs capitalised to assets (4 106) (6 736) 39▼ Debt repaid (66.3) Average cost of debt 9.85% ▼ (Sep 2020: 9.89%) Net finance cost 16 621 15 354 8▲ Exchange rate and other (18.5) movements Average investment return ▲ Income/capitalisation increased ▼ Income/capitalisation declined Closing balance 392.1 ▼ Expense declined ▲ Expense increased 3.64% ▼ (Sep 2020: 5.26%) 1. Restatements are disclosed in note 17 of the interim financial statements 3. Reconciliation based on movements over the past 12 months. Debt raised and debt repaid 2. In this table, assets are reflected as negative amounts for the six months to September 2021 amount to R10.5 billion and R24.4 billion respectively 12 FINANCIAL PERFORMANCE Funding plan progress 2022 2023 Guarantee utilisation at 30 September 2021 Funding Committed Funding Committed R billion R billion plan 1 at Sep 2021 plan 1 at Sep 2021 350 DFIs 8.8 8.5 18.4 11.5 ECAs 0.5 0.5 – – 272 Domestic bonds and notes 3.1 0.1 6.0 – 31 47 Commercial paper 0.5 0.5 – – Total Government Drawn down Committed not Available International bond 7.0 – – – guarantees drawn down Private placement 7.0 7.0 – – Debt maturity profile at 30 September 2021 3 Syndicated loan 15.0 – – – R billion 2 Total funding 41.9 16.6 24.4 11.5 31 18 29 24 % secured 40% 47% 26 20 48 40 36 33 31 14 Debt servicing costs of R71 billion for 2022, reducing to an average of Mar-22 Mar-23 Mar-24 Mar-25 Mar-26 Mar-27 around R60 billion per year to 2025 Interest Capital 1. Funding sources targeted are subject to change depending on requirements 2. The table above includes gross commercial paper and committed funding, whereas the debt raised figure in the statement of cash flows is net of commercial paper and accounts for amounts drawn down 3. Based on existing debt only, using forward rates and net of swaps 13 FINANCIAL PERFORMANCE Overview of cash flow movements KEY TAKEAWAYS Cash flows for the six months ended 30 September 2021 R billion • Net cash increase of 135 R16.4 billion during the period (41) Primary energy, coal and nuclear • Cash from operations remained (5) Primary energy, diesel (Eskom and IPP OCGTs) insufficient to meet (14) Primary energy, renewable IPPs debt servicing and Debt servicing of some capital (2) Primary energy, imports R40 billion comprising (17) Employee benefits investment Capital of R24 billion Interest of R16 billion requirements (11) Working capital Repairs, maintenance • Eskom’s capital and (10) Debt service gap of and operations ±R15 billion tariff structure must (100) (16) without support be resolved to 19 36 ensure long-term (21) financial 11 32 sustainability (1) (24) Government support of (15) R31.7 billion was 1 Revenue Operating Operating Interest repaid Balance before Capital Balance Debt raised Debt repaid Debt service gap Government cashflows surplus investing expenditure before funding support received to alleviate and other some of the cash flow pressure 1. Debt raised for the year is reported net of commercial paper in the statement of cash flows 14 FINANCIAL PERFORMANCE Arrear debt management Municipal arrear debt • Since March 2021, municipal arrear debt grew Our municipal debt management strategy R billion % by R5.6 billion (15.8%▲) focuses on 50 +16% 90 • Payment level of 81% by municipalities, CURRENT ACCOUNT MANAGEMENT 40 85 excluding metros (Sep 2020: 80%). Payment Stop defaulting and enforce payment of current amounts 30 80 level of 50% for top 20 defaulting municipalities 40,9 20 32,9 35,3 (Sep 2020: 49%) FUTURE DEBT MANAGEMENT 25,1 75 10 12,4 17,0 • Eskom is fully participating in the work of the Reduce and/or eliminate overdue debt 0 70 Sep-17 Sep-18 Sep-19 Sep-20 Mar-21 Sep-21 Eskom Political Task Team and its ARREAR DEBT MANAGEMENT Arrear municipal debt, R billion Municipal payment levels, % Multidisciplinary Revenue Committee Prevent future defaulting through pre-emptive action • A proposal to assist municipalities in crisis is Soweto small power user (SPU) debt under discussion with stakeholders We have engaged with 45 municipalities on R billion • Invoiced Soweto SPU debt (including interest) our active partnering model, including all 20 decreased to R6.9 billion, due to write-off of of the top 20 defaulting municipalities 15 prescribed debt and “in duplum” interest 10 -8% • Other than municipal and residential arrear Maluti-A-Phofung, our largest defaulter, did 16,8 16,1 14,1 13,2 debt, only two large customers owe amounts not agree to the terms of the proposed 5 7,5 6,9 in excess of R100 million, with combined debt partnering agreement. We have approached 0 the court to resolve this matter Sep-17 Sep-18 Sep-19 Sep-20 Mar-21 Sep-21 of R785 million Total invoiced Soweto SPU debt, R billion 1. Soweto debt prior to 2019 includes prescribed debt and “in duplum” components that were not written off at the time 15 OUTLOOK Financial outlook for the remainder of the 2022 financial year Actual Projection • Historically, financial performance in the first half of the Financial indicator Sep 2021 March 2022 year is better than the second half as the winter period is characterised by higher tariffs and sales volumes, as well as Revenue, R million 134 982 246 253 lower maintenance EBITDA, R million 44 836 53 325 • Cost pressures remain in the second half of the year due EBITDA margin, % 33.22 21.65 to summer maintenance requirements and production costs associated with ensuring security of supply Operating profit (EBIT), R million 29 253 21 779 • Lack of generation reliability and low EAF is costing us Net profit/(loss) after tax, R million 9 241 (9 122) dearly, with anticipated spend of R16.1 billion on OCGTs contributing significantly to the expected loss Cash interest cover, ratio 2.20 1.53 • The lack of cost-reflective tariffs and unsustainable debt Debt service cover, ratio 0.88 0.69 burden also contribute to the anticipated loss after tax of Net debt/EBITDA, ratio 9.12 8.23 R9.1 billion, although this is an improvement from the previous financial year (Mar 2021: loss of R18.9 billion) Debt/equity (including long-term provisions), ratio 1.59 1.83 • Sales of 197.1TWh (2.8%▲) are expected by year end Free funds from operations (FFO) as % of gross debt 10.35 12.22 (Mar 2021: 191.9TWh) Positive trend forecast Negative trend forecast • Gross debt is expected to increase to R416.4 billion by year end (Mar 2021: R401.8 billion) largely due to funding NERSA’s decision to reject our MYPD 5 revenue application poses a significant risk to revenue postponed from the prior year certainty, operations and profitability in future years. We welcome the High Court decision ordering NERSA to process our revenue application and make a revenue decision Government support of R21.9 billion and for the 2023 financial year by 25 February 2022 R21 billion committed for 2023 and 2024 16 Eskom group annual results for the year ended 31 March 2019 The results presentation is available at www.eskom.co.za/IR2021/interim