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Integrated Report2014

Integrated Report 2014

1994• Eskomoperatesandmaintains37636MWofgeneratingcapacity,238964kmofpowerlinesand167413MVAofsubstationcapacity

• Eskomemploys40128people

• Eskomhas872509customers

• EskomcommitstotheReconstructionandDevelopmentProgramme(RDP)

• Sincethebeginningof1991Eskomhaselectrifiedatotalof384911homes

• EskomformstheEskomDevelopmentFoundationNPC

2000• RDPfortheperiod1994to2000:– 2391684electrificationconnectionsaremade

– Realpriceofelectricityreducesby14.1%

– Eskomachievesracialequityinmanagement,professionalandsupervisorystaffat50.7%

– 2631Eskomtraineesandbursarscompletetraining

– IlliteracyinEskomreducesfrom45%tolessthan10%asaresultofadultbasiceducationtraining

• TheSouthAfricanefficientlightinginitiativeisestablishedtopromoteenergyefficiency

2013• FinalunitofCamdenpowerstationcompleted(1571MWtotalcapacityofthestation)

• EskomsignsIPPcontractsintermsoftheDepartmentofEnergy’sfirstroundoftherenewableIPPprogramme

• RailcoalterminalsoperatingatCamdenandTukukupowerstationsreducethesizeoftheroadtransportfleet,contributingtoa31%year-on-yeardecreaseinpublicroadfatalitiesinvolvingcoaltrucks

• MYPD3determinationof8%

2002• SuccessfulparticipationintheworldsummitonsustainabledevelopmentheldinSouthAfrica

2003• EskomcommissionstheKlipheuwelwindfarmdemonstrationfacility

• DecisionismadetocommencethereturntoserviceofthemothballedCamden,GrootvleiandKomatipowerstations

2005• EskomspendsR10.3billiononblackeconomicempowerment

• Eskomhaselectrifiedatotalof3210557homessince1994

• Eskomtaskedtobuild70%ofnewgenerationcapacity,withtheremaining30%tobebuiltbyindependentpowerproducers

2007• ConstructionatMedupiandworkatKusilepowerstationsbegin

• EskomcompletesthefirstfourunitsatAnkerligpowerstationandfirstthreeunitsatGourikwapowerstation–liquid-fuelpowered(1044MWofopen-cyclegasturbines)

2009• FinalfiveunitsatAnkerligandtwounitsatGourikwacompleted(1040MWofopen-cyclegasturbines)

2011• EskomkeptthelightsonwhenSouthAfricahostedasuccessful2010FIFAWorldCupTM

• EskomissuesaUSdollarbondwhichraisedUSD1.75billion

• OperationKhanyisalaunchedtocombatelectricitytheft

2006• Klipheuwelwindfarmdemonstrationfacility(3MW)placedintocommercialoperation

2008• EskomimplementsrotationalloadsheddingbetweenOctober2007andFebruary2008

• RecoveredcoalsuppliesandreliabilityofsupplybyApril2008

• 5368learnersinthepipelineofwhom85%arestudyingintechnicalfields

2014• Eskomoperatesandmaintains41995MWofgeneratingcapacity,359337kmofpowerlinesand232179MVAofsubstationcapacity

• Eskomemploys46919peopleandachievesracialequityinmiddlemanagementandprofessionalsat70.6%

• Eskomhas5232915customers

• EskomgroupspendsR119.4billionwithB-BBEEcompliantsuppliers

• Over4.5millionhomeselectrifiedsince1991

• EskomcommittedR132.9milliononcorporatesocialinvestmentprojects

Late President Mandela visited Eskom in the late nineties to celebrate Eskom’s honouring of African struggle heroes

Twenty years of powering a democratic South Africa

In1994,EskomandthegovernmentwerefacedwiththeenormoustaskofextendingelectricityaccesstoallSouthAfricansinordertoimprovetheirqualityoflife.Atthesametime,therewastheneedtoexpandthecountry’sgenerating capacity to support economic growth. This diagram showsEskom’sjourneysincethestartof1994towhereitistoday

12014IntegratedReport

32014 Integrated Report

Navigation icons

Top: New poles are planted for new connections in the Cosmos area in JohannesburgBottom: Eskom employees do maintenance on a high-voltage powerline

The navigation icons above are used throughout the report to link stakeholder concerns, material items, performance and key performance indicators to strategic objectives

Becomingahigh-performanceorganisation

Leadingandpartneringtokeepthelightson

ReducingEskom’senvironmentalfootprintandpursuinglow-carbongrowth

Securingfutureresourcerequirements

Implementingcoalhaulageandtheroad-to-railmigrationplan

Pursuingprivate-sectorparticipation

Transformation(includingthebusinessproductivityprogramme)

EnsuringEskom’sfinancialsustainability

EskomHoldingsSOCLimited2

Contents

01 About this report 7Eskom’sapproachtointegratingreporting 7Letterfromthechairperson 10Chiefexecutive’sreport 14Shareholder’scompact 26

02 About the Eskom group 31Eskom’sbusinessmodel 31Eskom’slegalandoperatingstructure 42Purpose,valuesandstrategicobjectives 44FuturefocusforEskom 48

03 Eskom’s approach to integrated reporting 51Definingmaterialitemsinpartnershipwithstakeholders 51Risksrelatingtomaterialitems 57

04 Leadership and corporate governance 65Shareholderandboardofdirectors 65Corporategovernanceframework 68Leadership’skeyfocusareas 71Directors’andgroupexecutives’remuneration 81

05 Becoming a high-performance organisation 83Safety 85Improvingoperations 89Beingcustomer-centric 94Buildingstrongskills 100Investinginappropriatetechnologies 101

06 Leading and partnering to keep the lights on 103Keepingthelightson 106Deliveringcapacityexpansion 115

07 Reducing Eskom’s environmental footprint and pursuing low-carbon growth 127Reducingparticulateandgaseousemissions 128Reducingwaterconsumption 129ReducingEskom’scarbonfootprint 130

08 Securing Eskom’s future resource requirements 135

09 Implementing coal haulage and the road-to-rail migration plan 141

10 Pursuing private-sector participation 143

11 Transformation 147

12 Ensuring Eskom’s financialsustainability 153

13 Summarised group financial results 163

14 Appendices 169

Throughout this integrated report, performance against target is indicated as follows: Actual performance met or better than the target Actual performance almost met the target Actual performance did not achieve the target

Eskom Holdings SOC Limited4 52014 Integrated Report

Online content

Top: Rotek, a subsidiary of Eskom Enterprises, performs some of the maintenance on power station componentsBottom: The air-cooled condenser duct takes steam from the turbine to the air-cooled condenser plant at Kusile power station

Thetablebelowsetsoutthereportsthatareavailableonline:

Report Purpose and basis of preparation Online reference

Annualfinancialstatementsfortheyearended31March2014

ThegroupandcompanyfinancialstatementsofEskomHoldingsSOCLimitedinaccordancewithInternationalFinancialReportingStandardsandtherequirementsofthePublicFinanceManagementActofSouthAfricaaswellastheCompaniesActofSouthAfrica www.eskom.co.za/IR2014/01.html

TheEskomsupplementaryanddivisionalreport

Thesupplementaryanddivisionalreportsupportsandexpandsontheinformationintheintegratedreport.ItoffersadetailedreportabouttheperformanceofEskom’soperatingdivisions,keystrategicandsupportfunctions,andaffiliatedentitiesforthe2013/14year www.eskom.co.za/IR2014/02.html

TheKingReportonCorporateGovernance(KingIII)checklist

AsrequiredbyKingIII,EskomhasidentifiedanddisclosedtheKingIIIprinciplesthatdonotapply,togetherwithanexplanation,andareaswherefurtherimprovementisnecessary www.eskom.co.za/IR2014/03.html

TheEskomFoundationreport

TheEskomDevelopmentFoundationNPC(“Foundation”)isresponsibleforthecoordinationandexecutionofEskom’scorporatesocialinvestment(CSI)strategyinsupportofEskom’sbusinessimperatives.ThisreportsdetailstheoperationsandachievementsoftheFoundationforthe2013/14year www.eskom.co.za/IR2014/04.html

TheEskomFactorreport

TheEskomFactorisacollectivetermtoexplainEskom’sfootprintinSouthAfrica,whichhasbeenquantifiedthroughacomprehensiveassessmentofthecompany’seconomic,socialandenvironmentalimpactonthecountry,bothpositiveandnegative,withinthefinancialyearApril2010toMarch2011 www.eskom.co.za/IR2014/05.html

TheEskominterimintegratedreportforthesixmonthsending30September2013

TheSeptember2013interimintegratedreportsetsoutacontextualreviewofEskom’soverallperformancefortheperiod1Aprilto30September2013andshouldbereadinconjunctionwiththeintegratedreportfortheyearended31March2013 www.eskom.co.za/IR2014/06.html


This integrated report aligns with best practices in integratedreporting. It includes the principles of integrated reportingcontained in the international integrated reporting framework,published by the International Integrated Reporting Council(IIRC)inDecember2013,andtakesintoaccountotherguidelinespublishedinthisregard

Eskom’s approach to integrated reporting Integratedreportingbringsgreatercohesionandefficiencytothereportingprocess.Itencouragesintegratedthinkingtobreakdowninternalsilosandreduceduplicationincontent,soimprovingthequalityofinformationavailabletokeystakeholders.

Anintegratedreportfocusesonvaluecreationovertheshort,mediumandlongterm.Itusesthe“sixcapitals”intheframeworkasaguidetoensurethatacompanyconsidersallresourcesandhowtheyinteractwitheachother.Theintegratedreportshouldindicatehowthecompany’svaluecreationprocessisimpactedbythecompany’sinternalandexternalenvironment.

ThisreportfocusesonqualitativeandquantitativeitemsthatarematerialtoEskom’soperationsandstrategicobjectives.Thequestionofwhat is “material”hasbeendeterminedby theboardandexecutivemanagementthroughextensiveconsultationwithinEskomaswellaswithEskom’sstakeholders,whiletakingintoconsiderationEskom’sstrategicobjectives,riskassessmentsandtheway inwhich itsvaluechainoperates(refer topage51formore informationregardingthedeterminationofmaterialitems).

Eskom’s integratedreportsteeringcommitteeguidesthecompany incompilingthisreportandensuresalignmentwithotherreportingprocesses.Thefinancedirectorchairsthiscommitteeandreportsontheprocesstotheexecutivemanagementcommittee.

The integrated reporting pilot programme Eskom has been a member of the IIRC’s pilot programme since its inception. More than100 companies from around the globe have joined the programme’s business network sinceit was launched inOctober 2011. These companies interact with the council and each otherthrough regionalandsectormeetings, throughweb-basedseminars,conferencesand througha dedicated pilot programme community website. This wide-ranging interaction provides theopportunitytodiscussandchallengetechnicalmaterial,testitsapplicationandshareknowledgeandexperiences.

Eskom’s2012/13integratedreportwaswellreceivedandwasfollowedbyaninterimintegratedreportinDecember2013.Reviewsofthesereportsidentifiedanumberofwaystoimprovethereport,whichhavebeenconsideredincompilingthe2013/14report.

Board responsibility and approval statementTheboard, assistedby its respective committees, is ultimately responsible for overseeing theintegrityandcompletenessoftheintegratedreport.Theboardhaveappliedtheircollectivemind

Majuba power station near Volksrust in KwaZulu-Natal

About this report01


Structure of the reportThis report includes information on Eskom’s businessmodel, its approach to leadership andgovernance and its operational performance during the year under review. It is structuredasfollows:• Letter from the chairperson discusses key reflections and provides insight into theshareholder’svisionfortheutility

• The chief executive’s report provides an executive summary, highlighting key areas inoperationalperformance,Eskom’sprogressinachievingitslong-termstrategicobjectivesandthemainareasthatwillneedtobeaddressedduringtheyearahead

• The shareholder’s compact detailsEskom’sperformanceagainstkeyperformanceindicatorsassetbyitsshareholder,thegovernmentofSouthAfrica,representedbytheMinisterofPublicEnterprises

• About the Eskom group outlines Eskom’s business model, highlighting the internal andexternalfactorsthataffectitsoperations.Itdetailsthecompany’scorporatestructureanditspurpose,valuesandstrategicobjectivesandoutlinesEskom’sstrategicprioritiesfortheyeartocomeandbeyond

• Defining material items in partnership with stakeholdersexplainsEskom’smethodologyinidentifyingthematerialitemsthathaveabearingonperformanceandtherisksrelatingtothesematerialitems.Italsoprovidesareferenceforwheretheseitemsarediscussedingreaterdetailinthereport

• Leadership and corporate governanceprovidesinsightintoEskom’scorporategovernanceframework.Italsosetsoutleadership’skeyfocusareasfortheyearunderreviewanddetailsthelinkbetweenperformanceandremuneration

• Performance on strategic objectives details Eskom’s performance on key performanceindicatorsrelevanttoitseightstrategicobjectives.Itincludesperformancetargetsandactualmeasurements for key indicators relevant to each objective, as well as commentary onperformance.Operatinghighlights,challengesandfuturefocusareasarealsosummarised

• Summarised group financial resultsareasummarisedversionof the fullannualfinancialstatements

• Appendices consistof:– Atablecontainingthekeyperformanceindicatorsdiscussedinthisreport– Atablecontainingotherperformanceindicators– AnoverviewofawardsEskomreceivedin2013/14– Sustainability assurance statements reflectingEskom’s sustainability responsibilities, andapprovalandassurancestatementsfromEskomandtheexternalassuranceprovider

– Alistofabbreviationsandacronyms,andaglossary– Eskom’scontactdetails

About this report (continued)

tothepreparationandpresentationoftheintegratedreportandhaveconcludedthatitispresentedinaccordancewiththeinternationalintegratedreportingframeworkversion1.0(IIRCframework).

On 29 May 2014, the board approved the 2014 integrated report taking into considerationthecompletenessof thematerial items itdealswithand the reliabilityofdataand informationpresented,inlinewiththecombinedassuranceprocessfollowed.

SustainabilityGlobal Compact LEADEskomwasoneofthefirstsignatoriestotheUnitedNationsGlobalCompact(UNGC)in1999and iscommitted to itsprinciples.Eskomreportson itsprogress incomplyingwith theUNGCprinciplesonanannualbasis.EskomisalsoaUNGCLEADcompany,recognisedforleadershipinthesustainabilityfield.

Global Reporting Initiative (GRI)Eskom continues to use the GRI G3 guidelines, supported by Eskom internally developedguidelines,asabasisforreportingitssustainabilityinformation.EskomiscurrentlyassessingtheefficacyoftransitioningfromG3toG4aswellastheapplicationoftheIIRCframework.

Sustainability audit, combined assurance and King IIISelectedsustainabilityKPIsweresubjecttoexternalassurance.Thesearemarkedwithan“RA”inappendixAandBonpages170to177.Theassuranceopinionisonpage180.

Eskomfollowsacombinedassuranceapproach(referpage75fordetail).Eskom’sreportsarealsopreparedwithdueconsiderationtoKingIII.Refertowww.eskom.co.za/IR2014/03.htmlformoreinformationonKingIII.

Reporting boundaryThis integrated report reviews Eskom’s performance for the year from 1 April 2013 to31March2014.

This report holistically examines Eskom’s performance in relation to its strategic objectives(referpages83to161),takingintoaccounttheenvironmentinwhichthecompanyoperates,itslong-termgoals,therisksthatmightpreventitfromachievingthosegoalsandthemeasuresputinplacetomitigatetheserisks(referEskom’sbusinessmodelonpage31formoredetailonthecompany’soperations).

Unlessotherwisestated,theinformationinthisreportreferstotheEskomgroup,comprisingtheEskombusinessanditsmajorsubsidiaries(EskomEnterprisesSOCLimited,EscapSOCLimited,EskomFinanceCompanySOCLimitedandtheEskomDevelopmentFoundationNPC).(Referpage42formoredetail.)


There isaneed forenergysecurity inSouthAfrica to support thecountry’smuchanticipatedeconomicgrowthinthefuture.EskomiscommittedtoitspurposetoprovidesustainableelectricitysolutionstogrowtheeconomyandimprovethequalityoflifeofallSouthAfricans.Intheyearsahead,thecurrentcapacityexpansionprogrammewill,oncecompleted,resultinamoresecurenationalpowersupplythatcanmeetthecountry’sneeds.

South Africa is now experiencing the consequences of deferring planning and investmentdecisionsinyearsgoneby.Inordertokeepthelightson,Eskomhashadtorunitsgeneratingplantatsignificantlyhigherloadfactors,whichcontinuestohaveanegativeimpactontheoverallplantperformanceandthehealthoftheplant.EvenasnewcapacityenablesEskomtobridgethegap,carefulmanagementofexistingresourcesisrequiredtoensurethatwedonotpushourageingplantbeyondsustainablelimits.

Over the past year,Eskomhasworkedextremely hard to keep the lights on and, apart from14hours inMarch2014,wehavedonesosuccessfully.Werecognisethat loadsheddinghasseriouseconomicandsocial impactsandareworking tirelessly toavoid this,keeping inmindthatourmandateistoensuretheintegrityofSouthAfrica’spowersystem.Allofourresources– human, technical and financial – are geared towards ensuring that electricity generation,transmissionanddistributionremainsecureandsustainableoverthelongterm.Eskomresortstoloadsheddingonlywhennotdoingsocouldleadtoalonger,moredamagingshutdownoftheentiresystem.

Letter from the chairperson

In the two decades since SouthAfrica achieved its freedom, ourcountry has made enormousprogress. Eskom has played acentralroleinthistransformation.Between 1994 and 2014, ourgenerating fleet capacity hasbeen expanded from 37 636MWto41995MW,andourpowerlineshave increased from 238 964kmto 359 337km. Over the same

period, the proportion of households with access to electricityhasrisenfrom44%to85%1.Sincethe inceptionof thecapacityexpansionprogramme in2005,a totalof8930 individualshaveparticipatedinskillsdevelopmentandasignificantnumberofjobshavebeencreatedthroughthesemegaprojects

1. Based on the StatsSA 2012 General Household survey, revised in October 2013.

TheelectricitytariffapprovedbytheNationalEnergyRegulatorofSouthAfricain2013resultedinlowerrevenuethanEskomhasappliedforwhichhasseriousconsequencesforourbusinessandfuturesustainability.Wehavelaunchedthebusinessproductivityprogrammewhichaimstoreducecost,increaseproductivityandenhanceefficiencies,buttherevenueshortfallcannotbeaddressedthroughcostsavingsandefficienciesalone.Wecontinuetoengageourstakeholdersinthisregard,butcost-reflectivetariffsremainarequirement.

