The group’s annual integrated results are available on Eskom’s website at www.eskom.co.za/IR2015 Scan the code to be directed to the site Group audited condensed financial results for the year ended 31 March 2015 Business overview Annual Financial Statements Despite tough operating conditions during the year under review, EBITDA (earnings Operational sustainability Governance 31 March 2015 Condensed group income statement before interest, taxation, depreciation and armotisation) increased to R25.2 billion Generation plant availability (EAF) declined to 73.73% for the year, compared to We have seen significant changes in our governance structures. To stabilise the for the year ended 31 March 2015 leadership, the Minister of Public Enterprises announced the secondment of Mr Restated (2013/14: R25.1 billion), reflecting a marginal increase against the prior year. Even with 75.13% in the previous year. Unplanned maintenance (UCLF) deteriorated from Brian Molefe from Transnet to Eskom, as acting Chief Executive, during April 2015. 2015 2014 primary energy costs increasing by 19%, the EBITDA margin of 17% was maintained, by 12.61% in 2013/14 to 15.22%, partly due to the Duvha Unit 3 incident and the Majuba Rm Rm containing operating costs to a 2% increase year-on-year, due to internal cost savings silo collapse. Plant utilisation (EUF) was at 83.4%, substantially above international More recently, it was announced that Mr Anoj Singh, Group Chief Financial Officer of R9 billion, in terms of our Business Productivity Programme. norms, as generating units are worked harder and longer. Nearly two-thirds of our of Transnet, will be seconded to Eskom for a period of six months, with effect from Continuing operations coal-fired power stations are past their mid-life, requiring increased maintenance to 1 August 2015. Revenue 147 691 138 313 We have communicated for some time that the national power system is constrained maintain plant performance at desired levels. due to the lack of available generating capacity. To balance and protect the power Outlook Profit before net fair value gain/(loss) and net finance cost 9 146 11 649 system, we had to resort to expensive supply-side options, such as the open-cycle Overall coal stock stood at 51 days at 31 March 2015 (2013/14: 44 days), supporting Key initiatives in the short term include the sourcing of funding to support liquidity and Net fair value gain/(loss) on financial instruments excluding gas turbine (OCGT) plant and relying on independent power producers (IPPs), as security of supply. Coal rail performance achieved 12.59Mt (2013/14: 11.6Mt). Particulate financial sustainability. To minimise the impact of load curtailment and load shedding embedded derivatives 630 (620) well as demand-side options such as interruptible load agreements, load curtailment emissions of 0.37kg/MWhSO and water usage of 1.38 ℓ/kWhSO both declined slightly on our stakeholders and the economy, we will reduce unplanned maintenance through Net fair value gain on embedded derivatives 1 310 2 149 by key industrial customers and energy efficiency efforts by other customers to compared to the previous year (0.35kg/MWhSO and 1.35ℓ/kWhSO respectively). planned maintenance, and enhance operational efficiencies to reduce unpredictable Net finance cost (6 109) (4 058) balance supply and demand. When we could not meet demand, we had to resort to plant breakdowns, partial load losses and outage slips. We will also focus on making use Share of profit of equity-accounted investees, net of tax 49 43 controlled, rotational load shedding. Notwithstanding this, we still supplied electricity Excellent network performance was achieved by Transmission and Distribution. Energy of IDM options to reduce electricity demand. Profit before tax 5 026 9 163 to an average of 96% of the country when load shedding was implemented in stage 1. losses performance continued to improve, ending the year at 8.79% (2013/14: 8.88%). In the medium term, we will commission new generating capacity to alleviate the Income tax (1 366) (2 137) We are fully aware of the negative impact load shedding has on our customers and Total capacity of 5 701MW has been contracted with IPPs at 31 March 2015, and constrained system and accommodate demand growth. Profit for the year from continuing operations 3 660 7 026 the economy. While load shedding is regrettable, we are committed to performing the 1 795MW of renewable energy capacity has already been connected and is providing necessary maintenance to improve the long-term health of our plant, while