Group Group interim results for the six months ended 30 September 2023annual results for the year ended 31 March 2023 13 December 2023 The interim financial statements and performance commentary are available at www.eskom.co.za/investors/integrated-results/ Disclaimer This presentation does not constitute or form part of and should not be construed as, an offer to sell, or the solicitation or invitation of any offer to buy or subscribe for or underwrite or otherwise acquire, securities of Eskom Holdings SOC Ltd (Eskom), any holding company or any of its subsidiaries in any jurisdiction or any other person, nor an inducement to enter into any investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This presentation does not constitute a recommendation regarding any securities of Eskom or any other person. Certain statements in this presentation regarding Eskom’s business operations may constitute “forward looking statements”. All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding the financial position, business strategy, management plans and objectives for future operations of Eskom are forward looking statements. Forward-looking statements are not intended to be a guarantee of future results, but instead constitute Eskom’s current expectations based on reasonable assumptions. Forecasted financial information is based on certain material assumptions. These assumptions include, but are not limited to continued normal levels of operating performance and electricity demand in the Distribution and Transmission Divisions and operational performance in the Generation Division consistent with historical levels, and incremental capacity additions through Group Capital at investment levels and rates of return consistent with prior experience, as well as achievements of planned productivity improvements throughout the business activities. Actual results could differ materially from those projected in any forward-looking statements due to risks, uncertainties and other factors. Eskom neither intends to nor assumes any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In preparation of this document certain publicly available data is used. While the sources used are generally regarded as reliable the content has not been verified. Eskom does not accept any responsibility for using any such information. 1 The first six months of FY2024 remained challenging, both operationally and financially EAF worsened Loadshedding on Emissions performance Transmission further to 183 days deteriorated to network 55.30% 0.92kg/MWhSO reliability (Sep 2022: 102 days), (Sep 2022: 0.45kg/MWhSO) (Sep 2022: 58.66%) despite extensive performance declined OCGT usage Distribution 1 employee fatality Lost-time injury rate declined to Net profit after tax reduced to network (Sep 2022: 1 employee performance and 1 contractor) 0.28 R1.6 billion remained stable (Sep 2022: 0.26) (Sep 2022: R3.8 billion) Tariff increase of Gross debt securities and Arrear municipal debt borrowings (incl. subordinated escalated further to R78 billion 18.65% Government loan) of Government debt (Sep 2022: 9.61%) R70 billion relief committed for R442.7 billion (Mar 2023: R58.5 billion) FY2024 (Mar 2023: R423.9 billion) OVERVIEW 2 Generation performance continued to deteriorate during the period, with networks and new build still delivering variable performance Generation performance GENERATION PERFORMANCE Generation performance % NETWORK AND NEW BUILD 35 % • Plant availability deteriorated to 55.30% (Sep 70 % • Transmission system minutes performance 30 2022: 58.66%), with unplanned load losses rising 60 25 declined to 1.71 minutes (Sep 2022: 1.07), with to 34.18% (Sep 2022: 30.86%) and planned 50 20 no major incidents (Sep 2022: one) 40 maintenance at 9.53% (Sep 2022: 8.97%) 15 30 • Distribution network performance remained 10 • Loadshedding up to stage 6 implemented on 20 5 stable, with frequency and duration of supply 183 days (Sep 2022: 102 days) or 3 