It remains critical for us to balance the short-termpriority of security of supplywith long-termoperationalandfinancialsustainabilityand thisentailsdifficult trade-offs tobemade,amongstothers:• Giventhetightreservemargin,wehaveoperatedthemoreexpensivediesel-fuelledopen-cyclegasturbine(OCGT)stationsfarabovepreviousloadfactorstoensureacontinuoussupplyofelectricity.Inlightofourrevenueoutlook,thissituationisnotsustainable

• Eskom’sGenerationsustainabilitystrategywillimproveplanthealthandreliabilityinthelongterm,but theneed formaintenanceshouldbebalancedwith thecurrentpowersystemandfinancialconstraints

• Ensuringthattheoldercoal-firedstationsmeetthestrictatmosphericemissionstandardsisachallenge.Shouldourolderplantpersistentlyexceedthelegallimitsforatmosphericemissions,theboardmayhavetoconsiderusingtheplantatreducedcapacity,whichwouldplaceevengreaterpressureonsecurityofsupplyandpossiblyhaveanegativefinancialimpact

Thesearedifficulttrade-offsthatnotonlyEskom,butthecountry,shouldconsider.

Integrateddecision-makingatapolicylevelisneededtoensurethatthecountrylooksbeyondtheendofthecurrentcapacityexpansionprogramme.Thisinvolvesplanningfornewpowerstationsina timelymanner, including thediversificationofenergysources,buildingandstrengtheningthe distribution and transmission networks, addressing environmental concerns, securing anadequate,affordablesupplyofprimaryenergyaswellasmovingtowardscost-reflectivetariffs.

ClarityonnewpowerstationsbeyondKusileisrequiredforallparticipantsintheelectricitysector.Nearlytwo-thirdsofEskom’spowerstationsarebeyondthemidpointoftheirexpectedlifespans.Whilewehavenotyetbeenallocatedanynewbase-loadcapacityafterKusile,weareexploringdiversificationofourenergysourcestocomplementourgeneratingfleetinfuture,thusensuringsecurityofsupplytothecountry.Thisincludesthedevelopmentofagasstrategy,whichentailstheconversiontocombined-cyclegasturbinesintheshorttermandupstreamgasactivitiesinthe long term. These decisions are not Eskom’s andwe are confident that, workingwith theshareholder,thesequestionswillbeaddressedcomprehensivelyduringtheperiodahead.

Onbehalfoftheshareholderandtheboard,IwouldliketothankMrBrianDames,Eskom’sformerchiefexecutive,whosteppeddownattheendofthereportingperiod.Brianspent27yearswithEskomandbroughtbothskillanddedicationtohisposition.Thepositionofchiefexecutivehasbeen filledbyEskomboardmember,MrCollinMatjila, onan interimbasis until a permanentreplacementisidentified.

WewelcomeMsTsholofeloMolefe,formerlythegroupexecutive:GroupCustomerServices,asournewfinancedirector.


A team from the Cullinan technical service centre fix a technical fault on a distribution line

The board thanks the executivemanagement committee for their vigilance and determinationinconfrontingthechallengesfacingEskom.Wehaveahighlycompetentmanagementteaminplace.Werecognise,however, that thevacanciesatsenior levelneedstobeaddressed.Thiswillbeoneofthefirstprioritiesoftheincomingchiefexecutive,whomayalsowanttoshapethemanagementstructure.

Anoteofappreciationisowedtoourformershareholderrepresentative,theHonourableMinisterMalusiGigabaandtheDepartmentofPublicEnterprises,whohavesupportedandguidedEskomonthepathtosustainablegrowth.Eskom’sboardandmanagementhavebeenfortunatetohaveanactiveandaccessibleshareholderrepresentativewhoenabledustounderstandgovernment’sthinkingonkeyissues.TheoverallstrategicdirectionofEskomisalignedtotheDepartmentofPublicEnterprises’visionstatement“Todrive investment,productivityandtransformation in itsportfolioofstate-ownedcompanies,theircustomersandsupplierssoastounlockgrowth,driveindustrialisation,createjobsanddevelopskills.”

ThisreportcoversaperiodwhenademocraticSouthAfricabidfarewelltoitsfoundingpresident,NelsonMandela,whowasan inspirationtoallofhumanity.Asheoncesaid,“Afterclimbingagreathill,oneonlyfindsthattherearemanymorehillstoclimb.”ThisispreciselythesituationfacingEskom.Wearededicatedtofulfillingourmandate,buttheboardwillnotallowEskomtocommititselfbeyonditsmeans.ItiscriticalforEskomtoensureabalancebetweensecurityofsupply,financialandoperationalsustainabilityandenvironmentalcomplianceandtoresponsiblymanagethetrade-offsthatarerequired.

DrawinginspirationfromformerPresidentMandela,wewillsuccessfullyconfrontthechallengeswefaceintheyearsahead.

Zola TsotsiChairperson

Letter from the chairperson (continued)


Becoming a high-performance organisationSafetySafetyisatthecentreofourzeroharmpolicy.Overallsafetyperformancehasbeenimprovingoverthepastthreeyearsbuttherearestillconcernsrelatedtocontractors.Weareworkingwithcontractorstoensurethatallsafetyrequirementsaremet.Non-complianceisnottolerated.

At the Ingula pumped-storage construction site, a single accident claimed the lives of sixcontractorsinOctober2013.Inthewakeofthistragicincident,wehavecontinuedtoreinforceallsafetypracticesonsiteandcontinuetoimplementimprovementactions.

Our thoughtsandprayersgo toall the families, friendsandcolleaguesof theemployeesandcontractorswhopassedawayinthelineofdutythispastyear:

Eskom employees Contractor employees

LlwellynFredericks MauriceAntonio

MthunziMajeke FedericoCaasiJr

MulimisiPietMamburu DennisCasale

SaulLegstomMicambeni BonganiTomDhlamini

NigelRogerRoelfse MajaraLesaoana

LucasMasilela

McatsaneThokozaneMbebe

MalanMjoli

SelbyVelaphiMkhwanazi

BenzileMlotshwa

DanielMthiyane

SinethembaNdzoyiya

ThembalakheNtsethe

KhayaEricNukani

TsephoJusticeRakcotsoka

ArnoReynders

AbiasTobe

MojalefaTshwaela

Technical performance In line with the Generation sustainability strategy, Eskom is implementing appropriate levelsof planned maintenance based on what is necessary to ensure long-term plant health whileremainingcognisantofcurrentsystemconstraints,compliance,safetyandstatutoryrequirementsaswellasthefinancialconstraints.

Overthenextseveralyears,SouthAfrica’selectricityshortagewillbealleviatedasnewpowerstationsbeginfeedingpowerintothegrid,providingimprovedsecurityofsupplytobusinessesandhouseholds.Westillhavesomewaytogobeforethisvisionbecomesareality.Thisintegratedreportreflectsthecomplexchallengeswefaceinre-orientingourbusinesswhileensuringastablesupplyofelectricity.

Eskomisdoingwhatneedstobedone.Wehaveoutlinedafour-yearstrategypremisedonoureightstrategicobjectivestobuildasustainablefuture,basedonthefollowingsevensustainabilityelements:• Sustainableassetcreation• Financialsustainability• Operationalsustainability• Buildingasustainableskillsbase• Environmentalsustainability• Transformationandsocialsustainability• Buildingasolidreputation

During2014/15,ourprimaryfocuswillbeonthefirstthreeelements–assetcreation,financialandoperationalsustainability–wherethematerialchallengestothebusinessaremost immediate.Safetywillremainanoverarchingpriority.

Thepowersystemwill remainconstraineduntilunits from thecapacityexpansionprogrammecomeonline.Duringthistime,allSouthAfricanshavearoletoplayinusingenergyefficientlyandreducingdemandonthesystem,particularlyduringpeakhours.

This report reviewsourperformance in termsof theeightstrategicobjectives. Itshowswherewehavemadeprogress,wherewearelaggingbehindandwhatwearedoingtoensurethatourbusinesscontinuestosupporteconomicandsocialdevelopmentinSouthAfricaandtheregion.

Chief executive’s report

Eskom’s going-concern statuswillcontinuetobeakeyfocusforthe coming year as the revenueshortfall created by theMYPD 3decisioncannotbesolvedthroughcost savings and efficienciesalone – cost-reflective tariffsremainarequirement.Eskomhasto balance short-term prioritieswith long-term sustainabilityrequirements


Leading and partnering to keep the lights onKeeping the lights onWearecommittedtokeepingthelightson,butwecannotaffordtodosoatallcost.Weneedtooperatewithinourfinancialmeansandinawaythatdoesnotcompromisethesustainabilityofthenationalelectricitygrid,thenaturalenvironment,thesafetyofourpeopleandsurroundingcommunities.

Arangeofshort-terminterventionsareinplacetoassistusinmeetingthedemandforelectricity,especiallyduringpeakhours,whilenewpowerstationsareunderconstruction.Theseincludethemassrolloutprogrammes,whichdistributeenergy-savinglightbulbstoresidentialcustomers,andthe49Mcampaigntoencourageenergy-efficientbehaviourstoachieveanoveralltargetof10%energydemandreduction.Eskomhasalsocontinuedtheimplementationofitsdemandresponseprogrammetosignupcustomerstoreducedemandforcompensationshouldthepowersystemrequireit.

TheMYPD3 tariffdeterminationsharplycurtailed funding for integrateddemandmanagement(IDM)andmadenoawardforthedemandmarketparticipationprogrammebeyondyeartwooftheMYPD3period,andthereforeEskomhastofocusonaccessingalternativefundingforEskom’sIDMprogrammeandalsorecoveringitthroughtheregulatoryclearingaccountadjustment.Thepeak demand electricity reduction of 410MW achieved through IDM initiatives exceeded thetargetof379MW.Eskomcontinuestoimprovetheinternalenergyefficiencyofitsfacilities(powerstationsandofficebuildings)andrealisedannualisedenergysavingsof19GWhfromnewIDMprojectsfortheyearended31March2014,exceedingthetargetof15GWh.

Over thepastyearEskomhasworkedhard tokeep the lightsonand,apart from14hours inMarch 2014, we have done so successfully. When the power emergency was declared on6 March 2014, Eskom followed approved load shedding procedures. This occurrence – thecombined result of a low reservemargin and loss of load at two power stations, due in partto coal-quality issues – lasted for 14 hours. It differed vastly from 2008, when South Africaexperiencedprolongedperiodsof loadshedding.Itwasunavoidableandweapologiseforanyinconveniencecaused.

Decreasing the maintenance backlogWhilenoloadsheddingisforecastinthenearfutureitremainsapossibilityasthepowersystemwill remain constrained until units from the capacity expansion programme come online. Thestatus of the system is also affected by changes in atmospheric emission licence conditions.Much hinges on the balancing of the demand and supply side options in the interim withoutcompromisingthesustainabilityoftheexistingEskomgenerationfleetfurtherwhilethecapacityexpansionprogrammeisbeingcompleted.Ourabilitytosupplycontinuouspowertothegridthusdependsonboththeadherencetorequiredmaintenanceprogrammestoimprovetheperformanceofthecurrentfleetandourabilitytoaccessandleverdemandsidemanagementoptions.

TheGeneration sustainability strategy to improve performance over a period of five years to2017/18,involveshavingthegeneratingfleetoperateat80%availability,with10%ofthefleet’scapacity scheduled for maintenance and a 10% allowance for emergency outages. This hasenabledustodomoreplannedmaintenance in2013/14than in thepreviousyear. In2013/14maintenancewasfocusedondesign-basedmaintenance,8%oftotal10%plannedmaintenance,

Theperformanceof thegeneratingplant isunderseriouspressure,especiallyasEskom triesto focusondrivingsustainability through theexecutionofnormalplannedmaintenance,whilecateringforshortdurationcorrectivemaintenanceopportunities.Thisisshownbytheunplannedcapabilitylossfactor(UCLF)percentagefortheyearendedMarch2014whichdeterioratedfrom12.12%to12.61%.ThehigherUCLFpercentageisanindicationofthedeterioratingplanthealthof an ageing power station fleet. The deterioration inUCLFand higher plannedmaintenanceresultedindecreasedplantavailabilityof75.13%fortheyeartoMarch2014comparedto77.65%thepreviousyear.

During the past year the two indicators of Transmission’s technical performance, namely thenumberofsystemminuteslostandmajorincidents,improvedcomparedtothepreviousyear,duetothesustainedreductioninlinefaultsandplantfailures,aswellaseffectiveriskmanagement.

Thetwo indicatorsofDistribution’s technicalperformance,namelysystemaverage interruptionfrequency index and the system average interruption duration index, improved significantlyduring the year. The improvement is due to the increase in the number of customer networkcentres,maximisinglive-linework,reductionofoutagesduetotechnologysolutionsandimprovedmaintenance.

Being customer-centricEskom’shas5232915customersasat31March2014.Arangeofstatisticalperceptionandinteraction-based customer surveys are used tomeasure customer satisfaction with Eskom’sservice.Mostof thesesurveyshave indicatedan improvement incustomersatisfaction in thisyearcomparedtothepreviousyear.Despitethenumberofsystememergencies,theproactivemannerinwhichEskominformsitscustomersofthesystemstatus,viatwicedailyreports,aswellastheKeyAlertSMSmessagingsystem,hasmadeadifference.

CustomersrespondedadmirablywhenEskomdeclaredpowersystememergenciesduringtheyearandreduceddemandby600MWinNovember2013,by340MWinFebruary2014andby1160MWinMarch2014.

Building strong skillsEskom is a complex business that requires a diverse skills set thatmust bemaintained anddeveloped.Theseareskillsthatwecannotdowithoutandtrainingremainsapriorityaswebuildforthefuture.

Asat31March2014,wehad5160technicallearnersinthepipeline(engineers,techniciansandartisans)aswellas4325learnersbeingtrainedtocontributetothesocio-economicdevelopmentofthecountry’syouth.

The construction of new power stations is South Africa’s largest capital investment project.Thecapacityexpansionprogrammeemploysover400001people,8930ofwhomhavebenefiteddirectlyfromskillstraining.

TheMedupiexperiencehasalsounderlinedtheneedforEskomtoincreaseitsproject-managementcapacity.Tothisend,Eskom’sprojectmanagementtrainingcentreofexcellenceandtheEskompowerplantengineeringinstitutehavemadeprogressbycollaboratingwithvariousuniversities,suchasthesmartgridcentredevelopmentattheUniversityofKwaZulu-Natal.

Chief executive’s report (continued)

1. The 25 181 jobs created mentioned elsewhere in the integrated report (pages 148, 150 and 172) refers to contractors that have been on site for a minimum of three months.


The turbine hall under construction at Medupi power station

whiletheremainderwasusedforshort-termemergentrisks.Someoutagesweredeferredduetosupply-demandconstraints,delayingimprovementsinplantperformance.

To ensure that the most crucial maintenance is done, our technical governance committeeprioritisedtheoutagesthathadtobecompletedduringtheyearandthesewerecarriedout.

We are taking several steps to reinforce operational stability over the short tomedium term.TheEskomboardhasapprovedsomeflexibilitytotheexecutionofplannedmaintenanceduringperiodsofatightpowersystemtoeasepressureonthereservemargin.Wearealsoworkingwithsomelargeindustrialcustomerstostrengthenpower-reductionagreements.Forthefuture,weareexploringtheconversionofopen-cyclegasturbinestorunoneithernaturalgasordieseltoreducecost.

Delivering capacity expansionEskomspentR59.8billiononcapitalexpenditure in2013/14,R2.5billion less thanbudgeted.Thebuildprogrammeisapriorityforboththeboardandmanagement:• Wecompletedthereturn-to-serviceprogrammeduringthereportingperiod.Allthreestations(Camden,GrootvleiandKomati)are fullyoperational.The lastunitof thisproject–Komatipowerstation’sUnit3–wascommissionedinSeptember2013,bringingthetotalamountofgeneratingcapacityforreturn-to-serviceunitsaddedtothegridsince2005to3741MW

• Therefurbishmentprojects,despitetheongoingchallengeofoutageconstraints,havemadegood progress. All the Kriel units have now been refurbished, with the final unit (Unit 5)synchronisedtothegridon15March2014.Furthermore,threeofthesixMatlaunitshavebeenrefurbished,withthethirdunit(Unit5)synchronisedtothegridon25March2014.DelayswereexperiencedatDuvhaduetooutagemovements,hencetherefurbishmentprogrammewillonlystartduring2014/15.ThedevelopmentoftheGenerationoutagemanagementplantakesintoaccounttheoutageschedulesrequiredfortherefurbishmentprojects

• We remain on track for synchronisation of Medupi Unit 6 during the second half of 2014.Commissioningofthefirstunithasstarted,andweareworkingwithcontractorstoensurethattheyadheretoagreedschedulesandprocesses.Keychallengesincludefindingsolutionsforthecontrolandinstrumentationsystems.Eskomwillsubmititsclaimstocontractorstorecovercostsandcompensatefordelaysincurredinaccordancewiththerelevantworkscontracts

• TheKusilepowerstationUnit1isscheduledforsynchronisationbytheendof2015.Thekeychallenge isfindingasolution forcontrol systems toavoid repeatingdelaysexperiencedatMedupi.TherewasanincreaseinproductivityatKusileoverthepastyear.Fourmedium-termcontractshavebeensignedforcoalsupplytoKusilepowerstationduringthecommissioningphase.Theconclusionoflong-termcoalandlimestonesupplyagreementsforKusileisyettobefinalised

• Workcontinuesat the Ingulapowerstation,but the tragic incident that cost the livesof sixcontractors has affected the schedule.We have taken a range of steps to investigate theincidentandpreventsimilarincidents.Worktoinstallturbinesandgeneratorswillbeginsoon.Asaresultoftheaccident,thesynchronisationofUnit3,thatwasinitiallyscheduledforthesecondhalfof2014,isnowtargetedforthesecondhalfof2015

Atotalof811kmoftransmissionpowerlinesand3790MVAoftransmissionsubstationcapacitywerealsocommissionedduringthecourseoftheyear.Constructiononthe100MWSerewindfarmisprogressingwell,with69%ofthetowerfoundationsand17%oftheturbinescompleted.



Securing Eskom’s future resource requirementsEskom’s thermal power stations require primary energy (fuel in the form of coal, diesel anduranium)aswellaswatertofunction.Theseneedtobesecuredwellinadvance,inthecorrectvolumes,at theappropriatequality levels,andat thebestpossibleprice ifweare togeneratesufficientelectricityinasustainable,cost-effectiveway.

Overallcoalstockdayswereat44dayson31March2014,exceedingthetargetof42days.

