Integrated Results Presentation for the year ended 31 March 2012 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 Limited (“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 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. In support of 2 Agenda and presenters Executive summary Brian Dames Audited financial results Paul O’Flaherty Construction Paul O’Flaherty Operations Brian Dames Concluding remarks Brian Dames In support of 3 Executive summary Brian Dames Chief Executive Remember your power In support of Executive summary • No load shedding since April 2008, despite an extremely tightly balanced energy system • Safety remains a major concern and continues to be of primary focus • Three years of good financial performances – financial surpluses will be reinvested in the business, helping to fund the capital expansion programme and to service debt • As at 31 March 2012, secured 77.6% of the funding required for the capital expansion programme • NERSA approved Eskom‟s revised tariff increase for the final year of MYPD 2, beginning 1 April 2012, to an average increase of 16% (NERSA had previously approved an increase of 25.9% for 2012/13) • R72.1bn spent on Broad-based Black Economic Empowerment • Improved the efficiency of operations – completed the first phase of the Back2Basics programme which rolled out a single-instance SAP system on schedule and within budget In support of 5 Executive summary • Significant progress in the capital expansion programme: – Installed 535MW of additional generation capacity, 631km of high-voltage transmission lines and 2 525MVA of new transformer capacity during the year to 31 March 2012 – Commissioned three Komati power station units, Grootvlei power station unit 5 and increased capacity at Camden unit 6 – this leaves only 3 units at Komati to complete the return to service power stations – Since the inception of the capital expansion programme installed 5 756MW of additional generation capacity, 3 899km of high-voltage transmission lines and 20 195MVA of new transformer capacity – Hydrostatic pressure test for Medupi Unit 6 planned for June 2012 • Total learner complement of 11 953 learners; 5 715 are engineering, technical and artisan learners, 5 159 are in the youth programme as well as a further 1 079 learners • In partnership with the Government hosted a highly successful Conference of the Parties (COP17), which took place in Durban in November and December 2011 In support of 6 Eskom at a glance Eskom electricity sales by customer for the • Strategic 100% state-owned electricity utility, year ended 31 March 2012 (31 March 2011) strongly supported by the government Commercial & 6.4%, 14.5%, Mining (14.5%) • Supplies approximately 95% of South Africa‟s agricultural (6.2%) 4.7%, electricity and more than 40% of Africa‟s electricity Rail 1.4%, Residential (4.7%) (1.3%) Foreign • For the year ended 31 March 2012: 5.9%, (5.9%) – Electricity sales of 224 785GWh (2011: 224 446GWh) and electricity revenues of R113.0bn (2011: R90.38bn) Industry • As at 31 March 2012: 26.1%, (26.6%) – 43 473 (2011: 41 778) employees 41.0%, – 4.9 million (2011: 4.7 million) customers (40.8%) Municipalities – Net maximum generating capacity of 41 647MW (2011: 41 194MW) Eskom’s net capacity mix – 31 March 2012 Hydro – 399 750km (2011: 395 419km) of power lines and cables Pumped Storage Coal – Moody‟s and S&P ratings: Baa2 and BBB+ with 1.4% a negative outlook (2011 outlook: stable) 3.4% ~ 42GW 4.4% net • 17.1GW of new generation capacity by 31 March maximum 85.0% 5.8% 2018, of which 5.8GW already commissioned Nuclear capacity In support of 7 Gas Eskom‟s strategic pillars support our purpose In support of 8 Corporate structure • New organisational structure created to support our new strategy and purpose • New executive management committee established to support the Chief Executive and ensure that the strategic imperatives are executed Chief executive Office of the Internal Audit chief executive Finance & Technology Customer Human Enterprise Generation Transmission Distribution Group & Sustainability services Resources development Capital commercial Line functions Service Functions Strategic functions • Line functions to focus on operations and on creating value • Service functions to safeguard assets, provide expertise on day-to-day standardised services and leverage synergies in the organisation • Strategic functions aim to bring about step changes in performance and provide broader strategic support to the group In support of 9 The structure of SA's electricity industry is changing Change in the industry value chain: • The ISMO Bill was tabled in ISMO • Eskom expects to phase in the Independent System Parliament on 13 May 2011 and Market Operator subsidiary structure during • A phased approach to be taken 2012/13 • The System and Market Operator • It is envisaged that the subsidiary division was instituted on be transformed into a separate 1 October 2011 state owned company Eskom Construction Primary Generation System Transmission Distribution Customer energy operations Service sourcing Strategic and service functions In support of 10 Performance against shareholder compact March March March Performance 2011/2012 Company level performance indicator 2012 2011 2010 area Target Actual Actual Actual Ensuring Generation capacity installed (MW) 385 535 315 452 adequate future Transmission lines installed (km) 606 631 443 600 electricity Transmission capacity installed (MVA) 500 2 525 5 940 1 630 Management of the national supply/ demand No load Ensuring reliable None None None constraints shedding electricity supply DSM energy efficiency (GWh) 1 051 1 422 1 339 n/a Internal energy efficiency (annualised GWh) 25.5 45.0 26.2 n/a Water usage (L/kWh sent out) ≤1.35 1.34 1.35 1.34 Business Cost of electricity (rand/MWh) 387.0 374.2 296.4 255.1 sustainability Debt: equity ≤2.6 1.7 1.7 1.7 Interest cover ≥1.0 3.3 1.4 0.8 % local content in new build contracts placed 52.0 77.2 79.7 73.9 Supporting the developmental