578 hours 10 0 interruptions within target, although 0Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar equating to an effective 149.1 days (Sep 2022: Sep 2019 Sep 2020 Sep 2021 Sep 2022 Mar 2023 Sep 2023 distribution energy losses of 9.64% remain high Planned losses FY2021 Unplanned losses FY2021 1 653 hours or 68.9 days equivalent) (Sep 2022: 9.56%) EAFFY2022 PCLF Planned losses UCLF Unplanned losses FY2022 • Gas turbines produced 2.9TWh (Sep 2022: • Other IPP programmes produced 8.9TWh Network Networkperformance performance 2.1TWh) at a cost of R18 billion (Sep 2022: Minutes Events/hours (Sep 2022: 7.7TWh). Overall, IPP programmes R15.8 billion) for Eskom and IPP OCGTs Minutes 5.0 Events/hours 40 delivered about 2.7TWh less than target, 5.0 40 • Average coal purchase price increased by 10.2% 4.0 30 contributing to the overall generation capacity 4.0 (Sep 2022: 5.5%) 3.0 30 shortfall 3.0 20 • Three Kusile units returned to service using 2.0 20 • Kusile Unit 5 expected to synchronise to the 2.0 temporary stacks 1.0 10 10 grid during December 2023, with commercial 1.0 0.0 0 operation six months later • Koeberg Unit 1 undergoing commissioning tests 0.0 Sep 2017 Sep 2018 Sep 2019 Sep 2020 Mar 2021 Sep 2021 0 following a long-term outage Sep 2019 Sep 2020 Sep 2021 Sep 2022 Mar 2023 Sep 2023 • First phase of the partial correction of major System minutes lost for events <1 minute SAIFI SAIDI System SAIFI = minutes lost for interruption System average events <1 minute SAIFI frequency index SAIDI plant defects at Medupi and Kusile to be • Koeberg Unit 2 outage to replace steam SAIFI ==System SAIDI System average averageinterruption interruptionfrequency duration index index completed by December 2023 generators commenced on 11 December 2023 SAIDI = System average interruption duration index OPERATING PERFORMANCE 3 Emissions performance showed significant deterioration, with 27 air quality–related environmental legal contraventions ENVIRONMENTAL PERFORMANCE PEOPLE AND SOCIETY Environmental performance • Relative particulate emissions performance • Tragically, one employee fatality was recorded kg/MWh l/kWh deteriorated significantly to 0.92kg/MWh sent out sent out (Sep 2022: one employee and one contractor) 1.00 1.45 sent out (Sep 2022: 0.45kg/MWhSO). • Group lost-time injury rate worsened slightly Kendal, Kriel and Matla accounted for 0.80 1.40 to 0.28 (Sep 2022: 0.26) almost half of emissions 0.60 1.35 • Headcount increased slightly to 39 987 • Kendal air quality criminal case adjourned to 0.40 1.30 18 March 2024 (Sep 2022: 39 871), with the intake of 757 0.00 1.25 Sep 2019 Sep 2020 Sep 2021 Sep 2022 Mar 2023 Sep 2023 Youth Employment Services learners offsetting • National Environmental Consultative and natural attrition Advisory Forum’s work on MES continues, Relative particulate emissions Water consumption with extension to August 2024 • Racial and gender equity improved further, with Safety performance • Water consumption at power stations Number Index racial equity at professional/middle management deteriorated slightly to 1.45l/kWhSO 10 0.40 level at 84.37% (Sep 2022: 82.67%) 8 (Sep 2022: 1.33l/kWhSO) due to 0.30 • Disability equity stood at 2.90% (Sep 2022: 6 operational challenges 0.20 2.94%) 4 • A total of 44 environmental legal 2 0.10 • Completed 40 362 electrification connections contraventions far exceeded tolerance 0 0.00 (Sep 2022: 35 159) levels (Sep 2022: 40), with 16 related to Sep 2019 Sep 2020 Sep 2021 Sep 2022 Mar 2023 Sep 2023 • CSI spend of R41.8 million benefitted 174 669 water, 27 to air quality and one to waste Fatalities (employees & contractors) LTIR beneficiaries (Sep 2022: R32.5 million) regulations OPERATING PERFORMANCE 4 Operating performance has a direct impact on financial performance and as a result, financial indicators continue to decline KEY FINANCIAL INDICATORS Sep 2023 Sep 2022 Profitability Gearing R billion % Debt/equity Gross debt/EBITDA Revenue, R million 158 