Procuring sufficient coal of the appropriate quality remains a challenge. The calorific valueof coal at Arnot,Matla and Tutuka power stations remains lower than required by the powerstationdesign,causingloadlosses.Thehighashcontentcontinuestoimpactashhandlingplantreliabilityandboilerperformance.Inaddition,stone-contaminatedcoalaffectedperformanceatthesestations.TechnologiestoscreencoalforstonesandmetalhavebeeninstalledatTutukaandArnotpowerstationstoassistinmitigatingthisrisk.

Coal supplywasalsoa factor in the rotational load shedding implementedon6March2014.Prolongedrainyweatherhadleftcoalstocksandopen-pitcoalmineswet.Finecoal,whenwet,congealsandstickstoconveyorbelts,restrictingtheamountofcoalthatcanbedeliveredtotheboilersresultingintheaffectedpowerstationsgeneratinglesselectricity.

Severalprojectsareunderwaytoensurethatournewcoal-firedpowerstationshavesufficientwater resources when they begin operating. The first phase of the Mokolo Crocodile wateraugmentationprojectreachedthe10.3kmmarkduringtheyear,increasingthewatersupplytotheareaby37%andtransportingenoughwatertosupplyfourofthesixMedupiunits.

Lookingbeyondshort-termsupplyissues,wehavetwostrategicconcerns.First,foratleastthenexttwodecades,Eskomneedstobeabletoobtaincoalofanacceptablequality,atanaffordableprice,fromSouthAfrica’scoalreserves.SecondistheneedtotakeadvantageoftheresourcesinthesouthernAfricanregion.Wecontinuetointeractwithgovernment,aswellasoursuppliers,inanefforttoensurethatourresourceneedscanbemetoverthelongterm.

Astrategyhasbeendevelopedto take fulladvantageof thebenefitsofgas. In theshort termEskomisundertakingaconversionofexistingopen-cyclegasturbine(OCGT)installationswhichwillallowtheOCGTstoswitchfromexpensivedieseltomoreaffordablegas.ItisdesirableforEskom to participate in upstream gas activities to expedite the production of unconventionalgassuchascoal-bedmethaneandshalegas,whichcouldenablecost-competitivebase-loadcapacity.LongerterminitiativesalsoincludeacquiringgasfromMozambiquethroughexistingandplannedinfrastructureandpossiblythebuildingofclosed-cyclegasturbines.

EskomsupportedthegovernmentofSouthAfricainconcludinganinter-governmentalagreementbetweenSouthAfricaandtheDemocraticRepublicoftheCongo(DRC)ontheproposedGrandIngahydro-electricprojectontheCongoRiver.

Implementing coal haulage and the road-to-rail migration planWetransported11.6Mtofcoalbyrailduring2013/14,reachingourtargetof11.5Mtandimprovingourperformanceby15%relativetothepreviousyear.Railwaylinesarebeingbuilttosupplythenewcoal-firedpowerstations.TheroutefortheMajubaheavy-haulrailwaylineisbeingclearedandconstructionisunderway.Whenthe68kmrailiscompletedin2017,thisdedicatedlinewilltransport 14Mt of coal a year fromErmelo toMajubapower station. The railway line for coaltransportationtoKusilealsosawsomeprogresswhenprotractednegotiationswereconcludedforthepurchaseofaservitudeonafarminthepathoftheline.

Whenthebuildprogrammeiscompletedin2019/20,Eskomwillhaveincreaseditscapacityby17384MW1.Someofourgeneratingplantwill reach theendof their lifecyclesover thenextfive to10 yearsand, as theeconomygrows, so toowill thedemand for electricity.While thegovernment’s Integrated Resource Plan (IRP 2010) indicates that new base load capacity isrequiredbeyond theMedupi andKusile power stations, nonewbase-load capacity hasbeenallocatedtoEskomyet.Eskomisworkingwiththeshareholdertoensurethatplanningforfuturecapacityisundertakeninatimelymanner.

Reducing Eskom’s environmental footprint and pursuing low-carbon growthEnvironmentalcomplianceremainsapriority inouroperations.During thereportingperiodwespent R3 billion on improving the generating fleet’s environmental performance. During theyear the water usage improved relative to the previous year while the particulate-emissionsperformanceremainedthesame.Wealsomettheinternaltargetsforbothindicators.

Despite thesemeasures, there is the risk that our older coal-fired stationswill not be able toconsistentlymeet the limitssetbynewatmosphericemission licences,whichcame intoeffectinApril2014andtheminimumemissionstandardswhichcomeintoeffectin2015.Shouldthisriskmaterialise,theresultinglegalconsequence,penaltiesandsignificantfinancialimpactmaymake it unsustainable to continue running these ageing stations at full capacity,whichwouldhaveimplicationsintermsofourabilitytomeetdemandanddomaintenanceontherestofthefleet.Wearecommittedtoenvironmentalsustainabilitybutbelievethatabalancedapproachisnecessarytoensureenvironmentalsustainabilitywhilstsupportingeconomicgrowthandaccesstoaffordableelectricity.

Eskomisengagingwithlocalauthoritiestoalignthenewatmosphericemissionlicenceswiththecapabilityofinstalledtechnologyandconsideringthecurrentoperatingconditions.Toaddresstheriskrelatedtocomplyingwiththeminimumemissionstandardswehaveappliedforafive-yearextensiononthenewlicencetermsforsomeofourgeneratingplant.Thiswillgiveusthetimeto retrofitemissions-filtering technologies to theplant toensure thatwewillbeable to reliablyabidebythenewlicenceterms.Weremaincommittedtoworkingwiththeauthoritiestolimitthenegativeeffectsonpublichealthandsomaximiseourpositiveimpactonsociety.

InthecaseoftheKrielpowerstation,Eskom’srequesttoincreasetheparticulate-emissionslimitandtoallowagraceperiod forwhenemissionsexceedthe limitof thenewlicence,hasbeendenied.Everyeffortwillbemadetocomplywiththeconditionsofthelicence.Thenewlimitdoesnotallowthestationtocontinuouslyoperateatitsfullratedpowerandwillrequireloadlosses.

Wealsoinvestinrenewableenergyindirectlybypurchasingelectricityfromindependentpowerproducers(IPPs)thatusewind,solarpower,biomass,landfillgasandsmallhydrotechnologiestogeneratepower.

Critical for Eskom at this point is ensuring a balance between security of supply, financialsustainabilityandenvironmentalcomplianceandtoresponsiblymanagethetrade-offsthatarerequired.


1. Capacity increased from 17 100MW reported in 2012/13. The concentrated solar power plant (100MW), project Illanga (the 150MW photovoltaic renewables project to supplement auxiliary power usage by power stations), in addition to 34MW enhancements to existing plant capacity, are now included as there is more certainty regarding these projects.


Ensuring Eskom’s financial sustainabilityIn February 2013, theNational ElectricityRegulator of SouthAfrica (NERSA) awarded us anannual tariff increaseof8%over theperiod from2013/14 to2017/18,substantially lower thanourrequestfor16%perannum.Whilewewillbeabletocompletethecurrentcapacityexpansionprogrammeusingexistingresources,thetarifflevelawardedmeansthatwewillnotachievecost-reflective tariffsby2017/18.Wewillnotbeable toexpand the investmentassetbasebeyondcurrentcommitments,anditwillbeachallengeforustomeetallregulatoryrequirements.

TheenvironmentthatEskomcurrentlyoperatesinposesanumberofchallenges:• TherevenueshortfallofR225billioncreatedbytheMYPD3determinationrequiressignificantadjustmentsinthebusiness

• Lowerthanprojectedlocalelectricitysalesareexacerbatingtheprojectedrevenueshortfall• Weusedtheopen-cyclegasturbinestationsmoresincethetoolsweusedtoreducedemandinthepast–particularly,powerbuybacksandtheshort-termpower-purchaseprogramme–arenolongeravailable.Wewillnotbeabletocontinuethispracticeoverthelongertermaswecannotaffordthisnormaintainourliquiditybuffer

• Payments to IPPs,whichare regulated in termsof theirpowerpurchaseagreements,haveincreased, and the costs are currently higher than anticipated by NERSA. The regulatorymethodology allows the recovery of prudently incurred IPP costs as a pass throughwith atimingdelayinthereimbursement

• Thereisincreasedpressureonthecreditratingassociatedwiththecountry’screditprofileandEskom’sfinancialprofile

• Ourcreditratingsunderpinourabilitytoborrowsufficientvolumesataffordablelevels.Eskom’sforeign-currency ratings are on the low end of investment grade (Baa3 fromMoody’s) andsecond-lowest(BBBfromStandard&Poor’s)investmentgrades.Bothratingshavea“negative”outlook. InDecember 2013, Fitch affirmedEskom’s long-term local currency issuer defaultrating of BBB+.Eskom is at risk of a further downgrade if SouthAfrica’s sovereign rating,presently on “negative” outlook, deteriorates, or if our standalone financial profileweakensmaterially

The Soshanguve manufacturing technology demonstration centre is a business incubator funded by the Eskom Development Foundation

Pursuing private-sector participationEskomwelcomesgovernment’srecentannouncementsregardingadditionalgenerationcapacitythrough renewables, co-generation and coal technologies. These will augment the nationalelectricitysupplyandreducepressureonthegridwhentheycomeintooperation.

Eskomhassuccessfullyconnected21renewableenergyindependentpowerprojects(RE-IPP)(representingatotalcapacityof1076MW)tothegrid.Oftheseprojectsatotalof467.3MWiscurrentlyavailabletothesystem.

TotalenergyprocuredfromIPPsfortheyearamountedto3671GWhatacostofR3266million(averaging88c/kWh)whichisR721millionhigherthantheNERSAdecisionfor2013/14.

AstheIPPprogrammeexpands,welookforwardtogrowingparticipationbyprivate-sectorplayers,aswell as greater certainty regarding Eskom’s role in acquiring and building new generationcapacity.

TransformationMaximising Eskom’s socio-economic transformationTransformation is both a business and social imperative.We continued contributing to SouthAfrica’seconomictransformationinlinewithavailableresourcesandallperformancetargetsforbroad-basedblackeconomicempowerment(B-BBEE)attributableexpenditurewasexceededfortheyearended31March2014.Thelocalsourcinginthecapacityexpansionprogrammefortheyearwas54.6%.

The expiry of Eskom’s exemption from the Preferential Procurement Policy Framework Act(PPPFA)hasrequiredthatanumberofcommoditystrategiesandtargetsbeamended.Wewillcontinuetoseek innovativewaystofurtheradvancethesupplierdevelopmentand localisationmandateincollaborationwithotherstate-ownedcompanies,andwithintheambitofapplicableprocurementregulations.

TheEskomDevelopmentFoundationNPCoverseesourcorporatesocial investmentprojects.A totalof357443peoplebenefited from itsR132.9million investment inprojects focusingonhealth,education,theenvironment,andsmallandmedium-sizedbusinessdevelopmentduringtheyear.

Webroughtelectricityto201788householdsduringtheyearaspartofEskomandtheDepartmentofEnergy’selectrificationprogramme,aswellasto112schools.TheDepartmentofEnergyhasmadeadditional fundingavailable toextend theelectricitynetwork to ruraland far-flungareaswhichwillhelpaccelerateprogresstowardsuniversalelectrificationby2025.

Internal transformationOur employment equity indicators for black and female employees in senior management,middlemanagement and professional positions all showed an improvement compared to thepreviousyear.

Weextendedouremploymentequityplan,whichwassignedin2010andexpiredinMarch2013,byayeartoallowtimetoanalyseourinternaltransformationprogressanddevelopalong-termemploymentequityplan.Therevisedplanwillbesubmittedtotheshareholderin2014/15.

Eskomhasa highly competentmanagement team in place.We recognise, however, that thevacanciesatsenior levelneeds tobeaddressed.Thiswillbeoneof thefirstpriorities for theincomingchiefexecutive,whomayalsowanttoshapethemanagementstructure.



Two of the 46 wind turbines to be erected at the Sere wind farm on the West Coast

Incombination,thesefactorsareputtingagreatdealofpressureonourfinancialsustainability.Accordingly,wearediscussingpossiblefundingoptionswiththeshareholder.Inaddition,wehaveappliedtoNERSAfortheregulatoryclearingaccount(RCA)adjustment.TheRCAisnecessitatedbythefactthattherevenueandexpenditureapprovedforEskomislargelybasedonforecasts.TheMYPD rules require that from time to timea reconciliationof thesevariancesbedone inordertoquantifyover/undercollectionofrevenueandover/under-expenditureonEskom’spart.NERSAallowsonly expenditure that haspassed theefficiency test.Should the results of theassessment indicate thatEskomhas to re-imburse thecustomers, then thepriceofelectricitywouldhavetodecreaseproportionally to theRCAbalance.Similarly, if thecustomershavetore-imburseEskom, thepricewouldhave to increase.Dependingon thequantumof theRCAbalance,itiseithercarriedovertothefollowingfinancialyear,oratariffadjustmentiseffectedin the followingfinancial yearor theMYPD is re-openedand the full stakeholder consultationprocessisundertakenbeforeanytariffadjustmentisallowed.

Whilewe pursue these discussions,wewill continue to strengthen internal efficiencies, deferspendwherepossibleandreducecoststhroughourbusinessproductivityprogramme.However,cost-reflectivetariffsremainanecessityforoperationalandfinancialsustainability.

Wehave identifiedand largelysecured funding for thecurrentcapacityexpansionprogrammeandhavesufficientliquiditytomeetourimmediateliabilityrequirements.Weareconfidentthatwewillbeabletosecuretheremainingfundingforthecurrentcapacityexpansionprogramme.However,thiswillhavetobebalancedagainstthenegativeoutlookfromtheratingagenciesandthepossibilityofadowngradeduetothedeteriorationinthecreditmetrics.

EskomachievedagroupnetprofitofR7.1billionfor2013/14(2012/13:R5.2billion)whichwassignificantlyaffectedbytheprofitontheembeddedderivativesofR2.1billion(2012/13:lossofR5.9billion).Theprofitshouldbeviewed incontextofEskom’sholisticfinancialposition.Thegroup is highly leveraged with a debt-to-equity ratio of 2.06 at 31March 2014 (2013: 1.84).Eskom’sgrossdebtasat31March2014isR255billion(2013:R203billion)andwillcontinuetoincreaseasweexecuteourfundingplan.Boththefreefundsfromoperationsasapercentageofgrossdebtandgrossdebtasapercentageofearningsbeforeinterest,taxation,depreciationandamortisationratiosaresignificantlybelowinvestment-gradetargets.

ConclusionEskomremainscommittedtoitsaspirationofsustainabledevelopmentasdemonstratedinourcontinuedsupport,asanactivesignatory, for theUnitedNationsGlobalCompact.EskomisaUNGC LEAD companywhichmeans that we are seen as a leader in the sustainability field.AspartofthiscommitmentEskomsuccessfullypilotedaUNGCLEADboardprogrammewhichisfocusedondrivingthesustainabilityagendathroughtheboardsofcompanies.

Eskom continues to confront a challenging set of financial and operational circumstances. InthiscontextwerememberthewordsoflateformerpresidentNelsonMandela:“Italwaysseemsimpossible until it’s done.”All of our efforts are aimedat ensuring an uninterrupted supply ofelectricitytothenationwithoutcompromisingthefinancialwell-beingofthecompany.Workingwiththeshareholder–whohasbeenverysupportive–andwithcooperationofallSouthAfricansinusingelectricityefficiently,wewillsuccessfullymeetthesechallenges.

I would like to acknowledge the contributions of Mr Brian Dames, who served as our chiefexecutiveuntilthecloseof2013/14.WethankBrianforhiscontributionstothisorganisationover


nearlythreedecades.TheexecutivecommitteealsobidfarewelltoMrBhabhalaziBulunga,groupexecutive:HumanResourcesandMrKannanLakmeeharan(divisionalexecutivefortheOfficeoftheChiefExecutive)andgroupexecutive:TechnologyandCommercial(acting)duringtheyear.

A sincereword of thanks toMsCarolineHenry,who acted as chief financial officer after theresignation of the former finance director, Mr Paul O’Flaherty, to whom we bid farewell inJuly 2013. Caroline drew on her extensive experience as the EskomTreasurer to ensure aseamlesstransition.

CongratulationstoMsTsholofeloMolefe,whohasbeenappointedasournewfinancedirector.I knowshewillapplyherself tohernew rolewith thesamededicationandacuity thathelpedtransformGroupCustomerServicesintotheefficient,effectivedivisionitistoday.

Aboveall, I thankour46919employees,whosetalent,skillandcommitmentwillmakeall thedifferenceaswebuildthebridgetoasustainablefuture.Wehaveaclearstrategyinplace–nowwemustexecute.

Collin MatjilaInterim chief executive


Key performance areas

Performance indicator Unit

Target 2013/14

Target achieved?

Actual 2013/14

Actual 2012/13

Actual 2011/12

Pageref

Delivercapitalexpansion

Generationcapacityinstalledandcommissioned

MW 100 120 261 535 117

Transmissionlinesinstalled

Km 770.0 810.9 787.1 631.0

117,123Transmission

capacityinstalledandcommissioned

MVA 3790 3 790 3580 2525

Generationnewbuildcapacitymilestones(Medupi,KusileandIngula)

Daysdeviation

30.00 48.90 43.48 n/a 117

Reduceenvironmentalfootprintinexistingfleet

Relativeparticulateemissions

kg/MWh 0.36 0.35 0.35 0.31 128

WaterusageperkWhsentout6

L/kWhSO 1.39 1.35 1.42 1.34 128,129


Coalroad-to-railmigration

Mt 11.48 11.58 10.12 8.50 141

Ensurefinancialsustainability7

Costofelectricity(excludingdepreciation)

R/MWh 453.40 541.92 496.24 374.19 153

Interestcover Ratio 1.18 0.65 0.27 3.27

155Debt:equity(includinglong-termprovisions)

Ratio 2.17 2.21 1.96 1.69

Freefundsfromoperations(FFO)as%oftotaldebt

% 9.11 9.21 8.55 15.06

Buildstrongskills(totalpipelineornewenrolments)

Trainingspendas%ofgrossemployeebenefitcosts8

% 5.00 7.87 − −

100

Engineers Number 2007 1 962 2144 2273

Technicians Number 780 815 835 844

Artisans Number 2619 2 383 2847 2598

Youthprogramme9 Number 5000 4 325 5701 5159

Shareholder’s compact

The South African government, represented by the Minister ofPublicEnterprises,isEskom’ssoleshareholder

Eachyear, inconsultationwith theshareholder,Eskomagreeson itsperformanceobjectives,measuresandindicators,aswellasitsannualtargets,inlinewiththePublicFinanceManagementAct(1999).

The tablebelowsetsoutEskom'sperformance for theyear to31March2014 in termsof theshareholder’scompact.Allkeyperformanceindicators(KPIs)onthecompactrefertotheEskomcompany only. Commentary on performance is contained in the “Performance on strategicobjectives”sectionofthisreport.

