Winter Outlook Briefing May 2023 CC Executive summary • Despite several positive developments to address Eskom’s challenges, loadshedding has intensified with a devastating impact on our economy. • The winter outlook indicates an increased risk of supply shortfall against expected demand, with our worst-case scenario indicating that loadshedding could intensify to stage 8, if our interventions are not successful. • The increase in loadshedding levels does not mean there is a greater risk of a national blackout, instead loadshedding is one of the processes we use to prevent such an occurrence by managing the demand for electricity at a given time. • Efforts to reduce and ultimately end loadshedding require us to work together to drive interventions both on the supply side (improving available generation) and demand side (reducing peak demand) • Eskom remains committed to increase the amount of available generation, with a specific focus over the winter period, by: • Reducing our unplanned losses in the generation fleet • Managing planned maintenance to the minimum level of maintenance required over winter • Increasing diesel burn at the open cycle gas turbines (OCGT) • We are driving the Generation Operational Recovery Programme with the support of our Board to sustainably recover the performance of the plants over the next 24 months. • Leadership stability, skills interventions, partnering with industry and other Government departments are some of the enablers we have put in place to ensure we succeed. • Despite all these efforts, more needs to be done to reduce the level of electricity demand specifically during the peak. We believe the public can greatly support efforts to mitigate impact of the energy crisis especially over the winter period CC Despite several positive developments to address Eskom’s challenges, loadshedding has intensified impacting the economy Developments Impact Establishment of NECOM, • Intergovernmental structure established, followed by the President’s EAP and appointment of Energy Action Plan overseen by the Electricity Minister electricity Minister Impact MES / air quality • Independent advisory panel to assess impact of MES / air quality consultation panel challenges and consider mitigations to security of supply • Exemption for Kusile temporary solution • 2022 experienced the highest levels of Positive developments in • NERSA determination with NT debt relief solution is a positive loadshedding Eskom’s financial challenges development towards a sustainable ESI • Reduced Q3 real GDP growth by 2,1 • EAF has deteriorated from target of 60% at the time and currently 52% percentage points • Load losses associated with Flue gas duct incident at Kusile and delays to • R300 bn cost to the EAF deterioration Koeberg resulting in loss of  3080 MW generation capacity economy • ~ 5% of SA GDP lost in 2022 • Developers experienced delays in reaching commercial close (global Limited impact from sec 34 economic challenges) - 279.2 MW added since April 2022, determination REIPP • BW 5 and 6 anticipated to come online 2024 and 2025 respectively BW5&6, RMIPPP, etc. • Release of RFP for BW7 & Gas Programme highly dependent on available grid capacity SS The winter outlook indicates significant risk of demand and supply imbalance Available supply based on winter outlook (Base case + 3000MW) Available supply against forecast peak demand MW MW Base case Reducing demand and increasing Worst case Load losses (worst case) further supply is critical to close the gap exacerbated by Koeberg U1 and 47 512 18 000 Kusile units 1,2,3 +6 488 15 000 33 000 3 000 6 700 26 512 3 000 26 512 3 700 Installed capacity Load losses Planned Available capacity Supply Demand Maintenance • Unplanned load losses have deteriorated to ~16 000 MW, impacted by Kusile, 1-3, 5, Medupi U4, and Koeberg U1 • Should load losses deteriorate to 18 000 MW (base case +3000) and the forecast peak demand materialise – this could result loadshedding beyond stage 6 driven by variance of ~4000MW in UCLF. • Efforts are underway to return units from outages, reduce partial load losses and maintain planned maintenance between 1300 - 3000 MW over the winter period • Eskom will be intensifying demand side management and increasing diesel production to reduce the supply deficit within stage 6 loadshedding SS Winter period comparison between 2022 and 2023 shows a net reduction in Capacity ~3000MW over winter Capacity Demand Decrease of 3080 MW due to unavailability of Kusile 1,2,3, and Demand in winter 2023 is expected to be similar to 2022 at around Koeberg 1 34 000 MW Planned maintenance reduced over Winter to range of 1300MW - 151 MW increase in Demand Response (DR) from April 2022 to April 3000MW, however same principle between 2022 and 2023 2023 IPP of 75 MW has been added to the grid and a 100MW Standard DSM is 57 Mw higher in April 2023 than in April 2022 Offer participant has signed to deliver by winter 290 MW from the Emergency Generator Programme is expected Power alert delivers up to 270 MW at peak, but is mature and not during winter 2023 expected to increase SS The scenarios of the winter outlook