627 ▲ 144 841 60 35 4.0 20 30 EBITDA, R million 37 742 ▼ 37 957 40 25 3.0 15 20 20 2.0 10 EBITDA margin, % 23.79 ▼ 26.21 0 15 10 1.0 5 -20 5 Operating profit (EBIT), R million 20 905 ▼ 22 156 -40 0 0.0 0 Sep-19 Sep-20 Sep-21 Sep-22 Mar-23 Sep-23 Sep-19 Sep-20 Sep-21 Sep-22 Mar-23 Sep-23 Net profit after tax, R million 1 618 ▼ 3 839 EBITDA, R billion EBITDA margin, % Gross debt/EBITDA ratio Debt/equity ratio Pre-tax nominal return on assets, % 3.08 ▼ 3.28 Net profit/(loss) after tax, R billion • Favourable revenue growth due to higher Cash interest cover, ratio 1.53 ▼ 2.14 Solvency tariffs, offset by a decline in sales volumes R billion Ratio Debt service cover, ratio 0.55 ▼ 1.53 50 2.5 • EBITDA and operating cash flows negatively affected as production costs remain high due Gross debt/EBITDA, ratio 13.20 ▼ 12.63 40 2.0 to supply from more expensive sources, 30 1.5 Debt/equity (including long-term including reliance on OCGTs, despite a provisions), ratio 1.88 ▼ 1.75 20 1.0 decline in sales volumes 10 0.5 Gearing, % 65 ▼ 64 • Cash flows remain inadequate to meet debt 0 0.0 Sep-19 Sep-20 Sep-21 Sep-22 Mar-23 Sep-23 servicing requirements Free funds from operations (FFO) as % of gross debt 8.02 ▼ 8.28 • Gross debt/EBITDA worsened due to growth Cash from operations, R billion Debt service cover ratio Cash interest cover ratio in debt and overall decline in profitability Legend: ▲ Performance improved ▼ Performance declined FINANCIAL PERFORMANCE 5 Profitability was negatively affected by growth in primary energy and finance costs GROUP INCOME STATEMENT FOR THE PERIOD ENDED 30 SEPTEMBER 2023 • Revenue: 18.65% tariff increase, offset by 6% decline in sales R million Sep 2023 Sep 2022 % • Primary energy: due to higher OCGT spend to alleviate Revenue 158 627 144 841 10▲ supply constraints at coal-fired stations and higher production Other income 681 2 053 from renewable IPPs due to IRP-driven growth. Delays in the Primary energy (85 089) (77 261) 10▲ Standard Offer Programme, Emergency Generation Net employee benefit expenses (17 352) (16 241) 7▲ Programme and Risk Mitigation IPP Procurement Programme Net impairment loss and write-downs (1 873) (414) (RMIPPPP) further contributed to the reliance on OCGTs, Other expenses (17 252) (15 021) 15▲ with favourable diesel prices also supporting higher OCGT EBITDA (before net fair value gain) 37 742 37 957 1▼ production. Non-production from Koeberg Unit 1 due to long- Depreciation and amortisation expenses (16 837) (15 801) 7▲ term outage had to be replaced by more expensive sources Operating profit (EBIT) 20 905 22 156 6▼ • Employee benefit cost: 7% salary adjustment for all Net fair value and foreign exchange gains 974 582 employees, except top management, to support operational stability Net finance cost (19 700) (17 476) 13▲ Share of profit of equity-accounted investees 71 50 • Other expenses: R1.7 billion increase in repairs and maintenance, as well as higher plant operating costs due to Profit before tax 2 250 5 312 58▼ poor plant performance Income tax (632) (1 473) • Net finance cost: exchange rate and interest rate pressures Net profit for the period 1 618 3 839 58▼ due to global macro-economic factors, coupled with lower Legend: ▲ Income/gain increased ▼ Income/gain declined finance costs capitalised as new build units are commissioned ▼ Expense/loss declined ▲ Expense/loss increased FINANCIAL PERFORMANCE 6 Sales volumes declined by an annual average of 3% over the last five years REVENUE Revenue and sales trend R million Sep 2023 Sep 2022 % R billion TWh 160 106 Local 158 895 143 994 10▲ 150 104 International 5 267 5 435 3▼ 102 140 Gross electricity 100 164 162 149 429 10▲ 130 revenue 98 120 Net revenue not (6 259) (5 375) 16▲ 96 recognised (IFRS 15) 110 94 Net electricity 100 157 903 144 054 10▲ 92 revenue 0 90 Other revenue 724 787 8▼ Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 Total revenue 158 627 144 841 10▲ Sales, TWh Electricity revenue, R billion