Eskom Gas Strategy Eskom and Sasol Memorandum of Understanding September 2024 South Africa like many countries around the world is grappling with the energy trilemma Energy Security Impact of these interlinkages in decision • Unreliable performance from installed Eskom making base leading to constraint energy supply ▪ Decisions that impact the energy sector must be viewed along the dimensions of energy security, affordability and sustainability ▪ Relative priority placed on each dimension evolves over time based on the context ▪ As a developing country energy security and affordability takes more priority than sustainability in the short term ▪ Decision making during this dynamic Energy Sustainability context needs to enable sufficient Energy Affordability / Access flexibility to respond to changing • 84% of electricity generation fossil fuel based, • SA’s socio economic status and high context 47% contribution to GHG emission levels of employment • The transition of a country’s energy system • GDP growth negatively impacted by towards mitigating and avoiding potential energy crisis environmental harm and climate change impacts Sources: Five minute guide to Energy Trilemma (ARUP); WEC Energy Trilemma; Power System Laboratory (Goran Andreson) Eskom’s transition from fossil fuel to cleaner energy sources will not be an overnight change Just Energy Transition (JET) Long term objectives • Pursue financial and operational Importance 1 2 sustainability Level of JET Objectives • Facilitate a competitive future Turnaround Objectives energy industry • Optimise repurposing and • Operations recovery repowering plans • Modernize our power system • Improve the income statement • Implement an integrated socio-economic strategy • Strive for net zero emissions by • Strengthen the balance sheet 2050 • Business separation • Actively pursue renewable energy allocation • People and culture Short-term Medium-term Long-term Eskom’s strategy is not binary, we need a balance between optimal operation of the coal fleet and transitioning to clean energy. Finding an optimal solution to aid in the transition and provide a second life to the stations will be critical JET – Just Energy Transition Reduction in coal baseload capacity requires new dispatchable sources of generation (gas, nuclear) to complement intermittent renewables Expected changes in Eskom’s energy mix Coal Nuclear Gas / LF Hydro Pump Storage Renewable Projects Total capacity and technology mix, Calendar year¹ Current Projected Key Insights • Eskom’s fleet constitutes about ~84% running on coal, that is forecasted to decrease by 10 GW over the next decade 36% 59% • Increasing share of wind and solar energy, pose challenges as they are intermittently available and may 84% 13% not be reliably to sustain the grid during periods of high demand 10% 4% 1% 6% • Based on current technology, Gas is the most viable 6% 1% technology for clean dispatchable energy and grid 5% balancing due to its relatively low capital costs and fast 34% 4% 25% ramp rates 5% 1% 6% 2024 2030 2035 Includes aspirational and unfunded projects as well as nuclear new build Footnote: 1 New capacity projects are represented by installed capacity Source: Clean Energy Project Funnel and Roadmap 26 Aug 2024 The rationale for our gas strategy generators is informed by a number of considerations ▪ Provides viable alternative for decreasing baseload electricity, and repowering option Dispatchability ▪ Gas plants are dispatchable and will be required to support high penetration of renewables Environmental ▪ Contributes to the country’s energy transition and decarbonisation Impact goals - Natural gas is cleaner than coal, leading to reduced emissions ▪ Reigniting gas industry will have a positive impact on the economy, Socio Economic providing a repowering option for coal plants, and creating job opportunities ▪ Conversion of our diesel peaking plants to gas to reduce costs - natural gas is Efficiency more cost-effective than diesel, resulting in lower operational costs for power generation. 5 Thank you Confidential Independent Review 6