attempting power to the grid, at an average load factor of 31%. We purchased 6 022GWh from Condensed group annual financial information Discontinued operations to minimise load shedding. We need a buffer of 3 000MW to 5 000MW for the IPPs during the year, at a cost of R9.5 billion (2013/14: 3 671GWh costing R3.3 billion). (Loss)/profit for the year from discontinued operations (42) 63 Condensed group statement of financial position foreseeable future to enable the maintenance backlog to be closed and to avoid the IPPs play an important role in ensuring security of supply at a time when our generating at 31 March 2015 Profit for the year 3 618 7 089 need for load shedding into the future. capacity is closely matched or exceeded by electricity demand, by providing space for 2015 2014 maintenance and reducing the need for load shedding. IPPs also provide much needed Rm Rm During November 2014, we developed a Turnaround Strategy to arrest the operational renewable energy to our energy mix. and financial decline and stabilise the business. The Turnaround Strategy focuses on Assets four key areas, namely financial sustainability, operational sustainability, sustainable Sustainable asset creation Condensed group statement of cash flows Property, plant and equipment and intangibles 458 881 404 389 asset creation as well as revenue and customer sustainability. Commercial operation of Medupi Unit 6 is expected during the third quarter of Liquid assets 17 359 30 583 for the year ended 31 March 2015 Restated 2015. A number of important milestones have been achieved at Kusile, and Unit 1 is Working capital 35 488 31 811 2015 2014 Financial sustainability expected to be synchronised in the first half of 2017. The date of first synchronisation Other assets 51 156 38 210 Rm Rm Electricity revenue rose by 6.9% to R147.7 billion (2013/14: R138.3 billion), with EBITDA of Unit 3 of Ingula has been revised to the second half of 2016, due to the work increasing to R25.2 billion (2013/14: R25.1 billion), despite electricity volumes declining Total assets 562 884 504 993 Net cash from operating activities 27 311 23 642 by 0.7% to 216 274GWh (2013/14: 217 903GWh). Besides the implementation of stoppage imposed following the fatal accident in October 2013. Sere Wind Farm, our Net cash used in investing activities (56 386) (56 461) load shedding, electricity volumes were affected by industrial action in the platinum first utility-scale renewable project with a generating capacity of 100MW, was placed Equity 122 247 119 784 Net cash from financing activities 17 954 41 519 sector, contraction in the gold mining sector, closure of the Bayside aluminium smelter into commercial operation on 31 March 2015. A total of 318.6km of transmission lines Liabilities Cash and cash equivalents at beginning of the year 19 676 10 620 and depressed commodity prices. Primary energy costs increased by R13.6 billion, were installed and 2 090MVA substation capacity commissioned under the new build Debt securities and borrowings 297 434 254 820 Foreign currency translation 24 (23) driven by increased use of IPPs and amounts due in terms of the Medupi coal supply programme during the year. Working capital 44 063 44 821 Effect of movements in exchange rates on cash held 284 504 agreement. The utilisation of OCGTs during periods of constrained capacity remains Other liabilities 99 140 85 568 Since inception of the programme in 2005 to 31 March 2015, we have spent R265 billion Cash and cash equivalents at beginning of the year high, in order to balance supply and demand. Total liabilities 440 637 385 209 attributable to non-current assets held-for-sale – (125) on capital expansion and have added 6 237MW of generation capacity, 5 816km of Despite an increase in cash generated by operations to R27.3 billion (2013/14: transmission lines and 29 655MVA of substation capacity. Capital expenditure for the Total equity and liabilities 562 884 504 993 Cash and cash equivalents at end of the year 8 863 19 676 R23.6 billion), cash reserves declined by R10.8 billion to R8.9 billion. Debt securities year amounted to R53.1 billion (2013/14: R59.8 billion), the majority of which was spent and borrowings increased to R297.4 billion (2013/14: R254.8 billion) due to funding of on the Medupi, Kusile and Ingula projects, as well as on extending our transmission R49.5 billion raised in terms of our borrowing programme, coupled with repayments of and distribution networks. However, the delay in delivering the new build programme, Annual financial statements capital and interest of