CONDENSED GROUP INTERIM FINANCIAL STATEMENTS for the six months ended 30 September 2021 TOWARDS A NEW www.eskom.co.za ENERGY FUTURE CONTENTS BUSINESS PERFORMANCE OVERVIEW The following commentary provides an overview of our financial and operational performance for the six months ended 30 September 2021, Business performance overview 1 as well as progress on other key matters. Developments after the end of the period to the date of approval have been discussed where Approval of the condensed group interim financial statements 9 relevant. Condensed group statement of financial position 10 Some noteworthy points for the six months under review include: Condensed group income statement 11 • Financial results have improved significantly, with a net profit after tax of R9.2 billion Condensed group statement of comprehensive income 11 • Sales volumes are up 8% year-on-year due to the phased easing of COVID-19 lockdown restrictions and return to operations of most sectors of the economy Condensed group statement of changes in equity 12 • Higher revenue and improved cost control resulted in an improvement in EBITDA to R44.8 billion • Operating profit was eroded by net finance cost of R16.6 billion due to the unsustainable gross debt of R392.1 billion. Net debt Condensed group statement of cash flows 13 reduced by R60.3 billion to R360.3 billion Notes to the condensed group interim financial statements • NERSA’s rejection of the MYPD 5 revenue application poses significant risk to revenue certainty for the electricity industry and Eskom’s operations, prompting our urgent High Court review of the decision to facilitate a revenue decision for implementation by 1 Structure and activities 14 1 April 2022 2 Basis of preparation 14 • Government support of R31.7 billion to support liquidity was received by July 2021 • Generation performance is not reflecting the benefits of the Generation recovery plan and reliability maintenance recovery 3 Significant changes in accounting policies 15 programme, with levels of unplanned losses remaining high 4 Critical accounting estimates and judgements 15 • Regrettably, loadshedding had to be implemented on 21 days during the period to protect the constrained system • Major incidents occurred at Medupi Unit 4 and Kendal Unit 1, leading to the loss of 1 360MW to the system 5 Segment information 15 • Transmission and distribution network performance remained stable • Medupi Unit 1 achieved commercial operation on 31 July 2021, signifying the completion of the construction and commissioning 6 Issuances, repurchases and repayments of debt securities and borrowings and share capital 16 activities of the Medupi project, while modifications to new build units continue 7 Dividend paid 16 • Particulate emissions performance has improved, although challenges are still encountered at Kendal Power Station • Regrettably, we have suffered three employee and two contractor fatalities during the period 8 Significant events and transactions 16 • Salary increases for bargaining unit staff are the subject of arbitration proceedings 9 Seasonality of interim results 16 • Eskom’s deliverables are on track, but delays in a number of critical external decisions and dependencies are putting the Transmission legal separation by 31 December 2021 at significant risk 10 Revenue 17 11 Primary energy 17 in South Africa. The strategy responds to the changing energy Introduction 12 Employee benefit expense 17 Like many South African businesses, we have been navigating a landscape as a result of global and national trends which are aimed very challenging operating environment, with growth hampered by at decentralised, democratised and decarbonised energy that 13 Finance cost 17 capacity shortages and depressed economic conditions as a result utilises digitisation to achieve efficiencies. The strategy will be of the COVID-19 pandemic. This had an adverse impact on Eskom’s aligned to the strategic direction being pursued by the Generation, 14 Income tax 17 financial and operational performance, and on the South African Transmission and Distribution Divisions that will operate as 15 Accounting classification and fair value 18 economy as a whole. separate legal entities as subsidiaries of Eskom Holdings. 16 Material events subsequent to 30 September 2021 22 Thankfully, we have begun to see signs of recovery across the To adequately respond to our financial and operational challenges, economy, particularly in the industrial and mining sectors, which we require an integrated, robust and sustainable long-term strategy 17 Restatement of comparatives 23 to enable us to meet our mandate, vision and mission. Our strategy has led to an improvement in electricity demand and sales volumes. 18 Exchange rates 23 There has been a corresponding improvement in our financial embraces the changing environment and positions the imminent performance compared to the first six months of the previous energy transition as the pivot to a sustainable future. 19 Reportable irregularities 23 financial year. However, the increase in demand has exacerbated We are revising our strategy to focus on four strategic objectives to supply constraints, which limit our ability to meet demand resulting ensure that we can overcome our challenges, while positioning the in the need to implement nationwide loadshedding. We continue The condensed group interim financial statements for the six months ended 30 September 2021 have been prepared under the supervision entity sustainably in an evolved energy landscape. The four strategic to monitor and assess the impact of the economic climate on our of the Chief Financial Officer (CFO), C Cassim CA(SA) and were published on 15 December 2021. objectives are: operations and finances to better manage our response to these challenges. Ultimately, our priority remains supplying electricity as • Pursue financial and operational sustainability The condensed group interim financial statements for the six months ended 30 September 2021 and 30 September 2020 have not been • Facilitate a competitive future energy industry audited, reviewed or reported on by the external auditors of the group. The financial information for the year ended 31 March 2021 is as an essential service and maintaining the safety of our people. • Modernise the power system reflected in the audited financial statements. More broadly, Eskom’s financial challenges persist due to a lack of • Strive for net zero emissions by 2050 with an increase in cost-reflective tariffs, an unsustainable debt burden and no clear sustainable jobs solution to the municipal arrear debt challenge. These factors continue to affect financial sustainability and place pressure on our The strategy is underpinned by Eskom’s Just Energy Transition (JET) liquidity, further contributing to our operational challenges which journey which will seek to: require significant capital to resolve. • Accelerate the repurposing and repowering of coal-fired power stations To improve our financial position, we require a considerable • Actively pursue a share of the renewable energy generation reduction in the debt profile or a sizable increase in cash flows • Drive job creation opportunities through supporting local through cost-reflective tariffs, which would result in operational manufacturing and stimulating reindustrialisation cash flows that are adequate to service finance cost, and improve cash interest cover and debt service cover ratios to acceptable Through clear and concise goals and initiatives, these core strategic levels. While we continue to focus on addressing these factors, objectives will be pursued in the immediate, short, medium and we remain reliant on Government’s equity support to assist us in long term through the allocation of resources to ensure that servicing our debt and interest commitments. milestones which support organisational goals are achieved. We require support through enabling policy and stakeholder alignment Eskom’s overall strategy is informed by our mandate from the to meet the envisioned end state. Although there are many risks Department of Public Enterprises (DPE) to provide a stable associated with the strategy as a result of a fast-changing open electricity supply in a sustainable and efficient manner, to enable energy landscape, measures are being crafted to ensure their economic growth and assist in lowering the cost of doing business impact on the success of the strategy is mitigated. ESKOM HOLDINGS SOC LTD | 1 BUSINESS PERFORMANCE OVERVIEW (continued) Introduction (continued) Primary energy costs grew by 13.7%, increasing to R61.8 billion for Funding Regrettably, there has been no substantial progress on the High Eskom has committed to an aspirational goal of net zero carbon the period (September 2020: R54.3 billion). These costs are directly Our borrowing programme had originally targeted raising Court applications under way to review NERSA’s recent revenue emissions by 2050, with an increase in sustainable jobs. To develop related to the volume of electricity generated from Eskom’s power R25.5 billion during the 2022 financial year, of which R16.6 billion and regulatory clearing account (RCA) determinations, although a more detailed understanding of what this net zero JET pathway stations as well as purchases from independent power producers has already been secured. However, we anticipate raising total we do expect favourable outcomes as our applications correctly could look like, we have conducted energy systems modelling. The (IPPs) and international imports required to meet electricity funding of R41.9 billion by 31 March 2022 to strengthen our liquidity adhere to the principles of the MYPD methodology. NERSA is in modelling takes account of Integrated Resource Plan (IRP) 2019 demand. Electricity production increased by 6.9% from 111.1TWh position, with the increase in borrowings arising from the private the process of finalising the RCA application of R8.4 billion for the considerations, up to its timeline of 2030, after which we extrapolate to 118.7TWh, mostly through higher coal and nuclear production, placement of USD500 million and syndicated loan of R15 billion 2020 financial year. On 19 November 2021, we submitted our RCA the modelling based on various assumptions. The modelling aims to as well as the more expensive Eskom open-cycle gas turbine that were postponed from the previous financial year. The private application for the 2021 financial year, with a balance of R10.7 billion. show the energy mix and emissions profiles over various scenarios, (OCGT) and IPP production. placement was issued during July 2021. The first phase of the syndicated loan was executed in October 2021, raising R10 billion. On 2 June 2021, we submitted our MYPD 5 revenue application to constrained by certain technical and financial aspects. All scenarios Coal costs are being controlled, in particular from short- and An international bond issuance up to R7 billion is planned for the NERSA, for financial years 2023 to 2025. The revenue application indicate a high requirement for solar PV, wind and battery storage, as medium-term sources, evidenced by a 0.7% decrease in the second half of the financial year, subject to market conditions. was made in accordance with the prevailing MYPD methodology, the least-cost combination of new capacity options. average purchase cost per ton of coal compared to March 2021 which remains valid until replaced by an alternate methodology. On Eskom remains committed to providing reliable, cost efficient (September 2020: 4.6% increase compared to March 2020). At the end of September 2021, Fitch affirmed their previous 30 September 2021, NERSA rejected the application on the basis of and sustainable electricity to South Africa, and we believe that Unfortunately, Eskom OCGTs were utilised frequently to support ratings of Eskom with a negative outlook. This is in line with Fitch’s it being submitted on the prevailing MYPD methodology. NERSA our integrated long-term corporate strategy will allow us to the power system, generating 772GWh at a cost of R2.5 billion affirmation of South Africa’s long-term credit rating in May 2021. originally intended to approve an interim price determination for the continue contributing to socio-economic growth through the (September 2020: 496GWh at R1.4 billion). There were no other credit rating actions during the period. 