List of fact sheets • Eskom’s energy flow diagram • Full list of stakeholder issues mapped to who raised them • King III checklist noting exceptions or partial application • Declaration in terms of Section 32 of PAIA Eskom’s energy flow diagram The energy wheel shows the volume of electricity that flowed from local and international power stations and independent power producers (IPPs) to Eskom’s distribution and export points during the past two years, including the losses incurred in reaching those customers. All figures in GWh, unless otherwise indicated Generation of electricity 2015/16 2014/15 Available for distribution 2015/16 2014/15 Total imports 2015/16 2014/15 Generation 216 043 222 591 Generation (including IPPs) 229 012 232 322 International purchases 9 703 10 731 OCGT 3 936 3 709 International purchases 9 703 10 731 Wheeling1 3 930 3 623 Wheeling1 3 930 3 623 Own generation 219 979 226 300 Total 13 633 14 354 IPPs 9 033 6 022 Subtotal 242 645 246 676 Generation (including IPPs) 229 012 232 322 Pumping (4 046) (4 114) Pumping (4 046) (4 114) Total exports 2015/16 2014/15 Total 238 599 242 562 Total 224 966 228 208 International sales2 13 465 12 000 Wheeling1 3 930 3 623 Total 17 395 15 623 External sales 2015/16 2014/15 Southern African Power Pool Local sales 201 022 204 274 International sales2 13 465 12 000 Total 214 487 216 274 Internal use 2015/16 2014/15 Demand 2015/16 2014/15 Technical and other losses 2015/16 2014/15 Internal use 661 791 External sales 214 487 216 274 Distribution 13 866 14 920 Generated (71) (53) Technical and other losses 19 895 20 940 Transmission 6 029 6 020 Internal use 661 791 Total 590 738 Total 19 895 20 940 Generated (71) (53) Wheeling 3 930 3 623 Distribution % 6.43% 6.78% Unaccounted/rephasing (303) 988 Transmission % 2.61% 2.53% Total 238 599 242 562 Total % 8.59% 8.79% 1. Wheeling is the buying and selling of electricity between Eskom and foreign parties without the power being available to the South African grid. 2. International sales includes exports by Distribution International to Lesotho. The actual volumes were 89GWh for both 2015/16 and 2014/15. Integrated report | 31 March 2016 1 Full list of stakeholder matters This fact sheet supplements the “Material stakeholder matters” section of the integrated report and represents the full list of material matters raised by stakeholders over the year. The table indicates which matters were raised by which stakeholders. For ease of reference, the matters have been grouped according to our sustainability dimensions. For a discussion of the matters with higher stakeholder importance and with the highest impact on Eskom, refer to the stakeholder materiality matrix on page 19 of the integrated report Lenders, Government, Suppliers Employees Civil Organised analysts Parliament and and organised society and business Media Matters raised by stakeholders and investors and regulators contractors labour environmental and industry Customers and public Financial sustainability Regulatory environment including: • Electricity price path certainty a a a a a • Regulatory Clearing Account methodology and the quantum of increase awarded Financial performance and going concern status, given Government financial support a a a a a a a Liquidity position, and the impact of: • Government support • Cost-efficiency drive a a a a a a a • Outstanding municipal and Soweto debt • Spend on liquid fuels due to use of OCGTs Funding plan and alternatives, together with the impact of a credit ratings downgrade of the South African Government and/or Eskom on the ability to raise funding a a a Revenue and customer sustainability Impact of increased electricity prices on customers and the economy, together with the impact of: • Decline in electricity sales volumes • Operational efficiencies e.g. significant use of diesel for OCGTs a a a a a a • Non-standard tariffs Arrear customer debt (mainly municipalities and Soweto) and customer disconnections a a a a Impact of energy losses, theft of equipment and illegal connections on supply to customers a a a a a Customer dissatisfaction relating to reliability and stability of electricity supply, including: • Impact of load shedding and load curtailment on customers • Disconnection of customers due to non-payment and illegal connections a a a a a • Replacement of conventional meters by prepaid meters Probability of a national blackout a a a a a Operational sustainability Security of supply, and the impact of: • International sales and purchases of electricity • Plant breakdowns and philosophy of doing maintenance without load shedding • Impact of strikes at coal mines a a a a a • Operational efficiency and the cost of using OCGTs • Limitations from emission licences Technical performance of Generation plant, including the maintenance backlog a a a a a Energy efficiency programmes and incentives a a a a a a Future decommissioning of existing Generation plant a a a Technical performance and maintenance of Distribution and Transmission plant, including Grid Code compliance and the Transmission Development Plan a a a a Coal sourcing and containing coal costs, together with migrating coal volumes from road to rail a a a a a a Integrated report | 31 March 2016 1 Full list of stakeholder matters continued Lenders, Government, Suppliers Employees Civil Organised analysts Parliament and and organised society and business Media Matters raised by stakeholders and investors and regulators contractors labour environmental and industry Customers and public Sustainable asset creation New build project delays and escalating cost to completion, including the impact of: • Contractor performance and strike action • Shortage of critical skills a a a a a a a • Ancestral graves at Medupi construction site Progress on new Generation and Transmission capacity: • New capacity post Kusile in terms of the Integrated Resource Plan 2010-2030, including new IPP base-load