Eskom group integrated results for the six months ended 30 September 2016 Cover slide (same as IR cover) 3 November 2016 This presentation is available at www.eskom.co.za/IR2016/interim Contents Overview of Financial Operating Conclusion the period review performance Throughout this presentation, period end refers to the 6 months ended 30 September 2016, while year refers to the year ended 31 March 2016 and comparative period or prior year to the period ended 30 September 2015 1 days without load shedding 2 Key highlights for the period Financial performance • EBITDA of R31.5 billion, representing an increase of 23% compared to the comparative period • Cost savings of R8 billion achieved • Cash generated from operating activities increased by 39% to R31.9 billion compared to the comparative period • Liquid assets of R43.8 billion at 30 September 2016 • 86% of funding for 2016/17 has been secured • 28% of funding for 2017/18 has been secured 3 Key highlights for the period (continued) Operational performance • Generation plant performance improved with EAF of 78.49% • Medupi Unit 5 synchronised to the grid on 8 September 2016 • Ingula Units 4, 2 and 1 in commercial operation on 10 June, 22 August and 30 August 2016, adding 999MW peaking capacity • Ingula Unit 3 was synchronised to the grid on 29 October 2016 after repairs were completed • 53 km of lines installed and 1 050MVA transformers commissioned for Transmission 4 Key highlights for the period (continued) Socio-economic performance • 99 869 additional households were electrified compared to 41 778 households for the comparative period, an increase of 139% • Procurement from B-BBEE compliant suppliers was 65% • Local content contracted more than 80% • R75 million committed to corporate social investment, impacting 120 246 beneficiaries 5 Financial review Improved financial performance Financial performance Key financial ratios Total primary Cash interest Debt service cover Revenue R97bn energy cost cover ratio 2.65 ratio 1.90 (10.5%) reduced by 1.5% (Sept 2015: 2.43) (Sept 2015: 1.41) EBITDA margin FFO as % of total Gross debt / EBITDA R31.5bn 32.7% debt 9.2% EBITDA ratio 12.0 up by 23% (Sept 2015: 29.3%) (Sept 2015: 8.1%) (Sept 2015: 12.8) Profitability Solvency 35 40% 2.0 68% 30 35% 66% 30% 1.5 25 64% 25% R billion 20 Ratio 20% 1.0 62% 15 15% 60% 10 10% 0.5 5 58% 5% - 0% 0.0 56% Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 EBITDA (R billion) EBITDA margin (%) Debt / Equity Gearing 7 Income statement for 6 months ended 30 September 2016 Sept Sept YoY % R million 2016 2015 change Revenue 97 131 87 876 11 Other income 752 1 369 (45) Primary energy (40 380) (40 999) 2 Net employee benefit expense (15 758) (13 806) (14) Net impairment loss (615) (122) (404) Other expenses (9 635) (8 723) (10) Profit before depreciation and amortisation and net fair value loss (EBITDA) 31 495 25 595 23 Depreciation and amortisation expense (9 998) (7 609) (31) Net fair value loss on financial instruments and embedded derivatives (1 875) 3 - Net finance cost (6 535) (3 498) (87) Share of profit of equity-accounted investees, net of tax 18 28 (36) Profit before tax 13 105 14 519 (10) Income tax (3 749) (4 172) 10 Net profit for the period 9 356 10 347 (10) 1. Figures refer to the unaudited group’s results. 2. Figures for September 2015 were restated. 8 Overall electricity sales volumes increased by 1.2% Electricity volumes % growth/(decline) & contribution Contribution • International sales volume growth of -10% 0% 10% 20% 30% 40% 31.6% due to Eskom having surplus Redistributors 1.6% 43% capacity Residential 2.9% 6% • Growth in in redistributors (1.6%), Commercial 3.6% 5% commercial (3.6%) and residential Industrial (6.2%) 21% (2.9%) Mining (0.3%) 14% • Decline in sales volumes: rail (7.9%), industrial (6.2%), mining (0.3%), and Agriculture (0.7%) 2% agriculture (0.7%) Rail (7.9%) 1% • Overall electricity sales volumes International 31.6% 7% increased by 1.2% Total 1.2% 9 Eskom is embarking on a programme to stimulate local demand Eskom has sufficient reliable • 2000MW - 5000MW of excess capacity in the medium term and affordable • Current EAF of 78.49% versus 71.07% in 2016 capacity available Eskom is • Engaging with key industrial customers to understand requirements embracing • There are 2200MW of existing projects to be connected in the customer pipeline that can be expedited for delivery engagement for • Engaging with municipalities and metros to enable their growth new connections • Driving a country initiative together with Government to assist distressed customers Stimulating medium term • Targeting growth though specific industries that can have sustainable industrial knock-on economic effects e.g. platinum, ferrochrome etc. growth Eskom is open to business, come engage with us 10 10 Primary energy costs decreased by 1.5%, compared to an average increase of 