2023 financial year based on a new price methodology, which is yet provision of electricity. Unfortunately, our ratings by all three internationally recognised to be developed. Subsequently, the regulator member responsible Expenditure on international purchases was stable at R2.5 billion, credit rating agencies remain at sub-investment grade level, thereby for electricity, announced that the revenue determination In support of this, we will continue to drive the priorities outlined in with imports of 4 061GWh (September 2020: 4 474GWh at affecting market appetite and the cost of borrowing, and increasing methodology is still valid. The reasons for the NERSA decision to the turnaround plan, which are operational recovery, improving our R2.5 billion). Expenditure on IPPs increased to R16.3 billion our reliance on Government guarantees to meet our funding needs. reject Eskom’s revenue application is therefore unclear. income statement, strengthening our balance sheet, accelerating net of capacity charges, with 7 461GWh energy purchased the restructuring of Eskom into three separate entities, and building (September 2020: 5 842GWh at R13.7 billion). At 30 September 2021, the gross book value of outstanding debt This decision poses a significant risk to revenue certainty across a high-performance culture. Our progress across these areas is securities and borrowings stood at R392.1 billion (September 2020: the electricity industry and is impossible to implement, both in Employee benefit costs increased to R16.8 billion (September 2020: R463.7 billion). The reduction has largely been driven by debt terms of legal processes and the timing required. In response, we discussed in more detail throughout this performance overview. R16.4 billion) as a result of higher contract labour and overtime costs, servicing – which was only possible with support from Government have initiated urgent High Court proceedings to review NERSA’s Financial performance offset by headcount reduction as well as the decision not to award – as well as fair value adjustments on foreign debt due to the decision and to require NERSA to urgently process the MYPD 5 salary increases to managerial employees in October 2020. Other application for at least one year, as required by law. The timeframe Financial results strengthening of the Rand. During the period, we repaid capital operating expenditure increased to R12.3 billion (September 2020: of R24.4 billion and interest of R16.3 billion (September 2020: proposed by our High Court application allows for a decision to We recorded a net profit after tax of R9.2 billion for the period R10.4 billion), largely due to an increase of R1.9 billion in repairs and R23.7 billion and R19.1 billion respectively). be made in time for implementation by 1 April 2022. NERSA has (September 2020: R216 million), despite navigating a challenging maintenance. Generation has conducted extensive maintenance to opposed this review application. A court outcome is expected and uncertain operating environment due to supply constraints address plant performance challenges in line with the Generation The debt repayment profile of existing debt only, net of swaps and during December 2021. and South Africa’s ongoing national lockdown, which continue recovery plan, and additional unplanned maintenance has been based on forward rates, remains pressured over both the short and to have an adverse impact on the economy. Revenue grew to required to address several critical plant components. long term. Interest payments of R31 billion and capital payments of In August 2020, we submitted proposals to NERSA for the R135 billion (September 2020: R108.7 billion), an increase of R40 billion are required during the current financial year, while total restructuring of tariffs, to address the planned legal separation 24.2%, due to a recovery in demand and sales volumes, combined During the period, we wrote off R0.9 billion relating to damage interest payments of R130 billion and capital payments of R154 billion of Eskom and to more accurately reflect the component costs with tariff increases. from the explosion at Medupi Unit 4, which is discussed in more are required over the next five years to March 2026. These of electricity. NERSA’s decision is expected during the current detail below. The fire at Kendal Unit 1 (also discussed below) repayments can only be met with continued Government support. financial year, for implementation in the 2023 financial year, The recovery was largely as a result of the phased easing of resulted in a write-off of R86 million based on the preliminary however, it is likely that the uncertainty around MYPD 5 will also lockdown restrictions and the return to operations of many damage assessment. By July 2021, Eskom received the full R31.7 billion of Government influence this process. sectors of the economy. Sales grew by 8% to 100.9TWh (September 2020: 93.4TWh), with local and international sales equity support committed for the current financial year. In the 2021 Altogether, these factors led to an improvement in EBITDA National Budget Review, Government expressed its commitment In an effort to improve liquidity through cost optimisation and increasing by 7.2TWh and 0.3TWh respectively. An improvement to R44.8 billion (September 2020: R28.3 billion) along with to providing a further R21.9 billion in support for the 2023 financial efficiencies, we have restricted organisational cash requirements was seen across nearly all sectors, with the industrial and mining corresponding growth in the EBITDA margin to 33.20% year and R21 billion for 2024, which will assist Eskom in maintaining a through targeted savings on operating and capital expenditure sectors most positively affected by the recovery of global (September 2020: 26.06%). Mainly due to depreciation of positive liquidity position in line with financial planning assumptions. and working capital. Our target is to reduce Eskom’s cost base commodity markets, leading to better profit margins and higher R15.6 billion (September 2020: R13.8 billion) and net finance costs of by R20.1 billion in the current financial year, and a cumulative production by large mines and smelters. R16.6 billion (September 2020: R15.4 billion), EBITDA was reduced Managing liquidity R61.8 billion by 2023. During the first six months of the year, to a profit before tax of R13 billion (September 2020: R0.3 billion). Liquidity remains one of our greatest challenges, limiting our we achieved savings of R7.8 billion against a target of R10 billion. In addition, the fourth multi-year price determination (MYPD 4) coupled with successful court review applications resulted in a ability to achieve financial and operational stability. Access to The majority of savings came from primary energy and, to a lesser tariff increase of 15.06% for customers supplied directly by Eskom cost-effective funding remains restricted, while inadequate price extent, employee benefit costs and other operating expenditure. from 1 April 2021, and a tariff increase of 17.80% for municipal and increases granted by the National Energy Regulator of South Africa By year end, savings of R18.6 billion are expected. Work is under metropolitan distributors from 1 July 2021. (NERSA) and escalating municipal arrear debt further contribute to way to identify further opportunities to close the gap. Since the 2020 liquidity constraints. financial year, we have achieved combined savings of R38.5 billion, exceeding the cumulative target of R30.3 billion to date. Liquidity reserves increased from R4 billion at 31 March 2021 to R20.4 billion at 30 September 2021, largely driven by Government During the period, we incurred capital expenditure of R14.1 billion support and improved revenue during the period. Despite this, (September 2020: R10.8 billion). We expect to spend R32.2 billion liquidity is expected to remain constrained for the remainder of the during the 2022 financial year (March 2021: R24 billion), a R billion 50 20 Ratio 3.5 Ratio financial year. To address our liquidity challenges, our turnaround substantial increase from the prior financial year as a result of plan focuses on improving our income statement, by achieving additional funding required for outages including general overhaul 3.0 40 revenue certainty, cost optimisation and efficiencies, combined and refurbishment projects. 15 2.5 with strengthening our balance sheet. 30 2.0 At 30 September 2021, total municipal arrear debt stood at 10 Revenue certainty is dependent on sales growth and the migration R40.9 billion (September 2020: R32.9 billion), representing 75.5% of 1.5 20 towards cost-reflective tariffs. As discussed earlier, sales volumes total invoiced municipal debt (September 2020: 75.6%). The top 20 5 1.0 have improved considerably compared to the prior year, although defaulting municipalities constitute 81% of total invoiced municipal 10 0.5 demand is not expected to recover to pre-COVID-19 levels for arrear debt (September 2020: 80%). 0 0 0.0 the foreseeable future. We have obtained regulatory approval for a Sep 2017 Sep 2018 Sep 2019 Sep 2020 Mar 2021 Sep 2021 Sep 2017 Sep 2018 Sep 2019 Sep 2020 Mar 2021 Sep 2021 Sep 2017 Sep 2018 Sep 2019 Sep 2020 Mar 2021 Sep 2021 long-term negotiated pricing agreement (NPA) with South32, which was implemented from 1 August 2021. A number of short- and long- Free funds from operations FFO as % of gross debt Debt/equity ratio Cash interest cover EBITDA Gross debt/EBITDA Debt service cover term NPA applications from customers are under consideration. 