capacity • Medupi, Kusile and Ingula Power Station progress a a a a a a a • Transmission N–1 Grid Code compliance • Implementation of the nuclear build programme, as well as the cost and location thereof Sale of non-core assets a Environmental sustainability Environmental performance, such as contraventions, water use and particulate emissions, compromising our licence to operate a a a Energy mix and reducing our carbon footprint by procuring renewable energy, mainly from IPPs, and through retrofits to existing stations a a a a a a Climate change and the impact of carbon tax a a a a a Water scarcity and future water infrastructure a a a a Environmental impact of nuclear power generation and nuclear waste management a a a Safety and security Safety of the workplace, employees, contractors and the public a a a a a Business continuity and disaster management a a a a a Building a sustainable skills base Shortage of skills and retention of skilled employees, and the impact of vacancies a a a a a a Employee salaries and benefits a a a Transformation and social sustainability Transformation through employment and procurement equity, as well as supplier development and localisation a a a a Electrification connection challenges a a a a a a Socio-economic contribution and corporate social investment a a a a a a Transport and availability of coal • Transport by road and rail, a a a • Availability of coal Governance and leadership External interference in Eskom’s operations a a a a a a a Eskom’s business model and structure of the electricity supply industry, including possible private participation in Eskom a a a a a a Governance concerns around procurement processes, including: • Koeberg steam generator contract • Cancellation of old coal supply agreements (resulting in job losses) and entering into new agreements a a a a a • Fine imposed on a Medupi supplier by a lender Changes in and stability of leadership a a a a Access to information a a a Remuneration of directors and executives a a a a a Integrated report | 31 March 2016 2 King Code of Corporate Governance (King III) application register This fact sheet supplements the “Our governance” section of the integrated report and provides the breakdown of exceptions and alternative practices to the King III principles, as determined by the Governance Assessment Instrument of the Institute of Directors of Southern Africa (IoDSA). Disclaimer The assessment criteria of the web-based tool, the Governance Assessment Instrument (GAI), have been based on the practice recommendations of the King III report. These criteria are intended to assess quantitative aspects of corporate governance only and not qualitative governance. As such, the results are proposed to serve as an indication of the structures, systems and processes in place and are not intended to include an indication of the governance culture of an entity. The responsibility for the input of data in order to attain a result through the use of this tool is that of the user and the entity in respect of which the user subscription has been granted. Neither the Global Platform for Intellectual Property (Pty) Ltd (TGPIP), nor the IoDSA, as Licensor of the content of the GAI, makes any warranty or representation as to the accuracy or completeness of either the assessment criteria or the results. Eskom Holdings SOC Ltd Registration number: 2002/015527/30 Applied/Partially Main category Sub-category King III principle King III practice applied/Not applied Commentary Chapter 1: Ethical Responsible leadership The Board ensures that the company ethics are managed The board ensures that ethical risks and opportunities are Partially applied The Board will consider the outcome of the Eskom Fraud Risk leadership and effectively assessed (i.e. identified and evaluated in terms of probability Assessment to enhance the assessment of ethical risks and and impact) and that an ethics risk and opportunity profile is opportunities corporate citizenship compiled Chapter 2: Role and function of The Board has elected a chairman of the board who is an The nominations committee oversees a formal succession plan Partially applied The shareholder attends to succession planning for non-executive Boards and directors Board independent non-executive director. The CEO of the company for the board, CEO and certain senior executive appointments directors. The People & Governance Committee oversees succession does not also fulfil the role of chairman of the Board planning for the Group Chief Executive and senior executives Role and function of The Board has elected a chairman of the board who is an There is succession planning in place for the chairman Partially applied The Chairman is appointed by the shareholder. The shareholder Board independent non-executive director. The CEO of the company considers the succession of the Chairman does not also fulfil the role of chairman of the Board Role and function of The Board has appointed the Chief Executive Officer and has The CEO is not a member of the remuneration committee Partially applied The remuneration role is included in the People & Governance Board established a framework for the delegation of authority Committee. The Group Chief Executive is an ex officio member of the People & Governance Committee, but recuses himself when his remuneration is discussed, or if there is an actual, perceived or potential conflict of interest Role and function of The Board has appointed the Chief Executive Officer and has The CEO is not a member of the nomination committee Partially applied The nomination role is included in the People & Governance Board established a framework for the delegation of authority Committee. The Group Chief Executive is an ex officio member of the People & Governance Committee, but recuses himself when Board nominations are discussed, or if there is an actual, perceived or potential conflict of interest. He contributes