SALES VOLUMES • Average selling price increased (17%▲) to 178.82c/kWh (Sep 2022: 153.23c/kWh) GWh Sep 2023 Sep 2022 % • 5.7TWh (6%▼) decline in sales volumes due to generation supply constraints, leading to Local 86 786 91 909 6▼ loadshedding and load curtailment, as well as economic factors and embedded self-generation with a decline in sales seen in most sectors International 5 091 5 695 11▼ • Despite loadshedding constraints, the mining sector experienced higher electricity demand Total sales 91 877 97 604 6▼ (3%▲), with favourable commodity prices leading to improved margins and higher production Legend: ▲ Revenue/sales increased ▲ Revenue non-recognition increased • International (11%▼), agricultural (9%▼), as well as redistributor and residential customers ▼ Revenue/sales declined ▼ Revenue non-recognition declined (8%▼) experienced the largest declines in percentage terms FINANCIAL PERFORMANCE 7 Despite favourable diesel prices, primary energy costs increased by 10% due to reliance on expensive Eskom and IPP OCGTs to alleviate supply constraints COST PRODUCTION UNIT COST • Total energy produced decreased by 6.1TWh BASE-LOAD R45 306 million 87 724GWh R516/MWh COAL & OTHER (Sep 2022: R42 915 million) (Sep 2022: 95 395GWh) (Sep 2022: R450/MWh) 15%▲ (5%▼) due to supply constraints • Coal plant impacted by frequent breakdowns, R396 million 3 918GWh R101/MWh NUCLEAR (Sep 2022: R482 million) (Sep 2022: 4 445GWh) (Sep 2022: R108/MWh ) 7%▼ requiring fuel oil for unit start-up and combustion support, as well as inflationary cost pressures R12 459 million 1 980GWh R6 269/MWh • Average coal purchase price increased by 10.2%, ESKOM OCGTs 9%▼ DIESEL (Sep 2022: R11 160 million) (Sep 2022: 1 609GWh) (Sep 2022: R6 906/MWh ) linked to mine input costs, which were affected R5 545 million 872GWh R6 093/MWh by fuel costs and weakening of the Rand IPP OCGTs (Sep 2022: R4 643 million) (Sep 2022: 494GWh) (Sep 2022: R8 428/MWh ) 28%▼ • Nuclear output down due to long-term outage R16 989 million 8 548GWh R1 988/MWh • Diesel production sources account for 21% of RENEWABLE IPPs (Sep 2022: R15 205 million) (Sep 2022: 7 722GWh) (Sep 2022: R1 969/MWh) 1%▲ total cost but only 3% of total production; use of diesel is necessary but unsustainable R413 million 318GWh R1 300/MWh OTHER IPPs (Sep 2022: Nil) (Sep 2022: Nil) (Sep 2022: Nil) n/a • Other IPP programmes include the Standard Offer Programme, where Eskom offers a price to purchase from self-generation customers, and the R3 981 million 4 649GWh R856/MWh IMPORTS (Sep 2022: R2 856 million) (Sep 2022: 4 394GWh) (Sep 2022: R650/MWh) 32%▲ Emergency Generation Programme, where suppliers offer a price to Eskom. Only 100MW and 60MW capacity operational by 30 Sep 2023 TOTAL R85 089 million 108 009GWh R788/MWh 16%▲ (Sep 2022: R77 261 million) (Sep 2022: 114 059GWh) (Sep 2022: R677/MWh) • Delays in these programmes and the RMIPPPP led to higher OCGT usage than planned Legend: ▼ Unit cost declined ▲ Unit cost increased FINANCIAL PERFORMANCE 8 Liquidity improved by R8.8 billion since year end, largely due to debt raising and Government support. Operating cash remains insufficient to meet debt servicing needs CASH FLOWS FOR THE PERIOD ENDED 30 SEPTEMBER 2023 R billion 159 (65) Primary energy, controllable Primary energy, (21) non-controllable1 Government Debt raised of R20 billion comprising: support of (17) Employee benefits Total debt servicing Pre-funding from March 2023 of R16 billion R16 billion required Working capital of R49 billion (13) Drawdowns from existing DFIs of R4 billion to alleviate cash flow (16) Repairs, maintenance pressure and other (132) (16) 27 11 9 16 (31) (7) 11 (38) (18) 20 Revenue Operating Operating surplus Capital Balance before Debt repaid Interest repaid Balance Debt raised Other funding Debt service gap Government Net cash cashflows expenditure and debt servicing before funding activities subordinated loan increase other investing 1. Non-controllable primary