2 | CONDENSED GROUP INTERIM FINANCIAL STATEMENTS | 30 SEPTEMBER 2021 ESKOM HOLDINGS SOC LTD | 3 BUSINESS PERFORMANCE OVERVIEW (continued) Financial performance (continued) Average partial load losses of 4 612MW for the period have increased Average coal stock levels (excluding Medupi) stood at 47 days at the the contractual negotiations for the implementation. Rollout of Managing liquidity (continued) significantly (September 2020: 3 613MW), and are worse than the end of the period (September 2020: 57 days). No station ended the the low-load and transient solution will commence during available Despite our best efforts, limited success has been realised target of 3 112MW. Partial load losses contributed approximately quarter with stock below its individual minimum stockholding level planned outages after June 2023. Regrettably, the incident at in managing municipal arrear debt, which has escalated to 44% to total UCLF for the period under review. Ash dam constraints (September 2020: no stations). Coal-related load losses contributed Medupi Unit 4 has hampered overall progress. unsustainable levels. We cannot solve our municipal debt challenges at Camden – comprising unit shutdowns as well as the reduced 0.73% OCLF during the quarter, mainly at Matla and Kriel. Eskom capacity of units once they return to service – accounted for 39% of continues to work with mines on initiatives to improve coal quality. Boiler plant modifications on Kusile Unit 1 have been completed, on our own – continued support and cooperation from Government is crucial to address the root causes of the problem. We are fully total OCLF during the period. and the unit was returned to service in September 2021. The outage At Majuba Power Station, rail operations to deliver coal did not on Kusile Unit 2 commenced in November 2021 while the outage participating in the work of the Eskom Political Task Team (PTT) Medupi Unit 4 was on a nine-day planned maintenance outage resume as planned on 1 September 2021. However, the first coal on Unit 3 is scheduled to commence during the second half of the and its Multidisciplinary Revenue Committee, although progress on when the generator exploded on 8 August 2021. This resulted in train of 72 wagons since the fire in December 2019 was successfully financial year, depending on outage availability. Modifications on these interventions remains relatively slow. We have submitted a extensive damage to the Unit 4 generator, as well as disturbance to offloaded at the coal tippler early in October 2021. Kusile Units 4, 5 and 6 are being rolled out during construction. number of proposals to the PTT to address municipal arrear debt, Unit 5, resulting in the unit tripping. Unit 5 was returned to service but the matter has not yet been resolved. Active partnering, where on 12 August 2021. The incident occurred during the activity to Transmission performance of 2.01 system minutes lost has Eskom has incurred R224.8 million to the end of October 2021 on Eskom renders support to capacitate municipalities to improve displace hydrogen with carbon dioxide and air, for the purposes deteriorated (September 2020: 1.32 minutes), primarily due to one correcting the boiler plant defects at Medupi and Kusile. collection and maintain municipal infrastructure, will support the of finding an external leak. Fortunately, no injuries were sustained large incident resulting from the loss of a substation transformer in recovery plan for these municipalities. during the incident. The investigation into the incident and Gauteng during June 2021, leading to a loss of 0.86 system minutes. Good progress has been made on Kusile Unit 4, with key milestones assessment of the extent of the damage is still in progress, although Other aspects of transmission network performance have generally achieved towards first synchronisation by January 2022 and We have engaged with 45 municipalities on active partnering, we have concluded that the incident was caused by human error. shown an improvement since the prior year. Distribution network commercial operation by June 2022. including all of the top 20 defaulting municipalities. Unfortunately, performance remains stable, and continues to perform much better Maluti-A-Phofung, our largest defaulter, did not agree to the terms of the proposed partnering agreement, and we have since The duration of repairs will depend on the extent of the damage than target. Environmental performance and the long-lead components to be replaced, although it is Relative particulate emission performance has improved to approached the court on this matter. expected that the repair duration could take 18 to 24 months. The Eskom and City Power, the electricity company owned by the City 0.32kg/MWh sent out (September 2020: 0.35kg/MWh sent out) forced shutdown period will be utilised to execute opportunity of Johannesburg, have signed a memorandum of understanding due to an improvement in performance at Kendal Power Station. Operational performance aimed at concluding a transaction in which Eskom would eventually maintenance and the implementation of new build modifications Nevertheless, poor performance at Matla, Lethabo, Tutuka, Kendal, Plant and network performance which are ready for execution. The incident resulted in a loss sell or transfer the distribution of electricity to City Power, in Average unplanned unavailability of generation plant during the Hendrina and Grootvlei continues. By the end of September 2021, of 720MW (approximately 1.60% of total official capacity) of those parts of Johannesburg currently supplied by Eskom, mainly six-month period was around 11 600MW (September 2020: seven units were operating in non-compliance with average monthly generation supply to the grid for an extended period, coupled with Sandton and Soweto. City Power holds the distribution licence 9 700MW), higher than the base-case assumption of 11 000MW emission limits, which placed 4 101MW at risk of being shut down by catastrophic damage to the generator, adjacent equipment and to the rest of the City of Johannesburg. Should an agreement be in the Winter Plan (from April to August 2021) and in line with the the authorities (September 2020: five units accounting for 3 153MW). structures during the explosion. For the year-to-date, the incident reached, the parties will seek the requisite regulatory approvals base-case of 12 000MW in the Summer Plan (from September 2021 Poor performing units are placed on outage to undertake repairs, and has accounted for 0.40% UCLF. and give affected customers an opportunity to contribute to a to March 2022). During the period, loadshedding was implemented settlement in a public participation process. Among the regulators load losses are taken by non-performing units. on 21 days (September 2020: 19 days), comprising five days at Additionally, Kendal Unit 1 (640MW) tripped on 11 September 2021 from whom approvals are required are NERSA, National Treasury stage 1, 14 days at stage 2, one day at stage 3 and one day at stage 4. Eskom appeared in the Witbank Magistrates Court on due to a failure of the generator transformer. Upon initial and the Department of Mineral Resources and Energy (DMRE). No Under the Summer Plan, one day of stage 1 loadshedding would investigation, it was determined that the generator transformer had 20 August 2021 in respect of the Kendal criminal matter. The pre- transaction has been concluded yet. trial hearing was postponed to 14 January 2022 to allow Eskom be required for unplanned unavailability up to 12 000MW, with caught fire due to an internal fault. The fire damaged the cables to 40 possible days of stage 2 loadshedding up to 13 000MW and the main cooling water system on the west side of the power station. New build performance time to prepare representations in response to additional charges 94 possible days of stage 3 loadshedding at 14 000MW. Units 3 and 2 experienced loss of vacuum and were shut down under Medupi Unit 1 achieved commercial operation on 31 July 2021, brought by the National Prosecuting Authority relating to the controlled conditions. The units were returned safely on 13 and adding installed capacity of 794MW to Eskom’s base and signifying incorrect or misleading reporting of incidents. At Kendal, the Eskom and IPP OCGTs were utilised frequently during the period 14 September 2021 respectively. The root cause of the generator problems experienced and capacity constraints have also resulted completion of construction and commissioning activities to support the power system. Eskom and IPP OCGTs generated transformer failure is under investigation. Repairs on the unit is in in several non-compliances to particulate matter emission limits on on the 4 764MW Medupi project. Transformer capacity of 1 234GWh year-to-date (September 2020: 787GWh), at a cost progress, and the unit is expected to return in December 2021. Units 3, 4 and 5 during the period, and the station incurred two 1 065MVA has been installed (September 2020: 750MVA), while of R4.5 billion (September 2020: R2.6 billion). Average unplanned legal contravention incidents. 44.1km of transmission lines were installed during the period unavailability since 1 October 2021 has been around 13 700MW, Koeberg Unit 1 tripped from the grid on 30 August 2021 due to a (September 2020: 6.3km), strengthening the transmission network. necessitating increased use of OCGTs. reactor scram (an emergency shutdown of a nuclear reactor) as a Water performance deteriorated to 1.45ℓ/kWh sent out direct result of one of the three primary pump motors tripping on At Medupi, boiler plant modifications have been implemented on (September 2020: 1.41ℓ/kWh sent out). Poor water performance Generation plant availability (EAF) of 65.27% was lower than overcurrent due to a faulty relay. Prior to that, it had been online all six units, except for the long-lead milling modifications and across the generation fleet is due to poor water management the same period of the previous year (September 2020: 67.86%), for 75 days, after returning to service in June 2021 from its last the duct erosion modifications on Unit 6. All available units are practices, namely leaks and overflows of tanks from units, lower or and significantly worse than the shareholder target of 74%. refuelling and maintenance outage. Troubleshooting and repairs however capable of reaching full load. The basic design of further lack of water recovery from dams due to poor water quality, ashing The decrease against the previous year is largely due to an increase were completed promptly and safely, and the unit was returned improvements to the low-load and transient operations have been with cooling water to control cooling water chemistry, leading to in unplanned losses (UCLF) to 23.14% (September 2020: 18.64%), to service on 3 September 2021. Subsequently Unit 1 tripped from offset by a reduction in planned maintenance (PCLF) to 8.88% completed. Detail design will commence after the completion of pollution control dam overflows. the grid on 24 October 2021 when the reactor scrammed while (September 2020: 9.90%) and other load losses (OCLF). bringing a steam feedwater pump, which had been out of service for Progress on the Generation recovery plan continues. Owing to a statutory overspeed test, back to service. The unit returned to liquidity challenges, funds for reliability maintenance have been service on 27 October 2021, and was restricted to 70% power until constrained, leading to delays in the procurement of spares and the the cause of the incident was fully resolved on 2 November 2021. appointment of key contractors. To date, reliability maintenance Other than these incidents, both units at Koeberg continued to has been completed on seven units, with another five units in operate safely during the period. progress. Kendal Unit 5 (640MW) returned to service in June 2021 The long-term operation (LTO) activities to enable Koeberg to % % Events/hours Minutes kg/MWh sent out ℓ/kWh sent out from repairs to the electrostatic precipitators to comply with operate for another 20 years beyond 2024 continue. In addition, the 100 25 40 4 0.6 1.50 emissions limits. Unit 6 has also returned to service. replacement steam generators on both units will be installed during 0.5 1.45 Full load losses remained high, mainly due to high boiler tube failure their respective outages in 2022. The three steam generators on 80 20 30 3 rates and outage slips. For the period under review, 50% of outages site are being prepared for installation in the forthcoming outage on 0.4 1.40 60 15 met their due date (September 2020: 54.55%), significantly below Unit 2 early in 2022. The remaining three steam generators are still 20 2 0.3 1.35 the target of 80%. Unplanned failures immediately following outages being manufactured, with two nearing completion. 