indicate loadshedding could intensify to stage 8 if our interventions are not effective Winter 2023 – 1 April -31 August (153 days) Scenarios Base case: Base case +1500MW : Base case + 3000 MW 15 000 MW UCLF 16 500 MW UCLF 18 000 MW UCLF Number of LS days 122 Days 152 Days 153 Days OCGT costs R 12.1bn R 12.5bn R 12.5bn Highest stage of LS Stage 5 Stage 6 Stage 8 Month Peak residual Load reduction Max load Load reduction Max load Load reduction Max load forecast days reduction stage days reduction stage days reduction stage May 32 499 27 5 31 6 31 7 June 32 572 18 3 30 6 30 7 July 32 378 28 5 31 6 31 8 August 31 413 28 5 31 6 31 8 If unplanned outages average 18000MW for the winter period, load shedding will be required everyday and will be implemented up to stage 8 SS Risks & uncertainty with regards to System Operators winter outlook Load shedding is implemented to maintain the stability of the national power system. Schedules are available up to Stage 8 load shedding so that it can be implemented in a controlled way to ensure that the required operating reserves are maintained. Beyond stage 8 SO will determine the amount of MW to be reduced per area The winter outlook is “tight” and any significant outage slips will have a knock-on effect that will influence the plan from that point forward. The winter outlook does not cater for difficulties that could arise at power stations due to industrial action or other protests. There is a ± 2 000 MW variance in UCLF (4 000 MW). This is often the variance in one week (168 hours). This cannot be predicted and makes planning uncertain. Trend analysis suggests that this variance could increase to ± 4 000 MW by the end of the outlook period (March 2024) The unavailability of Kusile units 1, 2 & 3 as well as Koeberg Unit 1 has removed 3 080 MW of Capacity from the power system for winter 2023. This is equivalent to 3 stages of load shedding. 7 SS Increased loadshedding does not mean greater risk of a national blackout Increased loadshedding National blackout ▪ Controlled reduction of electricity ▪ Uncontrolled loss of energy in the demand to match supply entire power system ▪ Scheduled ahead of time, sequenced ▪ Multiple systems would have to fail at for specific areas the same time for a black out to occur ▪ Proactively managed through a well ▪ Generally, occur as a result of cascading established process from the national tripping of critical transmission lines, control possibly caused by significant weather events (tornadoes, storms) Loadshedding does not increase the risk of a national blackout Loadshedding is implemented to prevent a national blackout BN Multiple levers are being implemented to reduce the level of loadshedding Potential impact Lever Description for winter months Comments • Returned Medupi U6, Lethabo U6, Tutuka U2&3 & Matla U6 from unplanned • ~6 000MW target over next Reduce outages 24 months 1 unplanned • Ensure UCLF reduces and is managed below 15000 MW ~2000 MW • Enablers being implemented to losses (UCLF) • Addressing load losses at priority stations ensure sustained recovery Manage • Maintaining maintenance between 1 300 MW & 3000 MW over winter with a focus on statutory maintenance • Maintenance will be increased planned 2 maintenance • Between end of May 2023 until late June 2023 only three units will be on outage ~1700 - 3000 MW in the summer months when (PCLF) demand is lower • Expediting return of units off load and address outage slips Increase • Increase the utilisation of Open Cycle Gas Turbines (OCGTs) to a 20% load diesel • 20% load factor for the 3 generators factor for the winter period ~482 MW installed capacity of 2409 MW utilisation • Budget for diesel in FY2024 has been secured • Aggressive Media Campaign • Fast-track the COUNTRY initiatives to encourage the management of “Use What you need” Drive consumption and demand initiatives to incentivize customers to add to the Demand Side • Energy losses radio campaign 4 Management existing base of Demand Management Programs of 4.5 GW. ~740 MW currently flighted on National (DSM) • Demand Response of through the recently launched Distribution Demand and Regional stations Management Programme (DDMP) by Eskom in partnership with municipalities The delivery against these levers will be managed through the Generation winter period that is intended to create a single- minded focus on reducing load losses in the shortest time possible to reduce the impact of loadshedding 9 BN 1 We will return four Kusile units and Koeberg unit 1 before the end of 2023 Units on long term outage - return dates Key insights • Due to the delays being experienced in replacing the steam generators at Koeberg U1, the commercial Koeberg U1 Kusile* U1, 2, 3, 5 Medupi U4 operation date is forecast to be 900 MW ~ 2280 MW ~720 MW September 2023 • Kusile U1, U2 and U3 will be operational by the end of December 2023 with the temporary Sept 2023 December 2023 July 2024 stack but environmental exemption is required to operate at full capacity • Kusile U5 will be synchronised to the grid by November 2023 and will provide 720MW • Medupi U4 will be operational in July 2024 with the second-hand