to the nomination and appointment of senior executives Composition of Board The Board comprises a balance of power, with a majority of The nominations committee makes recommendations for Partially applied The Board makes recommendations to the shareholder on the skills non-executive directors. The majority of non-executive appointment as director based on all of the following: gap. Knowledge, experience, integrity and capacity of potential directors are independent • knowledge and experience gap on the board; directors is determined by the shareholder • integrity of the candidate; and • skills and capacity of the candidate Composition of Board The Board comprises a balance of power, with a majority of The classification of directors as independent or otherwise in Not applied The independence of the non-executive directors will be assessed non-executive directors. The majority of non-executive the integrated report is disclosed on the basis of a yearly annually as part of the annual Board performance and disclosed directors are independent assessment of the independence of the non-executive directors accordingly Composition of Board The Board comprises a balance of power, with a majority of Non-executive directors that are classified as "independent" by Not applied The independence of the non-executive directors will be assessed non-executive directors. The majority of non-executive the entity are subjected to an annual evaluation of their annually as part of the annual Board performance directors are independent independence by the chairman and the board Board appointment Directors are appointed through a formal process Procedures for appointments to the board are all of the Partially applied The procedure for the appointment of non-executive directors is process following: determined by the shareholder, through the Department of Public • formally set out in a policy; Enterprises (DPE), and implemented by DPE. The transparency • transparent; and thereof could be improved. The procedure for the appointment of • a matter for the board as a whole (although the board may executive directors is determined by the shareholder and be assisted by the nomination committee) or the Minister, as implemented by Eskom, in accordance with our recruitment policy applicable Board appointment Directors are appointed through a formal process Before candidates are nominated for board appointments, Partially applied Non-executive directors are appointed by the shareholder. The process there are procedures in place to investigate the candidates' vetting process could be improved. The recruitment process for backgrounds or legal exclusions from membership inspected executive directors, conducted by Eskom, includes a background and applied check Integrated report | 31 March 2016 1 King Code of Corporate Governance (King III) application register continued Applied/Partially Main category Sub-category King III principle King III practice applied/Not applied Commentary Chapter 2: Board appointment Directors are appointed through a formal process Non-executive directors agree all of the following in their Partially applied The shareholder appoints the director and issues the letter of Boards and directors process letters of appointment: appointment, which highlights the director's duties. The Code of • the directors’ code of conduct; Ethics, Board charter and insurance policy, as well as the (continued) • the duties that are expected from each director; determination of remuneration, are provided after the letter of • the remuneration for holding office as director; and appointment has been issued and Eskom has been informed of the • the terms of directors’ and officers’ liability insurance appointment Board appointment Directors are appointed through a formal process The nominations committee identifies and participates in Partially applied The shareholder identifies, selects and appoints non-executive process selecting board members directors. The People & Governance Committee assists with the identification and selection of executive directors Board appointment Directors are appointed through a formal process The nominations committee ensures that new directors have Partially applied Non-executive directors are vetted and appointed by the shareholder. process not been declared delinquent or are not serving probation in The People & Governance Committee oversees the vetting of terms of Section 162 of the Companies Act, 2008 executive directors (including the terms of Section 162 of the Companies Act) Board appointment Directors are appointed through a formal process The integrated report classifies directors as executive, Partially applied Whilst the integrated report includes the criteria mentioned, it process non-executive or independent and provides information about excludes political connections individual directors that shareholders may need to make their own assessments in regard to all of the following: • independence; • education, qualification and experience; • length of service and age; • significant other directorships; • political connections; and • other relevant information Board appointment Directors are appointed through a formal process The nominations committee establishes procedures for Partially applied Non-executive directors are appointed by the shareholder. The process appointments to the board and ensures that these are properly People & Governance Committee ensures that procedures for the carried out appointment of executive directors are in place Director development The induction of and ongoing training, as well as the The board ensures that inexperienced directors are developed Not applied There is no formal mentorship programme in place, but the balance development of directors are conducted through a formal through mentorship programmes of experienced and less experienced members on the Board assists in process the informal transfer of