Key performance indicators of the shareholder’s compact



Target 2013/14

Target achieved?

Actual 2013/14

Actual 2012/13

Actual 2011/12

Pageref

Focusonsafety Employeelost-timeincidencerate(LTIR)

Index 0.36 0.31 0.401 0.41 85

Keepthelightson MaintenancebacklogreductionbasedonEskomtechnicalgovernancecommitteeapproval

Number 0 0 − n/a 106,114

IDMdemandsavings MW 379 410 595 365 106,111

Internalenergyefficiency

GWh 15.0 19.4 28.9 45.0 106,113

Putcustomeratthecentre

Customerserviceindex

Index 88.7 86.6 86.8 85.6 96

Improveoperations

NormalUCLF2 % 10.00 12.61 12.12 7.97

89,91

Less: Constrained UCLF3

% − − 1.63 3.41 −

Underlying UCLF4 % − − 10.98 8.71 −

EAF % 80.0 75.13 77.65 81.99

Totalsystemminuteslostforevents<1minute

Minutes 3.40 3.05 3.52 4.73

89,93

SAIDI5 Hours 45.0 37.0 41.9 45.8


Artisan training is provided at the Eskom Academy of Learning in Johannesburg



Target 2013/14

Target achieved?

Actual 2013/14

Actual 2012/13

Actual 2011/12

Pageref

Maximisesocio-economiccontribution

Localsourcinginprocurement

% 52.0 54.6 80.2 77.2

148

ProcurementfromB-BBEEcompliantcompanies

% 75.0 93.9 86.3 73.2

Procurementfromblackyouth-ownedcompanies

% 1.0 1.0 1.0 −

Employmentequity–disability

% 3.00 2.99 2.59 2.49

151

Racialequityinseniormanagement,%ofblackemployees

% 61.0 59.5 58.3 53.9

Genderequityinseniormanagement,%offemaleemployees

% 30.0 28.9 28.2 24.3

Racialequityinprofessionalsandmiddlemanagement,%ofblackemployees

% 71.0 71.2 69.6 65.7

Genderequityinprofessionalsandmiddlemanagement,%offemaleemployees

% 36.0 35.8 34.6 32.4

1. One noise-induced hearing loss late report by Generation and one LTI incident for Distribution resulted in the signed off LTIR of 2012/13 changing from 0.39 to 0.40.

2. Normal UCLF – measures the lost energy due to unplanned energy losses resulting from equipment failures and other plant conditions.3. Constrained UCLF – This is UCLF that was a result of emissions and short-term related UCLF due to system constraints to meet the

“Keeping the lights on” objective. This is apportioned between PCLF and OCLF.4. Underlying UCLF – This is the difference between normal and constrained UCLF and that is still within Generation’s control.5. SAIDI is an availability of supply index – the average duration (hours) of a sustained interruption the customer would experience per annum

(number of hours per annum).6. The volume of water consumed per unit of generated power from commissioned power stations.7. The original year to 31 March 2014 budget which was included for the shareholder compact was subsequently revised and the differences

mainly result from additional operating expenditure allocated to Generation. The revised budget ratios are as follows:• Costofelectricity(excludingdepreciation) 463.25R/MWh• Interestcover(excludingremeasurementoftheshareholderloan) 0.98• Debt/equity 2.19• FFOasa%ofgrossdebt 10.51%

8. This is a new measure, effective from 1 April 2013.9. Includes learners trained by Eskom, as well as learners trained by Eskom’s suppliers.

Shareholder’s compact (continued)


EskomisSouthAfrica’sprimaryelectricitysupplierandiswhollyownedbytheSouthAfricangovernment.Intotal,itgeneratesanddistributesabout95%ofelectricityusedinSouthAfricaandabout40%ofelectricityusedonthecontinent

About the Eskom group

Nature of the business and client baseEskomgenerates,transmitsanddistributeselectricitytoindustrial,mining,commercial,agriculturalandresidentialcustomersinSouthAfrica,andtomunicipalities,whointurnredistributeselectricitytobusinessesandhouseholdswithintheirareas.Italsopurchaseselectricityfromindependentpowerproducers(IPPs)intermsofvariousagreementschemesaswellaselectricitygeneratingfacilitiesbeyondthecountry’sborders.

Eskom operates 27 power stations with a total nominal capacity of 41 995MW, comprising35726MWofcoal-firedstations,1860MWofnuclear,2409MWofgas-fired,2000MWhydro-andpumped-storagestationsaswellasthe3MWwindfarmatKlipheuwel.Thecompanyalsomaintainsmore than359337kmofpower linesandsubstationswithacumulativecapacityof232179MVA.

Eskom is building new power stations and major power lines to meet South Africa’s energydemand. This capacity expansion programme will be completed in 2019/20. To ensure thatEskomisabletomeetdemandandcreatethespaceforcrucialinfrastructuremaintenancewhilenew generating capacity is being built, it runs a range of demand-management and energy-efficiencyprogrammes.

Eskom sold 217 903GWh of electricity to about 800 municipalities in bulk, 3 000 industrialcustomers, 1 000 mining customers, 50 000 commercial customers and 84 000 agriculturalcustomersin2013/14.Italsosuppliedelectricitytomorethan5.1millionresidentialcustomers.Thefigureforresidentialusersincludesprepaidcustomers.

Eskom’s business modelThe International Integrated Reporting Council’s framework describes a company’s businessmodel as “its system of transforming inputs, through its business activities, into outputs andoutcomeswith theaim to fulfilling theorganisation’sstrategicpurposesandcreatevalueovertheshort,mediumandlongterm”.Thissystemisaffectedbyinternalandexternalfactors,whichtogethermakeupthecompany’soperatingenvironment.

02

Eskom was voted as the “Most desired company to work for” by the Sunday Times newspaper. Awards were also received in the categories “Community Upliftment” (second place), and “Top company that does the most to look after the environment and natural resources” (second place)


Eskom uses integrated demand-management programmes to reduce energy demandwhile itbuildsadditionalgenerating,transmittinganddistributingcapacity.

Eskomisalsotaskedwithsupportingthegovernment’sdevelopmentalobjectives,asoutlinedintheNewGrowthPath,theNationalDevelopmentPlanandotherdevelopmentdocuments.

Eskom’sannualcorporateplangiveseffecttoEskom’smedium-termstrategicobjectivesandtheannualshareholder’scompactsetsoutannualkeyperformanceindicatorsinsupportofEskom’smandate and strategic objectives. This plan and compact are sent to the Minister of PublicEnterprisesforapprovalbeforethestartofeachfinancialyear.

Theeconomic,socialandenvironmentalclimateTheelectricitythatEskomproducesisamajordriveroftheeconomyandabout3%ofthecountry’sgrossdomesticproductcanbeattributedtoEskom.

Thepaceatwhichtheeconomygrowsislinkedtothepaceatwhichthecountry’senergyneedsgrow,andthereforethepaceatwhichEskomneedstoexpandtomeetdemand.Infrastructurecapital investmenthashistoricallynotkeptupwitheconomicgrowth,resultinginaconstrainedelectricity-supplysituationintheshortterm.

ElementsofthesociallandscapeaffectingoperationsincludeanincreaseinlabouractionagainstEskom’scustomers,whichultimatelyreducestheirelectricityusage,andagainstitscontractorsandsuppliers,whichhasthepotential to furtherdelay thecapacityexpansionprogrammeandraisesconcernsaboutcontractorandemployeesafety.

Thecurrenteconomicclimatealsohasthepotentialtoincreasecustomernon-payment,electricityandequipmenttheft,andillegalconnections,allofwhichhaveatechnicalandfinancialimpactonEskom’sabilitytoensuresecurityofsupply.

Justaselectricitygenerationinevitablyaffectstheenvironment,theenvironmentalsohasaneffecton Eskom. Eskom’s operating licence depends on various legislative requirements, includingkeepingitswaterusageandatmosphericemissionswithinlegislativerequirements.

TheIntegratedResourcePlanforElectricity2010-2030The IRP 2010 sets out South Africa’s long-term energy needs and discusses the generatingcapacity,technologies,timingandcostsassociatedwithmeetingthatneed.InNovember2013,theDepartmentofEnergy(DoE)issuedadraftupdateoftheIRPforpubliccomment.Thisreflectstheeffectofslowingeconomicgrowthonprojectedelectricitydemandaswellaschangesinthecommittedbuildprogramme.Publiccommentontheupdatehasbeengathered.TheDoEisnowconsultingwithothergovernmentdepartmentsand isexpectedto issuetheapprovedupdatedplaninthesecondhalfof2014.

Thegovernment is in theprocessofallocatinggeneratingcapacity topowerproducers,basedontheIRP2010requirements.ThenumberofMWsrequiredandtechnologyallocatedtoEskomwill substantially influence itsexpansionplansafter thecompletionofKusile,especially if thatallocationincludesnuclearpower.NoSouthAfricancabinetdecisionhasyetbeenmaderegardingnewnuclearpowerstations.Thegovernment’snuclearenergyworkinggroupsandsub-workinggroupsaredevelopingstrategiesfortheenvisagednewnuclearbuildprogramme,includingthesupplyofnuclearfuel.Eskomisparticipatinginthesub-workinggroups.

About the Eskom Group (continued)

Electricity supply industry (ESI) in South Africa The ESI consists of generation, transmission and distribution as well as the importing andexportingofelectricity.Eskomsellselectricitytoavarietyofcustomers,includingtoredistributors(municipalities).Redistributorsdistributepowertoend-usersdirectly,underlicence.

Eskomisakeyplayerintheindustryinthegenerationspace,particularlywithmostofthebase-loadandpeakingcapacitybeingoperatedbyEskom.

Independentpowerproducers(IPPs)havebeeninvitedtoparticipatethrougharenewableenergyprogramme run by the Department of Energy (DoE). Potential players were shortlisted andsuccessfulbiddershavebeencontractedtosupplyenergyintothenationalgridownedbyEskom.All gridplanning isdonebyEskom, linesareconstructedunder specific licensingcriteriaandconformtoanationalgridcodewhichisoverseenandregulatedbyNERSA.

Regulation of electricity market:TheelectricitybusinessisregulatedbyNERSAintermsoftheNationalEnergyRegulatoryAct.NERSAissueslicences,regulatesalltariffincreases,providesnationalgridcodes,etc.

Integrated Resource Plan 2010 (IRP 2010): The IRP2010setsoutSouthAfrica’s long-termenergyneedsanddiscussesthegeneratingcapacity,technologies,timingandcostsassociatedwithmeetingthatneed.

National Nuclear Regulator (NNR): The NNR ensures that individuals, society and theenvironmentareadequatelyprotectedagainst radiologicalhazardsassociatedwith theuseofnucleartechnology,andinEskom’scase,regulatesitsKoebergnuclearpowerstation.

Independent system market operator bill (ISMO):Thisisaproposaltorestructuretheexistingmarketstructure(onedominantplayerwithinaregulatedmarketwhichmanagestheoverallvaluechain of electricity generation, transmission and the bulk sale of electric power). A proposedindependent system operator with or without transmission assets being incorporated into thestructurewasconsideredintermsoflegislation.Eskomhasinitscommentstotheparliamentarysub-committeeindicatedthatitwasimportantnottoembarkonanyrestructuringwhilethepowersystemwasconstrainedandrecommendedaphasedapproachtowardsthecreationofanISMO.

Southern African Power Pool (SAPP): EskomimportselectricityfromNamibia,Lesotho,andMozambique and sells electricity to Lesotho, Namibia, Botswana, Zimbabwe, Mozambique,SwazilandandZambiaoneitherfirmorunfirmcontracts.

External factors that influence EskomEskom is affected by four key external factors, which form the framework within which thecompany operates. These factors are the shareholder mandate; the economic, social andenvironmentalclimate; theIntegratedResourcePlanforElectricity2010-2030(IRP2010);andrelevantlegislation,regulationsandpolicies(otherthantheIRP2010).

ShareholdermandateEskom’smandate,asoutlinedby thegovernment, is tosustainablyprovideelectricity togrowtheeconomyandimprovethequalityoflifeofpeopleinSouthAfricaandtheregion.Inpractice,this requires keeping the lights on under conditions of tight supply – requiring a concertedeffort tobalancecompetingpriorities inanappropriatemanner–theneedtodomaintenance,manage the financial constraints, and ensure sustainability in the longer term.Eskom cannotdo this on its own and relies on partnerships with all stakeholders and various demand-sidemanagementinterventions.


Live-line maintenance on the high-voltage lines reduces the need to shut lines down for maintenance

Legislation,regulationandpoliciesEskomissubjecttonumerouslawsandregulationsregardingitsoperations,includingconditionsrelating to tariffs, expansion activities, environmental compliance and regulatory and licenceconditions.Eskomhas tooperatewithin the termsof thevarious regulationsandwaterusageand atmospheric emissions licences that govern its operations. Current licensing conditionsplacestringentlimitsonplantemissionstoreducethecountry’scurrentandfutureenvironmentalfootprint.

Important legislation that influences Eskom’s governance include the Companies Act (2008),thePublicFinanceManagementAct(1999),thePreferentialProcurementPolicyFrameworkAct(2000),thePromotionofAccesstoInformationActandthePromotionofAdministrativeJusticeAct (2000). King III, theProtocol onCorporateGovernance in thePublicSector, and variousinternationalguidelinesguideEskomregardingbestpracticeingovernanceandreporting.Eskomhasappliedmostof theKing IIIprinciplesalthough,since it isastate-ownedcompany,someof them do not apply. In some instances, Eskom has adopted alternative practices to thoserecommendedbyKingIII.Whereaprinciplehasnotbeenapplied,anexplanationisprovided.FormoreinformationonKingIIIpracticesrefertowww.eskom.co.za/IR2014/03.html

EskomperiodicallyhastoapplytoNERSAfortherevenueitrequirestosustainablyoperateitsbusiness.Theapplicationforrevenueisintheformofamulti-yearpricedetermination(MYPD)andcurrently thethirdpricingapplication,MYPD3, is ineffectandcoversthefive-yearperiod2013/14to2017/18.

Eskom’s internal operating environmentThefourinternalcornerstonesofEskom’sbusinessare:leadershipandgovernance;theEskomvalues;policies,proceduresandsystems;andtechnology.

LeadershipandgovernanceEskom’sboardisresponsibleforgoverningthecompany.Theexecutivemanagementcommitteeandabroadermanagementcommittee,whichincludeslineandfunctionalleaders,implementthedecisionsmadeatgovernancelevelonaday-to-daybasis.Thereisacleardistinctionofrolesand responsibilitiesbetween theboard, theexecutivemanagement committee (Exco)and themanagementcommittee(Manco).TheExcoprovidesoverallguidancewhileMancofocusesonmonitoringperformanceandoperationsatamoredetailedlevel.

Eskom’sleadershipandgovernanceisunderpinnedbyEskom’svalues.

Eskom’svaluesEskomworkswithinaculturethatstrivestoembodythefollowingvalues:• Zero harm:Eskomstrives toensure that zeroharmbefalls itsemployees, contractors, thepublicandthenaturalenvironment

• Integrity: Eskomstrivestoachievehonestyofpurpose,conductandactions,andrespectforpeople

• Innovation: Eskomstrivestoencouragevalue-addingcreativityandtoberesultsorientated.Itaimstoleadthroughexcellenceininnovation

• Sinobuntu: Eskomiscaring• Customer satisfaction: Eskomiscommittedtomeetingorevenexceedingtheneedsoftherecipientsofitsproductsandservices

• Excellence: Eskom aims to be recognised for its exceptional standards, performance andprofessionalism



Eskom’s value chainEskom is committed to providing andmaintaining a safe, healthyworking environment for allemployeesandcontractorsandhasmadesafetyakeyfocusareawithinthecompany.

CoreoperationsAsstatedinthe“Natureofthebusinessandclientbase”,onpage31ofthisreport,Eskom’scoreoperations are the generation, transmission and distribution of electricity. The primary energyresources(coal,liquidfuelanduranium),waterandlimestonethatEskom’spowerstationsneedtooperate,mustbesufficient,deliveredontimeandatoptimalcost,andbeoftherequiredquality.

Coal is procured in term of cost-plus contracts, fixed-cost contracts,medium- and short-termcontracts. Cost-plus contracts are long-term agreementswhereby amine’s coal reserves arededicated toEskomandboughtatacost thatcovers themine’s fullcapital investmentplusareturnoninvestment.Fixed-costcontractsarewithminesthatproducebothexport-qualitycoalforsaleoninternationalmarketsandEskom-qualitycoal,whichissoldtothecompanyatafixedprice,subjecttoannualinflationaryadjustments.KusilewillbethefirstEskompowerstationtouselimestonewhenitcomesintooperation.

Generating electricity requires a significant amount of water and also results in atmosphericemissions,ashandnuclearwaste.

Eskomaimstominimiseitsimpactontheenvironmentbyreducingatmosphericemissionsandfresh-waterusagebytransitioningtoacleanerenergymix,consideringdifferenttechnologiesandcontinuingwithresearchanddevelopmenttodevelopimprovedenergytechnologies.

Eskom’sprimarypartnersare thepeopleandcompanies itsellselectricity to,both locallyandbeyond itsborders.Thequalityof theserelationships isvery important to thecompanyand isconstantlybeingmonitoredandenhanced.Eskom’scustomersareimportantpartnersinassistingthe company to ensure security of supply by reducing their electricity demand. This is donethrough demand-management and energy-efficiency strategies such as the televised PowerAlerts,theintegrateddemand-managementcampaignandthe49Menergy-efficiencycampaign.

Strong partnerships with government, suppliers and contractors are vital to Eskom meetingcurrentandfutureelectricityneeds.Thisgroupincludesvariousgovernmentdepartments,coalminesandwaterauthorities,IPPs,fellowmembersoftheSouthernAfricanPowerPool,originalequipment manufacturers and contractors working on the capacity expansion programme.Eskomhasalsoestablishedpartnershipswithotherstate-ownedentitiessuchasTransnetandBroadbandInfracotocapitaliseonanycomplementarystrengthsthatmayexistbetweenitselfandtheseorganisationsandenhancetheeconomiccontributionofstate-ownedentities.

Eskom’s regional development strategy involved creating the Southern African Energy unit,throughwhichit importedelectricity inthepastyearfromNamibia,Lesotho,andMozambique.AsamemberoftheSouthernAfricanPowerPool,EskomalsosellselectricitytoLesotho,Namibia,Botswana,Zimbabwe,Mozambique,SwazilandandZambiaonfirmorunfirmcontracts.

