ESKOM PRESENTATION TO THE PORTFOLIO COMMITTEE DME 9

ESKOM PRESENTATION TO THE PORTFOLIO COMMITTEE DME 9 May 2001

ESKOM 2001 OBJECTIVES REGULATED BUSINESS Generation Transmission Distribution

CONTENTS BACKGROUND BUSINESS OBJECTIVES 2001

BACKGROUND

STRATEGIC INTENT Eskom will be the pre-eminent African energy and related services business, of global stature

KEY ISSUES Clarity on Governance and Regulatory Framework Provide strength and stability through the process of restructuring Maintaining excellence in customer and business performance

KEY ISSUES Research and Development Major projects Pebble Bed Modular Reactor – Cabinet Approval – EIA – Detailed feasibility study Other projects e. g. wind, solar power, fuel cells Pilots planned - PBMR, wind, solar thermal and discard coal repowering

KEY ISSUES Governance Incorporation of Eskom (Eskom Conversion Bill) Shareholder Compact – Clear mandate from Government as Shareholder – Mutual understanding and commitment to initiatives to achieve strategic intent

KEY ISSUES Regulatory Framework Need to address the following: – Methodology (Legislation - Regulatory Bill) – Price increase approval process – Definition of Regulatory model (market model) Imperatives for current business needs Pre-condition for introduction of competition in the ESI

KEY ISSUES Restructuring Principles Should be informed by: – Government’s objectives and policy (Energy White Paper) – International experience and expertise – Unique SA situation – Need to preserve existing strengths within the industry – Stakeholders input – Eskom’s strategic intent, in respect of Eskom

BUSINESS OBJECTIVES 2001

OVERVIEW OF FINANCIAL RESULTS Eskom Financial Performance:

ESKOM 2001 OBJECTIVES Objectives Financial performance Economic, efficient and effective use of operating and capital resources Maintain financial independence KPIs and targets Productivity improvement not less than 2, 5% Total electricity cost not to exceed R 120, 08/MWh Resources accessed without recourse to Government

CUMULATIVE PRODUCTIVITY IMPROVEMENT FOR ALL RESOURCES R’m (2000 Rands)

ESKOM 2001 OBJECTIVES Objectives KPIs and targets Financial performance Long-term financial viability Net profit - R 3 342 million After tax - R 2 122 million Debt-equity ratio less than 0, 6 Sales growth 2, 4% in GWh 6, 1% in Rm

DEBT : EQUITY

TWh SOLD TWh

ESKOM 2001 OBJECTIVES Objectives KPIs and targets Financial Maintain good governance Improve discipline, governance and accountability to support strategic intent and new business Shareholder compact approved and implemented Effective governance structures and processes implemented Effective internal controls in place PFMA training

ESKOM 2001 OBJECTIVES Objectives KPIs and targets Financial Information Systems strategy aligned with changing environment Enabling agreement and service level agreements between Eskom and arivia. kom Review and align information system strategy to support transformation

ESKOM 2001 OBJECTIVES Objectives KPIs and targets Technical performance Maintain excellent technical performance Sustainability index - 80% Generation plant performance - Energy Availability Factor - 90% - Unplanned Automatic Grid Separations - 1, 7

ESKOM 2001 OBJECTIVES Objectives KPIs and targets Technical performance Maintain excellent Transmission system performance Supply Interruptions: - No incidents with a severity greater than or equal to one - System Minutes lost not to exceed 6, 2

TECHNICAL PERFORMANCE Unplanned Automatic Grid Separations per 7000 hours Number Energy Availability Factor (EAF) % Total System Minutes Lost Minutes

ESKOM 2001 OBJECTIVES Objectives KPIs and targets Customer Satisfaction Customer management Perception of customers Regulation Clear regulatory framework Customer satisfaction levels, Pre. Care and Maxi. Care, at least 8 on a scale of 1 to 10 Input into design of an appropriate regulatory framework

ELECTRICITY TARIFF INCREASE Deflated by consumer price index Base = 100 in 1990

ESKOM 2001 OBJECTIVES Objectives KPIs and targets Human resource alignment Implement employment equity Percentage of black management, professional and supervisory staff to exceed 50, 7% Percentage of women management, professional and supervisory staff to exceed 18, 4% Develop and implement friendly disabled person policy

STAFF PROFILE

ESKOM 2001 OBJECTIVES Objectives KPIs and targets Human resource alignment Align human resource management to support the strategic intent Intellectual capital managed and retained Transformational leadership development program Reward systems updated Human resources policies reviewed Human resources sustainability index implemented

ESKOM 2001 OBJECTIVES Objectives KPIs and targets Human resource alignment Maintain consultative processes and structures Processes and structures in place Managing the impact of HIV/AIDS Response strategies to HIV/Aids surveillance and financial impact study findings implemented Ensure people are ready for change Leadership empowered to manage change

ESKOM 2001 OBJECTIVES Objectives KPIs and targets Human resource alignment Safety Improve safety Disabling injury incidence rate less than 0, 4 Work-related and public fatalities to be lower than previous year

ESKOM 2001 OBJECTIVES Objectives KPIs and targets Socio economic Black economic empowerment Encourage black enterprise development Electrification To electrify additional homes during 2001 Procurement expenditure R 2 647, 5 million including VAT 186 370 homes to be electrified

ELECTRIFICATION Cumulative number of homes connected

ESKOM 2001 OBJECTIVES Objectives KPIs and targets Environmental Protecting environment Environmental management systems compliant with SABS ISO 14001 by end 2002 Action plans in place

ESKOM 2001 OBJECTIVES Objectives KPIs and targets Environmental Protecting environment Impact on environment Environmental legislation contraventions - 0 Relative water consumption - 1, 26 /k. Wh Particulate emissions 0, 33 kg/MWh Radiation exposure 0, 25 m. Sv

ENVIRONMENTAL PERFORMANCE Litres Water Consumed per k. Wh Sent out

ENVIRONMENTAL PERFORMANCE kg Particulate Emissions Relative to Energy Sent Out

CONCLUSION