R14.4 billion and R17.1 billion respectively. Two ratings agencies partly due to poor contractor performance and strike action, has placed additional The condensed annual financial statements have been prepared under the supervision Disclaimer reduced our credit rating to sub-investment grade. pressure on our ageing fleet of power stations to perform at a time when most are of the acting Chief Financial Officer, Ms Nonkululeko Veleti CA(SA), and audited by This announcement does not constitute an offer to sell or an invitation of any offer due for major refurbishment. the group’s independent auditors, SizweNtsalubaGobodo Inc. in compliance with The revenue gap resulting from the MYPD 3 revenue determination and increased to buy securities of Eskom Holdings SOC Ltd (Eskom) or any of its subsidiaries in any Section 30 of the Companies Act, 2008. jurisdiction. Certain statements in this announcement regarding Eskom’s business primary energy costs are putting pressure on our liquidity and compromising our Revenue and customer sustainability financial sustainability. This is further impacted by an inappropriate return on assets Municipal arrear debt increased to R5 billion at 31 March 2015 (2013/14: R2.6 billion), The group’s independent auditors issued an unmodified audit opinion, which includes operations and financial position may constitute forward-looking statements which as a result of cost increases above inflation, lower sales volumes and the lack of a cost- while Soweto debt remained high at R4.2 billion (2013/14: R3.6 billion). The an emphasis of matter related to going concern. Details of the going concern are not intended to be a guarantee of future results but instead constitute Eskom’s reflective electricity price over a sustained period. residential revenue management strategy is driving energy protection and energy loss assumptions are disclosed in the group annual financial statements, under the current expectations based on reasonable assumptions. Actual results could differ programmes, such as Switch OVA!, and improving debt collection. directors’ report and the notes to the financial statements. materially from those projected in our forward-looking statements due to risks, Accordingly, we are working on steps to address our liquidity and future financial uncertainties and other factors. sustainability, including migration to a cost-reflective electricity price, initiating a The Eskom KeyCare index for customer satisfaction achieved an above-target score The audited annual financial statements of the group, together with the unmodified revenue adjustment application for 2014/15, the second year of the MYPD 3 period, audit opinion, are available for inspection at Eskom’s registered office and on the of 108.7, reflecting continual interaction with key industrial customers. The Enhanced recovery of arrear customer debt, mainly from defaulting municipalities and realisation Eskom website (www.eskom.co.za/IR2015). of targeted cost savings under the Business Productivity Programme. We will continue MaxiCare index improved significantly from 92.7 to 99.8, indicating the impact of Head office our customer service improvement programme on residential, small and medium There were no significant events after the reporting date which impact these results. Megawatt Park Maxwell Drive Sunninghill Sandton with our borrowing programme to source additional funding and, with Government customers. PO Box 1091 Johannesburg 2000 support, we aim to avoid further credit ratings downgrades. Approval by Board of Directors Tel +27 11 800 2775 Fax +27 86 668 0171 Subsequent to year end, the shareholder approved an equity injection of R23 billion, Safety Signed on behalf of the Board of Directors on 28 May 2015. together with the conversion of the R60 billion subordinated shareholder loan. Tragically, we reported three employee and seven contractor fatalities during the year. Dr Ben Ngubane Ms Chwayita Mabude Ms Venete Klein HKLM 1036 Furthermore, we had R191 billion in unutilised Government guarantees available at The Board extends its sincere and heartfelt condolences to their family, friends and Eskom Holdings SOC Ltd Acting Chairman Chairman: Audit and Chairman: Social, Ethics and year end, which, together with the equity injection, will improve key financial metrics colleagues. Nevertheless, we continue our commitment to safety. The lost-time injury Reg No 2002/015527/30 Risk Committee Sustainability Committee and assist in easing liquidity pressures. rate deteriorated slightly to 0.33 (2013/14: 0.31). www.eskom.co.za