CapacityexpansionprogrammeEskom is in the process of a capacity expansion programme to expand its generation andtransmissioncapacity.ThisprogrammewillincreaseEskom’sgeneratingcapacityby17384MW.This includes building two coal-fired and one pumped-storage power stations, onewind farmaswellasaconcentratedsolarthermalstation.Italsoinvolvesstrengtheningandsubstantiallyextendingthetransmissiongrid.

Policies,proceduresandsystemsSystemsplayan important role inEskom,affectingeveryaspect of operations fromsafety totheexperienceofitscustomerstotheefficiencyofitspowerstations.Standardisedprocesses,policiesandprocedureshavebeendevelopedforallaspectsofthebusinessandareregularlyupdatedtoensuregoodgovernanceandimplementefficiencyimprovements.

Eskomhaskeyperformanceindicatorstomeasurebusinessperformance.Thesemeasuresaredocumentedandapprovedintermsoftheenterpriseperformancemanagementprocess.

Eskomachieved ISO9001certificationon31March2013.During thesurveillanceaudits, thecertificationbodies(e.g.SABS)didnotidentifyanysignificantfindingsorrisksthatcouldleadtoEskomlosingitsISO9001certificate.WorkisunderwaywiththeSABStoidentifyspecialistISOstandardswhichneedtobeimplementedinspecificdivisionsorbusinessunitsinEskom.

TechnologyTechnologyisakeyenablerforEskomandincludestelecommunications,informationtechnology,researchandinnovation.Eskomisconstantlyscanningthetechnologyenvironmentfornewwaystoimproveitsoperations.

Eskomruns focused researchprogrammes to improve itsprocessesand technologiesaswellas reduce its impacton theenvironment. If research indicates thata technology ispromising,Eskom invests in a pilot project to investigate the feasibility of larger-scale rollout. Thesetechnologies include new methods for generating electricity (such as the concentrated solarpowerplantinUpington)andsmartgridtechnology.

The Apollo HVDC converter station in Johannesburg converts the direct current power into alternating current power from Mozambique and then feeds it into the South African national grid


Eskom Holdings SOC Limited38 39 402014 Integrated Report 2014 Integrated Report

Inte

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Capacity 120MWLines 811kmSubstation 3 790MVA

Installed this year:

R271 billion funding plan secured for the capacityexpansion programme

Carbon dioxide 233.3MtNitrous oxide 2 969tSulphur dioxide 1 975ktParticulate emissions 78.9kt

Emissions

Free funds from operations R27.5 billionLiquid assets of R30.6 billionRevenue of R139.5 billionOpex of R128.1 billionCredit rating of BBB

Liquid fuel1 148.5ML

46 919 employeesEmployeesSkillsExperience

Training spend as % of gross employee benefits: 7.87%

Local sourcing in procurement 54.6%B-BBEE 91.8%Black women owned (BWO) 7.5%Racial equity in senior management 59.3%Electrification: 201 788 houses this yearand R3.0 billion total capital investmentCSI committed: R132.9 million

R156.2 million spent onResearch and developmentIntegrated demand managementPower station technologyClean coal technology

11.6Mt coal transported by rail

48 used nuclear fuel elements discharged in 2013/14

Imports 9 425GWh

IDM49M campaign

Energy efficiency

5.2 million customers

Water used317 052ML

Ash produced35.0Mt

Coal burnt122.4Mt

Gross maintenance costs ofR28.6 billion across

Eskom in 2013/14

Internal

External

LearnersEngineers 1 962 learnersTechnicians 815 learnersArtisans 2 383 learnersYouth 4 325 learners

Generated 231 129GWh

IPP purchases 3 671GWh

Local sales 205 525GWh

IDM savings 410MW

International sales 12 378GWh

Transmission energy losses 2.34%

Distribution energy losses 7.13%

Policies, procedures and system

s

Leadership and governance

Technology

Shareholder mandate

Economic and social climateLaw

s, regulations and policies

FinanceEskom’sfundingmodelconsistsofequity,revenueanddebt funding,withstrongsupport fromthegovernment.Eskom’srevenuerequirementandresultanttariffisdeterminedbyitsregulator,NERSA, throughmulti-year-price-determinations. Eskom’s credit rating is affected by its ownfinancialpositionaswellasthesovereigncredit rating.Eskomhasembarkedonthebusinessproductivity programme to address the revenue shortfall it is faced with by introducing costreductions,increasingproductivityaswellasimprovingoperationalefficiencies.

WorkforceEskom’s operations are supported by a highly skilled workforce that executes Eskom’s coreoperationsandprovidessupportingbusinessservicessuchashumanresourcesmanagement,informationtechnologyservices,procurement,research,etc.

Eskom has a rigorous transformation programme in place to ensure equity in theworkplace,and has put in place skills-development programmes to train engineers, technicians andartisanstomeetitsneedforskilledworkersinfuture.Eskom’semployeesreceivetrainingonanongoingbasis.

ProcurementEskomhasa centre-ledprocurementandsupply chainprocess.Eskomuses itsprocurementpartnershipstostimulateblackeconomicempowerment,inlinewithitssupplierlocalisationanddevelopmentaspirations.

CorporatesocialinvestmentanddevelopmentservicesEskomhasadedicatedsubsidiary,theEskomDevelopmentFoundationNPC,toruncorporatesocial investment activities. Eskom is also leveraging the capacity expansion programme toreduceunemployment,improvethecountry’sskillspool,stimulatethelocaleconomyandincreaseeconomicequitybysupportingB-BBEE.

Eskom has been implementing the Department of Energy’s integrated national electrificationprogrammeinitslicensedareasofsupplysinceApril2001.Sinceitstartedelectrifyinghomesin1991,morethan4.5millionhouseholdshavebeenelectrifiedwithinEskom’ssupplyareas.

ThefollowingdiagramoutlinesEskom’sbusinessmodelandhowitcreatesvalue:


Eskom Holdings SOC Limited Eskom Holdings SOC Limited41 42 432014 Integrated Report


The Eskom energy wheel Theenergywheelshowsthevolumeofelectricitythatflowedfromlocalandinternationalpowerstationsandindependentpowerproducers(IPP)toEskom’sdistributionandexportpointsduringthepasttwoyears,includingthelossesincurredinreachingthosecustomers.AllfiguresareinGWhunlessotherwisestated.

Eskom energy flows during 2013/14 and 2012/13

Eskom’s legal and operating structureEskom’s legal structure Eskom’sheadofficeisinJohannesburg,whileithasoperationsacrossSouthAfrica.ItmaintainsasmallofficeinLondon,primarilyforqualitycontroloftheequipmentbeingmanufacturedforthecapacityexpansionprogramme.

TheEskomgroupconsistsoftheEskombusinessandanumberofsubsidiaries,including:• The Eskom Enterprises SOC Limited group. ThroughtheRotekandRoshconentities,EskomEnterprisesprovideslife-cyclesupport,plantmaintenance,networkprotectionandsupportforthecapacityexpansionprogrammeforEskom’slinedivisions.TheseentitiessupportEskom’sstrategic objective of “Becoming a high-performance organisation” as well as the “Leadingandpartneringtokeepthelightson”objective.Thereisalsoasubsidiarywithaninterest inelectricity operations andmaintenance concessions inUganda. Another subsidiary, EskomEnergieManantalis.a(EEM),operatesanoperatingandmaintenanceconcessionwithSociétédeGestion de l’Energie deManantali (SOGEM). Amediation process to reach agreementon a 10-year operating andmaintenance contractwas not as successful as intended,withsomemajor issues that could potentially exposeEEM to undue risk remaining unresolved.Exitoptionsarethusbeingpursued.Asaresult,EEMhasbeenclassifiedasadiscontinuedoperationinEskom’sMarch2014financialstatements

• Eskom Finance Company SOC Limited wasestablishedin1990primarilytoenableEskom’semployees tohaveaccess tohome loanfinancewhilstoptimisinghomeownershipcosts tobothEskomand itsemployees.Eskom is in theprocessof findinganappropriatedisposalsolutionforthissubsidiaryonrequestoftheshareholder,however,asitcurrentlydoesnotmeettherequirementsasstatedintheInternationalFinancialReportingStandards(IFRS),ithasnotbeenclassifiedasadiscontinuedoperationinEskom’sfinancialstatements

• Escap SOC Limited, Eskom’s wholly owned insurance captive company, manages andinsuresthebusinessriskofEskomanditssubsidiaries,excludingnuclearandaviationliabilities

• The Eskom Development Foundation NPC is a wholly owned non-profit company thatmanagesEskom’scorporatesocialinvestmentinsupportofEskom’s“Transformation”objective

Eskom’s operating structure Eskom’soperatingstructure,depictedbelow,compriseslinefunctionsthatoperatethebusiness,servicefunctionsthatservicetheoperationsandstrategicfunctionsthatdeveloptheenterprise.

FY2014 FY2013 Variance

Generation(includingIPPs) 234 800 236265 1466International 9 425 7698 (1727)Wheeling1 3 353 2948 (405)Subtotal 247 578 246911 (667)

Pumping (3 862) (4037) (175)Total 243 716 242874 (842)

Availablefordistribution

FY2014 FY2013 VarianceSales 217 903 216561 (1342)Losses 21 488 22221 733Internal 465 461 (4)

Generated (129) (243) (114)Wheeling1 3 353 2948 (405)Other 636 926 290Total 243 716 242874 (842)

Demand

TotalimportsFY2014 FY2013 Variance

Internationalpurchases 9 425 7698 (1727)Wheeling1 3 353 2948 (405)Total 12 778 10645 (2133)

Externalsales

Technicalandotherlosses

Technicalandotherlosses–%

FY2014 FY2013 VarianceLocal 205 525 202770 (2755)International 12 378 13791 1413Total 217 903 216561 (1342)

FY2014 FY2013 VarianceDistribution 15 824 15464 (360)Transmission 5 664 6757 1093Total 21 488 22221 733

FY2014 FY2013 VarianceDistribution 7.1% 7.1% –Transmission 2.3% 2.8% 0.5%

TotalexportsFY2014 FY2013 Variance

Internationalsales 12 378 13791 1413Wheeling1 3 353 2948 (405)Total 15 731 16739 1008

FY2014 FY2013 VarianceGeneration(excludingOCGT)

227 508 230845 3337

OCGT 3 621 1904 (1717)Pumping (3 862) (4037) (175)IPP 3 671 3516 (154)Total 230 938 232228 1291

Generationofelectricity

FY2014 FY2013 VarianceGenerated (129) (243) (114)Internaluse 465 461 (4)Total 336 218 (118)

Internaluse

South African power pool

1. Wheeling is the buying and selling of electricity between Eskom and foreign parties without the power entering into South Africa.

GenerationMrTGovender

TransmissionMrMMNtsokolo

DistributionMsANoah

GroupCustomerServicesActingMsELJohnson

HumanResourcesActingMrMMNtsokolo

TechnologyandCommercialActingMrKLahmeeharan(upto30April2014)

GroupCapital

FinanceActingMrDLMarokane

MsTBLMolefe

EnterpriseDevelopmentMsELJohnson

SustainabilityDrSJLennon

AssuranceandForensic(internalaudit)

Chiefexecutive(interim)MrCMatjila

Line functions

Service functions

Strategic functions

OfficeoftheChiefExecutive



PurposeThepurposeofEskomistoprovidesustainableelectricitysolutionstoassisttheeconomytogrowandtoimprovethequalityoflifeofpeopleinSouthAfricaandintheregion.

Strategic objectivesEskomhasaligneditselfaroundeightstrategicobjectives.TheseobjectivesgiveEskomdirectiontodeliveronitspurpose,visionandvalues.Theyareconfirmedonanannualbasisaspartofthecorporateplanprocess.

Becomingahigh-performanceorganisationEskomcontinues its transformation intoahigh-performanceutility focusedonqualitycustomerservice; safer, effective and efficient plant operation through prudent plant maintenance;optimisingkeytalent;andensuringresiliencemeasuresareinplaceformajordisruptiveevents.ThebusinessproductivityprogrammeisidentifyingandeliminatinginefficienciesinthebusinesstoenableEskomtobettermanageitscostsandrevenue.

LeadingandpartneringtokeepthelightsonEskomiscommittedtokeepingthelightsonwhilstatthesametimemaintainingasoundbasisforsustainableoperations.Thiswillbedonebytakingaleadingroleandactivelypartneringwithallkeystakeholders,includingthepeopleofSouthAfrica,inacomprehensivesupply-and-demandmanagementstrategy.

ReducingEskom’senvironmentalfootprintandpursuinglow-carbongrowthEskomiscommittedtoreducingitsenvironmentalandcarbonfootprintandhelpingSouthAfricaachieveitsenvironmentaltargetsbytransitioningtoacleanerenergymixandreducingemissionsandwateruseandensuringfullcompliancewithenvironmentallegislation.Inaddition,Eskomhastoadapttoachangingenvironmentasaresultofthenegativeimpactsofclimatechangeplacingpressureonitsresourcesandinfrastructure.

SecuringfutureresourcerequirementsEskommustpartnerwithsuppliersandregulatorstoensurethatithastheresourcesincludingland, coal, liquid fuel, uranium andwater it needs for its existing and new generating assetstooperate.

Implementingcoalhaulageandtheroad-to-railmigrationplanEskomwillcontinuetoreducethenumberofcoaltrucksontheroadandcontributetothesecurityof coal supply bymigrating coal transport from road to rail. The aim is to reduce the cost oftransportingcoalandimprovethesafetyrecordofcoalhauliers.

Pursuingprivate-sectorparticipationEskom acts as a catalyst for private-sector participation in SouthAfrica to ensure security ofsupplyforSouthAfrica.

Transformation(includingthebusinessproductivityprogramme)EskomhasinitiatedatransformationprogrammetoaddressnationalandinternaltransformationchallengesbyleveragingthecapacityexpansionprogrammeandEskom’sorganisationalspendtoreduceunemployment,improvethecountry’sskillspoolandincreaseeconomicandworkplaceequity.Thistransformationprogrammeisinformedbythegovernment’sdevelopmentalgoals.

Eskomisaddressingtheoverallchallengesitfacesthroughthebusinessproductivityprogramme,whichaimstoensureasustainablebusinessdespitethefinancialconstraintsfaced.

Purpose, values and strategic objectivesThepurposeofEskom’sannualcorporateplanistooutlinethestrategicandoperationaldirectionof Eskom and to capture the necessary financial, operational and resource plans to supportthis direction.As such, the corporate plan becomesan engagement document for discussionwith Eskom’s stakeholders. The latest plan covers the four-year period from 1 April 2014 to31March2018andthefocusisonEskom’sresponseplantoitschangingenvironment.

A secondary purpose of the corporate plan is to comply with the requirements of section 52ofthePublicFinanceManagementAct(PFMA)aswellassection29oftheNationalTreasuryregulations,andtosupportinternalEskompolicies.Theconsolidatedcorporateplanwithallitsannexures is submitted to theDepartmentofPublicEnterprises (DPE)andNationalTreasuryannuallyinFebruary.

The targets reflected in the integrated report for2013/14are those thatwereapproved in thefive-yearcorporateplanthatcovered2013/14to2017/18.The2017/18targetsarethosethatarereflectedinthecurrentfour-yearcorporateplanthatwassubmittedtoDPEandNationalTreasuryon28February2014.Eskom’spurpose,valuesandstrategicobjectiveshavebeenconsistentinboththe2013/14and2014/15corporateplans.

Eskom’s purpose, values and strategic objectives

OurpurposeToprovidesustainableelectricitysolutionstogrowtheeconomyandimprovethe

qualityoflifeofpeopleinSouthAfricaandtheregion


ZIISCE: Zeroharm,Integrity,Innovation,Sinobuntu,Customersatisfaction,Excellence

Foundation: Long-termnation-building–Electricityforall–Triplebottomline

EnsuringEskom’sfinancialsustainability







AccomplishEskom’spurpose

Executestrategicpillars

Getfoundationright,buildcapacity



Trade-offs AnexcessorshortageofanyoftheresourcesrequiredforEskom’scoreoperationsorsupportingservicescanaffectalltheothers.Eskomisconstantlymonitoringandmanagingthe costsandbenefitsof key trade-offs between its required resources toensure thatitsoperationsareefficientandsustainable.Thefollowingareexamplesofthetrade-offsEskomcurrentlyfaces:• Dieseltoruntheopen-cyclegasturbinesensuressecurityofsupplyintheshortterm,butnegativelyaffectsEskom’sfinancialsustainabilityinthelongerterm

• Eskom’s Generation sustainability strategy is crucial to improve plant health andreliability in the long term, thereby improvingsecurityofsupply. In theshorter term,planned maintenance has to be balanced with the constrained power system andfinancial constraints. By contrast, not performing sufficient maintenance negativelyaffectsplantreliability,whichlikewiseincreasestheriskofloadshedding

• Requesting customers to reduce their electricity demand assists Eskom to meetdemand,buthasnegativeconsequencesforEskom’srevenueduetoreducedsales

• Coalisarelativelyinexpensivefueltosourcefinancially,buthasahighenvironmentalcost,andcontributestoanincreasinglyvulnerablesupplychain,e.g.relianceonroadtransportandminingchallengescoupledwithextremeweatherevents

Six capitals

Financial capital

Manufac-tured

capitalIntellec-

tual capitalHuman capital

Social and relation-

ship capitalNatural capital








Ensuringfinancialsustainability

EnsuringEskom’sfinancialsustainabilityEskom remains focused on re-engineering the business to achieve sustainability and cost-efficiencybystrikingabalancebetweenreducingcostswhereappropriateandthethreesourcesof funding:equity,debtand revenue.Thiswill inevitably involve increasingelectricityprices toobtaincost-reflectivetariffsinthefutureandtoretainasupportivecreditratingthatretainsaccesstofundingaswellasreducesthecostthereof.

Link between Eskom strategic objectives and the “six capitals”The capitals, as defined in the integrated reporting framework are “stocks of value” that areincreased,decreasedortransformedthroughtheactivitiesandoutputsofabusiness.

For the purpose of the integrated reporting framework, the six capitals are categorised anddescribedasfollows:• Financial capital – The pool of funds that is available to an organisation for use in theproductionofgoodsortheprovisionofservices

• Manufactured capital – Manufactured physical objects (as distinct from natural physicalobjects)thatareavailabletoanorganisationforuseintheproductionofgoodsortheprovisionofservices.Manufacturedcapitalisoftencreatedbyotherorganisations,butincludesassetsmanufacturedbythereportingorganisationforsaleorwhentheyareretainedforitsownuse

• Intellectual capital –Organisational,knowledge-basedintangibles• Human capital–People’scompetencies,capabilitiesandexperience,andtheirmotivationstoinnovate

• Social and relationship capital–Theinstitutionsandtherelationshipswithinandbetweencommunities,groupsofstakeholdersandothernetworks,andtheabilitytoshareinformationtoenhanceindividualandcollectivewell-being

• Natural capital –Allrenewableandnon-renewableenvironmentalresourcesandprocessesthat provide goods or services that support the past, current or future prosperity of anorganisation

The tablebelowgivesan indicationofhowthesixcapitalsare impactedbyEskom’sstrategicobjectives.ItisevidentfromthisthatEskom’sstrategicobjectivesareintegratedandconsiderallaspectsofitsbusinessandthevaluethatitcreatesovertime.