Total learners in the system - engineers 1 800 2 273 1 335 955 objectives of Total learners in the system - technicians 700 844 692 681 South Africa Total learners in the system - artisans 2 350 2 598 2 213 2 144 Pursuing private Completed Setup a ring-fenced Systems and Market sector In support of by year Done n/a n/a Operator (SMO) Division within Eskom 11 participation end Eskom‟s integrated reporting journey Benchmarked (2010 annual report) against the 2012 Dow Jones Sustainability Index (DJSI) and the Integrated report aligned Johannesburg Stock Exchange (JSE) Socially with IIRC and IRC of SA Responsible Investment (SRI) index discussion papers B+ GRI declaration According to the JSE feedback on the 2010 report, Eskom “achieved a performance level that not only complies with the minimum requirements for inclusion in the index, but which is also very close to the best performer level in the category for companies with a high environmental impact” 2002 First Integrated 2011 Annual Report Integrated Annual Results (including Financial with B+ GRI declaration and Sustainability 1994 information) First Environmental 2008 Report for Integrated Annual Eskom In support of Results with first B+ 12 GRI declaration Triple bottom line: socio-economic • Eskom is a major driver of the South African economy – approximately 3% of the country‟s GDP can be attributed to Eskom • B-BBEE attributable spend amounted to R72.1 billion or 73.2% of attributable spend for the year (2011: R41.9 billion or 52.3%) • Job creation – 28 616 (2011: 21 477) individuals working on new build project sites, since 2005 of which 13 954 are employed from the local districts Supplier • 77.2% local content in the new build contracts placed for the financial development year & localisation • Since inception of the respective new build projects, the total local content committed by the Eskom supplier network amounted to R75.2 billion or 62.6% of the total contract values awarded in the new build projects • Since the inception of the build programme, 5 915 individuals have completed their skills development training and 2 342 are currently in training • A total of 155 213 (2011: 149 914) homes were electrified during the financial year Electrification • Since inception of the electrification programme in 1991, a total of 4 206 181 (2011: 4 050 968) homes have been electrified In support of 13 Triple bottom line: socio-economic • The Eskom company disability percentage is 2.49% of the total workforce • Racial equity(1) in senior management is 53.9% and in professionals and Employment middle management 65.7% equity • Gender equity(2) in senior management is 24.3% and in professionals and middle management 32.4% • Over 130 000 people employed in the Eskom cloud and over 500 000 people supported by Eskom • Over 60 000 jobs in non-mining related industries suppliers Training and • Eskom‟s learner pipeline includes 2 273 engineering, 844 technical, 2 598 development artisan and 1 079 other learners • A further 5 159 learners in the youth programme • Investment in training for the year was R1.4 billion (2011: R1.0 billion) • Eskom‟s 2011 Integrated Report was awarded 2nd place in the Ernst and Young, Sustainability Reporting Awards Corporate • Eskom is a member of the International Integrated Report Committee‟s governance pilot programme, which continues our drive and commitment of open, transparent and relevant communication to all our stakeholders Eskom • Invested R87.9 million in corporate social initiatives during the year which Development impacted 256 organisations with some 531 762 project beneficiaries Foundation during the period In support of (1) Percentage of black employees 14 (2) Percentage of female employees Triple bottom line: safety Year to Year to Year to 31 March 31 March 31 March Employee Fatalities: 2012 2011 2010 and Employees (1) 13 7 2 contractor fatalities Contractors 12 18 15 and LTIR Employee lost-time incident rate: Index (target: 0.40) 0.41 0.47 0.54 Electrical Vehicle Other Causes of Causes of fatalities(2): Contact fatalities Employees and contractors 5 9 11 Action taken: – Incorporation of safety into performance management system – Safety training and monitoring for staff Action – Launch of Zero harm campaign taken – Peer reviews of risk control interventions conducted at selected sites – Regular work stoppages to discuss and embed safety issues – Management took robust action on repeat incidents – Boot camps were held to focus on specific safety issues In support of 15 (1) Amended after issuing the annual report due to a lost time injury reported in January deteriorated to a fatality in July 2011 (2) Covers the period 1 Apr 2011 – 31 Mar 2012 Triple bottom line: environmental Year to Year to Year to Change 31 March 31 March 31 March Atmospheric emissions: 2012 2011 2010 Carbon dioxide (CO2) (Mt) 231.9 230.3 224.7 Sulphur dioxide (SO2) (kt) 1 849 1 810 1 856 Environmental Nitrogen oxide (NOx) (kt) 977 977 959 performance Nitrous oxide (N2O) (t) 2 967 2 906 2 825 Relative particulate emissions (kg/MWh sent out) 0.31 0.33 0.39 Specific water consumption (l/kWh sent out) 1.34 1.35 1.34 Number of legal contraventions: 50 63 55 Installed solar panels at Kendal and Lethabo power stations to supplement Solar panel auxiliary power consumption at these stations – the start of a programme installations that will be rolled out across our fleet of coal-fired stations ISO 14001 certification achieved at 9 coal fired power stations, Koeberg nuclear plant, Peaking Business Unit, Generation Head Office, Medupi, Management Kusile, Ingula, Power Delivery Projects and Group Capital Head Office systems The execution of the ISO 9001 implementation plan is underway, with In support of 16 good progress made on certification Triple bottom line: financial highlights(1) Audited Audited Audited year to year to year to 31 March 31 March 31 March Income statement for the period 2012 2011 2010 Revenue (Rm) 114 760 91 447 71 130 Growth in GWh sales (%)(2) 0.2 2.7 1.7 Profit for