BUDGET REVIEW AND RECOMMENDATIONS REPORT

Presented by : Ms N Magubane

Director General

12 October 2010

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DoE Management Team• Mrs. Thandeka Zungu: COO• Mr. George Mnguni: DDG: Corporate Services.• Mr. Dakalo Netshivhazwaulu: Acting CFO• Mr. Ompi Aphane: Acting DDG of Electricity, Nuclear &

Clean Energy• Mr. Zingisa Mavuso: Acting DDG of Hydrocarbons &

Energy Planning• Mr. Mohau Nketsi; Senior Manager of INEP BPU• Ms. Ditebogo Kgomo: Chief Director of Nuclear• Mr. Velile Kweyama: Director Internal Audit• Ms Nonhlanhla Ndebele: Office of the Director General• Mr. Sifindo Mbebe; Office of the Director General

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Presentation outline

• Overall Departmental budget review

• Major funded projects.

• Personnel budget outlook.

• Unfunded key activities.

• Austerity measures adopted to contain expenditures.

• Overview of project performance.

• Conclusion.

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Introduction

• Objective is to highlight the department’s budgetary and performance review for the first six months of 2010/11, focusing on major programmes.

• The presentation has taken into account the following: – Minister's Budget Vote commitments

– Department Strategic Plan 2010-11 – 2012-13

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Overall Departmental budget review

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Programme 2010/11

Initial

R’000

Roll Overs

R’000

Adjusted

Allocation

R’000

Expenditure

YTD

R’000

Exp as %

Of Budget

Administration 104,205 - 104,205 60,257 57.83 Hydrocarbons and Energy Planning 1,558,608

-

1,558,608 402,196 25.80 Electricity, Nuclear and Clean Energy 408,817 5,000 413,817 29,132 7.04 Associated Services 3,463,760 56,000 3,519,760 1,618,750 45.99

Total 5,535,390 61,000 5,596,390 2,110,335 37.71

Major funded projects

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TRANSFER PAYMENTS

Original Budget2010/11

Exp YTD Sep 2010

Available balance

Act Exp as a % of Budget Allocation

R'000 R'000 R'000 % 20 Year Integrated Energy Plan 3,000 0 3,000 0.00%REFSO 20,700 488 20,212 2.36%Transnet Pipelines 1,500,000 350,000 1,150,000 23.33%EDSM - Eskom 108,900 62,221 46,679 57.14%EDSM - Municipalities 220,000 57,510 162,490 26.14%INEP - Eskom 1,719,810 721,116 998,694 41.93%INEP - Municipalities 1,020,104 137,443 882,661 13.47%INEP - Non-grid 124,200 879 123,321 0.71%

Major funded projects

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TRANSFER PAYMENTS

Original Budget2010/11

Exp YTD Sep 2010

Available balance

Act Exp as a % of Budget Allocation

R'000 R'000 R'000 % Working Energy Project 20,000 0 20,000 0.00%NECSA 574,110 471,709 102,401 82.16%NNR 19,954 8,157 11,797 40.88%EDIH 61,582 25945 35,637 42.13%

Organisation and establishment structure of Energy

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Structure No. of posts

Interim Structure (initial) 325

Additional funded Positions 206

Filled Positions 458

Vacant posts 73

Total funded posts 531

Unfunded posts 394

Approved structure 925

Key unfunded activities

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Area Amount (R’000)

NERT 10,000

FIFA tournament 150,000

Clean Energy operations 3,420

International Affiliations 11,000

Accommodation 9,000

Establishment of SANEDI 17,000

Total 200,420

Adopted Austerity Measures

• Restriction on international travelling• Restriction of internal catering• Review of international commitments for

affiliations• Stringent measures for control of tele-

communication costs• Review of internship programme• Restriction of advertisement on commercial media• Review of process for appointment of consultants

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Electricity Chief Directorate: Progress Reporting.

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Project Planned Completion date

Financial Implications

Comment/Status

Integrated Resource Plan 2010

December 2010

None Draft report presented to IMC –Energy.Draft report released to general public for consultation.

Establishment of Independent System and Market Operator (ISMO).

July 2010 None Draft Establishment Bill sent to other government departments

Electricity Regulation Act, Second Amendment Bill

June 2010 None Awaiting finalization of ISMO Bill in order to incorporate and align.

DoE 1000MW IPP June 2010 None PPA negotiations 95% complete.Expected Financial Close Feb 2011

Establish Regional Electricity Distributors

June 2010 None Directly Cab memo prepared for IMC on way forward.

Standard Offer Policy on Energy Efficiency and Demand Side Management.

June 2010 None Done and sent to NERSA for implementation.

Electricity Chief Directorate: Progress Reporting.

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Project Planned Completion date

Financial Implications

Comment/Status

Development of the fuel strategic stocks policy & the relevant regulations

March 2011 None The Strategic Stocks Regulations were published for public comments on 23rd Sept. 2010.

Deadline for submission of comments is 23 October 2010

The draft Policy is still under discussion in the Department.

Development of the LPG Price Regulations

July 2010 None The Regulations were Promulgated on 14th July 2010

Review of the fuel specifications & standards

March 2011 None A draft position paper is currently under discussion in the Department and would thereafter be presented

to the Inter-Departmental Task Team.

Once considered by IDTT it will be published for public comments.

Electricity Chief Directorate: Progress Reporting.

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Project Planned Completion date

Financial Implications

Comment/Status

Development of the 25 year fuel liquid infrastructure plan

March 2011 R 4 million The TOR was published on 1st October 2010 & compulsory briefing session to potential Bidders will be held on 18th November 2010.