Stra

tegi

c ob

ject

ives



Future focus for EskomThecurrentenvironmentthatEskomoperatesinposesanumberofshort-termchallenges:• Thepowersystemwillremainconstraineduntilunitsfromthecapacityexpansionprogrammecomeonline,but the levelofpower thatcanbegeneratedcanbe influencedbychanges inatmosphericemissionlicenceconditions

• The MYPD 3 determination has resulted in a revenue shortfall of R225 billion, which isexacerbatedbylowerlocalsalesvolumes,increasingpressureonEskom’screditrating

• High open-cycle gas turbine usage (as a result of power system constraints) is increasingoperationalexpenditureandhasanegativeimpactonEskom’sfinancialsustainability

• Theutilitybusinessmodelischangingaroundtheworld.Eskomneedstorefineitsbusinessmodeltoensureitsagilityandlong-termsustainability

The Eskom environment is dynamic, posing challenges, threats and opportunities. To guideEskominachievingthestrategicobjectivesanddeliveron itsmandate,Eskomhasdevelopeda response plan to ensure sustainability along seven distinct dimensions. In pursuing thesedimensions, safetywill continue tobe the foundation forallEskom’soperationsand is key toEskom’sperformance.Theprinciplesoftheresponseplanareasfollows:• Capital investment will prioritise capacity expansion projects, generation sustainability,environmentalcompliance,transmissionstrengtheningandcompliance,customerconnections,assetmaintenance,assetreplacementandrefurbishmentandtheconnectionofindependentpowerproducers,basedontheavailablecapitalbudgetoverthefive-yearMYPD3period

• EskomwillpursuetheGenerationsustainabilitystrategywhichfocusesonplant,peopleandprocesses

• Alternativefundingoptions,includinggovernmentsupportwillbepursued• Theregulatoryclearingaccountadjustment(RCA)willbepursued• Focusonskillsbuilding,transformationandenvironmentalsustainabilitywillcontinue• Eskom’sbusinessmodelmustbeadaptedandre-engineered

Seven areas of sustainability

Eskom mandate

Eskom reputation

Transformation and social sustainability

Building sustain

able

ski

lls b

ase

Environmental sustainability

Financial sustainability

Operational sustainability

A

sset

cr

eation

Eskom’soverallstrategicdirectionisalignedtotheDPEvisionstatement“Todriveinvestment,productivity and transformation in its portfolio of state-owned companies, their customers andsupplierssoastounlockgrowth,driveindustrialisation,createjobsanddevelopskills.”

Focus for 2014/15 During2014/15,Eskomwillfocusonthreecoreareasinsupportofitsstrategicobjectives:• Sustainable asset creation throughthecapacityexpansionprogramme,withparticularfocusonsynchronisationofMedupiUnit6

• Ensuring financial sustainability by implementing the business productivity programmewhichalsoincludesapplyingtoNERSAintermsoftheRCA

• Operational sustainability bycontinuingtheGenerationsustainabilitystrategyandenhancingperformancelevelsintheTransmission,DistributionandGroupCustomerServicesdivisions



More than 120 stakeholder engagements were arranged in theyearto31March2014atanationallevel.Thisexcludesthemanyengagementsatanoperationalandprovinciallevel.Engagementsfocusedon sharing key information, improvingexisting andnewrelationships and creating partnerships to ensure support inaddressingEskom’schallenges

Eskom’s approach to integrated reporting

Defining material items in partnership with stakeholdersTherelationshipswithstakeholdersaremanaged inEskom in termsofagovernanceprocesswhichisalignedtoKingIII.Thisincludesastakeholderrelationspolicy,processcontrolmanual,assessmentofstakeholderrelationsandannualreportingofthematerialissuestotheexecutivemanagement committee, the social, ethics and sustainability committee and to the board.Newdevelopmentsfor2014willincludeastakeholdermanagementdatatoolandthebi-annualsubmissionofanintegratedstakeholderrelationsissuesandengagementreporttotheexecutivemanagementcommitteeandboard.

ThisintegratedreportfocusesonqualitativeandquantitativeitemsthatarematerialtoEskom’soperationsandstrategicobjectives.Thequestionofwhatis“material”hasbeendeterminedbytheboardandexecutivemanagement throughextensiveconsultationwithinEskomaswellaswith Eskom’s stakeholders, while taking into consideration Eskom’s strategic objectives, riskassessmentsandthewayinwhichitsvaluechainoperates.

Material itemsare those that arebothof high concern to stakeholdersandhavea significantimpactonthebusiness.Eskomanalysedthefollowingtodetermineitsmaterialitems:• Bothformalandinformalstakeholderfeedback,includingmediacoverage• Parliamentaryquestionsreceivedandthequestionsandfeedbackfromgovernmentportfoliocommitteeengagements

• Reportssubmittedtotheboardandshareholderfordiscussionorapproval• Eskom’s shareholder’s compact, corporate plan, its long-term strategic objectives and keyfocusareasfor2013/14

• Eskom’skeyrisks,asidentifiedbyitsintegratedriskmanagementprocess• PoliciesandinitiativesrelevanttoEskom’sbusiness• Policy,legislationandregulationchanges

Thecomplete listofmaterial itemswasanalysed in termsofEskom’sstrategicobjectivesandwas tabledatEskom’s integrated report steering committee for considerationof theaccuracyandcompletenessofthelist.AspartofEskom’sgovernanceprocess,thefollowingcommitteesalso reviewed thematerial items thatwere included in this integrated report foraccuracyandcompleteness:• Executivemanagementcommittee• Social,ethicsandsustainabilitycommittee• Auditandriskcommittee• Board

03

Many stakeholder groups such as the World Bank visit the Medupi power station project


Stakeholder engagementTherearevariousavenuesofcommunicationthroughwhichstakeholderscanapproachEskomwith their concerns and expectations. The company takes care to ensure that all stakeholderengagements are carefully planned in terms of the scope of the engagement, the intendedoutcomesoftheinteractionandtheengagementapproach.

Engagement platforms

Specialpublicationsandnewspapers

Reports

Socialmedia

Strategicpartnerships

Opendialogues

Taskteamsandpublichearings

Monthly,quarterly,andbi-annualmeetings

Seniormanagementvisits

Sitevisits

One-on-one

Sponsorships

Stakeholderforums

Studygroupmeetings

Policies

CEandChairman’sroadshows

Committeemeetings

Conferences

Steeringcommitteeinclusiveofmanagement

representatives

Executiveforums

Eskom’s approach to integrated reporting (continued)

Eskomoperateswithinacomplexstakeholderlandscapeinvolvingmultiplestakeholderswithmultipleobjectives,whoareengagedthroughmultipleengagementagentsandtouchpoints.Thestakeholders

engagedduringtheyearinclude:

GovernmentPublicEnterprises,WaterandEnvironmentalAffairs,NationalTreasury,DTI,Tradeandindustry,GCIS,Publicworks,DST,CooperativeGovernment,andTraditionalAffairs(COGTA),SALocalGovernmentAssociation

Key customersTopkeycustomers,industrial,miningcommercial,municipalities,agricultural,residential

ParliamentPublicEnterprises,MineralsandEnergy,WaterandEnvironmentalAffairs,TradeIndustry,NCOP,SelectCommitteeonFinance,SelectCommitteeonPublicEnterprisesandLabour,ProvincialandLocalGovernment,StandingCommitteesOversightandICT

EmployeesEmployees,Executiveforum,Exco,board

IndustryAssociationofMunicipalElectricityUndertakings,industryexperts

RegulatorsNationalEnergyRegulator(NERSA)NationalNuclearRegulator(NNR)

Civil societyNGOsandCBOsSANGOC,WWFConsumersForum

BusinessFinancialInstitutions,Investors–LocalandInternational,BUSA,SACCI,ChamberofCommerceandIndustrySA,bothnationalandregional

Organised labourNUM,NUMSA,Solidariteit,Cosatu

SuppliersCapacityexpansioncontractors,Fuelsuppliers,Originalequipmentmanufacturers

MediaSouthAfrican,Africanandinternational

International relationsMultilateralInstitution(WorldBank,AfricaBankandIMF)Cooperationagreements,MoUinternationalcorporations/members(WEF,CIGRE)foreignrepresentations


Eskom’s interaction with stakeholders

Stakeholders Method of interaction

Government,parliament,nationaldepartmentsandregulators

One-on-onemeetings;Presentationstoparliamentaryportfoliocommittees;Committeemeetings;Eskomwebsite;Reports;Annualgeneralmeeting;Industryassociationsandtaskteams;Sitevisitsandpublichearings;Monthly,quarterlyandbi-annualmeetings;Communityandexecutiveforums

Lenders,investorsandcustomers Roadshows;Meetings;Resultspresentations;Webcasts;Sitevisits;Eskomwebsite;Teleconferences;Socialmedia;Formalpresentationwebsite;Companyannouncements;Reportsandquarterlyforums

Suppliersandcontractors Roadshows;One-on-onemeetings;Preferentialprocurementprogrammes;Opendays;Contractsandserviceagreements;Workshops;Presentations;Training;Projectsteeringcommittees

Eskommanagement,employeesandorganisedlabour

Provincialemployeeengagements;Collectivebargainingpractices;Pre-andpost-interimandannualresults;Regularmeetings;Eskomwebsite;Socialmedia;Developmentprogrammes;Specialpublicationsandnewspapers;Opendialogues,conferencesandforums;Partnerships

Businessgroups,civilsocietyandnon-governmentalorganisations

Roadshows;Resultspresentations;Reports;Communityforums;Stakeholderforums;Peereducators;Industrypartnership;Wellnesscampaigns,HIVandAidsawareness;Skillsdevelopmentprogrammes;Advertisinginlocalnewspapers;Sponsorships;NGOForum

Industryexperts,analysts,academicsandmedia

Industryassociationsandtaskteams;Forumsandcommittees;EmailsandEskomwebsite;Interviews;Roadshows;Resultspresentations;Quarterlybriefings;Companyreports;Articles

The improvement in the 12-month moving average top customer KeyCare servicemeasurefortheyearisattributabletoEskommeetingregularlywithitstopcustomerstosharecriticalinformationonthesystemstatusandthecapacityexpansionprogramme.Thiswas donewith regular feedback from the chief executive to the key customers,quarterlyliaisonmeetingsatplantlevelandcustomerforums.Theregionalkeyaccountmanagersandtheir teamsalsoregularlyvisit thegeneralmanagersofcustomersandmunicipalmanagerstoshareimportantinformationandtoenquireaboutservice-relatedissues requiring attention.During the year, 56 generalmanagers, 133engineers and138accountingstafffromthetopcustomerswereinterviewed.

Despite the number of system emergencies, the proactive manner in which Eskominformsitscustomersofthesystemstatus,viatwicedailyreports,aswellastheKeyAlertSMSmessagingsystem,hasmadeadifferencebyassistingEskom’stopcustomerstoplantheiroperationalactivities.

Stakeholder materiality matrix Thisintegratedreportaddressesonlythoseitemsthat:• Havesuchrelevancethattheycouldsubstantivelyinfluencestakeholders’decisions• Poseasignificantriskoropportunitytobusinessoperationsintheshort,mediumandlongterm• MayaffecttheachievementofstrategicobjectivesandsustainabilityofvaluecreatedthroughEskom’sactivities

Eskom’sintegratedreportsteeringcommitteeprioritisedtheissuesthatwereidentifiedthroughthestakeholderengagementprocess,toformastakeholdermaterialitymatrixasoutlinedinthetablethatfollowsonpage56.WhileEskomconsidersalltheitemsraisedbystakeholders,thesearenotallnecessarilyaddressedinthisreport.

Stakeholdermaterialitemshavenotbeengroupedtogetheringeneralcategories.Bygroupingthem together thesignificanceofsomematerial itemswouldhavebeen lost forsomespecificstakeholders.Stakeholderconcerns thatarerankedashavinga“high”or“medium” impactonEskom (the last two columns) are regarded as having the potential to significantly affect thecompany’s achievement of its strategic objectives. As such, they have been included in thisintegratedreportunderthe“Performanceonstrategicobjectives”section.

Thematerialitemshavebeennumberedtoallowforcross-referencingwiththekeyfocusareasand associated risks table on pages 58 to 62. The numbering does not indicate the level ofimportanceofanitem.



Risks relating to material items TheEskomboard,throughtheauditandriskcommittee,managesEskom’sriskandresilienceinordertoprovidegreatersecurityforitsemployees,customersandotherstakeholders.TworiskprofilesareconsideredinEskom,namelyenterpriseriskandbusinessriskprofiles.

An enterprise risk profilegivesExcoandtheboardarobustandholistictop-downviewofkeyrisksfacingtheorganisation.ThismakesitpossibletomanagethoserisksstrategicallyandtoincreasethelikelihoodthatEskom’sobjectiveswillbeachieved.Enterpriseriskisdefinedasoneoracombinationofthefollowing:• Risksemanatingfromexternalfactorsand/orenterpriseeventsthatarestrategicchallengeswhichmayaffectEskom’sabilitytoachieveitsobjectivese.g.climatechange

• Risks associated with Eskom’s ability to develop and execute strategy, achieve strategicobjectives,andbuildandprotectvalue

• Businessrisksthatoccuracrossmultipledivisionsthat,whenintegratedandaggregated,arematerialandimpactEskom’sobjectives

• TheaggregatedrisksmaynotberecognisedasmaterialinanyonedivisionbutareoccurringacrossmultipleEskomdivisionsandwhenintegrated,becomesignificant

• Asinglebusinessrisk,maybematerialenoughtoimpactontheEskom’sobjectivesasawholeandassuchmaybereportedasacorporaterisk

Thebusiness risk profile givesExcoandtheboardarobustandholisticbottom-upviewofkeyrisksfacingthedivisions,andaviewof the levelofeffectiveness in themanagementof thoserisks.

Risks inherent toEskom’soperationsareconsideredas:• Risks thatwillhaveasignificantconsequenceshould theymaterialise,but thatmaynotbeconsistentlylistedontheriskregisterbecauseoftheperceivedadequacyofthecontrolsorduetotheirperceivedlowlikelihood

• Riskswhichbytheirnaturefallintotherealmofbusinesscontinuitymanagement–i.e.relatedto the continuity of critical products and services in the event of a disruption to processesproviding these(the focushere isnoton thecauseof thedisruptionbuton the time-criticalimpact on the process if buildings, equipment, system, technologies, human resources, orsuppliers,areaffected)

• Risksthatfallintothecategoryofdisasterrisks–i.e.withpotentiallysignificantimpactonthecountryifEskomproductsandservicesaredisrupted(ifbusinesscontinuityisnotadequate),andifEskomdoesnothavethecapabilitytorespond

In linewithEskom’s integratedriskmanagementmethodology, inherent risksarecontinuouslyreviewedwithaparticularfocusontheeffectivenessofcontrols.

EskomisrequiredtocomplywiththerelevantprovisionsintheDisasterManagementActNo57of2002(andtheassociatedNationalDisasterManagementFramework)andEskomiscurrentlyfocusingonimprovingtheprocessesaroundthisrequirement.

Thefollowingtabledetails thekeyfocusareasandassociatedrisksandprovidesa linktothematerialitemsidentifiedinthestakeholdermaterialitymatrix(refertopage56).Italsoreferstothesectioninthisreportwheretheitemsarediscussedinmoredetail.Labourissueshavebeenidentifiedasanewitemonthistablesincetheintegratedreportfortheyearended31March2013.

Impact on Eskom

11. Environmentalconcernsregardingtheuseofnuclearpowerincludingthemanagementofnuclearwaste

17. Socialresponsibilitycontribution

22. Tenderopportunitiesforsuppliers

41. Eskomannualandinterimresults

42. Performanceagainsttheshareholdercompact

3. Impactofinternationalsalesonsecurityofsupply

10. Concernsregardingwaterscarcity

23. Impactofcarbontax24. Directors’

remunerationandleadershiptransition

27. Protectingthepoorfromhightariffsandprovidingfreebasicelectricity

31. Availabilityofalternativeinvestmentoptionstoinvestors

35. Employeesalaryandbenefits

40.Customerdissatisfactionwithqualityofservicedelivery

1. Technicalperformanceofgeneration,distributionandtransmissionplant,includingmaintenance

4. Overrelianceonopen-cyclegasturbines,includingtheavailabilityandcostofliquidfuel

5. Securityofsupply,includingloadsheddingandqualityofcoalfeedintopowerstations

6. Delayedcompletionofcapacityexpansionprojectsincludingcosts,contractorcapacityandperformance,jobcreation,localisationandlabourunrest

9. Impactofparticulateemissionlicencesonthesecurityofsupply

12. Adequatecoalstockatpowerstations25. Impactofoutstandingelectricitydebtorson

Eskom’sliquidityposition26. Negotiatedpricingagreements28. Impactofhightariffsonbusinessesand

customers29. RevenueshortfallfollowingNERSA’sMYPD3

determinationandtheimpactofthisonfinancialandoperationalsustainability

39. Energylossesduetotheftofequipment,illegalconnections,metertamperingandillegalvendingofpre-paidelectricity

21. Fraudandgovernanceissues

34.Availabilityofjobsandtrainingopportunities

37.Electricvehicleresearch

15. CreationofanIndependentSystemMarketOperator

18. Transformemploymentequity

19. Electrificationconnectionchallenges(includingnetworkupgrading,timeliness,costs)

20. Increaselocalisationandprocurementfromblack,blackwomenandblackyouth-ownedbusinesses

33. Shortageoftechnicians,artisansandengineers

36. Improveresearchandinnovation

2. Implementenergy-efficiencyprogrammesandincentives

7. Reducecarbonfootprintbyprocuringrenewableenergy

8. Environmentalcontraventionsandwaterlicences

13. Availabilityofcoalandwaterofacceptablequalityatafairprice

14. Safetyoftheworkplace,thepublicandthetransportofcoalontheroads

16. Private-sectorparticipationthroughDepartmentofEnergyrenewableenergyprogrammeandotherIPPs

30. Uncertaintyregardingtheregulatoryregimeincludingthetariffreview

32. Savingsthroughthebusinessproductivityprogramme

38. Lackofimprovementinsafetyperformance44. Strategicpartnerships,relationshipsand

communicationwithstakeholders45. AwaitedIRP2010allocationsafterKusile,

especiallynuclearandcoalpowerstations

43. Businesscontinuityanddisastermanagement,includingthestrategyforinsurance

HighLow

High

Low

Stak

ehol

der c

once

rns

Stakeholder materiality matrix



Inreviewingthetablebelow,thereadershouldbeawarethattheidentificationofrisksisbasedonanapproachthatattemptstoidentifywhatcouldgowrongtodisrupttheachievementofcurrentobjectives, andwhether there is adequatemitigation in place to address suchaneventuality.Itdoesnotintendtosetoutasamatteroffactanyparticularconcernordeficiency.Itshouldbeseenasaprocesstoconsiderdifferentscenariosandthecontingencyplansinplaceshouldsuchascenariomaterialise.