stator and the new stator will be operational in October 2025 Note: * Kusile U1, 2 and 3 output capacity limited to 520MW per unit due to environmental restrictions BN The Generation Operational Recovery Programme is being implemented to sustainably recover the performance of the plants 3 World class performance 70% 2 Execute excellence 65% EAF1 1 Set up for success EAF1 Actions for FY25 onwards Actions for FY24 ❑Kusile fully operational and return of ❑Set-up the enabling structures ❑Focus on the next priority stations Medupi 4 (Jul 24) from long term forced outage ‒ Turnaround plans ‒ Kriel & Arnot ❑Successful execution and RTS of ❑Continuous focus on current and ‒ Generation recovery office future skills Koeberg 1 - 14 Sept ‒ Key enablers ❑Ensure successful implementation ❑Guard performance at current flagship ❑Sustain Excellent Medupi performance of Koeberg 2 steam generator and stations ❑Embed principles of Operational long-term operating projects Excellence ‒ Medupi, Lethabo, Matimba and Peaking ❑Commercial operation of Kusile 5 ❑Focus on the Top 6 priority stations ❑Address internal skills gaps – Tutuka, Duvha, Majuba, Kusile Matla, ❑Prevent outage slips Kendal ❑Return Matla 6 (complete) – Return of Duvha 2 (complete) ❑Return of Kusile 1, 2 and 3 – Dec 23 ❑Execution of Koeberg 1 Outage ❑Synchronisation of Kusile 5 ❑Source external specialized skills ❑Review plant shutdown dates based on system requirements Continuous execution of Culture transformation and Strategic Levers as per the Generation recovery plan Note: 1. MTD for March 2024 and March 2025 11 BN Several enablers are being implemented to ensure that the Generation Recovery Programme is successful Enablers and progress status Management Interventions and progress ✓ Delayer and stabilise leadership team by closing critical vacancies Leadership Stability ✓ Executive coaching and psychosocial support via EmpowerU intervention ✓ Prioritise Management Development,Technical training and authorisations ✓ Closing critical vacancies through crowdsourcing and recruitment - focus on Engineering, Operating, Maintenance, Critical Commissioning and Procurement Vacancies ✓ Industry support on project management (Medupi U4 and Kusile recovery) and general technical support on valves, pumps, waste water recovery system, and coal conveyors Maintenance & ✓ Prioritise insourcing of critical maintenance with labour support and limited outsourcing to credible service Inventory providers Management ✓ Establishment of inventory management and recovery team for turbine, boiler, and auxiliary plant ✓ DPE minister initiative to leverage other SOE support - Engaging with Denel to leverage state capability on security and SAA on technical support for gas turbines Government ✓ Environmental exemption to allow for Kusile U1, U2 and U3 to operate at full capacity with temporary stack and for Hendrina, Support Grootvlei and Camden to operate until system is stable 12 ✓ Support Eskom’s participation in clean energy investments to support RE growth, e.g. gas and pumped hydro storage schemes Implementation complete ✓ Implementation in progress Implementation not started MB CALL TO ACTION for WINTER: Protect our electricity supply – we can reduce stages if we do our bit 1 What have we done… 2 What are we doing… 3 What can you do…. 1. Eskom has ACHIEVED 4500 How can you help to reduce MW (Demand programs) Program 1: loadshedding: 2. Eskom launched a national Load Management 1. Use only the electricity you Programme (LM) incentive program targeting need 1450MW over 3 years 2. Switch off what is not needed 3. SMART metering is being 3. Protect the electrical Program 2: deployed (>300 000) – customer infrastructure in your area support required Residential Load Management (RLM) 4. Stop the Izinyoka – they leave 4. Aggressive Media campaign for a you in darkness CALL TO ACTION 5. Pay and be legal 5. We have implemented a Program 3: 6. Delay charging should be number of pilots across various Energy Efficiency (EE) implemented for inverter systems sectors Programme CC In conclusion: • Eskom would like to apologise to all South Africans for the negative impact caused by the implementation of loadshedding • We understand the impact loadshedding has on the economy and on the livelihood of all South Africans, however loadshedding is implemented to maintain the stability of the national power system to avoid a blackout • The immediate winter outlook indicates a higher risk of demand and supply imbalance, and scenarios indicate loadshedding could intensify to stage 8 if the interventions are not effective • Higher levels of loadshedding do not mean that we are at a higher risk of a national blackout – we implement loadshedding to ensure that we prevent a national blackout • There are plans, systems and processes to prevent the possibility of a national black out. • We will intensify efforts to overcome the winter period, and continue to implement the Generation Recovery Programme which will sustainably improve the performance of our plants • The biggest impact we can all make as a nation is to use electricity sparingly, especially during the peaks END