40 10 0.2 1.30 (post-outage UCLF) improved slightly to 19.66% (September 2020: 10 1 20 5 21.45%), contributing 0.89% to overall UCLF year-to-date. 0.1 1.25 0 0 0 0 0.0 1.20 Sep 2017 Sep 2018 Sep 2019 Sep 2020 Mar 2021 Sep 2021 Sep 2017 Sep 2018 Sep 2019 Sep 2020 Mar 2021 Sep 2021 Sep 2017 Sep 2018 Sep 2019 Sep 2020 Mar 2021 Sep 2021 EAF PCLF UCLF SAIFI SAIDI System minutes lost for events <1 minute Relative particulate emissions Water consumption 4 | CONDENSED GROUP INTERIM FINANCIAL STATEMENTS | 30 SEPTEMBER 2021 ESKOM HOLDINGS SOC LTD | 5 BUSINESS PERFORMANCE OVERVIEW (continued) Operational performance (continued) We completed 38 256 connections under DMRE’s electrification At 30 September 2021, 226 forensic cases were being investigated. We anticipate electricity production to be 4.8TWh or 2.1% higher Environmental performance (continued) programme (September 2020: 63 909). Our corporate social Investigations and reporting of these and other matters will than the prior year. However, primary energy costs are expected to In July 2021, the World Bank approved the extension of the Medupi investment spend continued to be disrupted by the national continue, with the appropriate disciplinary processes being increase by about 14.1% year-on-year, due to increased production flue gas desulphurisation (FGD) implementation deadline from lockdown, with only R27.4 million committed to 54 projects instituted, and internal control measures in the affected and related from OCGTs and IPPs as well as normal inflationary increases. June 2025 to June 2027. The revised schedule indicates a target date during the period, assisting 5 790 beneficiaries (September 2020: areas being reviewed and enhanced. The average coal purchase price per ton is expected to increase by for commercial operation of the first unit’s FGD by mid-2026 and R22.2 million to 3 320 beneficiaries). 5.2% year-on-year. We have reviewed our employee flagging practices to ensure that the final unit during the second half of 2027. The team is engaging on employees who were dismissed following a disciplinary procedure, The Short-Term Power Purchase Programme (STPPP) and the Risk the water supply from Thabazimbi to Medupi to finalise the water Readiness for legal separation From Eskom’s perspective, we are on track to meet the targets set resigned pending the finalisation of a disciplinary process, or Mitigation Independent Power Producer Procurement Programme supply tie-in, and details have been obtained of land available for resigned pending the completion of an investigation, will not be (RMIPPPP), which were intended to provide additional capacity consideration of FGD waste disposal. The development of contract out in terms of DPE’s Roadmap for Eskom in a Reformed Electricity Supply Industry for legal separation of the Transmission business allowed to be employed by Eskom or a contractor on Eskom sites and offset usage of expensive OCGTs, have unfortunately been and procurement strategies have commenced. The key priorities for a period of 10 years. Processes to withhold pension benefits and delayed while awaiting regulatory and Government approval. In are to complete the technology selection and resolve funding by 31 December 2021. Functional separation of the Generation, Transmission and Distribution Divisions was completed in the recovery of losses or damages from these employees have also October 2021, the Board approved the termination of the STPPP as constraints before proceeding with any solution and commencing been improved. a result of the delays. We reiterate our call to Government and all environmental approval activities. June 2021. We have established the legal entity – the National Transmission Company of South Africa – as a wholly owned stakeholders to accelerate procurement of new generation capacity, To improve commercial governance processes and contract as adequate capacity is critical to powering the rebuilding of an People and safety subsidiary of Eskom, and have appointed interim directors, until management, implementation of our procurement roadmap is economy which has been devastated by the COVID-19 pandemic. The group headcount continued to decline to 42 325 at the end of the such time as permanent directors are appointed. Measures are under way. Feedback on these initiatives is provided to National period (September 2020: 43 795), mainly through natural attrition, in place to start trading electricity between Eskom’s Generation, Treasury and DPE on a regular basis. We will continue to deliver on our municipal debt management supported to some extent by the voluntary separation packages Transmission and Distribution Divisions. strategy and pursue active partnering agreements to stem the (VSPs) offered to managerial level staff during the previous financial Our PFMA and loss control function became fully operational growth in arrear debt and improve customer payment levels, However, a number of matters outside of Eskom’s control remain year. A total of 74 employees left Eskom by February 2021, at a cost from 1 April 2021. This function is responsible for conducting with the objective of enhancing revenue recovery and ultimately, outstanding, thereby putting the timelines for full separation at risk. of R112 million. This was in addition to 185 exits as part of the first assessments and determinations of all occurrences of irregular as liquidity. We are working with Government and the PTT to identify The first relates to the granting by NERSA of a transmission licence round of VSPs during the 2020 financial year, at a cost of R286 million. well as fruitless and wasteful expenditure, including oversight of sustainable solutions for the recovery of municipal and Soweto to the new entity. The second is the amendment of the Electricity consequence management, such as disciplinary action, condonations arrear debt. Racial equity at senior management level improved to 75.98% Regulation Act, 2006. The amendment bill has been drafted by DMRE and recovery of losses. We have embarked on an initiative with DPE (September 2020: 72.27%), while racial equity at professional and and submitted to Cabinet, but still has to go through a parliamentary and National Treasury to ring-fence historical irregular expenditure Reducing our reliance on debt and containing debt service costs management level increased to 80.87% (September 2020: 79.17%). review process, which could take as long as 12 to 18 months. We are to minimise the impact on our annual financial statements, remains most critical in the near term. Gross finance costs are Gender equity also improved, to 43.24% at senior management level exploring legal workarounds to move forward with de facto legal demonstrating a commitment to resolving the outstanding irregular the second largest cost item after coal, higher than both employee (September 2020: 40.90%) and 39.46% at professional and middle separation given these external constraints and dependencies, such as expenditure balance going forward. benefit costs and capital expenditure, and have a direct and management level (September 2020: 38.65%). Disability equity at the wholly owned subsidiary acting as agent for Eskom in the interim. negative impact on profitability and liquidity, threatening our ability group level has declined to 2.91% (September 2020: 2.97%). We have submitted condonations to the value of R18.5 billion to to continue as a going concern. Our strategy is to manage debt Clarity and direction on the future industry structure and National Treasury for approval, of which around R9.3 billion has downwards as best we can, however, the reality is that this remains The group lost-time injury rate (including occupational diseases) associated policy is needed to engage lenders, whose approval is been condoned. An amount of R6.6 billion was not condoned, a slow and challenging process in the absence of cost-reflective remained stable at 0.25 (September 2020: 0.24). Tragically, we have required to proceed. We continue to expend our best efforts on and R2.6 billion is awaiting approval. Where applicable, we have tariffs and a structural solution to our overburdened balance sheet. suffered three employee and two contractor fatalities during the delivering those items over which we have control, but achievement commenced with a process in terms of the applicable framework to period (September 2020: two employees and seven contractors). of the timelines is highly dependent on timely delivery of legislative remove irregular expenditure once approved by the Board. Government support has been crucial in assisting us to service We maintain that every loss of life in Eskom’s service is preventable and regulatory milestones. our debt commitments and remain a going concern. However, it and unacceptable. We extend our heartfelt condolences to the Outlook only serves to assist us in meeting our debt service obligations affected family, friends and colleagues. Other matters Historically, Eskom’s financial performance in the first half of and thereby stabilise the balance sheet, and to improve liquidity Board and executive changes the year is better than the second half, as the winter period is in the short to medium term. It will not provide the sustainable At 30 November 2021, we had recorded 7 957 positive COVID-19 Ms Nelisiwe Magubane resigned as an independent non-executive characterised by higher tariffs and sales volumes. In addition, less solution required to support Eskom’s long-term financial viability. cases, comprising 6 543 employees and 1 414 contractors, with director and chairperson of the Investment and Finance Committee maintenance is performed in winter to ensure adequate supply to We recognise that this support comes at a cost that the country 7 754 recoveries, a recovery rate of more than 97%. Sadly, we have on 15 August 2021. Board vacancies have become a constraint on sustain the increased demand and to offset lower winter production simply cannot afford. lost 154 employees and 22 contractors to the disease. We extend the ability of directors to attend committee meetings. A number of by renewable IPPs. The seasonality of Eskom’s performance means our sincere condolences to those affected by their loss. requests have been put to the shareholder to fill board vacancies As stated before, to achieve independent financial sustainability, that there is considerable cost pressure in the second half of the as a matter of urgency. financial year, driven largely by summer maintenance requirements remain a going concern and meet our debt service requirements After salary negotiations with NUM, NUMSA and Solidarity through the Central Bargaining Forum deadlocked earlier in the year, the and costs associated with ensuring security of supply. on a standalone basis, the price of electricity in South Africa must Ms Mel Govender was appointed as Group Executive: Legal and matter was referred for arbitration. The matter is scheduled for migrate towards a cost-reflective tariff. Compliance from 1 October 2021. While the phased easing of COVID-19 lockdown restrictions has arbitration during December 2021. We have implemented our We have to emphasise that the power system is unreliable and led to an improvement in financial performance during the first six final offer of a 1.5% basic increase and changes to the conditions of Progress on governance clean-up unpredictable due to insufficient maintenance of generation plant months of the year, ongoing risks for Eskom’s sales and revenue service with effect from 1 July 2021. External investigations into major cases of suspected fraud over many years. Maintenance outages take around 24 months to include supply constraints, loadshedding and load curtailment, as and corruption involving former employees, directors and plan, and take from three to six months to execute. The response Societal impact well as a constrained economy. By the end of the year, we expect suppliers continue. We are providing the necessary support to to the pandemic prevented us from doing as much maintenance as During the period, only procurement spend with black-owned to record an after-tax loss of approximately R9.1 billion, as the lack law enforcement authorities to investigate any concerns and we would have liked, while prevailing liquidity challenges continue and black youth-owned suppliers achieved targeted levels. Total of cost-reflective tariffs and high debt service costs continue to violations of the law. Where possible, we are seeking recovery to constrain funds available for maintenance. To date, we have preferential procurement spend, as well as spend with black women- contribute to Eskom’s loss-making position. of financial losses using criminal and civil processes, although released funding of R8.3 billion for outages during the 2022 financial owned suppliers, qualifying small and exempted micro enterprises, criminal convictions and recoveries are dependent on successful Sales of 197.1TWh are expected by year end, which is 5.3TWh or year, and R8.2 billion for those in 2023, against a requirement of and suppliers owned by black people living with disabilities, prosecution by law enforcement agencies and the justice system. 