energy includes renewable IPP costs and environmental levies 2. Debt raised for the year is reported net of commercial paper in the statement of cash flows 3. Other funding activities is predominantly cash flows from derivatives held for risk management FINANCIAL PERFORMANCE 9 Growth in debt securities and borrowings due to weakening of the Rand, together with debt raising and Government support GROUP STATEMENT OF FINANCIAL POSITION AT 30 SEPTEMBER 2023 R million • Liquidity: remains constrained due to debt servicing and Sep 2023 Sep 2022 % working capital requirements; Government support Property, plant and equipment and intangible assets 672 946 670 312 <1▲ assisted with managing liquidity Working capital – current inventory and receivables 64 859 55 003 18▲ • Working capital: growth in trade receivables, coupled Liquid assets – cash and cash equivalents and with an increase in inventories (coal stock, maintenance current investments 32 733 34 705 6▼ spares and consumables) Derivatives held for risk management 26 759 31 673 16▼ • Derivatives: declined due to capital cash flows from Other assets 1 53 201 42 121 26▲ hedging activities, partially offset by favourable impact of Total assets 850 498 833 814 2▲ fair value movements, linked to the weakening Rand Equity 2 238 242 246 920 4▼ • Debt: conversely, foreign-denominated borrowings were Debt securities and borrowings 426 723 423 638 <1▲ negatively impacted by weakening of the Rand; debt raised Government subordinated loan 2 16 000 – included pre-funding of R16 billion from March 2023. In Working capital – current payables addition, received R16 billion Government support as a 60 891 55 616 9▲ subordinated loan Derivatives held for risk management 1 659 1 408 18▲ Other liabilities 3 106 983 106 232 1▲ Current ratio Debt/equity ratio Total equity and liabilities 850 498 833 814 2▲ 1.07 ▲ (Sep 2022: 0.99) 1.88 ▲ (Sep 2022: 1.75) Legend: ▲ Asset increased ▼ Asset declined ▼ Liability declined ▲ Liability increased USD/ZAR exchange rate EUR/ZAR exchange rate 1. Mainly comprises future fuel supplies, deferred tax and non-current inventory and receivables 2. Government support received recognised as a subordinated loan under debt securities and borrowings in the financial statements (Sep 2022: R4 billion recognised as equity) R18.83 ▲(2022: R17.97) R19.92 ▲(2022: R17.55) 3. Mainly comprises non-current decommissioning provisions, employee benefit obligations, contract liabilities and lease liabilities FINANCIAL PERFORMANCE 10 Net finance costs increased by 13% due to growth in debt, higher cost of borrowing and lower capitalisation of interest NET FINANCE COST FOR THE PERIOD ENDED 30 SEPTEMBER 2023 R million Sep 2023 Sep 2022 % Gross finance cost 25 544 22 813 12▲ Average cost of debt Average investment return Finance income (2 283) (1 471) 55▲ 10.74% ▲ (2022: 10.28%) 7.58% ▲ (2022: 4.45%) Borrowing costs capitalised to assets (3 561) (3 866) 8▼ Total 19 700 17 476 13▲ Legend: ▲ Income/capitalisation increased ▼ Income/capitalisation declined ▼ Expense declined ▲ Expense increased Gross debt securities and borrowings (excluding Government subordinated loan), R million NET DEBT AT 30 SEPTEMBER 2023 Opening balance at 30 Sep 2022 423 638 R million Sep 2023 Sep 2022 % Debt raised (net of commercial paper) 28 766 Debt securities and borrowings 426 723 423 638 <1▲ Debt repaid (33 120) Government subordinated loan 16 000 – Other movements 2 4 645 Lease liabilities 7 769 8 202 5▼ Closing balance at 31 Mar 2023 423 929 Cash and cash equivalents 1 (16 355) (16 667) 2▼ Debt raised (net of commercial paper) 19 670 Payments made in advance 1 (616) (797) 23▼ Debt repaid (30 850) Net derivatives held for risk management 1 (24 905) (30 113) 17▼ Other movements 2 13 974 Total 408 616 384 263 6▲ Closing balance at 30 Sep 2023 426 723 Legend: ▲ Asset increased ▼ Asset declined ▼ Liability declined ▲ Liability increased 2. Mainly fair value movements due to exchange rate