the period after tax (Rm) 13 248 8 356 3 620 Return on average total assets (%) 3.7 2.9 1.6 Revenue per kWh (cents per kWh)(3) 50.3 40.3 31.9 Operating costs per kWh (cents per kWh)(4) 41.3 32.8 28.2 Capital expenditure (Rbn)(5) 58 815 47 932 43 663 As at end of the period: Average days coal stock (days) 39 41 37 Gross debt securities issued/borrowings (Rm) 182 567 160 310 105 973 Debt: equity (ratio) 1.6 1.6 1.6 Funding plan well advanced and more than 77% of sources of funds secured Credit ratings remained unchanged but the outlook turned negative (1) Group numbers unless otherwise specified (4) Company numbers and includes depreciation and In support of (2) Compared to the same period last year amortisation costs 17 (3) Company numbers and includes environmental levy (5) Excluding interest capitalised Audited financial results Paul O‟Flaherty Finance Director Remember, we’re all connected In support of Income statement for the year ended 31 March 2012 NERSA Audited Reviewed Audited Audited target to year to half-year year to year to • 224 785GWh electricity sales 31 March 31 March to 30 Sept 31 March 31 March for the year ended 31 March Rm 2012(1) 2012 2011 2011 2010(2) 2012, an increase of 0.2% on Revenue 116 152 114 760 63 882 91 447 71 130 the 224 446GWh reported for Other income 2 791 699 395 587 552 the year ended 31 March 2011 Primary energy (47 399) (46 314) (21 858) (35 795) (29 100) • Group revenue of R114.8 billion Opex (incl. depreciation (47 683) (44 762) (21 534) (36 772) (31 719) and amortisation) (31 March 2011: R91.4 billion), Net fair value loss on an increase of 25.5% (815) (2 388) (1 126) (1 816) (4 239) financial instruments Operating profit before • Effective tax rate of 28.0% embedded derivatives 23 046 21 995 19 759 17 651 6 624 (31 March 2011: 27.9%) Embedded derivative 0 334 263 (1 261) 2 284 gain / (loss) • Net profit increased from R8.4 Operating profit 23 046 22 329 20 022 16 390 8 908 billion as at 31 March 2011 to Net finance costs (5 965) (3 963) (2 106) (4 741) (2 938) R13.2 billion as at 31 March Share of profit of equity - 2012 accounted investees 0 41 16 24 14 Profit before tax 17 081 18 407 17 932 11 673 5 984 Income tax (4 783) (5 156) (5 129) (3 261) (2 080) Loss from discontinued 0 (3) 7 (56) (284) operations Net profit for the period 12 298 13 248 12 810 8 356 3 620 In support of (1) NERSA target for 2012 is at an Eskom company level 19 (2) Restated Key performance ratios Audited Audited Audited year to year to year to Unit 31 March 31 March 31 March 2012 2011 2010 EBITDA Rm 31 130 23 609 14 624 Funds from operations (FFO) Rm 30 483 16 953 2 356 Gross debt/ EBITDA ratio 6.5 7.5 8.4 FFO/ gross debt % 15.2 9.5 1.9 Return on average total assets (1) % 3.7 2.9 1.6 Return on average equity (1) % 13.9 10.7 5.6 Working capital ratio ratio 0.8 0.9 0.9 Revenue per kWh (electricity sales) cents per kWh 50.3 40.3 31.9 Costs per kWh (electricity business) cents per kWh 41.3 32.8 28.2 Bad debt as percentage of revenue % 0.5 0.8 0.8 Average debtor days: Customer service large power users days 21.8 18.9 18.9 Customer service small power users (2) days 42.9 45.1 40.5 Key industrial and international days 14.4 15.5 15.4 customers (3) (1) Historic In support of (2) Excluding Soweto debt 20 (3) Excluding disputes Earnings before interest and tax (EBIT) Rm 1 595 (10 519) 22 487 137 689 112 (572) (3 437) (1 414) (3 139) 22 329 16 390 2011 Tariff GWh sales Other Other Net fair value Embedded Primary Manpower Depreciation Other 2012 operating increase volume growth revenues income changes in derivatives energy costs and operating operating profit before financial amortisation expenses profit before finance costs instruments expense (1) finance costs (1) Includes net impairment losses In support of 21 EBIT before embedded derivatives Cents/kWh(1) 50.5 40.5 32.1 9.5 7.6 0.7 0.7 1.3 2.5 (3.0)(3.5)(4.1) (2.1) (0.8) (1.0) (6.1) (6.8) (5.8)(6.5) (7.9) (8.7) (13.3) (16.0) (20.6) (28.2) (32.8) (41.3) Total Primary Employee Depreciation Other Total Other income Net fair value EBIT (before revenue energy benefit and operating operating loss on financial embedded (2) costs expense amortisation expenses costs instruments, derivatives) expense (3) excluding embedded derivatives 2010 2011 2012 (1) Numbers represent the annual Eskom Company results In support of 22 (2) Total revenue includes non-electricity revenues (3) Other operating costs include repairs and maintenance costs of 4.0 c/kWh for 2012 (2011: 3.3 c/kWh and 2010: 2.3 c/kWh) Improving profitability • Improving profitability mainly as a result Free funds from operations (FFO) (1) of revenue growth which is primarily Rm driven by an increase in tariffs 30 483 • Revenue growth has been offset by 16 953 escalating operating expenditures mainly due to an increase in primary energy costs 2 356 Mar-10 Mar-11 Mar-12 • Gross finance costs continue to rise as additional borrowings are raised to finance the capital expansion programme Net profit (1) • Net surplus of R13.2 billion for the year to Rm be reinvested in the business 13 248 • Eskom has held a moratorium on 8 356 dividend payments since 2008 due to its 3 620 capital expansion programme Mar-10 Mar-11 Mar-12 (1) For the years ending 31 March 2010, 31 March 2011 and 31 March 2012 In support of 23 Sales and revenue growth • 224 785GWh sales for the year: Electricity sales (GWh) – represents a 0.2% increase compared GWh to last year; and 218 591 224 446 224 785 – below the budgeted sales of 227 073GWh (budgeted growth of 1.2%) • Sales growth (in GWh) affected by: – Industrial action in the metal and gold industries Mar-10 Mar-11 Mar-12 – Winter demand from large power users was significantly below Electricity revenue (c/kWh) expectations Cents/ kWh – While the last winter‟s cold snaps 50.3 were severe, they were relatively brief 40.3 – Demand patterns also reflect weaker than expected economic activity 31.9 • Revenue per kWh increased by 24.8% primarily as a result of the 25.8% tariff increase granted by NERSA Mar-10 