skills. The intention is to formalise the process Performance The evaluation of the Board, its committees and individual The nomination for reappointment of a director only occurs Not applied The reappointment of directors is at the discretion of the assessment directors is performed every year after an evaluation of the performance of the director shareholder Performance The evaluation of the Board, its committees and individual The nominations committee comprises the board chairman and Partially applied The nomination role is included in the People & Governance assessment directors is performed every year non-executive directors Committee. The Group Chief Executive is an ex officio member of the People & Governance Committee, but recuses himself when matters affecting him are considered Board committees The Board delegates certain functions to well-structured All members of the remuneration committee are non- Not applied The remuneration role is included in the People & Governance committees without abdicating from its own responsibilities executive directors and a majority of the members is Committee. The Group Chief Executive is an ex officio member of independent the People & Governance Committee, but recuses himself when his remuneration is discussed, or if there is an actual, perceived or potential conflict of interest Group boards A governance framework has been agreed upon between the The holding entity Board consults with the chairman of the Not applied group and its subsidiary Boards Board of the subsidiary entity or division and its nomination committee prior to nominating a representative director (Only applicable to entities within a group) Remuneration of The company remunerates its directors and executives fairly Remuneration policies and practices are in place that Partially applied A remuneration practice is in place. The Eskom remuneration policy directors and senior adequately address all of the following: will be finalised once the DPE Remuneration Standards are approved executives • base pay and bonuses; by Parliament • termination of employee contracts; and • severance and retirement benefits; and • long-term incentive schemes Integrated report | 31 March 2016 2 King Code of Corporate Governance (King III) application register continued Applied/Partially Main category Sub-category King III principle King III practice applied/Not applied Commentary Chapter 2: Remuneration of The company remunerates its directors and executives fairly Remuneration policies and practices are both: Partially applied The remuneration practice and draft Eskom remuneration policy are Boards and directors directors and senior • aligned with entity strategy; and aligned with both the Corporate Plan and the shareholder compact. executives • linked to individual performance These are linked to the individuals' compacts (continued) Remuneration of The company remunerates its directors and executives fairly Non-executive directors' fees comprise both a base fee and an Partially applied The DPE Remuneration Standards is being finalised to accommodate directors and senior attendance fee per meeting this. The draft Eskom remuneration policy is aligned to these executives standards Remuneration of The company has disclosed the remuneration of each individual The remuneration report discloses both the nature and period Partially applied Restraint agreements are not applicable directors and senior director and prescribed officer of restraint provided for in executive service contracts executives Remuneration of The shareholders have approved the company's remuneration The shareholder passes a non-binding advisory vote on the Partially applied The shareholder approves the remuneration of Board and Exco directors and senior policy entity's remuneration policy every year or if not a company, it members at the AGM. The draft Eskom remuneration policy will be executives is approved by the Minister submitted to the Minister after approval of the DPE Remuneration Standards by Parliament Chapter 3: Audit Audit committee The Board has ensured that the company has an effective and The nominations committee presents the shareholder or the Partially applied The Board recommends audit committee members to the committees independent audit committee board with suitable candidates for election as audit committee shareholder for approval members Internal assurance The audit committee is satisfied with the expertise, resources The audit committee does both the following: Partially applied The finance function is reviewed through the process of internal and provider and experience of the company's finance function • considers and satisfies itself of the suitability of the expertise external audit. The Group Chief Financial Officer's performance is and experience of the financial director every year; and reviewed by the Group Chief Executive and the People & Governance • reviews the finance function every year Committee Chapter 4: Governance Board responsibility for The Board has determined the levels of risk tolerance The board sets the levels of risk tolerance every year Partially applied Eskom's risk appetite and tolerance approach, methodology and of risk risk governance parameters need improvement. Eskom's risk appetite and tolerance framework was first approved by the Audit & Risk Committee on 9 May 2014. It is currently under review by Exco and Board, and will be approved on or before 31 July 2016 Board responsibility for The Board has determined the levels of risk tolerance The board monitors that risks are taken within the entity's Partially applied Eskom's risk appetite and tolerance approach, methodology and risk governance tolerance and appetite levels parameters need improvement. Eskom's risk appetite and tolerance framework was first approved by the Audit & Risk Committee on 9 May 2014. It is currently under review by Exco and Board, and will be approved on or