2.8% higher than the previous financial year. As mentioned, we are R10.7 billion next year. continued to perform below target, mainly due to expired supplier exploring NPAs as well as other avenues to optimise electricity B-BBEE certificates and procurement spend related to IPP contracts As previously reported, civil action is under way to recover sales to energy-intensive customers and stimulate local sales for the that are not B-BBEE compliant. These contracts were concluded in approximately R3.8 billion from former directors and executives. benefit of the economy. We await the outcome of numerous High terms of the renewable IPP programme by DMRE. This continues In light of several notices and interlocutory applications filed by the Court review applications relating to NERSA’s recent decisions, as to have a negative effect on our procurement equity performance. defendants, the matter has been placed under judicial case management. these will have a substantial impact on tariffs and our revenue in Follow-up on non-compliant suppliers is performed on a monthly coming years. basis, which is expected to improve the status going forward. 6 | CONDENSED GROUP INTERIM FINANCIAL STATEMENTS | 30 SEPTEMBER 2021 ESKOM HOLDINGS SOC LTD | 7 BUSINESS PERFORMANCE OVERVIEW (continued) APPROVAL OF THE CONDENSED GROUP INTERIM FINANCIAL STATEMENTS Outlook (continued) Improving our financial and operational sustainability will ultimately Basis of preparation Maintenance execution is further hampered by a procurement support our long-term strategy, which positions Eskom as an The unaudited condensed group interim financial statements from page 10 to page 23 for the six months ended 30 September 2021 have process laid out by National Treasury that unwittingly acts as enabler of South Africa’s Just Energy Transition. JET is our pathway been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRS), a constraint, as we are unable to capitalise on opportunities to to transition towards a cleaner and greener energy future, with the presentation and disclosure requirements of International Accounting Standards (IAS) 34 Interim financial reporting and in the manner expedite the acquisition of critical spares, and does not allow us the goal of achieving net zero carbon emissions by 2050, while required by the Companies Act. to utilise contractors and procure spares which are approved by simultaneously creating new job opportunities for those displaced the original equipment manufacturers (OEMs), without going by the replacement of coal by cleaner technologies. Going concern to the open market. We are engaging with DPE and National The board made an assessment of the ability of the group to continue as a going concern in the foreseeable future. The considerations, The reduction in South Africa’s emissions is expected to come challenges and risks assessed by the board are detailed in note 2.1. Treasury to resolve these challenges. The lack of tariff certainty from the gradual closure as well as repowering or repurposing of also hampers effective advance planning of outages and related Eskom’s existing coal-fired power stations as they reach their end The board considered the risks relating to the group’s going-concern status and is satisfied that the risks will be satisfactorily addressed with expenditure, further necessitating the need for a stable multi-year of life, while simultaneously building new, lower carbon facilities. the mitigation strategies in place. The board continues to manage these strategies as a priority as it is important that they materialise as tariff determination. The closure and repowering or repurposing of coal-fired power envisaged. Tough and painful decisions will have to be made by Eskom, the shareholder and NERSA for the strategy to succeed. The board South Africa needs an extra 4 000MW to 6 000MW of generation stations will be undertaken in a phased approach over the next therefore concluded that it is satisfied that the group has access to adequate resources and facilities, with shareholder support, to be able to capacity to eliminate the risk of loadshedding in the near term. On 10 to 15 years, based on plant life, the cost to operate, as well as continue its operations for the foreseeable future as a going concern. an ongoing basis, volatility of around 4 000MW exists in the power operational and environmental performance. In total, we expect system due to unplanned unavailable generation capacity. This leads new generation capacity, as well as the additional transmission and Approval to the need to run expensive Eskom and IPP-owned open-cycle gas distribution infrastructure required to support this, to require an The board is of the opinion, based on the information available to date, that the condensed group interim financial statements fairly present turbines (OCGTs) to either avoid or minimise loadshedding; this investment in excess of R350 billion. the financial position of the group at 30 September 2021 and the results of the operations and cash flow information for the six months then plant was not designed to run as base-load. During summer, we ended. The condensed group interim financial statements have been approved by the board and signed on its behalf on 30 November 2021 by: During the 2021 United Nations Climate Change Conference conduct higher levels of maintenance, as overall demand is lower. (COP26), South Africa secured R131 billion in concessional funding The latest forecast indicates that we will spend around R16.1 billion from the governments of four developed countries, as a positive on our own and IPP-owned OCGTs to the end of the financial first step towards enabling the just transition and South Africa’s year. During October and November, OCGTs have been running decarbonisation. The decarbonisation of the electricity sector at load factors even higher than the 7.3% recorded during the first underpinned the country’s plan, and accordingly, the lion’s share is MW Makgoba AM de Ruyter C Cassim six months of the financial year, in an effort to reduce the level of expected to fund new Eskom generation, transmission and distribution Interim Chairman Group Chief Executive Chief Financial Officer loadshedding. The situation is expected to continue until such time projects. Funds will also be made available to support studies and as plant reliability improves, generation capacity increases and the investment into electric vehicles and the hydrogen economy. shortage is alleviated. Eskom is a crucial enabler of South Africa’s just transition towards As indicated before, Eskom simply is not in a financial position to an economically inclusive and lower carbon future, to ensure the carry the burden for much longer. Although the additional capacity competitiveness and growth of the economy. Consequently, the of 1 995MW to be added by 11 bidders under the RMIPPPP will continued viability of Eskom and the future of the electricity sector assist in alleviating the pressure, the capacity is not expected to is vital to support South Africa’s economic recovery. come online for some time to come, and will not solve the problem Lack of management continuity in the past contributed to instability in the near term. in the organisation. We believe it is critically important to have We further welcome the announcement of the preferred bidders continuity of management to steady the ship and resolve the current for 1 600MW wind and 1 000MW solar PV capacity under bid challenges. Although priorities are not being realised as quickly as window 5 which was recently announced by DMRE’s IPP Office, desired, we will steadfastly continue along the path we have set out. but similarly, this will not have a significant impact on the system We are doing our utmost to meet our commitments to the country in the immediate future. Even though Eskom is designated as and meet the expectations of its 60 million people in a positive the single buyer of electricity, we cannot in terms of regulations and constructive way given the constraints we face, but we cannot procure significant quantities of electricity in our own right, unless compromise on reliability maintenance. We cannot continue to it is driven by the IPP Office. As such, we may require additional sacrifice the health of our plant for short-term capacity gains. The Government support if we have to continue to run expensive diesel consequences for plant availability in the long term would be dire. plant to ensure security of supply to the country. We are committed to acting decisively to improve the performance Given all of this, the risk of loadshedding will remain until the of our plant, and thereby alleviate the constrained power system. capacity shortfall of 4 000MW to 6 000MW has been addressed. Eskom and its employees are fully dedicated to serving its customers The additional capacity would enable Eskom to cope with and the country. increasing demand which cannot always be met with the capacity of 25 000MW to 27 000MW which is available much of the time, and provide headroom to carry out the necessary maintenance and mid-life refurbishment of our generation plant, as well as outages to improve emissions performance. 