Stakeholder materiality matrix linked to key focus areas and associated risks

Key focus areas and associated risksKey performance indicators Strategic response and controls

Page reference

I Focus on safety

Related material items: 14, 38, 44

Thereisanongoingconcernthattheinherentlysignificanthealthandsafetyrisksassociatedwithanelectricitybusinessmightmaterialise

• Numberoffatalities

• LTIR

• Eskom’s“zeroharm”initiativefocusesonthefollowingelements:–Leadership–Contractorsafety–Supervisorycapacity–Trainingandfacilities–Humanbehaviour

• Eskom’slife-savingrules• Integratedcrime-preventionplan• Motorvehicleinterventionsto

improvevehiclesafety• Contractorcoaltrucksarenot

allowedtobeontheroadsbetween18:00onFridaysand06:00onSundays

85

8875

147

II Improve operations

Related material items: 1, 4, 8, 13, 36, 39, 42, 43

IfasignificantincidentrelatingtoEskom’sassetsandtechnologiesoccur,itmightresultinimpairmentofoperations,prosecutions,financiallossandreputationaldamage.Theftofelectricityandequipmentresultinginfinanciallossarealsopotentialrisks,includingtheimpactthereofontechnicalperformance.Theriskoflossofsupplytocustomersduetonetworkunavailabilityand/orequipmentfailureasaresultofageingplantmayleadtoaninterruption(s)ofsupplytocustomers

• UCLF• EAF• Systemminutes

lost(forevents<1)

• Numberofmajorincidents

• SAIFI• SAIDI

• Generationsustainabilitystrategy• Distributionsustainabilitystrategy

focusingonprioritisedinterventionstowardsrefurbishments,reliabilityimprovementsandmaintenance

• Transmissionnetworkstrengtheningprojects

• Leadershipinterventions• OperationKhanyisa• Technologiestohelpreducetower

componenttheft• Businesscontinuity,includingthe

appropriateinsuranceportfolio• Assetmanagement• Processcontrolmanuals

90,11493

93,123

719998

73

4974

III Being customer-centric

Related material items: 19, 27, 28, 40, 44

ThereisaconcernthatEskom’sreputationmaybenegativelyaffectedbypoorservicedeliveryandinsufficientunderstandingofwhatisimportanttocustomers

• Customerserviceindex

• EskomKeyCareindex

• Acentreofexcellencehasbeenestablishedwithstructuredoperatingunitstoimproveoperationsandtomanagereputationalrisk

• Customerserviceimprovementplan

94–97


Page reference

IV Build strong skills

Related material items: 6, 33, 34, 42, 44

ThereisaconcernthattheremaybeinadequateskillsincertainareasofthebusinesstosupportEskom’stechnology-intensiveoperations

• Trainingexpenditureasapercentageofgrossemployeebenefits

• Totalnumberoflearnersinthefollowingstreams:–Engineering–Technician–Artisan–Youthprogramme

• Skillsdevelopmentinitiatives(training,skillstransfer,engagementwitheducationalinstitutions)

• Back2Basicsinitiativetostandardiseoperations

• Localisationofskillsthroughthecapacityexpansionprogramme

• EskomprovidestrainingthroughtheAcademyofLearningandlearnerprogrammes

• Eskom’slearnerprogrammes,focusedontechnicallearners

100

74

150

100

100

V Security of supply

Related material items: 2, 3, 4, 5, 6, 8, 9, 12, 13, 39, 42, 43, 44, 45

IfthereisslowprogressonEskom’smaintenanceprogramme,itmaydelayimprovementsinplantperformance.Coupledwithpartialloadlossesduetopoorcoalquality,thismightresultinprolongedenergyconstraints,lossofconfidenceinEskomandanincreasedriskofloadshedding,whichwouldhavesevereimplicationsforthecountryandEskom.Potentialshortageofliquidfuelsmayimpactsecurityofsupply.Referto“deliveringcapacityexpansion”focusareabelow

• Integrateddemandmanagementandenergyefficiency

• MaintenancebacklogreductionbasedonEskom’stechnicalgovernancecommitteeapproval

• Protectionsystemsandoperatingstandards

• Black-startreadiness• Disasterriskplanningthrough

nationaldisastermanagementstructures

• Securityofsupplyrecoveryproject/systememergencypreparednessandemergencyresponsecommandcentre

• CapacityexpansionandIPPprogrammes

• NERSAapprovedNRS048-9loadcurtailingprotocols

• PowerAlert,PowerBulletinandquarterlystateofthesystemmediareleases

• Stakeholderengagement• Crisiscommunicationcentre

established• Referto“improveoperations”focus

areainthistableonpage58

57

104

115–124,143–145

104

54,105,109,113,191

51–56

VI Delivering capacity expansion


Iftherearefurtherdelaysindelivery,and/orifthecostofthecapacityexpansionprojectsescalates,itcouldleadtoalossofstakeholderconfidence,whichwouldaffectfuturebuildprojects.PossiblelatedeliverywouldalsoplacepressureonthepowersystemandtheGenerationsustainabilitystrategy

• Generationcapacity,transmissionlinesandtransmissioncapacityinstalled

• Generationexpansioncapacitymilestones(Medupi,KusileandIngula)

• Anintegratedmegaprojectriskmanagementframeworkhasbeenimplementedtoaligntheobjectivesofallrelevantstakeholders,identifyandintegraterisksandissuesacrossprojects,andimplementmoreeffectivetreatmentplans

• Appropriateinsuranceportfolio• Boardbuildprogrammereview

committee

115–124

70




Page reference

VII Labour


Possiblelabourunrestamongcontractors,serviceprovidersandsupplierscouldfurtherdelaymajorprojects,causesignificantdisruptionsinelectricitysupply,decreaseproductivityandposearisktothesafetyofEskomemployees,contractorsandmembersofthepublic

• Nospecifickeyperformanceindicators

• Strikepreventionmechanisms• Engagementwithgovernment

intelligenceagenciesandenvironmentalscanning

• Monitoringthelabourenvironment• Develop,reviewandimplement

strategyonemployeeengagement• Securitydrivetoprotect

employees,contractorsandinfrastructure

• Seethetreatmentandcontrolsunderthe“focusonsafety”focusareainthistableonpage58

52–54

76,151

75,85–88

VIII Reduce environmental footprint in existing fleet

Related material items: 2, 7, 8, 9, 10, 11, 23, 36, 37, 42

ShouldEskomfailtoembedclimatechangeandsustainabledevelopmentinitsoperations,itsaccesstonaturalresourcesandlicencetooperatemaybejeopardisedtothepointthatitwillbeunabletoreliablysupplyelectricity.Eskom’semissionsperformancecouldalsodeteriorate,possiblyresultingincostlylegalcontraventions,increasedpublichealthrisksduetogrowingemissions,reputationaldamageandjeopardisedsecurityofsupplyshouldgeneratingplanthavetobewhollyorpartiallyshutdown

• Specificwaterusage

• Relativeparticulateemissions

• Environmentallegalcontraventionsintermsoftheoperationalhealthdashboard

• Emissiontreatmentplansareinplace.However,theycannotalwaysbeexecutedduetotheoutagesrequiredtodoupgradesbeingpostponed

• Ongoingreviewstoensurethatwater-uselicencesandpermitrequirementsaremet

• KusileandMedupipowerstationswillbefittedwithfluegasdesulphurisationtechnology,whichwillreducesulphuroxides,nitrogenoxidesandparticulateemissions

• Renewable-energyprojectsareunderway

• EskomsupportsintroducingrenewableenergyIPPstotheelectricityindustry

• Internalandexternalenergy-efficiencyprogrammes

• Eskom’sclimatechangestrategy

128–129,132

129–130,137–138

138

132–133

143–145

111–114

130–132

IX Implementing coal haulage and the road-to-rail migration plan


Failingtosuccessfullyimplementtheroad-to-railmigrationstrategywouldcostEskomlostopportunitiesintermsofcost(roadrepairsandlogisticscostswouldnotbelowered)andreputation.Safetybenefitswouldalsonotmaterialise

• Amountofcoalhaulagetransferredfromroadtorail

• Theroad-to-railmigrationstrategyisbeingimplementedinpartnershipwithTransnetFreightRail

141

X IPP-contracted energy Related material items: 5, 16, 44

IfIPPsareonlyabletointermittentlydeliverelectricity,Eskom’sdemand-and-supplyplanningmaybeaffected,soaffectingsecurityofsupply

• InstalledIPPcapacity

• GWhpurchasedfromIPPs

• EskomcontinuestosignpowerpurchaseagreementswithIPPs

• EskomisimplementingacontractmanagementstrategyforIPPs

143–145


Page reference

XI Independent System Market Operator

Related material item: 15

ThecreationoftheIndependentSystemMarketOperatormayaffectEskomanditsstakeholdersshoulditbeimplementedwithinaconstrainedcapacityenvironment

• Nospecifickeyperformanceindicators

• EskomcontributedtothepreparationofaduediligencereportthatwastabledwiththeDepartmentofEnergy

• Eskomhassuggestedaphasedapproach

32

XII Maximise socio-economic contribution and procurement equity

Related material items: 17, 19, 20, 21, 22, 27, 42, 44

Failingtomeettargetsforcorporatesocialinvestment,universalelectrificationandlocalprocurement–especiallyprocurementfrombusinessesthatareownedbyblackpeople,blackwomenorblackyouth–wouldmeanthatEskomhaseffectivelynotfulfilleditsmandatetocontributetothegovernment’sdevelopmentalplans

• Percentageoflocalcontentinallnewbuildcontracts

• PercentageofexpenditureattributabletoB-BBEEcompanies,black-women-ownedandblackyouth-ownedcompanies

• Corporatesocialinvestments

• Electrificationconnections

• Eskompromotesjobsandlocal-contentprocurementinallnewcommercialcontracts

• Eskom’sprocurementpoliciesadvanceB-BBEEandblack-women-ownedandblackyouth-ownedbusinesses

• EskomprovidestrainingthroughtheAcademyofLearningandlearnerprogrammes

• Theuniversalelectrificationprogrammeisongoing

• Corporatesocialinvestmentactivitiesareongoing

• Eskom’ssocio-economicdevelopmentstrategy

148–150

XIII Employment equity

Related material items: 18, 42

Failingtomeetequitytargetsfordisability,raceandgenderinmiddleanduppermanagerialandprofessionalpositionswouldaffectEskom’sreputationandlabourrelations,andcouldjeopardisethedevelopmentalaspectofitsmandate

• Employmentequityindicators

• Eskomhasimplementedanemploymentequityplansupportedbyalong-term,target-settingstrategytodrivethetransformationagenda

150–151




Page reference

XIV Ensure Eskom’s financial sustainability

Related material items: 4, 13, 16, 23, 24, 25, 26, 29, 30, 31, 32, 35, 41, 42, 45

TherevenueshortfallbetweenEskom’sMYPD3applicationandNERSA’stariffdeterminationsmaycompromisebusinessoperationsanddeliveryonthecurrentcorporatemandate.Shouldpoordecisionsbemaderegardingliquidityandportfoliomanagement,itwillleadtoinsufficientfundstomeetfinancialobligations

Furthersovereignratingdowngrades,combinedwithuncertaintyaroundEskom’sfinancialsustainabilityorabilitytomeetloanobligationsontimeasperceivedbytheratingagencies,mayresultinalowercreditratingforEskom.Thiswouldnegativelyaffectitsfundingandhedgingoptions,andincreaseborrowingcosts

• Financialandliquidityratios

• Eskomcontinuestomonitoritsfundingandliquidityposition

• TheMYPD3response,whichincludesthebusinessproductivityprogramme,formsthecoreofthetreatmentplan.Executivemanagementcommittee“sponsors”havebeenassignedtotheprogramme’ssevenstreamstodrivevaluecreationandensurethatcashisdeliveredtothebusiness,andtheboardcloselymonitorstheprogress

• ThereisongoingengagementwithNERSAregardingtheregulatoryrulesandRCA

• Ajointboard/ExcotaskteamhasbeenestablishedtofindasolutiontoEskom’sfinancialsustainabilityinthelongterm

• Refertonote4inthe2014annualfinancialstatementsformoreinformationregardingEskom’sfinancialriskmanagement(www.eskom.co.za/IR2014/01.html).

153–161

73

48–49

72

Theheatmap that follows indicates the relative likelihood and impact of selected risks notedinthematerialitymatrix.Forarisktobeclassifiedasapriorityonerisk,boththelikelihoodandimpactshouldbehigh.Romannumeralsareusedtofacilitatethelinkagetothematerial itemstableabove.

Heat map of risks linked to material items

Low

High

Impact

Low Likelihood High

XIV

VI

V

IIIVIIIXI

XII

XIII

IIIIX

X

IV

VII

Rotek and Roshcon logistics services transports about 18 000 tons of abnormal loads for Eskom per year, such as this vale for the Ingula pumped-storage scheme



Eskom needs strong leadership, governance structures andprocesses to effectively manage its operations and achieve itscoremandateofensuringthatSouthAfrica’senergyneedsaremet

Leadership and corporate governance

Shareholder and board of directorsEskomisastate-ownedcompanyansweringto theMinisterofPublicEnterprises. Itsstrategicdirectionisguidedbyaunitaryboard(thatis,asingleboardwithbothexecutiveandnon-executivedirectors). The non-executive directors, including the chairman of the board, and the chiefexecutiveareappointedbytheshareholder.Thefinancedirectorisappointedbytheboardafterapproval of the candidate by the shareholder. The chairpersonand chief executive is not thesameperson.

Eskom’s board is responsible for the strategic direction of the company and monitoring thecompany’sprogressagainst thebusinessstrategy.TheboardalsodrivesEskom’sgoal tobeagoodcorporatecitizenandisassistedbyEskom’scommitteesandsubsidiariesinthisregard.Boardmembers have a diverse profile that includes the sciences, engineering, law, finance,auditing,enterpriseriskmanagement,businessandaccountingskillsandexpertise.Themajorityoftheboardismadeupofindependentnon-executivedirectors.

Thefirst three-year termof office for non-executivedirectorsexpires in July2014andwill bereviewedattheannualgeneralmeeting(AGM).Retiringdirectorsareeligibleforreappointmentandtheappointmentofnon-executivedirectorsisreviewedannuallyattheAGM.

04

Eskom has a transformation programme in place and has put in place skills-development programmes to train engineers, technicians and artisans


Leadership and corporate governance (continued)

Mr Brian Dames (48)ChiefexecutiveResigned31March2014

Mr Collin Matjila (52)Independentnon-executivedirectorAppointedasinterimchiefexecutiveon1April2014

Dr Boni Mehlomakulu (41)Independentnon-executivedirector

Mr Mafika Mkwanazi (60) Independentnon-executivedirector

Mr Phenyane Sedibe (44)Independentnon-executivedirector

Ms Lily Zondo (45)Independentnon-executivedirector

Ms Queendy Gungubele (55)Independentnon-executivedirector

Ms Yasmin Masithela (40)Independentnon-executivedirector

Ms Neo Lesela (44)Independentnon-executivedirector

Ms Bajabulile Luthuli (41)Independentnon-executivedirector

Ms Chwayita Mabude (44)Independentnon-executivedirector

Pleaseseewww.eskom.co.za/IR2014/07.htmlforboardmembers’qualifications,significantdirectorshipsandappointmentdates

Dr Bernie Fanaroff (66)Independentnon-executivedirector

Mr Zola Tsotsi (67)Independentnon-executivedirectorChairpersonoftheboard

Ms Tsholofelo Molefe (45)FinancedirectorAppointed14January2014

Membership of the board at31March2014

Directors’ ages are as at 31 March 2014


Changes in board composition and company secretaryMr Brian Dames resigned as chief executive, effective 31 March 2014. Mr Collin Matjila,an independent non-executive director, was appointed interim chief executive effective on1April2014whiletherecruitmentprocessforanewchiefexecutiveisunderway.

Mr Paul O’Flaherty resigned as finance director effective 10 July 2013. Ms Caroline Henry(seniorgeneralmanager:Treasury)was,intheinterim,appointedasactingchieffinancialofficer.On 14 January 2014, Ms Tsholofelo Molefe, formerly the group executive: Group CustomerServices,wasappointedasthefinancedirector.

MsBongiweMbomvuresignedascompanysecretary,effective31August2013.MsAnnamarievanderMerwewasappointedasinterimcompanysecretarywitheffectfrom1September2013.

Board assessmentsAnindependentevaluationoftheperformanceandeffectivenessoftheboard,individualdirectorsand the company secretary is being undertaken with regard to 2013/14, in line with Eskompractice.Theboardwillconsidertheimprovementopportunitiesidentifiedintheevaluationreportanddevelopaprogrammetoimplementtherecommendations,includingtheenhancementofthedirectortrainingprogrammetofocusonindustry-specifictopics,aswasthecasethepreviousyearwithregardstothe2012/13evaluation.

Director induction and orientationA comprehensive programme is in place to train and orientate new directors and externalcommitteemembersonacontinualbasis.