before 31 July 2016 Board responsibility for The Board has determined the levels of risk tolerance The entity discloses in the integrated report details of where Not applied Eskom's risk appetite and tolerance approach, methodology and risk governance the limits of risk appetite (willingness to tolerate risk) exceed, parameters need improvement. Eskom's risk appetite and tolerance or deviate materially from, the limits of the company's risk framework is currently under review by Exco and Board, and will be tolerance (ability to tolerate risks). (Only applicable in the approved on or before 31 July 2016. Once approved and event that the company's risk appetite exceeded its risk implemented, specific assessments will need to be made so that tolerance levels) disclosure can be made in future reports Risk assessment The Board has ensured that risk assessments are performed on Risks are prioritised and ranked in order to focus responses Partially applied Application of Eskom's risk appetite and tolerance model needs a continual basis and interventions to those risks outside the Board's tolerance improvement. This model is currently under review by Exco and limits Board and will be approved on or before 31 July 2016 Risk assessment The Board has ensured that risk assessments are performed on The board ensures that key risks are quantified where Partially applied The majority of quantification relates to risks associated with finance, a continual basis practicable supply and projects. To support effective application of appetite, tolerance and potential exposure, quantification of risks in all other areas are being attempted as far as possible Risk disclosure The Board has ensured that there are processes in place which The board discloses in the integrated report its views on the Partially applied The integrated report summarises the risk management process, but enable complete, timely, relevant, accurate and accessible risk effectiveness of the entity's risk management processes does not specifically address the view of the Board on its disclosure to stakeholders effectiveness. Whilst it can be assumed from the approval of the quarterly Risk & Resilience reports that the Board is satisfied, this matter is not specifically covered in the integrated report Integrated report | 31 March 2016 3 King Code of Corporate Governance (King III) application register continued Applied/Partially Main category Sub-category King III principle King III practice applied/Not applied Commentary Chapter 6: Compliance Compliance with laws, The Board should delegate to management the implementation Management has established the appropriate structures to Partially applied A set of formalised guiding documents has been implemented to guide with laws, rules, codes rules, codes and of an effective compliance framework and processes educate, train, communicate about, and measure compliance the requirements associated with compliance management. Employees standards are trained on specific compliance requirements on an ad hoc basis. and standards Training on compliance methodology and key generic processes is provided to the compliance community through a CISA-accredited programme. High-level KPI measurement is currently being implemented, with specific focus on environment and safety. In certain areas, resource constraints have an impact on effective training and communication Compliance with laws, The Board should delegate to management the implementation The compliance function has adequate resources to fulfil its Partially applied Resources are constrained, and available capacity as well as rules, codes and of an effective compliance framework and processes duties competence need to be augmented. KPMG was recently standards commissioned to review internal controls, including the adequacy of the compliance function. Once completed, their report will be submitted to top management for consideration Chapter 8: Governing Governing stakeholder Transparent and effective communication with stakeholders is The integrated report includes reasons for refusals of requests Partially applied The nature and volume of PAIA requests and the percentage of stakeholder relationships relationships essential for building and maintaining their trust and confidence for information that were lodged with the entity in terms of refusals and their complexity prevents comprehensive disclosure in the Promotion of Access to Information Act, 2000. (Only the integrated report applicable in the event of any such refusals during the reporting period) Integrated report | 31 March 2016 4 Compliance with Promotion of Access to Information Act, 2000 This fact sheet contains our declaration in terms of Section 32 of the Promotion of Access to Information Act, 2 of 2000 (PAIA) for 2015/16. The statistics required by South African Human Rights Commission are as follows: 2015/16 a. The number of requests for access received 50 b. The number of requests for access granted in full 8 c. The number of requests for access refused in full 7 d. The number of requests for access refused partially 16 e. The number of requests for access in process 12 f. The number of internal appeals lodged 4 g. The number of internal appeals in process 3 h. The number of cases in which access was given as a result of internal appeal 2 i. The number of internal appeals lodged on the grounds that a request was regarded as having been refused in terms of Section 27 – j. The number of applications ending up in court – k. The number of cases in which extension of 30 days were requested 23 In addition to these formal requests, we also dealt with informal requests lodged via the PAIA Portal, not in terms of the Act. Our PAIA manual is available on www.eskom.co.za/OurCompany/PAIA/Pages/Promotion_Of_Access_To_Information.aspx Eddie Laubscher National Deputy Information Officer Eskom Holdings SOC Ltd 31 May 2016 Integrated report | 31 March 2016 1