volatility as well as accruals, 1. In this table, assets are reflected as negative amounts interest and discounting FINANCIAL PERFORMANCE 11 Government’s debt relief package and the municipal debt relief programme are critical for improving financial performance Government debt relief GOVERNMENT DEBT RELIEF R billion 120 • Of the R78 billion debt relief for 2024, Eskom received R16 billion in August, R20 billion in 100 October and R5 billion in December 2023. No conversions to equity have taken place yet 80 70.0 • The Minister of Finance tabled the Eskom Debt Relief Amendment Bill in November 2023, to 60 allow for interest charges on the subordinated loan at market interest rates 40 78.0 66.0 20 40.0 • Moody’s and S&P Global upgraded Eskom’s credit ratings with a stable outlook in September 2023 0 and November 2023, on the back of Government’s debt relief commitments 2024 2025 2026 MUNICIPAL DEBT RELIEF PROGRAMME Cumulative R184 billion support towards debt servicing • The municipal debt relief programme is expected to improve payment levels and the settlement Takeover of R70 billion in debt commitments in 2026 of current accounts by municipalities over time. Applications closed on 31 October 2023 Growth in arrear municipal debt • By 30 November 2023, 52 municipalities received approval or conditional approval from R billion +32% % National Treasury. These municipalities account for R50.2 billion, or 86%, of the arrear debt 70 82 balance at 31 March 2023 60 80 50 • A further 20 municipalities, accounting for R6.5 billion, or 11%, have applied and are awaiting 78 40 70.0 76 approval from National Treasury 30 58.5 20 40.9 52.9 74 • No write-offs have been processed to date as the municipalities must comply with the 32.9 10 25.1 72 conditions for 12 months for Eskom to process the first third of the debt write-off 0 70 Sep-19 Sep-20 Sep-21 Sep-22 Mar-23 Sep-23 • The overdue amounts have not been recognised as revenue and have been fully provided for, Arrear municipal debt, R billion Municipal payment levels, % therefore the write-offs will not affect Eskom’s profitability FINANCIAL PERFORMANCE 12 Financial outlook for FY2024 continues to be negatively affected by poor operational performance Actual Projection • Financial performance remains hampered by the lack of cost- Financial indicator Sep 2023 Mar 2024 reflective tariffs, excessive use of OCGTs due to capacity Revenue, R million 158 627 ▲ 298 278 shortages, above-inflationary cost increases, non-payment by some customers and high debt servicing costs EBITDA, R million 37 742 ▲ 42 178 • Historically, financial performance in the first half of the year is EBITDA margin, % 23.79 ▼ 14.14 better than the second half, with the winter period characterised by higher tariffs and sales volumes, as well as Operating profit (EBIT), R million 20 905 ▼ 7 433 lower maintenance. The summer period sees higher Net profit/(loss) after tax, R million 1 618 ▼ (23 221) maintenance and higher production from renewable IPPs Cash interest cover, ratio 1.53 ▼ 1.15 • Tariff increase of 18.65% awarded for 2024, although sales volumes expected to decline by 2% to 185.3TWh (2023: Debt service cover, ratio 0.55 ▼ 0.45 188.4TWh) Gross debt/EBITDA, ratio 13.20 ▲ 12.05 • Financial performance expected to remain constrained by poor EAF as well as ongoing delays in the RMIPPPP and other IPP Debt/equity (including long-term provisions), ratio 1.88 ▲ 1.79 programmes, requiring reliance on expensive OCGTs to Free funds from operations (FFO) as % of gross debt 8.02 ▲ 9.71 augment supply Legend: ▲ Positive trend expected ▼ Negative trend expected • Spend on Eskom and IPP OCGTs to be managed within budgeted levels, with any overruns to be funded from internal savings and savings on other IPP programmes. Higher OCGT production supported by favourable diesel prices OUTLOOK 13 The interim financial statements and performance commentary are available at www.eskom.co.za/investors/integrated-results/