SOC LTD CENTLEC SOC LTD Addressing EDI Service

(SOC) LTD CENTLEC (SOC) LTD (Addressing EDI Service Delivery Challenges) Parliament Committee on Energy 21 February 2012 Centlec Delegation

Who are We and What's Our Story ? 2

Background Centlec (SOC) Ltd was established in April 2004 as a municipal entity wholly owned by the Mangaung Local Municipality. It provides an electricity distribution service in the Free State to 5 local municipalities (Mangaung, Kopanong, Naledi, Mantsopa and Mohokare) Other value added services provided by Centlec include: Training and Development Support to struggling municipal electricity distributors in the Free State Embedded generation (Soon to be re-commissioned) Centlec has always been the greatest supporter of EDI restructuring objectives 3

Cabinet Decision and its Implications On the 8 th of December 2010, cabinet took a decision to immediately stop the restructuring of the EDI industry. IMPLICATIONS New industry leaders needed to address EDI challenges A new strategy and approach needed A new willingness and commitment by stakeholders to address EDI challenges is needed 4

EDI Objectives Even though the restructuring process by EDI Holdings has been stopped, the objectives that it was meant to address remain valid and urgent. These are: To provide low cost electricity to all consumers, with equitable tariffs for each customer segment; To provide a reliable and high quality supply and service to all customers, in support of The government’s economic and social development plans; To meet the country’s electrification targets in the most cost-effective manner, and so ensure that electrification is contributing to social and economic development; To meet the legitimate employment, economic and social interests of all employees in the sector, and ensure their safety; and To operate in a financially sound and efficient manner, in order to provide a reliable and sustainable future for both consumers and employees. 5

The Case for a Provincial Footprint 6

OUR APPROACH SUPPORTS THE ECONOMIC DEVELOPMENT INITIATIVES Airport Redevelopment** • Flight Training • Industrial Settlement • Human Settlement • Maintenance • • Chemical Cluster Mining & Beneficiation Communications Hub N 8 Development Corridor • Bfn – Maseru Rail** • Nodal Development** • Transport • Light Industrial • Institutional • Commercial • Aircraft Maintenance • Tourism, etc. Xhariep • Tourism • Energy, etc. Development Triangle • Logistics Hub** • Agro. Processing • Tourism, etc. Transport possibilities: • National & Provincial Roads as catalysts for development • Rail as an alternative means of transporting passengers and goods • Free State can play significant role in overall aviation in the country – aircraft maintenance, repairs, new development and building airframes, etc. 7

Centlec Viability Economies of scale will improve profitability (surplus) Provincial growth plans and socio-economic needs will form part of Centlec planning and design requirements Costs will drop significantly as this will be a shared service Centlec will be in a better position to raise funds to address the current capital backlog * Source: EDI Holdings information 8

In What Form? 9

The (SDA Route) 10

Down To Earth Mode of Operation Service Provider Service Authority Service Delivery Kopanong Naledi Mohokare Mantsopa LETSEMENG Agreement (SDA) CENTLEC Tariffs Electrification Maintenance & Refurbishment IDP Com plian ce Service Provision Delivery 11

Centlec With a Provincial Footprint: 5 Focus Areas Reliable Supply Eradication of Electrification Backlogs DSM Skills Development (Increase Artisan Output) Profitability Compete with Consultants (Electrification) Centralized Services (e. g. Vending, SCADA) and Specialized Technical Services (Network Protection, Design, Training, Tariff Design etc. ) 12

Municipalities Under Centlec FS 172 Mangaung FS 173 Mantsopa 5 municipalities indicated in orange already under Centlec control. And 3 where loss making initially FS 171 Naledi FS 162 Kopanong FS 163 Mahokare 13

3 127 991 Electrification Backlog 3 500 000 ELECTRIFICATION BACKLOG BY PROVINCE 2 405 165 3 000 1 667 435 2 500 000 Western Cape Northern Cape Number of Households North West Total. Gauteng Free State 669 421 818 708 Backlog Mpumalanga 329 440 231 485 201 919 823 972 879 082 1 250 716 0 196 605 50 405 272 958 500 000 191 366 1 000 740 569 914 070 1 500 000 1 333 886 2 000 Limpopo Kwa-Zulu Natal Eastern Cape 14

Refurbishment Backlog (2007)* * Source: EDI Holdings 15

The Era of “Modimo-Nthuse” B O PR Network Infrastructure Requirements M E L Build Capability 16

What's Our Value Preposition ? 17

FS Enablers 18

FS Enablers v. Constitution v. Ordinance 8 of 1962 v. Provincial Lekgotla Resolution v. Section 76 MSA 19

LOCAL GOVERNMENT ORDINANCE 8 OF 1962 [NB. The administration of the whole of this Ordinance has under Proclamation 113 of 1994, published in Government Gazette 15813 of 17 June 1994, been assigned to Free State Province with effect from 17 June 1994. ] ORDINANCE as amended by Local Government Laws Amendment Act 51 of 2002 PN 4 [sic] of 2004 (PG 45 of 28 May 2004) (145 A) Council may co-operate with other local authorities and persons. (1) A council may, . . . by agreement, cooperate with any other local authority or person for the better or more economical carrying out, either jointly or by any of the contracting parties, of any matter within the power of the council. 20

CONSTITUTION AND MSA v The Constitution does not say that a municipality itself must provide services; it gives municipalities the right to administer the matters assigned to them and then compels municipalities to ensure the provision of sustainable services. In other words, the municipality must take responsibility for the provision of services whether those services are provided by itself or on its behalf by another service provider. v MSA: Section 76 provides municipal services through either an internal or an external mechanism and also municipal entities operating under the sole or shared control of a municipality. If the service is to be provided through an external mechanism, including provision of the service must be in accordance with a service delivery agreement concluded between the municipality and the external mechanism. 21

2009 FS-Provincial Lekgotla Resolution “…Centlec to have a provincial footprint…” 22

Down To Earth Mode of Operation Service Provider Service Authority Service Delivery Kopanong Naledi Mohokare Mantsopa LETSEMENG Agreement (SDA) CENTLEC Tariffs Electrification Maintenance & Refurbishment IDP Com plian ce Service Provision Delivery 23

What's the Essence of Our Advocacy ? 24

Accelerate Service Delivery Driving Forces Scenario 1 Uncertainty Stay AS Is Security of Supply Issues Technology Revenue Management Alternative Futures Efficiencies Present Scenario 2 ME with Provincial Footprint 25

Centlec Growth Shape Market value creation Provincial Vending Center, Telecoms Network ICT e. g. , Training & Development, Switching, Network Design, etc. Provincial Call Center of Excellence Services e. g. , Political Buy-in, Separation, Tariff Design, Operation Management, Protection etc. Customer interaction & support e. g. , Transformers, Switch gears, Line Work Maintenance and Refurbishment Backlogs Governance/Expert Services/Skills Adoption Pioneers Emerging rapid growth Reaching maturity Maturity 26

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In the Absence of an Alternative We Volunteer Centlec for Adoption by Do. E As A Pilot Project 28

Pula !!! 29