Mar-11 Mar-12 In support of 24 MYPD2 - NERSA approved a lower tariff increase • NERSA approved Eskom‟s revised tariff MYPD2 average tariff increases increase for the final year of MYPD 2, 35% beginning 1 April 2012, to an average 31.3% increase of 16% (NERSA had previously approved an increase of 25.9% for 30% 27.5% 2012/2013) 25.8% 25.9% 24.8% 25% • The revised tariff strives to achieve a % change in tariff balance between the interests of the South African economy, our customers, 20% credit providers and shareholder 16.0% 15% • Revised tariff based on the acceptance of key principles: – Not to compromise Eskom‟s financial 10% viability – Continued commitment to migrate to 5% cost reflective tariffs – Price path certainty within extended 0% time frame FY FY FY FY FY FY 08/09 09/10 10/11 11/12 12/13 12/13 (Original) (Revised) In support of 25 Operating expenses(1) Primary Energy Costs Employee Benefit Expenses Rm Cents/ kWh Rm Cents// kWh 20.6 9.0 15.9 7.4 13.3 46 314 6.7 20 132 35 795 16 695 29 100 14 694 Mar-10 Mar-11 Mar-12 Mar-10 Mar-11 Mar-12 Depreciation & Amortisation Expenses(2) Other Operating Expenses(3) Rm Cents/ kWh Rm 6.8 Cents/ kWh 5.4 4.2 4.9 3.6 15 209 2.9 12 070 10 649 9 421 8 007 6 376 Mar-10 Mar-11 Mar-12 Mar-10 Mar-11 Mar-12 (1) Cents/KWh figures are calculated based on total electricity sales numbers (2) Including net impairment loss (3) Including managerial, technical and other fees, R&D, operating lease expense, auditor‟s remuneration, repairs and maintenance In support of 26 Analysis of primary energy costs • Primary energy costs increased by 29.2% Primary Energy Costs (c/kWh) (1) from 15.9c/kWh (31 March 2011) to 20.6c/kWh for the year to 31 March 2012 Primary energy costs 15.95 as at 31 March 2011: Cost of coal burnt up 33% of the increase 1.54 17.7% per ton Cost of using IPPs up 19% of the increase 0.88 154% to R3.3bn DMP(3) & co-generation 0.87 19% of the increase costs increased by 923%(4) Environmental levy 12% of the increase 0.55 increase of 0.5c/kWh OCGT(2) costs increased 10% of the increase 0.49 281% to R1.5bn Other items in aggregate contributed 7% of the increase 0.32 (1) Primary energy costs in c/kWh based on electricity sales (2) Open cycle gas turbine (OCGT) Primary energy costs as at 31 March 2012: 20.60 (3) Demand market participation (DMP), including power buybacks (4) Costs increased from R0.2 billion last year to R2.2 billion this year In support of 10 12 14 16 18 20 27 cents / kWh Hedging policy • Primary energy hedging: Embedded Derivatives (Loss) / Gain – No formal hedging against increases Rm in coal prices – Limited correlation with International 2 284 Coal Prices • Commodity derivatives hedging: 334 – Hedging in place to mitigate potential losses on embedded derivatives – Discussions continue with relevant (1 261) parties to find a solution on the Mar-10 Mar-11 Mar-12 remaining special pricing agreements • Foreign currency hedging: Net Fair Value Loss on Financial Instruments – All foreign currency exposure over Rm R50 000 is hedged – Uses inter-alia forward exchange contracts with short maturities and roll-over at maturity as well as cross- (1 816) currency swaps (2 388) – 87% of total debt as at 31 March 2012 has a fixed interest rate component – R69.4 billion of derivatives held for (4 239) risk management as at 31 March Mar-10 Mar-11 Mar-12 In support of 2012 (2011: R58.7 billion) 28 Group audited financial position – growth in property, plant and equipment through debt raised Rm Assets 450 000 400 000 Other assets: R25 313 350 000 Working capital: R25 911 Other assets: R19 847 Liquid assets: R40 480 300 000 Working capital: R21 682 250 000 Liquid assets: R49 892 Other assets: R19 680 Working capital: R18 938 200 000 Liquid assets: R19 612 Property, plant 150 000 Property, plant and equipment: Property, plant and equipment: R290 661 100 000 and equipment: R236 724 R187 905 50 000 0 March 2010 March 2011 March 2012 Rm Equity and Liabilities 450 000 Net debt to equity ratio: 1.6 400 000 Net debt to equity ratio: 1.6 350 000 Equity: R103 103 Net debt to equity ratio: 300 000 1.6 Equity: R87 259 250 000 Other liabilities: R62 753 Equity: R70 222 Other liabilities: R55 149 200 000 Working Capital: R33 942 Working Capital: R25 427 150 000 Other liabilities: R48 657 Working Capital: R21 283 Debt securities Debt securities 100 000 and borrowings: Debt securities and borrowings: and borrowings: R160 310 R182 567 50 000 R105 973 0 March 2010 March 2011 March 2012 In support of 29 Revaluation of assets – proforma if aligned to regulatory asset base Historical After Historical After cost: revaluation: cost: revaluation: For the year to For the year to For the year to For the year to Rm 31 March 2011 31 March 2011 31 March 2012 31 March 2012 Total profit/ (loss) for the year Historical profit/ (loss) for the period 8 356 8 356 13 248 13 248 Adjustments: Depreciation and amortisation expense - (16 898) - (14 368) Net impairment loss and other operating expenses - (27) - (250) Net finance cost - (8 589) - (4 999) Income tax - 7 144 - 5 493 Adjusted profit after revaluation for the year 8 356 (10 014) 13 248 (876) Equity (cumulative impact) Historical closing equity balance - 87 259 - 103 103 Adjustments: Additional comprehensive loss for the year - (35 117) - (49 241) Revaluation of property, plant and equipment - 332 482 - 277 703 Deferred tax on equity adjustments - (93 095) - (77 757) Adjusted closing Equity balance 291 529 253 808 Statement of financial position Property, plant and equipment 236 724 520 432 290 661 499 973 Ratios Electricity operating costs - cents per kWh (Company) 32.8 40.3 41.3 47.8 Interest cover ratio(Group) 1.5 (0.2) 3.3 0.7 Return on assets % (Group) 2.9% (1.7)% 3.7% (0.1)% Debt: equity ratio (Group) 1.6 0.5 1.6 0.7 In support of 30 Debt maturity and leverage Gross Debt/EBITDA ratio Debt & Borrowings Maturity Profile(1) 1 year to 10 8.4 years 7.5 35.2% 6.5 More than 10 years 59.2% Mar-10 Mar-11 Mar-12 Within 1 year 5.7% Interest Cover ratio FFO as a % of Gross