8 | CONDENSED GROUP INTERIM FINANCIAL STATEMENTS | 30 SEPTEMBER 2021 ESKOM HOLDINGS SOC LTD | 9 CONDENSED GROUP STATEMENT OF FINANCIAL POSITION CONDENSED GROUP INCOME STATEMENT at 30 September 2021 for the six months ended 30 September 2021 Unaudited Audited Unaudited1 Unaudited Unaudited1 Audited 30 September 31 March 30 September six months ended six months ended year ended 2021 2021 2020 30 September 30 September 31 March Rm Rm Rm 2021 2020 2021 Note Rm Rm Rm Assets Non-current 699 646 697 723 689 148 Revenue 10 134 982 108 723 204 326 Other income 849 637 2 662 Property, plant and equipment and intangible assets 667 554 666 225 659 959 Primary energy 11 (61 766) (54 318) (115 903) Future fuel supplies 4 816 4 414 5 361 Employee benefit expense 12 (16 762) (16 415) (32 887) Investment in equity-accounted investees 402 420 396 Impairment and writedown of assets (214) 102 (1 367) Deferred tax 3 691 6 459 52 Other expenses (12 253) (10 393) (24 018) Derivatives held for risk management 12 644 9 968 21 270 Payments made in advance 1 787 1 928 1 776 Profit before depreciation and amortisation expense and net fair Trade, finance lease, loan and other receivables 8 752 8 309 334 value and foreign exchange gain (EBITDA) 44 836 28 336 32 813 Depreciation and amortisation expense (15 583) (13 821) (27 016) Current 112 072 83 925 106 867 Net fair value and foreign exchange gain 373 1 091 883 Inventories 39 295 37 527 39 100 Profit before net finance cost 29 626 15 606 6 680 Derivatives held for risk management 2 049 1 411 15 586 Net finance cost (16 621) (15 354) (31 509) Payments made in advance 1 355 1 667 1 668 Trade, finance lease, loan and other receivables 32 745 24 758 25 472 Finance income 1 050 1 091 2 400 Investments and financial trading assets 15 985 14 401 13 155 Finance cost 13 (17 671) (16 445) (33 909) Taxation 232 120 112 Share of profit of equity-accounted investees, net of tax 36 47 71 Cash and cash equivalents 20 411 4 041 11 774 Profit/(loss) before tax 13 041 299 (24 758) Assets held-for-sale – – 8 460 Income tax 14 (3 800) (83) 5 824 Total assets 811 718 781 648 804 475 Profit/(loss) for the period 2 9 241 216 (18 934) Equity Capital and reserves 258 603 215 836 187 036 Liabilities Non-current 473 077 462 457 482 040 CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME Debt securities and borrowings 366 098 356 852 385 285 for the six months ended 30 September 2021 Derivatives held for risk management and embedded derivatives 2 292 3 770 2 277 Deferred tax 2 058 347 1 040 Unaudited Unaudited1 Audited Employee benefit obligations 15 976 15 414 14 098 six months ended six months ended year ended Provisions 51 091 50 150 44 402 30 September 30 September 31 March Trade and other payables and lease liabilities 8 910 9 114 9 410 2021 2020 2021 Payments received in advance, contract liabilities and deferred income 26 652 26 810 25 528 Rm Rm Rm Current 80 038 103 355 134 038 Profit/(loss) for the period2 9 241 216 (18 934) Debt securities and borrowings 26 011 44 974 78 418 Other comprehensive income/(loss) 1 833 (5 248) (7 298) Derivatives held for risk management and embedded derivatives 1 018 6 091 4 070 Employee benefit obligations 4 294 3 732 4 518 Items that may be reclassified subsequently to profit or loss 1 273 (5 218) (6 658) Provisions 5 758 6 395 4 835 Cash flow hedges 1 729 (7 330) (9 264) Trade and other payables and lease liabilities 37 543 37 636 37 316 Foreign currency translation differences on foreign operations 28 60 12 Payments received in advance, contract liabilities and deferred income 5 412 4 525 4 631 Income tax thereon (484) 2 052 2 594 Taxation – – 230 Financial trading liabilities 2 2 20 Items that may not be reclassified subsequently to profit or loss 560 (30) (640) Liabilities held-for-sale – – 1 361 Re-measurement of benefits 778 (44) (890) Income tax thereon (218) 14 250 Total liabilities 553 115 565 812 617 439 Total equity and liabilities 811 718 781 648 804 475 Total comprehensive income/(loss) for the period2 11 074 (5 032) (26 232) 1. Restated. Refer to note 17. 1. Restated. Refer to note 17. 2. A nominal amount is attributable to the non-controlling interest in the group. The remainder is attributable to the owner of the group. 10 | CONDENSED GROUP INTERIM FINANCIAL STATEMENTS | 30 SEPTEMBER 2021 ESKOM HOLDINGS SOC LTD | 11 CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY CONDENSED GROUP STATEMENT OF CASH FLOWS for the six months ended 30 September 2021 for the six months ended 30 September 2021 Share Cash flow Unrealised Foreign Accumulated Total Unaudited Unaudited1 Audited capital hedge fair value currency profit equity six months ended six months ended year ended reserve reserve translation 30 September 30 September 31 March reserve 2021 2020 2021 Rm Rm Rm Rm Rm Rm Rm Rm Rm Balance at 31 March 2020 132 000 6 825 (17 612) (3) 64 858 186 068 Cash flows from operating activities Restated profit for the period1 – – – – 216 216 Profit/(loss) before tax 13 041 299 (24 758) Restated other comprehensive income, net of tax1 – (5 278) – 60 (30) (5 248) Adjustment for non-cash items 33 700 32 254 67 808 Share capital issued 6 000 – – – – 6 000 Transfer between reserves – – (3 262) – 3 262 – Depreciation 15 583 13 821 27 016 Finance cost 17 671 16 445 33 909 Balance at 30 September 2020 138 000 1 547 (20 874) 57 68 306 187 036 Other 446 1 988 6 883 Loss for the period – – – – (19 150) (19 150) Other comprehensive income, net of tax – (1 392) – (48) (610) (2 050) Changes in working capital (10 964) (14 444) (12 980) Share capital issued 50 000 – – – – 50 000 Cash generated from operations 35 777 18 109 30 070 Transfer between reserves – – 8 888 – (8 888) – Net cash (used in)/from derivatives held for risk management (366) 1 100 1 399 Balance at 31 March 2021 188 000 155 (11 986) 9 39 658 215 836 Finance income received 229 143 278 Profit for the period – – – – 9 241 9 241 Finance cost paid (7) (26) (42) Other comprehensive income, net of tax – 1 245 – 28 560 1 833 Income taxes paid (135) (395) (1 047) Share capital issued 31 693 – – – – 31 693 35 498 18 931 30 658 Transfer between reserves – – 4 459 – (4 459) – Cash flows used in investing activities Balance at 30 September 2021 219 693 1 400 (7 527) 37 45 000 258 603 Disposals of property, plant and equipment and intangible assets 147 56 208 Acquisitions of property, plant and equipment and intangible assets (13 977) (10 267) (22 706) Acquisitions of future fuel supplies (813) (1 166) (1 559) Disposals of insurance investments 10 108 6 788 12 966 Acquisitions of insurance investments (11 680) (7 758) (14 955) Payments made in advance – (7) (139) Cash used in provisions (475) (401) (885) Net cash used in derivatives held for risk management (110) (582) (1 049) Finance income received 584 727 1 400 Other cash from investing activities 209 99 394 (16 007) (12 511) (26 325) Cash flows used in financing activities Debt securities and borrowings raised 10 519 13 056 15 756 Payments made in advance (244) (188) (329) Debt securities and borrowings repaid (24 425) (23 712) (65 586) Share capital issued 31 693 6 000 56 000 Net cash (used in)/from derivatives held for risk management (4 200) 6 408 7 859 Cash used in lease liabilities (268) (188) (497) Net cash used in financial trading instruments – (43) (61) Finance income received 230 230 791 Finance cost paid (16 342) (19 142) (37 070) Taxes paid (31) (40) (78) (3 068) (17 619) (23 215) Net increase/(decrease) in cash and cash equivalents 16 423 (11 199) (18 882) Cash and cash equivalents at beginning of the period 4 041 22 990 22 990 Foreign currency translation 28 60 12 Effect of movements in exchange rates on cash held (81) (139) (159) Assets and liabilities held-for-sale – 62 80 Cash and cash equivalents at end of the period 20 411 11 774 4 041 1. Restated. Refer to note 17. 12 | CONDENSED GROUP INTERIM FINANCIAL STATEMENTS | 30 SEPTEMBER 2021 ESKOM HOLDINGS SOC LTD | 13 NOTES TO THE CONDENSED GROUP INTERIM FINANCIAL STATEMENTS for the six months ended 30 September 2021 1. Structure and activities The board considered the risks relating to the group’s going-concern status and is satisfied that the risks will be satisfactorily Eskom Holdings SOC Ltd (Eskom), a state-owned company and holding company of the group, is incorporated and domiciled in addressed with the mitigation strategies in place. The board continues to manage these strategies as a priority as it is important that the Republic of South Africa. Eskom is a vertically integrated operation that generates, transmits and distributes electricity to local they materialise as envisaged. The board therefore concluded that it is satisfied that the group has access to adequate resources and industrial, mining, commercial, agricultural, redistributors (metropolitan and other municipalities) and residential customers, and facilities to be able to continue its operations for the foreseeable future as a going concern. to international customers in southern Africa. Eskom also purchases electricity from IPPs and international suppliers in southern Africa. These represent the significant activities of the group. The business focus of the subsidiaries is primarily to support the 3. Significant changes in accounting policies electricity business. The accounting policies are consistent with those applied to the financial statements as at and for the year ended 31 March 2021. 2. Basis of preparation 4. Critical accounting estimates and judgements The condensed group interim financial statements of Eskom as at and for the six months ended 30 September 2021 comprise the The significant estimates and judgements made by management in applying the accounting policies and the key sources of estimation company, its subsidiaries, joint ventures, associates and structured entities (together, the group). The condensed group interim uncertainty were substantially the same as those applied to the financial statements as at and for the year ended 31 March 2021. financial statements do not include all of the information required for full financial statements and should be read in conjunction with the Eskom Holdings SOC Ltd 31 March 2021 group annual financial statements. The annual financial statements of the group as at and for the year ended 31 March 2021 are available for inspection at the company’s registered office and on the Eskom website at 5. Segment information www.eskom.co.za. Generation Transmission Distribution All other Reallocation and Group The condensed group interim financial statements are prepared in accordance with the recognition and measurement requirements segments inter-segment of IFRS, the presentation and disclosure requirements of IAS 34 Interim financial reporting, and in the manner required by the transactions Companies Act. Rm Rm Rm Rm Rm Rm The condensed group interim financial statements are prepared on the historical-cost basis except for the following items which are 30 September 2021 measured at fair value: External revenue – 5 976 129 006 529 (529) 134 982 • derivatives held for risk management Inter-segment revenue/recoveries 93 356 19 163 (112 492) 6 820 (6 847) – • embedded derivatives • certain investments and financial trading assets and liabilities Total revenue 93 356 25 139 16 514 7 349 (7 376) 134 982 2.1 Going concern Profit/(loss) before tax 7 231 614 4 436 (52) 812 13 041 The board made an assessment of the ability of the group to continue as a going concern in the foreseeable future. The board: Income tax – – – (3 390) (410) (3 800) • noted that there is a need to secure funding of R42 billion in 2022 (40% of the funding for 2022 had been secured by September 2021) Profit/(loss) for the period 7 231 614 4 436 (3 442) 402 9 241 • considered the impact of the current economic climate and the sovereign’s credit ratings on Eskom’s ability to raise funds, including that the rating agencies have a cautious outlook on Eskom Segment assets 546 539 80 054 122 786 87 079 (24 740) 811 718 • reviewed the performance of the group for the period ended 30 September 2021, including the net profit after tax of R9 241 million Segment liabilities 81 615 19 155 48 938 430 211 (26 804) 553 115 and the net current assets of R32 034 million • considered that Eskom is in a debt reliant liquidity situation