18% over the last 5 years Sept 2016 Primary energy cost analysis Primary energy cost increase analysis R billion % of cost % of production R4.0 R6.4 3% 22% 4% R41.0 4% 4% R0.4 R40.4 4% R2.2 R0.7 4% 75% 92% 93% 78% Sep-15 Coal OCGT Imports IPPs Other Sep-16 related costs Sept 2015 Primary energy cost analysis • Primary energy costs decreased by 1.5%, compared to % of cost % of production an average increase of 18% the last 5 years 16% 5% • Reduction in usage of OCGTs resulted in a cost savings 5% 4% 3% of R6.4 billion 4% • Increase in total IPP costs of 33% with an increase in 4% production of 23% 79% 92% 78% Eskom generation International purchases 92% Independent power producers 11 Increase in renewable IPP cost of 37% with an average cost of R2 179/MWh Electricity cost, R/MWh Production volumes, GWh 4 000 3 500 3 500 3 000 3 000 2 500 2 500 2 000 2 000 1 500 4% 1 500 4% 1 000 1 000 500 500 4% - - CSP Hydro Solar PV Wind Total Re- CSP Hydro Solar PV Wind Total Re- IPP IPP Actual Sept 2015 Actual Sept 92%2016 78% Actual Sept 2015 Actual Sept 2016 Production mix 8% • Average year-on-year decrease in R/MWh of 1% from R2 208/MWh (September 2015) to R2 179/MWh 54% • Increase in production volumes of 39% 37% • Total increase in cost of 37% CSP Hydro Solar PV Wind 12 Financial position strengthened 30 Sept 30 Sept YoY % R million 2016 2015 change PPE and intangible assets 554 555 486 730 14 Working capital 44 119 43 753 1 Liquid assets 43 766 24 104 82 Other assets 46 640 57 145 (18) Total assets 689 080 611 732 13 Equity 186 581 171 117 9 Debt securities and borrowings 332 920 297 449 (12) Working capital 49 647 49 330 (1) Other liabilities 119 932 93 836 (28) Total equity and liabilities 689 080 611 732 (13) • Liquid assets increased by 82% to R44 billion 13 Arrear debt and debtors ageing • Arrear debt by municipalities, excluding interest, increased from R5.9 billion (September 2015) to R9.2 billion • Average Soweto collection level reduced from 18% (September 2015) to 14% • 6 345 post-paid meters were converted to prepaid meters during the period in Soweto • 12 123 smart meters were installed during the period in Midrand, Soweto and Sandton Within < 60 days > 60 days Electricity debtors age analysis, R million Total due date overdue overdue Large power users, excluding municipalities 7 616 6 937 252 428 Large power users, municipalities (excluding interest) 15 418 6 238 2 360 6 821 Small power users 2 834 1 628 175 1 030 Soweto SPU (excluding interest) 5 163 166 149 4 848 International customers 5 5 - - Total at 30 September 2016 31 036 14 974 2 936 13 127 % of total 48% 10% 42% Sept Sept 2016 2015 Average debtors days (all categories) 51 47 Average debtors days (excluding Soweto SPU and municipalities) 21 21 14 86% of funding for 2016/17 secured R billion 2016/17 2017/18 Domestic bond private placement 10.2 – Signed DFIs 30.4 7.4 Signed ECAs 7.1 2.2 Swap restructuring 1.8 2.5 Domestic bonds 1.2 – Commercial paper 2.4 – Committed facilities 6.5 6.5 Total funding secured 59.6 18.6 Funding secured, % 86% 28% Foreign currency BB+ Ba1 – Local currency BB+ Ba1 BBB– Standalone ccc+ b3 B– Outlook Negative Review for downgrade Stable 15 Credit rating concerns Concern Eskom’s response Large capex • Delivery of the new build programme ahead of schedule and programme  within costs • Eskom’s financial ratios are already showing signs of significant Weak financial improvement profile  • Eskom’s financial ratios are expected to improve in future and to move to investment grade within five years Challenging • Current court case ruling impacts on recovery of costs regulatory environment  • NERSA and Eskom has applied for leave to appeal which will be heard during November 2016 Rising energy costs  • Total primary energy cost reduced by 1.5% • Liquid assets of R44 billion at 30 September 2016 Funding & liquidity risks  • 86% of funding for 2016/17 has been secured • 28% of funding for 2017/18 has been secured 16 Operating performance Improved Generation operating performance Plant availability, % 0.8% 0.6% 11.2% • Significant improvement in EAF from 13.2% 71.2% (September 2015) to 78.49% 14.8% 9.7% • Unplanned breakdowns reduced from 14.8% (September 2015) to 9.73% 78.5% 71.2% • 19GWh production from OCGTs compared to 2 961GWh Sep-15 Sep-16 (September 2015) EAF UCLF PCLF OCLF 83% 81% 79% 77% 75% 73% 71% 69% 67% 65% May-15 Jul-15 Nov-15 Dec-15 Jan-16 May-16 Jul-16 Jun-15 Aug-15 Mar-16 Jun-16 Aug-16 Apr-15 Sep-15 Oct-15 Feb-16 Apr-16 Sep-16 Monthly EAF 12 Month moving average 18 Continued improvement in network performance System minutes lost for events < 1 minute Minutes • Transmission system minutes lost <1 of 5.0 2.74 (September 2015: 1) 4.0 • A few large incidents occurred impacting 3.0 2.0 the Transmission systems minutes lost < 1 1.0 • Distribution network performance (SAIFI 0.0 and SAIDI) within acceptable limits • Energy