Debt 15.2 3.3 9.5 1.5 0.9 1.9 Mar-10 Mar-11 Mar-12 Mar-10 Mar-11 Mar-12 In support of 31 (1) Represents the repayment of nominal capital in the strategic and trading portfolio. Data as at 31 March 2012. Debt maturity profile Strategic & trading portfolio nominal and interest cashflows as at 31 March 2012 Rbn Rbn Estimated average net 45 300 finance cost per annum over the next six years: 40 R23.5 billion 250 35 30 200 25 150 20 15 100 10 50 5 0 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 Total capital Total interest Cumulative nominal capital total In support of 32 Group audited cash flows(1) Cash flows from operating activities Cash flows utilised in investing activities Rm Rm 38 529 22 747 (47 817) (46 458) 9 411 (60 013) Mar-10 Mar-11 Mar-12 Mar-10 Mar-11 Mar-12 Cash flows from financing activities Cash and cash equivalents at period end Rm Rm 60 002 39 756 16 539 19 450 12 181 15 541 (4 256) 12 087 (39 672) Mar-10 Mar-11 Mar-12 Mar-10 Mar-11 Mar-12 Other financing Net debt issued In support of (1) Cash flows from operating and investing activities for 2010 have been restated. R127m cash and cash 33 equivalents resulting from common control transaction adjusted in 2011/12 cash flow statement Summary of audited cash flows Rm Operations Financing Investing 17 497 (26) (59 487) 22 308 38 529 (5 769) (5 290) (526) 127 19 450 12 087 - 31 Mar 2011 Cash Net repayment Net interest Debt Raised Investment in Other Capex Other Cash & cash 31 Mar 2012 Cash & cash generated by of borrowings repayments securities financing expenditure investing equivalents Cash & cash equivalents operations from common equivalents control In support of transaction 34 Funding plan – R300 billion from 1 April 2010 to 2017 Amount Funding Currently Draw-downs supported by Source of funds sourced secured to date Government Rbn Rbn Rbn Rbn Bonds 90.0 32.9 32.9 20.4 Commercial paper 70.0 70.0 20.0 0.0 Export Credit Agency backed 32.9 32.9 15.6 0.0 World Bank loan 27.8 27.8 5.6 27.8 AFDB loan 20.9 20.9 5.9 20.9 DBSA loan 15.0 15.0 3.0 0.0 Shareholder loan 20.0 20.0 20.0 20.0 Other sources 23.4 13.2 0.8 4.9 Totals 300.0 232.7 103.8 94.0 Percentages 77.6%(1) 44.6%(2) 40.4%(2) In support of (1) As a percentage of the R300bn funding sourced 35 (2) As a percentage of the currently secured total Credit ratings as at 31 March 2012 Entity Rating Status Moody‟s S&P Fitch Foreign Currency Baa2 BBB+ - Local Currency Baa2 BBB+ A Eskom Holdings ZAR Long-term - AA AAA SOC Ltd ZAR Short-term - A1 F1+ Outlook Negative (1) Negative (2) Stable/Negative(3) Stand-Alone Ratings Ba3 B None Foreign Currency A3 BBB+ BBB+ Local Currency A3 A+ A RSA Govt. ZAR Long-term - AAA AAA ZAR Short-term - A1 F1+ Outlook Negative (1) Negative (2) Negative (3) (1) During November 2011 Moody‟s lowered its outlook on Eskom‟s and South Africa‟s sovereign credit rating to negative from stable (2) During March 2012, S&P lowered its outlook on Eskom‟s and South Africa‟s sovereign credit rating to negative from stable In support of (3) During January 2012 Fitch lowered its outlook on Eskom‟s local currency rating as well as South Africa‟s sovereign credit 36 rating to negative from stable. Eskom‟s ZAR long- and short-term rating statuses remained „stable‟ Construction Paul O‟Flaherty Finance Director Switch from traditional light bulbs to CFLs or LEDs In support of New generation capacity and transmission networks 2005–2018 Mpumalanga Return-to-service (RTS) Base load Peaking & renewables refurbishment Transmission development • None • Nuclear–site • Sere (100MW) • Refurbishment and air • 60 Grid strengthening development and front • Pilot Concentrated Solar quality projects projects end planning Power (100MW) In • Biomass • Photovoltaic (Own use*) • Primary Energy projects (Road & Rail) • Komati (1 000MW) • Medupi (4 764MW) • Ankerlig (1 338.3MW) • Arnot capacity • 765kV projects Construction/ • Camden (1 520MW) • Kusile (4 800MW) • Gourikwa (746MW) increase (300MW) • Central projects complete Under • Grootvlei (1 180MW) • Ingula (1 332MW) • Matla refurbishment • Northern projects • Solar PV installations • Kriel refurbishment • Cape projects at MWP (0.4MW) • Duvha refurbishment • 3 700MW • 9 564MW • 3 518MW (1) • 300MW • ~ 4 700km Commissions of new stations First Unit Last Unit • ~ 17 082MW of new capacity (5 756MW installed and commissioned) Medupi 2013 2017 • ~ 4 700km of required transmission network (3 899.3km installed) Kusile 2014 2018 • 20 600MVA planned (20 195MVA installed) Ingula 2014 2014 Note: * Solar PV Plants at Lethabo (0.575MW) & Kendal (0.620MW) are in operation phase Medupi is the first coal-generating plant in Africa to use supercritical power generation technology In support of 38 (1) Includes 1.62 MW for Solar PV (MWP, Lethabo & Kendal) Source: Eskom Group Capital Division (Construction Management) Build progress to date To date, a large amount of construction work has been completed, adding ~ 5 756MW of capacity, ~ 3 899km of transmission network and ~ 20 195 of MVAs Megawatts MW of capacity 535 452.5 315 1 769.9 1 043 5 756.4 1 351 0 290 Transmission Km line 631.3 443.4 600.3 418.3 480.0 430.0 3 899.3 659.0 237.0 Substations MVAs 2 525 5 940 1 375 1 630 1 355(1) 20 195 5 280 1 090 1 000 FY FY FY FY FY FY FY FY Total 2004/5 2005/6 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12 In support of 39 (1) MVA – 2007/08 (1 355 MVA) includes Transmission contribution as well as Group Capital (1 295 MVA) Significant progress in build programme – began in 2005 with completion in 2018 % of estimated total cost spent as at 31 March 2012 33.2% R billion spent and to be spent on the capital expansion R118.5bn programme (excluding borrowing costs capitalised) 60.5% R91.2bn In addition, we plan to spend more than R40 billion over the next 5 years to strengthen, refurbish and expand our Distribution network R79.2bn R36.0bn 50.4% 46.5% 91.8% R33.5bn(1) R23.8bn R25.0bn R55.2bn R16.6bn R2.0bn R39.3bn R12.7bn R23.0bn R16.9bn R11.1bn Medupi Kusile Ingula Return to service Transmission