that resulted from low tariffs, stagnant and contracting sales volumes, 30 September 2020 above inflation cost increases and the capital programme to increase and replace generating and transmitting capacity External revenue – 5 075 103 648 793 (793) 108 723 • noted the deterioration of some of the group’s financial indicators Inter-segment revenue/recoveries 73 401 16 178 (89 425) 5 547 (5 701) – • considered the impact of the cash flow forecast for the 18 months ending 31 March 2023 and the projected net loss before tax for Total revenue 73 401 21 253 14 223 6 340 (6 494) 108 723 2022, estimated at R12 713 million per the latest projections • considered the impact of generation plant performance and the continuous increase in overdue electricity receivables (including Profit/(loss) before tax (1 690) (1 240) 854 2 974 (599) 299 the impact of non-recoverability of long outstanding electricity receivables) Income tax – – – (237) 154 (83) • considered the possible impact if key risks materialise and acknowledged that the group is dependent on the positive outcome of undecided court proceedings lodged against NERSA and the liquidation of the RCA balances Profit/(loss) for the period (1 690) (1 240) 854 2 737 (445) 216 The challenges that the group is facing are being addressed by the following mitigation strategies and actions: Segment assets 537 727 78 431 116 667 95 485 (23 835) 804 475 • continuous engagement is taking place with the shareholder and National Treasury to ensure that the challenges that impact the Segment liabilities 74 911 17 260 46 731 503 338 (24 801) 617 439 group’s going-concern status are addressed satisfactorily within a reasonable timeframe 31 March 2021 • government continues to support Eskom to operate as a going concern given the strategic role that Eskom plays in pursuit External revenue – 10 065 194 261 1 467 (1 467) 204 326 of government objectives, with support of R31.7 billion received in 2022 and R21.9 billion approved for 2023 as confirmed in the medium-term budget policy statement released in November 2022. The board is managing and regularly reporting on the Inter-segment revenue/recoveries 136 566 32 910 (169 286) 12 585 (12 775) – conditions relating to the support Total revenue 136 566 42 975 24 975 14 052 (14 242) 204 326 • progress has been made to prepare the business for legal unbundling. The implications and requirements of the implementation including legislative and regulatory changes, legal structure and ownership, ultimate industry structure as well as addressing Profit/(loss) before tax (20 215) (4 774) (2 497) 4 302 (1 574) (24 758) Eskom’s financial viability including the debt challenge are being address and followed up with government Income tax – – – 5 686 138 5 824 • court proceedings were lodged against NERSA regarding tariff and RCA decisions • the group’s cost structures and capital programme are continuously being reviewed to extract cost savings and improve cash flows Profit/(loss) for the period (20 215) (4 774) (2 497) 9 988 (1 436) (18 934) • the group’s generation capacity is being managed as a key focus area to ensure appropriate steps are being taken to manage the Segment assets 542 661 78 969 115 931 66 618 (22 531) 781 648 performance challenges • there is continued focus on implementing relevant strategies in an effort to recover overdue trade receivables through the political Segment liabilities 82 494 19 116 47 458 440 284 (23 540) 565 812 task team and other initiatives • the group is aware of the impact of large capital projects on its statement of financial position and will only engage on such projects with full disclosure and with the support of the shareholder • funding options, with the support of National Treasury, are being pursued to implement the group’s borrowing programme • there is continued focus to address the shortcomings relating to the completeness of the irregular expenditure reporting process in terms of the PFMA (resulted in the qualified audit opinion in recent years) and the clean-up of the related challenges in the commercial environment 14 | CONDENSED GROUP INTERIM FINANCIAL STATEMENTS | 30 SEPTEMBER 2021 ESKOM HOLDINGS SOC LTD | 15 NOTES TO THE CONDENSED GROUP INTERIM FINANCIAL STATEMENTS (continued) for the six months ended 30 September 2021 6. Issuances, repurchases and repayments of debt securities and borrowings and share capital Unaudited Unaudited Audited 6.1 Debt securities and borrowings six months ended six months ended year ended The nature of the group’s issuances, repurchases and repayments of debt securities and borrowings are consistent with those 30 September 30 September 31 March reported previously. The debt raised and repaid by the group is disclosed in the statement of cash flows. 2021 2020 2021 6.2 Share capital Rm Rm Rm Unaudited Audited Unaudited 10. Revenue six months ended year ended six months ended Redistributors 55 155 46 791 84 436 30 September 31 March 30 September Invoiced to customers 60 398 51 223 90 228 2021 2021 2020 Amounts not meeting revenue recognition criteria (8 039) (6 862) (11 727) Shares Shares Shares Recognised on a cash received basis 2 796 2 430 5 935 Authorised ordinary shares 300 000 000 000 300 000 000 000 300 000 000 000 Residential 3 808 3 395 6 366 Issued ordinary shares Invoiced to customers 4 045 3 602 6 751 Balance at beginning of the period 188 000 000 001 132 000 000 001 132 000 000 001 Amounts not meeting revenue recognition criteria (237) (207) (385) Share capital issued 31 693 000 000 56 000 000 000 6 000 000 000 Industrial 26 041 18 214 37 026 Balance at end of the period 219 693 000 001 188 000 000 001 138 000 000 001 Mining 20 571 16 352 30 708 Commercial 9 120 7 619 14 304 Agricultural 5 925 5 131 10 262 7. Dividend paid International 6 219 5 163 10 383 No dividend was paid to the shareholder during the six months ended 30 September 2021 nor in the comparative periods presented. Other customers 1 999 1 693 3 209 Post-paid electricity sales 128 838 104 358 196 694 8. Significant events and transactions Prepaid electricity sales 5 649 5 089 9 941 The following significant movements occurred in the six months ended 30 September 2021: Total electricity sales 134 487 109 447 206 635 8.1 Movements in debt securities and borrowings and derivatives held for risk management Other 899 649 1 682 The debt securities and borrowings balance decreased as a result of significant net debt repayments and a weaker Rand against major currencies. The derivatives held for risk management net asset position, which hedges foreign debt and borrowings, increased as a Gross revenue 135 386 110 096 208 317 result of the weaker Rand against major currencies as well as the realisation of gains and losses on certain forward exchange contracts. Capitalised to property, plant and equipment (404) (1 373) (3 991) 8.2 Share capital issued 134 982 108 723 204 326 Refer to note 6.2 for details about share capital issued in the period. 11. Primary energy 8.3 Embedded derivative liabilities Own generation costs 43 009 38 079 80 073 Eskom entered into a number of agreements to supply electricity to electricity-intensive businesses where the revenue from these contracts was linked to commodity prices and foreign currency rates or foreign producer price indices that gave rise to embedded Generation costs 39 082 34 439 72 882 derivatives. These contracts have since come to an end and embedded derivatives no longer need to be separated based on the new Environmental levy 3 927 3 640 7 191 contractual terms with these customers. International electricity purchases 2 450 2 524 4 998 Independent power producers 16 307 13 715 30 832 9. Seasonality of interim results The results of the group are impacted by the following seasonal fluctuations: 61 766 54 318 115 903 • revenue from electricity sales and consequently electricity receivables are normally higher during the first six months of the financial year (winter months) as compared to the summer months arising from higher sales volume, tariff energy charges and peak 12. Employee benefit expense demand. There was also an increase in sales volume in the six months ended 30 September 2021 compared to the same period Gross employee benefit expense 17 803 17 458 35 089 from last year attributable to the impact of reduced COVID-19 restrictions on the South African economy. Capitalised to property, plant and equipment (1 041) (1 043) (2 202) • primary energy costs associated with renewable IPP purchases are lower in the winter months (first six months of the financial year) due to a lower proportion of power being produced from renewable sources during this time. 16 762 16 415 32 887 • less routine maintenance work (and consequently lower costs) is undertaken during the winter months which coincides with the first six months of the financial year. 13. Finance cost Gross finance cost 21 777 23 181 45 625 Capitalised to property, plant and equipment (4 106) (6 736) (11 716) 17 671 16 445 33 909 14. Income tax Income tax for the interim period is recognised based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year which is applied to the pre-tax income of the interim period. The announcement by the Minister of Finance of a reduced corporate income tax rate of 27% is not yet regarded by the group as having been substantively enacted by 30 September 2021. 16 | CONDENSED GROUP INTERIM FINANCIAL STATEMENTS | 30 SEPTEMBER 2021 ESKOM HOLDINGS SOC LTD | 17 NOTES TO THE CONDENSED GROUP INTERIM FINANCIAL STATEMENTS (continued) for the six months ended 30 September 2021 15. Accounting classification and fair value 15.1 Accounting classification 30 September 2021 (unaudited) 31 March 2021 (audited) Fair value Amortised Other assets Total Fair value Amortised Other assets Total through profit cost and liabilities through profit cost and liabilities or loss or loss Rm Rm Rm Rm Rm Rm Rm Rm Financial assets Financial assets Investments and financial trading assets 1 935 14 050 – 15 985 Investments and financial trading assets 1 934 12 467 – 14 401 Negotiable certificates of deposit – 14 050 – 14 050 Negotiable certificates of deposit – 12 467 – 12 467 Listed shares 1 935 – – 1 935 Listed shares 1 934 – – 1 934 Derivatives held for risk management 1 752 – 12 941 14 693 Derivatives held for risk management 179 – 11 200 11 379 Foreign exchange contracts 1 530 – 7 1 537 Foreign exchange contracts 24 – 8 32 Cross-currency swaps – – 12 934 12 934 Cross-currency swaps – – 11 192 11 192 Commodity forwards 12 – – 12 Credit default swaps 5 – – 5 Credit default swaps 5 – – 5 Inflation-linked swaps 150 – – 150 Inflation-linked swaps 205 – – 205 Trade, finance lease, loan and other receivables – 31 055 327 31 382 Trade, finance lease, loan and other receivables – 38 751 310 39 061 Loans receivable – 8 327 – 8 327 Loans receivable – 8 235 – 8 235 Finance lease receivables – – 327 327 Finance lease receivables – – 310 310 Trade and other receivables – 22 728 – 22 728 Trade and other receivables – 30 516 – 30 516 Cash and cash equivalents Cash and cash equivalents – 20 411 – 20 411 Bank balances – 4 041 – 4 041 Bank balances – 5 889 – 5 889 2 113 47 563 11 527 61 203 Fixed deposits – 14 522 – 14 522 Financial liabilities 3 687 73 212 13 251 90 150 Debt securities and borrowings – 401 826 – 401 826 Financial liabilities Eskom bonds – 161 171 – 161 171 Debt securities and borrowings – 392 109 – 392 109 Commercial paper – 1 251 – 1 251 Eurorand zero coupon bonds – 5 600 – 5 600 Eskom bonds – 159 809 – 159 809 Foreign bonds – 55 553 – 55 553 Commercial paper – 1 146 – 1 146 Development