The project should be completed within 6 months after signing the contract.

Development of petroleum pricing framework

March 2011 R2.5 million (2010/11)

R200k p.a

The Regulatory Accounting Models for BSS, Coastal storage, secondary distribution, and secondary storage and handling has been finalised.

The final report will be completed by 22 October 2010.

Electricity Chief Directorate: Progress Reporting.

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Project Planned Completion date

Financial Implications

Comment/Status

Development of the Integrated Energy Plan

March 2011 R3 million for the energy modelling exercise

Governance structure which includes relevant government departments established.

IEP methodology developed and approvedDraft plausible futures complete.

Development of the Integrated Energy (Implementation ) Strategy

March 2011 None Draft IEP Strategy completed and circulated for comment by other government departments.

Electricity Chief Directorate: Progress Reporting.

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Project Planned Completion date

Financial Implications

Comment/Status

Development of the National Integrated Energy Modelling System

March 2012 •R3 million for phase 1 •R90 million for entire system

Process of acquiring service provider to develop model for IEP in progress.

Centralisation of energy data which is currently collected by the Department has started

Regulations for the Mandatory Provision on Energy Data

March 2011 None Draft regulations have been gazetted & stakeholder engagement process held.

Amended regulations have subsequently been reviewed by State Law Advisors.

Stakeholder inputs obtained & amended regulations forwarded to relevant government departments for inputs.

Electricity Chief Directorate: Progress Reporting.

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Project Planned Completion date

Financial Implications Comment/Status

Establish the South African National Energy Development Institute (SANEDI)

March 2012

2011/12: R491million2012/13: R601 million2013/14: R787millionR3 million for phase 1 R90 million for entire system

Business case for the establishment of SANEDI updated after input from National Treasury and DPSA

Final recommendations made to the Minister

Publish Energy Digest and Energy Price Report

March 2011

None Data collection in progress and skeletal structures started

Electricity Chief Directorate: Progress Reporting.

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Project Planned Completion date

Financial Implications

Comment/Status

Licensing of petroleum products

Ongoing None 15, 769 Applications lodged since 2006.

1,200 yearly average ( past 3 years).

From April to September 2010•298 Accepted/processed applications•16 Approved licences • 8 refused applications

•Average 52 applications lodged per month.

NOTE:90 days legislated time for application processing.

Project report: Non Grid Electrification Programme

Start: 01 April 2010 Finish: 31 March 2011

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Deliverable Completion date Funding Comment/Status

Install 1,000 SHS in Limpopo (Solar Vision)

31 March 2011 R6 million Some areas identified and rollout will start immediately after material delivery

Install 4,000 SHS in Central KZN (KeS)

31 March 2011 R24 million More than 50% of areas identified. Installations in progress

Install 4,000 SHS in Northern KZN (NuRa)

31 March 2011 R24 million Areas identified and waiting for council resolution. Material ordered and installations will start after confirmation

Install 1,500 SHS in Eastern Cape (Ilitha)

31 March 2011 R 9 million Areas are being identified and negotiated with Municipalities. There were delays due to availability of GIS data

SWH Roll-Out : tariff funded programme

Roll out area Number of Units Remark

Nelson Mandela Bay 120 000 Commenced 20 July 2010. 3600 Units already rolled out. Eskom agreed to ring fence the rebate for the 120 000 units. The plan is to roll out 5000 units per month. A launch for the programme is being planned with NMB awaiting Presidency on the availability of the President.

Bloemfontein 40 000 MOU signed and 300 rolled already out

Kroonstad 40 000 MOU signed

Ekurhuleni 120 000 MOU is being finalised.

Potchefstroom 8 000 MOU signed and roll out is being finalised. Roll-out commences 04 October

Roll out area

Number of Units

Remark

Mossel Bay 120 000 MOU signed and 400 rolled already out

Saldanha Bay

Target to be confirmed

MOU signed and roll-out commences 04 October

KZN (various munics)

270 000 MOU’s have been signed for total of 270 000 in KZN

SWH Roll-Out : tariff funded programme

SWH Roll-Out : fiscal funded programme Roll out area Number of Units Remark

Sol Plaatje Municipality 5400 Committed 5400. Eskom tender is at advanced stage and negotiations with suppliers now completed. Transfer of funds to ESKOM targeted for 28 October. Roll out expected end of October 2010.

Naledi Municipality 5400 Committed 5400. Eskom tender is at advanced stage and negotiations with suppliers now completed. Transfer of funds to ESKOM targeted for 28 October. Roll out expected end of October 2010.

Tshwane Municipality 10400 Eskom has been appointed as the roll out agent for the municipality and this project forms part of the Eskom tender

Noupoort 6000 Committed 200 units for 2010 financial-year. Proposed inclusion in 2010/11 financial year.

Number of Units settled through Eskom rebate programme to date

• A total number of 10 600 claims has been received as of end of

August 2010

• Eskom confirmed that they have settled 8700 units through the

rebate programme.

• The reason for the variance (1900 units) between the two figures is

because of the delays in the Measurement and Verification process.

• Target of total 6500 units for October in Bloemfontein, Kroonstad,

Mossel Bay, Potchefstroom and Saldanha

Roll out of High Pressure Systems

• DoE exploring programme with CEF to make funding available to cover the gap between the consumer willingness-to-pay and the installation cost.

• Modelling exercise to be completed end-October 2010

Spending patterns- INEP (‘000)

2008-2009; 1%

2009-2010; 2%

END…..

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