Completed Remaining In support of 40 (1) Includes transmission costs for Ingula, Kusile and Medupi Current planned capital expansion plan Year to Year to Year to Year to Year to Year to Year to Project 31 March 31 March 31 March 31 March 31 March 31 March 31 March Total 2013 2014 2015 2016 2017 2018 2019 Grootvlei (return to service) 30 30 Komati (return to service) 200 200 Camden (return to service) 30 30 Medupi (coal fired) 794 794 1 588 794 794 4 764 Kusile (coal fired) 800 800 800 800 1 600 4 800 Ingula (pumped storage) 1 332 1 332 Sere wind farm (renewable) 100 100 Total (MW) 260 894 2 926 2 388 1 594 1 594 1 600 11 256 In addition, Eskom has commenced the development of a 100MW CSP plant In support of 41 Operations Brian Dames Chief Executive If you’re not using it, switch it off In support of Primary Energy – operational performance • Highlights: – Coal by rail to Majuba and Camden increased by 1.4 million tons to 8.5 million tons for the year – Establishment of the rail line and inland coal terminals in Mpumalanga resulted in greater flexibility – Conclusion of a memorandum of understanding with a mining coal supplier, Sekoko Resources (Pty) Ltd in the Waterberg – Construction of Komati Water Scheme on track for completion at the end of 2012 and the Department of Water Affairs began construction of Mokolo and Crocodile water augmentation project – The Primary energy division has achieved ISO 9001 certification as at the end of March 2012 and are working towards ISO 14001 in the coming financial year In support of 43 Primary Energy – operational performance • Challenges: – Road fatalities involving the public and coal transporters continue despite safety initiatives – Maintaining coal stock levels at acceptable levels – Purchasing more expensive coal due to the poor volume performance of cost-plus mines(1) – Achieving contractual performance on all coal supply agreements as coal quality is poor – Road construction progress was affected by unreliable bitumen supply and delays in water-use licences In support of 44 (1) Cost-plus mines have contractual arrangements through which Eskom pays all capital and operating costs to mine the coal, plus an annuity return to the mining house Primary Energy – road to rail migration plan • The strategy focuses on mode selection and infrastructure and short term truck reductions • Since 2009, the implementation of the strategy has resulted in the following successes: – An innovative containerised rail solution has been implemented in Camden – Tutuka coal terminal will receive its first coal in July 2012 – Rail deliveries have increased steadily Coal road to rail migration (Mt) 9 8 8.5 8.2 7 7.1 6 5 5.1 4 4.3 3 2 1 0 Year to Year to Year to Year to Year to 31 Mar 2009 31 Mar 2010 31 Mar 2011 31 Mar 2012 31 Mar 2012 In support of Target 45 Generation – operational performance • Highlights: – Coal-related energy losses decreased compared to the previous year – Received praise from the World Association of Nuclear Operators for Eskom‟s proactive approach in assessing Koeberg‟s state of readiness in response to the Fukushima review guidelines – The number of unplanned unit trips which is an indication of reliability has improved to 3.19 (2011: 3.62) – Installed gaseous-emission monitoring systems on one unit of each coal-fired power station In support of 46 Generation – operational performance • Challenges: – Balancing the conflicting needs of shutting down power plants to perform maintenance with generating electricity to meet demand – Unplanned outages on Koeberg unit 2, the long-term shutdown of Duvha unit 4 and unplanned outages at coal-fired power stations severely affected key performance indicators – Coal-related energy losses at Matla, Tutuka, Duvha and Arnot power stations remain a concern and may increase if mines continue to deviate from coal-quality specifications – The tight system, poor coal and under-performing plant resulted in a high number of exemptions against emissions standards In support of 47 Slide required with graph and comments on performance Generation – technical performance • EAF performance deteriorated in 2012 Unplanned capability loss factor (UCLF(1)) % compared to the previous year 9 8 8.0 • The damage to Duvha unit 4 power station, 7 6.5 6 contributed more than 1% to the UCLF 5 6.1 5.1 5.1 • Boiler tube failures remain the significant 4 4.4 3 contributor to total unplanned capacity 2 losses 1 0 • Coal quality improved. It is important to Year to 31 Mar Year to 31 Mar Year to 31 Mar Year to 31 Mar Year to 31 Mar note though that the effects of the previous 2008 2009 2010 2011 2012 batches of poor quality coal continue to Energy availability factor (EAF(2)) % effect the performance of some of the units 95 as the damage that was caused will take 85 84.1 84.9 85.3 85.2 84.6 some time to fix 75 82.0 • There has been an improvement in the 65 reliability of Eskom‟s plant fleet although 55 Koeberg‟s performance was negatively 45 impacted by a forced outage to repair a 35 hydrogen leak related to the generator Year to Year to Year to Year to Year to 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar stator coolant system 2008 2009 2010 2011 2012 Actual Annual target In support of 48 (1) EAF measures plant availability, plus energy losses not under the control of plant management (2) UCLF measures the lost energy due to unplanned production interruptions resulting from equipment failures and other plant conditions Generation - preventative maintenance • A typical coal-fired generating unit requires certain necessary routine maintenance to ensure that it accedes in its technical performance requirements, is safe to operate and does not violate any environmental laws Activity Cycle time (years) Duration (days) General Overhaul (GO) 6 - 12 40 - 60 Interim Repairs (IR) 2-3 14 - 35 Mini – General Overhaul (MGO) 6 28 Boiler Inspection (BI) 1 – 1.5 7 - 14 Statutory inspection and test (ST) 6 35 Main steam pipe work 120 GO IR BI + ST MGO 18 18 18 18 18 months months months months