losses are under control at 8.6% SAIFI / SAIDI performance for total system losses 80 • Total customer base of 5.8 million with 70 60 5.7 million residential customers 50 40 30 20 10 0 SAIFI (events) SAIDI (hours) 19 We remain focused on bringing new capacity online P80 dates CO = Commercial operation CO achieved in CO achieved in CO in Mar 2015 CO in Aug 2015 CO by Jul 2018 Jun 2016 Aug 2016 100 794 333 333 800 Mar 2015 Aug 2015 Jun 2016 Aug 2016 Jul 2018 Sere Wind Farm Medupi Unit 6 Ingula Unit 4 Ingula Unit 1 Kusile Unit 1 5 020MW Mar 2015 Aug 2016 Jan 2017 Mar 2018 Majuba recovery Ingula Unit 2 Ingula Unit 3 Medupi Unit 5 1200 333 333 794 600MW from Unit 3 gap CO achieved in CO in Jan 2017 CO by Mar 2018 solution in Feb 2015 Aug 2016 600MW from Unit 4 in Mar 2015 20 20 We remain focused on bringing new capacity online 2012 to 2016 2017 to 2022 Sere Wind Ingula Ingula Medupi Kusile Kusile Medupi Kusile Kusile Farm Unit 4 Unit 2 Unit 5 Unit 1 Unit 2 Unit 1 Unit 4 Unit 6 Mar-15 Jun-16 Aug-16 Mar-18 Jul-18 Jul-19 May-20 Mar-21 Sep-22    100 333 333 794 800 800 794 800 800 794 333 333 794 794 794 600 800 800 Medupi Ingula Ingula Medupi Medupi Medupi Duvha Kusile Kusile Unit 6 Unit 1 Unit 3 Unit 4 Unit 3 Unit 2 Unit 3 Unit 3 Unit 5 Aug-15 Aug-16 Jan-17 Jul-18 Jun-19 Dec-19 Mar-20 Aug-20 Nov-21   1 893MW commissioned since ….9 104MW to be commissioned over the next 6 years 2015…. 11 002MW 21 21 A large amount of construction work has been completed from 2005 to date… Installed capacity MW of capacity 999 8 030 261 120 100 794 5 221 535 Transmission km lines 6 215 319 346 53 811 787 3 268 631 Substations 2 435 33 140 MVAs 1 050 3 790 2 090 3 580 17 670 2 525 Inception to Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Sep-16 Total March 2011 22 Other key operational performance Environment and safety • LTIR improved from 0.36 (September 2015) to 0.30 (September 2016) • One employee and four contractor fatalities experienced during the period • Particulate emissions improved from 0.34kg/MWhSO (September 2015) to 0.29kg/MWhSO (September 2016) • Water consumption at power stations worsened from 1.37l/kWhSO (September 2015) to 1.43l/kWhSO (September 2016) Electricity theft • The Operation Khanyisa campaign resulted in 50 arrests of electricity theft suspects and the opening of 26 cases on the court roll • Eskom Security Investigations made 144 arrests, and goods to the value of R29 million were recovered during the period to September 2016 23 Other key operational performance (continued) Socio-economic • Committed corporate social investment spent of R75 million, benefiting 120 246 beneficiaries • Procurement from B-BBEE compliant suppliers as a percentage of procurement was 65% (September 2015: 88%) – the reduction is due to a large number of qualifying suppliers without valid B-BBEE certificates due to changes in the Codes during the current period • Local content contracted more than 80% • Managed to more than double the number of households electrified from 41 778 (September 2015) to 99 869 for the 6 months to 30 September 2016 and almost 5 million since inception 24 Other key operational performance (continued) Human resource performance • 3 569 technical, engineering and artisan learners in the pipeline • 2.75% of employees are people with disabilities • Racial equity in senior management of 61.7% and in professional and middle management of 72.7% • Gender equity in senior management of 28.5% and in professional and middle management of 35.7% 25 Conclusion Conclusion • Eskom’s turnaround continues to stabilise the organisation: o Improved Generation performance o New build programme delivering to plan o Financial profitability and liquidity restored • Excess capacity currently exists and is projected to grow steadily over the next three years • Eskom calls on customers to increase consumption and to engage with Eskom proactively to take advantage of the excess capacity situation 27 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 Group Customer Services, Distribution and Transmission divisions and operational performance in the Generation and Primary Energy divisions consistent with historical levels, and incremental capacity additions through the Group Capital division at investment levels and rates of return consistent with prior experience, as well as achievements of planned productivity improvements throughout the business activities. Actual results could differ materially from those projected in any forward-looking statements due to risks, uncertainties and other factors. Eskom neither intends to nor assumes any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In preparation of this document certain publicly available data was 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. 28 Cover slide (same as IR cover) 3 November 2016 This presentation is available at www.eskom.co.za/IR2016/interim