financing institutions – 143 174 – 143 174 Eurorand zero coupon bonds – 5 949 – 5 949 Export credit facilities – 23 343 – 23 343 Foreign bonds – 64 007 – 64 007 Floating rate notes – 2 027 – 2 027 Development financing institutions – 130 623 – 130 623 Other loans – 9 707 – 9 707 Export credit facilities – 20 971 – 20 971 Other loans – 9 604 – 9 604 Derivatives held for risk management and embedded derivatives 4 148 – 5 713 9 861 Derivatives held for risk management and embedded derivatives 401 – 2 909 3 310 Foreign exchange contracts 3 827 – 398 4 225 Cross-currency swaps 219 – 3 824 4 043 Foreign exchange contracts 186 – 194 380 Credit default swaps 102 – – 102 Cross-currency swaps 109 – 2 715 2 824 Embedded derivatives – – 1 491 1 491 Commodity forwards 2 – – 2 Credit default swaps 104 – – 104 Trade and other payables and lease liabilities – 35 924 8 969 44 893 Trade and other payables and lease liabilities – 33 814 8 717 42 531 Lease liabilities – – 8 969 8 969 Trade and other payables – 35 924 – 35 924 Lease liabilities – – 8 717 8 717 Trade and other payables – 33 814 – 33 814 Financial trading liabilities Repurchase agreements 2 – – 2 Financial trading liabilities Repurchase agreements 2 – – 2 4 150 437 750 14 682 456 582 403 425 923 11 626 437 952 18 | CONDENSED GROUP INTERIM FINANCIAL STATEMENTS | 30 SEPTEMBER 2021 ESKOM HOLDINGS SOC LTD | 19 NOTES TO THE CONDENSED GROUP INTERIM FINANCIAL STATEMENTS (continued) for the six months ended 30 September 2021 15. Accounting classification and fair value (continued) 15.1 Accounting classification (continued) 15.2 Fair value 30 September 2020 (unaudited) Valuation processes and principal markets Fair value Amortised Other assets Total The group has a control framework in place for the measurement of fair values. It includes a valuation team that ultimately reports through profit cost and liabilities to the CFO and has overall responsibility for all significant fair value measurements. or loss The valuation team regularly reviews significant unobservable inputs and valuation adjustments. Where third-party information, such Rm Rm Rm Rm as broker quotes or pricing services, is used to measure fair value, this information is assessed as to whether it provides adequate Financial assets support for the accounting treatment applied including the level of the fair value hierarchy assigned to it. Investments and financial trading assets 1 568 11 587 – 13 155 The group is involved in various principal markets because of the unique funding activities undertaken where the fair value Negotiable certificates of deposit – 11 587 – 11 587 is determined by each participant in the different principal markets. The principal markets include capital and money markets, Listed shares 1 568 – – 1 568 development financing institutions and export credit agencies. Derivatives held for risk management 683 – 36 173 36 856 Valuation techniques and levels Foreign exchange contracts 407 – 288 695 Financial instrument Valuation technique Cross-currency swaps 127 – 35 885 36 012 Level 1: Quoted prices (unadjusted) in active markets Credit default swaps 9 – – 9 Investments and financial trading assets (listed shares Quoted bid price in active markets. A market is regarded as active when Inflation-linked swaps 140 – – 140 and government bonds) and financial trading liabilities it is a market in which transactions for the asset or liability take place Trade, finance lease, loan and other receivables – 24 050 354 24 404 (short-sold government bonds) with sufficient frequency and volume to provide pricing information on an ongoing basis. Loans receivable – 42 – 42 Finance lease receivables – – 354 354 Level 2: Observable inputs other than quoted prices Trade and other receivables – 24 008 – 24 008 included within level 1 Financial trading liabilities (repurchase agreements) A discounted cash flow technique is used which uses expected cash Cash and cash equivalents – 11 774 – 11 774 flows and a market-related discount rate. Bank balances – 5 267 – 5 267 Derivatives held for risk management Valuation determined with reference to broker quotes as well as use of Fixed deposits – 6 507 – 6 507 discounted cash flow and option pricing models. Broker quotes are tested for reasonableness by discounting expected future cash flows using a 2 251 47 411 36 527 86 189 market interest rate for a similar instrument at the measurement date. Financial liabilities Valuations of cross-currency swaps include the credit risk of Eskom Debt securities and borrowings – 463 703 – 463 703 (known as debit value adjustment) and counterparties (known as credit Eskom bonds – 159 696 – 159 696 value adjustment) where appropriate. A stochastic modelling approach is followed where the expected future exposure to credit risk for Eskom Eurorand zero coupon bonds – 5 273 – 5 273 and its counterparties (considering default probabilities and recovery Foreign bonds – 93 069 – 93 069 rates derived from market data) is modelled. Development financing institutions – 154 850 – 154 850 Export credit facilities – 29 350 – 29 350 Level 3: Unobservable inputs Floating rate notes – 4 032 – 4 032 Embedded derivative liabilities Fair valued using unobservable inputs. Other loans – 17 433 – 17 433 There were no changes in the valuation techniques applied nor transfers between level 1, 2 or 3 of the fair value hierarchy during the Derivatives held for risk management and six months ended 30 September 2021 nor in the comparative periods presented. embedded derivatives 2 376 – 3 971 6 347 Foreign exchange contracts 1 894 – 9 1 903 Cross-currency swaps 9 – 3 090 3 099 Credit default swaps 473 – – 473 Embedded derivatives – – 872 872 Trade and other payables and lease liabilities – 34 663 9 162 43 825 Lease liabilities – – 9 162 9 162 Trade and other payables – 34 663 – 34 663 Financial trading liabilities Repurchase agreements 20 – – 20 2 396 498 366 13 133 513 895 20 | CONDENSED GROUP INTERIM FINANCIAL STATEMENTS | 30 SEPTEMBER 2021 ESKOM HOLDINGS SOC LTD | 21 NOTES TO THE CONDENSED GROUP INTERIM FINANCIAL STATEMENTS (continued) for the six months ended 30 September 2021 15. Accounting classification and fair value (continued) 17. Restatement of comparatives 15.2 Fair value (continued) The impact of the restatements on the financial statements for the period ended 30 September 2021 relating to the restatements Fair value hierarchy disclosed in the annual financial statements at 31 March 2021 is disclosed below. The restatements relate to: The fair value hierarchy of financial instruments that are measured at fair value in the statement of financial position is as follows: • change of classification of Eskom pension fund from a defined contribution to a defined benefit fund • change in measurement of contributions toward environmental rehabilitation trust funds from cost to fair value 30 September 2021 31 March 2021 30 September 2020 (unaudited) (audited) (unaudited) Previously Adjustments Restated Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 reported Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Financial assets Group statement of financial position at Investments and financial 30 September 2020 trading assets Assets Listed shares 1 935 – – 1 934 – – 1 568 – – Non-current Derivatives held for risk management – 14 693 – – 11 379 – – 36 856 – Payments made in advance 1 546 230 1 776 Foreign exchange contracts – 1 537 – – 32 – – 695 – Equity Cross-currency swaps – 12 934 – – 11 192 – – 36 012 – Capital and reserves 186 870 166 187 036 Commodity forwards – 12 – – – – – – – Liabilities Credit default swaps – 5 – – 5 – – 9 – Non-current Inflation-linked swaps – 205 – – 150 – – 140 – Deferred tax 976 64 1 040 Financial liabilities Derivatives held for risk Group income statement for the period ended management and embedded 30 September 2020 derivatives – 3 310 – – 8 370 1 491 – 5 475 872 Employee benefit expense (16 676) 261 (16 415) Net fair value and foreign exchange gain 1 145 (54) 1 091 Foreign exchange contracts – 380 – – 4 225 – – 1 903 – Finance cost (16 423) (22) (16 445) Cross-currency swaps – 2 824 – – 4 043 – – 3 099 – Commodity forwards – 2 – – – – – – – Profit before tax 114 185 299 Credit default swaps – 104 – – 102 – – 473 – Income tax (31) (52) (83) Embedded derivatives – – – – – 1 491 – – 872 Profit for the period 83 133 216 Financial trading liabilities Repurchase agreements – 2 – – 2 – – 20 – Group statement of comprehensive income for the period ended 30 September 2020 15.3 Day-one gain/loss Profit for the period 83 133 216 The group recognises a day-one gain/loss on the initial recognition of cross-currency and inflation-linked swaps held as hedging Items that may be reclassified subsequently to profit or loss (5 218) – (5 218) instruments where applicable. Items that may not be reclassified subsequently to profit or loss 142 (172) (30) Cross-currency Inflation-linked Total Re-measurement benefits 195 (239) (44) swaps swaps Income tax thereon (53) 67 14 Rm Rm Rm Total comprehensive loss for the period (4 993) (39) (5 032) Loss at 31 March 2020 (1 320) (21) (1 341) Amortised to profit or loss 97 1 98 Group statement of cash flows for the period ended Loss at 30 September 2020 (1 223) (20) (1 243) 30 September 2020 Day-one loss recognised (107) – (107) Cash flows from operating activities Amortised to profit or loss 97 2 99 Profit before tax 114 185 299 Adjustment for non-cash items 31 232 1 022 32 254 Loss at 31 March 2021 (1 233) (18) (1 251) Changes in working capital (13 237) (1 207) (14 444) Day-one loss recognised (197) – (197) Amortised to profit or loss 88 1 89 Cash generated from operations 18 109 – 18 109 Loss at 30 September 2021 (1 342) (17) (1 359) 18. Exchange rates 16. Material events subsequent to 30 September 2021 Unaudited Audited Unaudited There have been no significant events subsequent to 30 September 2021. 30 September 31 March 30 September 2021 2021 2020 Euro 17.48 17.32 19.67 United States dollar 15.10 14.75 16.82 Pound sterling 20.35 20.34 21.62 Japanese yen 0.14 0.13 0.16 19. Reportable irregularities There have been no significant changes to reportable irregularities as disclosed in the annual financial statements for the year ended 31 March 2021. 22 | CONDENSED GROUP INTERIM FINANCIAL STATEMENTS | 30 SEPTEMBER 2021 ESKOM HOLDINGS SOC LTD | 23 CONTACT DETAILS Telephone numbers Websites and email addresses www.eskom.co.za Eskom head office +27 11 800 8111 Eskom website Contact@eskom.co.za +27 11 800 3343 Eskom Media Desk +27 11 800 3378 Eskom Media Desk MediaDesk@eskom.co.za +27 11 800 6103 Investor Relations +27 11 800 2775 Investor Relations InvestorRelations@eskom.co.za Eskom whistle-blowing hotline 0800 112 722 Forensic investigations Investigate@eskom.co.za www.thehotlineapp.co.za DPE whistle-blowing hotline 0800 111 628 DPE whistle-blowing website DPE@thehotline.co.za Eskom Development www.eskom.co.za/csi Eskom Development Foundation +27 11 800 8111 Foundation CSI@eskom.co.za 08600 ESKOM or Promotion of Access to National call centre PAIA@eskom.co.za 08600 37566 Information Act requests Customer SMS line 35328 Customer Service CustomerServices@eskom.co.za Facebook EskomSouthAfrica YouTube EskomOfficialSite Twitter Eskom_SA MyEskom Customer app Physical address Postal address Eskom Megawatt Park 2 Maxwell Drive PO Box 1091 Sunninghill Johannesburg Sandton 2000 2157 Group Company Secretary Company registration number Office of the Company Secretary PO Box 1091 Eskom Holdings SOC Ltd Johannesburg 2002/015527/30 2000 JOINT VENTURE [0007] 24 | CONDENSED GROUP INTERIM FINANCIAL STATEMENTS | 30 SEPTEMBER 2021