months 6 months In support of BI MGO IR 49 Transmission – operational performance • Highlights: – Substantially improved the availability of transmission assets – Improved number of line faults per 100km performance – Only one major incident(1) was recorded, less than the maximum of two as specified in the key performance indicators – Identified future trading opportunities in the Southern African region to assist in alleviating potential shortfalls in the medium-term electricity supply • Challenges: – Transmission interruption performance deteriorated during 2011/2012: • The „number of system minutes lost ≤ 1‟ was 4.7 against a target: of ≤ 3.4 • The „number of interruptions‟ recorded was 48 against a target of ≤ 35 – High levels of conductor, equipment and electricity theft are affecting plant performance and increasing cost – The number of protected bird mortalities due to collisions with power lines In support of 50 (1) Major incident: This is an interruption with a severity ≥ 1 system minute Transmission – technical performance • Both the number of interruptions and Severity of interruptions (System minutes lost ≤ 1) 5 the system minutes (1) lost ≤ 1 4.7 performance deteriorated during the 4 4.2 4.1 year 3 3.6 3.4 • This was primarily due to risks 2 2.6 associated with the execution of 1 increased expansion and refurbishment projects at operational 0 Year to Year to Year to Year to Year to sites 31 Mar 2008 31 Mar 2009 31 Mar 2010 31 Mar 2011 31 Mar 2012 • One major incident was recorded on Number of major incidents 6 the Transmission network during the year (target: ≤ 2) 5 5 4 3 3 2 2 1 1 1 0 Year to Year to Year to Year to Year to (1) System minutes: Is a measure of the severity of interruptions to customers. 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar One system minute is equivalent to the loss of the entire system for one 2008 2009 2010 2011 2012 minute at annual peak In support of Actual Annual target 51 Independent power producers • Eskom is committed to facilitating the entry of Independent Power Producers (IPPs) and acknowledges the role that IPPs must play in the South African electricity market • To date Eskom has contracted 1 008MW of installed capacity from IPPs • The amount paid for this capacity amounted to R3 250 million in 2011/12 (2010/11: R1 264 million) at an average cost of 0.77R/kWh • Eskom has actively supported the Department of Energy in finalising its request for proposal documents and power purchase agreements for the renewable energy IPP programme. The request for proposal document calls for 3 725MW of renewable energy technologies to be in commercial operation between mid-2014 and the end of 2016 – 28 preferred bidders announced for the first submission with a combined 1 416MW contribution – 19 preferred bidders announced for the second round of submissions with a combined 1 275MW contribution Target Actual Actual Actual Cumulative IPP installed capacity (MW) 2012 2012 2011 2010 Medium term power purchase programme 373 373 - Municipal base load generation 515 515 - Short term energy purchases 120 - - Total 1 500 1 008 888 0 IPP power purchased (GWh) n/a 4 107 1 833 0 In support of 52 Distribution – operational performance • Highlights: – Significant improvement of the system average interruption duration index (SAIDI) performance and marginal improvement of the system average interruption frequency index (SAIFI) performance during the year – Electrification connections during the year were 155 213 versus a target of 125 377 • Challenges: – Safety performance is a serious concern especially employee and contractor fatalities – High levels of theft of equipment and electricity including illegal connections affects plant performance and increases costs – Collisions and electrocutions of birds on distribution power lines – Acquisition of land and servitudes for electricity infrastructure In support of 53 Distribution – technical performance • SAIDI performance improved to 45.8 SAIDI (hours/annum)(1) 60 hours per annum against a target of 55.5 54.4 49.0 hours per annum 55 51.5 52.6 • The improved SAIDI performance is 50 49.0 45.8 attributed to the benefits of the 45 reliability improvement investments, 40 which include the focussed attention to and improved management of outages 35 Year to Year to Year to Year to Year to 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar • SAIFI performance improved to 23.7 2008 2009 2010 2011 2012 interruptions per annum, although the SAIFI (number/annum)(2) target of 22.0 interruptions per annum 30 25.4 24.7 25.3 was not achieved 25 24.2 23.7 22.0 20 15 10 5 0 Year to Year to Year to Year to Year to 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar (1) SAIDI: System average interruption duration index 2008 2009 2010 2011 2012 (2) SAIFI: System average interruption frequency index In support of Actual Annual target 54 Customer services • Directly provides electricity to about 45% of all end users in South Africa • Two main types of customers: – Redistributors: Mainly municipalities that sell electricity to end customers. – Direct customers: Industrial, commercial, mining, agricultural and residential consumers • Eskom top Mining and Industrial customers (previously KSACS) deals with customers using ≥100GWh of energy per year. At 31 March 2012, KSACS had approximately 146 customers accounting for 34% of total Eskom electricity revenues • One customer has a supply contract indexed to commodity prices • A member of Southern African Power Pool (“SAPP”) Key figures for the year to 31 March 2012 Sales Split Gross Electricity Revenue Split Number of customers Total: 224 785GWh (224 446GWh)(1) Total: R112 999m (R90 375m)(1) Total: 4.9 million (4.7 million)(1) Commercial , Agricultural Residential , 1.73% (1.81%) 7.7%, (7.7%) 5.5%, (5.3%) Foreign, 5.9%, (5.9%) Agricultural , 4.1%, (4.0%) Commercial Residential, Industry, International , Other 4.7%, (4.7%) 26.1%, (26.6%) 1.02% (1.05%) 0.19% (0.12%) 4.5%, (4.6%) Traction , 1.7%, (1.5%) Mining, 14.5%, (14.5%) Mining , 14.4%, (14.3%) Commercial & Agricultural, 6.4%, (6.2%) Traction, 1.4%, (1.3%) Redistributors Redistributors, Industrial , 40.4% (40.0%) 41.0%, (40.8%) Residential 21.7%, (22.6%) In support of 97.06% 55 (97.02%) (1) Numbers in brackets refer to the year to 31 March 2011 Customer services – operational performance • Highlights: – Secured a number of electricity buy-back deals amounting to 817MW – Successfully encouraged customers to reduce electricity load on short notice when required – Media advert “Power Alert” continued to drive savings in critical times. During the year average demand savings of 261MW was attained during “red” periods. The overall savings of Power Alert translate to 50.6GWh of energy savings – Accelerated the solar water-heating rebate programme. In the current year 158 175 units were verified – Rolled out 49M, a marketing campaign aimed at promoting long-term behavioural change in favour of energy savings – Introduced alternative incentive programmes for managing demand In support of 56 Customer services – operational performance • Challenges: Weighted customer service index(1) – Ensuring customers are updated on their quality of supply as well as planned 86 85.8 outage plans 85.6 – High electricity price increases negatively 85 85.1 84.7 affect the profitability and financial 84.4 84 sustainability of Eskom‟s customers and their ability to pay their electricity bills 83 – Management of Soweto outstanding debt – Ensuring that tariffs are cost reflective 82 82.1 taking into account size, locality and time of use by customers as well as addressing 81 cross subsidisation issues – Roll-out of the Energy Conservation 80 Year to Year to Year to Year to Year to Scheme – ensuring that all affected 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar 2008 2009 2010 2011 2012 customers understand the process and are comfortable with the reference Actual Annual target consumption (1) Eskom uses a composite index to measure the service delivered to its residential, small and medium customers. The index In support of combines the results of two external customer service perception surveys and four internal customer service process 57 measures. Integrated Demand Management • The accumulated verified demand savings Cumulative verified demand savings (MW) for the combined financial years 2005 to 3 500 2012, is 2 997MW (this is equivalent to Demand savings (MW) 3 000 five units worth of output of a typical power 2 500 station ) (1) 2 000 • The total evening peak demand savings 1 500 achieved of 365MW against a target of 1 000 313MW (2011: 354MW) 500 – The CFL roll-out programme 0 contributed 215MW to verified savings 2005 2006 2007 2008 2009 2010 2011 2012 • The annualised energy savings for this Verified MW Eskom Target financial year are 1 422GWh against the Energy Savings (GWh) target of 1 051GWh • Eskom‟s aim is to improve the energy 1 600 1 422 Annualised energy savings 1 400 1 339 efficiency of its facilities (over plants and 1 200 1 051 buildings) through the undertaking of 1 000 (GWh) energy audits and efficiency programmes 800 focusing on lighting, heating, ventilation 600 and air-conditioning (HVAC): 400 – For the year internal energy demand 200 0 savings of 1.4MW and energy savings 2011 2012 2012 Target In support of of 45GWh were achieved 58 (1) A single power station unit contributes about 600MW to national electricity supply Energy losses and theft • Energy losses reflect the difference between the quantity of energy sent out from the power stations and the quantity sold to the various customers at the end of the value chain Target % Actual % Actual % Actual % Energy losses 2012 2012 2011 2010 Distribution loss ≤6.07 6.32 5.68 5.87 Transmission loss ≤3.40 3.08 3.27 3.27 Total Eskom loss ≤8.75 8.65 8.25 8.45 • Eskom loses an estimated R1.2 billion annually due to energy theft and related activities • High levels of theft of copper and pylon persist, which are affecting plant performance and increasing costs • Operation Khanyisa, a public-awareness campaign about legal power usage, is now in full operation and South Africans have heeded the call to report electricity theft and illegal electricity sales In support of (1) 12 month moving average 59 (2) Transmission losses are all technical losses Concluding remarks Brian Dames Chief Executive Watch out for Power Alert and switch off appliances you don’t need In support of Priorities for next year • Safety • Keeping the lights on – Ensuring security of supply in partnership with South Africans – Ensuring demand side savings by both our customers and our own facilities • Ensure financial sustainability – MYPD3 application and country choices • Deliver on the build programme – Special focus on the commissioning of the first unit of Medupi • Improve operations by focusing on the continuation of the: – Next phase of the implementation of the Back to Basics programme (Processes, Systems and Tools) and – Implementation of the Generation (Reducing our unplanned capability load factor (UCLF) and ensuring the reliability of our power stations), Distribution and Customer Centricity Excellence Programmes • South African Energy – Separate unit formed to investigate regional power opportunities In support of 61 Conclusion • In 2013 Eskom will be celebrating our 90th anniversary. For nine decades, Eskom has been adding quality to the lives of South Africans and enabling the country‟s economic growth • Eskom‟s progress equates to that of South Africa‟s advancement. In this regard, Eskom‟s success is crucial • Embrace energy saving as a national culture, joining the global journey towards a sustainable future In support of 62 Insert image here Thank you Websites and email contacts Eskom website: www.eskom.co.za Eskom email: contact@eskom.co.za Investor relations: investor.relations@eskom.co.za Eskom media desk: mediadesk@eskom.co.za Eskom environmental: envhelp@eskom.co.za Eskom annual report: www.eskom.co.za/IR2012/ Eskom Development Foundation: www.eskom.co.za/csi