Corporate governance frameworkThegovernanceframeworkthatregulatestherelationshipbetweentheshareholder,thecompanyandtheboardincludesthefollowing:• A memorandum of incorporation,whichsetsoutcertainpowersoftheshareholderandtheboard.Eskom’srevisedmemorandumofincorporation(MoI)isbeingfinalised.TheboardandtheshareholderareinconsultationonvariousprovisionsoftheMoI

• A strategic intent statement,whichsetsouttheagreedmandateandstrategyforEskom• The corporate plan,whichformsthebasisofEskom’soperationsandoutlinesthecompany’spurpose,valuesandstrategicobjectives

• A shareholder’s compact, whichsetsoutannualkeyperformanceindicatorsandtargetsinsupportofthestrategicintentstatement.Totheextentnecessary,theshareholder’scompactseekstoclarifytheobjectivesofEskominthecontextofthestrategicintentstatement

• Codes of good governancesuchasKingIIIandtheProtocolonCorporateGovernanceinthePublicSector.Eskomhasendeavouredtoapplyall theKingIIIprinciplesandpractices.However,asastate-ownedcompany,a fewof thesecannotbeappliedandEskomhas, insome instances, adopted alternative practices to those recommended by King III. A reportonEskom’sKingIIIexceptionsandalternativepracticescanbefoundatwww.eskom.co.za/IR2014/03.html

• Relevant legislation, including the Companies Act, the Public Finance Management Act(PFMA),NationalTreasuryregulations,theEskomConversionAct(2001),andregulationsofNERSAandtheNationalNuclearRegulator(alsorefertopage34)

• Materiality framework whichsetsouttherequirementsregardingmattersneedingapprovalintermsofthePFMA

• Relevant policies and proceduresoftheshareholderandEskom• Delegation of authority frameworkwhichdelegatespowerandauthorityfromtheboardtocommitteesandemployees.Thereviseddelegationofauthorityframeworkwasapprovedandisbeingimplemented

Oneof theessentialcomponentsof thegovernance framework is theemphasison theclarityof rolesbetween theboard, shareholderandmanagement,and this isaddressed through thestrategicintentstatementandshareholder’scompact.

AsubsidiarygovernanceframeworkisinplacetoensurethatEskom’ssubsidiariesalignwiththegroup’ssustainabilitygoals.

Responsible and ethical leadership Eskom’sleadershipfocusesoneffectiveethicalleadershipandcorporatecitizenship.AscanalsobeseenfromwhatissetoutearlierregardingtheperformanceofEskomanditskeypriorities,theboardandexecutivemanagementhaverecognisedtheneedtointegratestrategy,governanceandsustainability.

The Eskom board ensures that the group’s ethics-management programme is effectivelyimplemented.Eskommanagesfraudandcorruptionby:• Fosteringethicalstandards• Raisingawarenessregardingethicsthroughtraining,reportingandprovidingadvicethroughanethicshelpdesk

• Encouragingwhistle-blowingthroughmechanismssuchasafraudandcorruptionhotlineon0800112722

• Conductingforensicinvestigations

Adetailedforensicreport istabledwiththeauditandriskcommitteeonaquarterlybasis.Thisreportcontainsinformationon:• Newforensicincidentsreported,includingthosereportedthroughthehotline• Progresson investigationsrelating to incidentsofcorruption, fraud, irregularitiesandsexualharassment

• LossesandrecoveriesrecordedbyAssuranceandForensics• Disciplinary action taken (11 employeeswere dismissed during the year as a result of theoutcomeofforensicinvestigations)

• Trendsandobservationsstemmingfrominvestigations• Preventativeactiontaken(forexample,fraudawarenesstrainingtoenhancevigilanceamongemployeeswasattendedby1933employeesduringtheyear)

EskomisasignatorytotheUnitedNationsGlobalCompactLEADinitiative,whichincludesananti-corruptionclause,aswellas theWorldEconomicForum’sPartnershipAgainstCorruptioninitiative.

CommitteesTheboard’seffectivenessisimprovedbytheuseofboardsub-committees,towhichitdelegatesauthority without diluting its own accountability. Board committees consist of a majority ofindependentnon-executivedirectorswhoexercise theirauthority inaccordancewithapprovedterms of reference,which are reviewed on an annual basis. These terms of reference defineeachcommittee’scomposition,role,responsibilitiesandauthority,andarealignedwithregulatory


http://www.eskom.co.za/IR2014/03.html


requirementsandbest-governancepractices.Theboardprovidesthestrategicdirection,whilethechiefexecutive,whoisassistedbytheexecutivemanagementcommittee,isaccountabletotheboardforimplementingthestrategy.

ThediagrambelowsetsoutEskom’skeygovernancestructures:

Eskom board

Chief executive

Executivemanagementcommittee

Auditandriskcommittee

Investmentandfinancecommittee

Tendercommittee

Social,ethicsandsustainabilitycommittee

Peopleandgovernancecommittee

Buildprogrammereview

committee

Theboardheld11meetingsduringtheyear.Theboardcommitteesheldthefollowingnumberofmeetings:• Auditandriskcommittee 9• Investmentandfinancecommittee 12• Tendercommittee 12• Social,ethicsandsustainabilitycommittee 5• Peopleandgovernancecommittee 6• Buildprogrammereviewcommittee 10

Pleaseseewww.eskom.co.za/IR2014/08.htmlformoreinformationonthecommitteesandtheiractivitiesthroughouttheyear.Forthereportoftheauditandriskcommittee,pleaserefertopage3oftheannualfinancialstatements,whichcanbefoundatwww.eskom.co.za/IR2014/01.html

Executive management committeeTheexecutivemanagementcommitteeisestablishedbythechiefexecutiveandassiststhechiefexecutivetoguidetheoveralldirectionofthebusinessandexerciseexecutivecontrolinmanagingday-to-dayoperations.Theexecutivemanagementcommitteeheld17meetingsduring2013/14.Refertopage43forEskom’soperationalstructureaswellastherelatedexecutivemanagementcommitteememberresponsibleforeachfunction.

Otherthanthechiefexecutiveandfinancedirector,whoareexecutivedirectors,Eskom’sgroupexecutives are appointed by the board. Group executives are full-time employees subject toEskom’sconditionsofservice.

Pleaseseewww.eskom.co.za/IR2014/09.html forexecutivemanagementcommitteemembers’qualifications,significantdirectorshipsandappointmentdates.

Changesinexecutivemanagementcommitteein2013/14Refertochangesinboardcompositiononpage68forchangesregardingthechiefexecutiveandthefinancedirector.

MrPaulO’Flaherty,whowasalsothegroupexecutive:GroupCapital,resignedwitheffectfrom10 July 2013 and Mr Dan Marokane (group executive: Technology and Commercial) wasappointedtoactasgroupexecutive:GroupCapital.

MrKannanLakmeeharan(divisionalexecutiveforOfficeoftheChiefExecutive)wasappointedtoactasgroupexecutive:TechnologyandCommercial.MrLakmeeharanresignedwitheffectfrom30April2014andMrMatshelaKokowasappointedtoactasgroupexecutive:TechnologyandCommercialuntilthepermanentappointmenthasbeenconcluded.

Ms Erica Johnson, group executive for Enterprise Development has been acting as groupexecutive:GroupCustomerServicesfrom20January2014afterMsTsholofeloMolefevacatedtheposition.

Mr Bhabhalazi Bulunga, group executive: Human Resources went on early retirement on31January2014.MrMongeziNtsokolo,groupexecutive:Transmission,wasappointedactinggroupexecutive:HumanResourcesfrom1February2014.

Fillingoftheexecutivevacancieswillbeoneofthefirstprioritiesfortheincomingchiefexecutive.

Leadership’s key focus areasTheboardandexecutivemanagementhavebeeninstrumentalinguidingEskomwithregardtothekeyprioritiesandrisksinthebusiness–theyhavebeenappropriatelyinvolvedinthematerialissuesaffectingthebusiness.

Someofthekeyitemsthatweretabledatboardandexecutivemanagementlevelduring2013/14arelistedbelowandalltheseitemsareaddressedinthisintegratedreport:• Strategy,includingthecorporateplanfor2014/15to2017/18• General performance and risks,includingsafety,boardandsub-committeeevaluations,keybusinessrisks,andshareholderreporting

• Generation sustainability,includingmaintenanceissues• Security of supply, including IPPs, energy efficiency, electricity and equipment theft, andstakeholderengagement

• Progress on the capacity expansion programme• Financial sustainability, including the business productivity programme, municipal debt,budgets,Eskom’sborrowingprogrammeandstatutoryreporting

• Security of coal and water supply,includingcoalhaulage• Eskom’s environmental footprint, includingemissionsandenvironmentallicences• Transformation,includingemploymentequity,jobcreation,theelectrificationprogrammeandB-BBEE





Cost savings through the business productivity programmeEskomimplementedthebusinessproductivityprogramme(BPP)whichfocusesonthereductionofthecostbase,increasedproductivityandrevisionsoftheEskombusinessmodelandstrategyinordertoclosetherevenueshortfallthatwascreatedbytheMYPD3determination.CashsavingsofbetweenR50billionandR60billionaretargetedovertheperiodofMYPD3.

To date, 86 savings opportunities (value packages) totalling R72.9 billion have beenidentifiedandapprovedandcoversthefollowingfunctionalareas:• Primaryenergy• Employeecosts• Repairsandmaintenance• Externalspend• Finance• Revenuemanagement

Cost-savingprojectsfocuson:• Improvingtheefficiencyandeffectivenessofthecapacityexpansionprogramme• Reducing external expenditure through, amongst others, efficient procurementpractices,negotiatingforbetterprices,revisingtechnicalstandardsandreviewingthenecessityofsomeactivities

• Reducingrevenuelosses,improvingdebtmanagementandfindingadditionalrevenuesources

• Optimisingmaintenancecostsandprocesses• Reducingdirectandindirectemployeebenefitcosts• Optimisingfundingoptionsandthebalancesheet• Optimisingandreducingthecostofprimaryenergy

Riskreviewsareperformedpriortotheimplementationofvaluepackages.Anumberofcontrolsareinplacetomanagetheriskofnon-realisationofBPPtargets.Thesemostlyrelatetothecurrentgovernanceprocessessuchasbusinessplanning,budgetingandperiodicfinancialmonitoring.However,morespecificmeasureswillbeimplementedaspartof theBPPprogramme.Thiswillprovideamuchmoregranularview,monitoringvalue packages from inception through savings realisation, following a “stage gate”methodology.Thisisaproven,standardmethodologyappliedincost-savingexercises.Acomprehensiveprojectmanagementapproachandmethodologyisintheprocessofbeingimplemented.

Ensure security of supply and Eskom’s financial sustainabilityBalancingsecurityofsupplyandEskom’sfinancialsustainabilityweretwoofthemostmaterialitemstheboardhadtodealwiththisyear.Someofthekeydecisionstheboardhastakenduringtheyearinthisregardarelistedbelow:• Thegoing-concernstatusofthecompanywillnotbecompromisedwhileEskomcontinuestoensuresecurityofsupply

• The funding for the use of open-cycle gas turbines (OCGTs) in 2013/14 was increasedfromR3.6billion toR11.3billion toensure security of supply, but this fundingneeds tobefoundelsewherewithintheapprovedbudgets,untilitisrecoveredasapartoftheregulatorymechanism

• Appropriatelevelsofplannedmaintenancebasedonwhat isnecessarytoensurelong-termplanthealthwillbeexecutedwhileat thesame time taking intoaccount thecurrentsystemconstraints,compliance,safetyandstatutoryrequirements,andthefinancialconstraints

• Eskomwillexplorealternativefundingoptions,includinggovernmentsupport• Eskomwillpursuealltheregulatoryoptions,includingtheliquidationoftheRCAbalanceand,ifnecessary,apotentialre-openingoftheMYPD3revenuedeterminationwillbeconsidered

• Thecapitalportfoliowillbemanagedwithintheavailablefundsandshouldadditionalfundingnotbesecuredforadditionalcapitalrequirements,thecurrentcapitalportfoliowillbereviewedtoreprioritiseprojectstoensureenvironmentalandregulatorycompliance

• The board build programme review committee was established in April 2013 to enhancegovernanceandmonitoringandprovideanadditionaloversightroleforthecapacityexpansionprogramme

• Theresidentialcustomerrevenue-managementstrategy,whichincludestheSowetorevenuemanagement strategy toaddressdebtorpayment levels, receivedPFMAapproval from theDPEandwillbeimplementedinthenewfinancialyear

• Various cost saving initiatives relating to the business productivity programme have beenapprovedbytheboardinvestmentandfinancecommittee

• The board has taken active steps to address the sustainability challenges in an integratedmanner,includingtheestablishmentofaspecialboard/Excotaskteam



Internal controls including security and combined assurance Internal controlsThe board, through the audit and risk committee, ensures that internal controls areeffective and adequately reported on for auditing and regulatory purposes. In line withKingIII,Eskomappliesacombinedassurancemodeltoensurecoordinatedassuranceactivities.Thismodelgives theauditand riskcommitteeanoverviewof significant risks,aswellas theeffectivenessofcriticalcontrolstomitigatetheserisks.Theprinciplesforthecombinedassurancemodelareembeddedinthecombinedassuranceframework.Eskom’sinternalauditfunctionismanagedbytheAssuranceandForensicsdepartmentwhichreportsdirectlytotheauditandriskcommittee.

Eskomhasfor thepast fewyearsbeenrunningthe“Back2Basics”programmetostandardise,simplifyandoptimise its internal processesand improve theoverall control environment.Thisis managed by a cross-functional committee called the CARAT committee. Process controlmanuals,eachcontaininga“riskandcontrols”matrix,havebeenpreparedforallkeyprocesses.Thesemanualscoverbothfinancialandoperationalprocesses, including theprocesses tobefollowedtodeterminethekeyperformanceindicatorsfortechnicalmattersandoperations.Theprocesscontrolmanualsareupdatedregularly.

TheCARATcommitteeisasub-committeeoftheexecutivemanagementcommitteeandperformsthefollowingintermsofitsmandate:• Itensuresthatprocessesaredrivenwithfunctionalaccountabilitywithrespecttotheprinciplesofcompleteness,accuracy,relevance,accessibilityandtimeliness

• Reviewsallchangerequestsaffectingprocesses,systemsordata• Ensurestheadherencetoandcompliancewithbusinessprocessesdefinedineachsupportfunctionprocesscontrolmanual

• Identifiestheneedforbusinessprocessoptimisationprojects• Enforcesstandardisationacrossthebusiness• DefinesandmonitorsKPIstodriveperformanceimprovementacrossthebusiness

TheAuditandForensicdepartment’srisk-basedplanfortechnicalandfinancialreviewsofinternalcontrolsystemsisapprovedbytheauditandriskcommitteeonanannualbasis.Eskomkeepsadatabaseofall internalandexternalauditfindings(financialandtechnical).Thedatabase ismonitoredonamonthlybasisbymanagementandAssuranceandForensics,andprogressonresolvingauditfindingsisreportedtotheauditandriskcommitteeonaquarterlybasis.Eskomalso provides theAuditor-General of SouthAfricawith a quarterly assessment on the controlenvironment.

Combined assuranceCombined assurance assists management in identifying duplication of assurance work, anypotentialassuranceshortfall,andimprovementplansforthoseareasidentified.Italsohelpsfocusassuranceproviderstobetterachieveconsensusonthekeyrisksthecompanyfacesandreducetheriskoffailingtoidentifysignificantrisks.

Thecombinedassurancemodelprovidesthreelinesofdefenceagainstrisk:• Line 1: Line management and managerial controls.Linemanagement is responsible formanagingriskandperformance

• Line 2: Functional areaslikeriskmanagement,compliance(includingISO9001and14001compliance), safety, health, environment, quality and the associated frameworks, policies,reportingandoversight,supportmanagementinexecutingitsdutiesandprovidesalayerofcontroloverriskmanagement

• Line 3: Independent, objective internal and external assurance providers.Thethirdlineofdefenceisindependentofmanagementandprovidesindependent,objectiveassurance

A combined assurance forum has been established to implement and embed the combinedassurance framework principles. The forum consists of the three lines of defence, with theobjectiveof:• Ensuringcoordinatedandrelevantassuranceactivitiesfocusingonkeyrisks• Improvingcollaborationbetweendifferentassuranceproviders• Improving reporting to the board and committees, includingminimising repetition of reportsbeingreviewedbydifferentcommittees

• Reducingassurancefatigueandminimisingdisruptionstothebusiness• Providingtheauditandriskcommitteewithabetterbasisforexercisingitsoversightfunction

TheAssuranceandForensicsdepartmentisresponsiblefordrivingcombinedassurancewithinEskom.Externalauditorsindependentlyauditthefinancialstatementsandselectedsustainabilityinformation.

Security risk managementThe board is responsible for ensuring that an integrated crime-prevention plan is in place tominimiseEskom’s exposure to crime, particularly fraud.Eskomdevelops strategies to protectassets, interests, information, people and processes, and gives assurance that the requiredmeasuresareimplemented.

Securityprojectsfortheyearincludedpurchasingnewdata-leakagepreventionsoftware,firewalls,laptopencryptionandasecurityoperationscentre.PublicFinanceManagementActapprovalhasbeenobtainedforthetransmissionnationalsecurityrefurbishmentproject.Thisprojectincludesvarious initiativesto improveandupgradethesecuritysystemsatvariouscriticalandhigh-riskTransmissionsites, inordertomitigateriskstothe integrityofassetsandcontinuityofsupply.Theprojectisunderwayandwillreceivecontinuedfocusuntilcompletion.



Remuneration and employee relationsEskom’sapproach to remunerationandbenefits isdesigned toattractandretainskilled,high-performingemployees.Toachievethis,Eskompursuesthefollowingremunerationprinciples:• Businessrequirementsdeterminemarketpositioning• Providemarket-relatedremunerationstructures,benefitsandconditionsofservice• Maintainexternalcompetitivenesstoattractandretainkeyskills• Ensureinternalequitythroughdefensibledifferentialsinpayandbenefits• Remunerateemployeesinaccordancewiththeirjobgrade,andatleastattheminimumoftheapplicablesalaryscale

• Followalead-lagmarketapproach.TheEskomsalary/guaranteedpackageswilltypicallybeleading themarket justafter theannual increaseshavebeen implementedand lagging themarkettwotothreemonthsbeforethenextincreasesaredue

Eskom is committed to resolving unjustifiable race- and gender-based incomedifferentials byreinforcing its remunerationmanagement principles. This involved ensuring that all qualifyingemployees are moved to the 50th percentile for their job description. An income differentialexercisewasimplementedinNovember2013andtheresultingsalaryadjustmentsweremade.

Eskom’semployeeengagementmodel aims toencourageemployeeparticipationand involveemployeesandexecutives inconversationsaroundstrategy,performanceandpeople.Eskomhasdevelopedmoreproductive,sustainablerelationshipswithorganisedlabourandcontinuestodosothroughapartneringmodeltoguidetheseinteractions.Thecompanyhasalsoembarkedonaprocesstofurtherstrengthentherelationshipswiththetradeunions,usingtheservicesofanexternalfacilitator.

Eskom’sremunerationstructuresfallintofourcategoriesassetoutbelow.

Bargaining unitBargaining-unit employees (all those belowmiddlemanagement) receive a basic salary plusbenefits.Majorbenefits includemembershipof thepensionandprovident fund,amedicalaid,housingallowanceandanannual bonus (thirteenth cheque).Basic salariesand conditionsofservicearereviewedannuallythroughacollectivebargainingprocess.Bargaining-unitemployeesalsoparticipateinanannualshort-termincentivescheme.

Eskom and its recognised trade unions approved the Council for Conciliation,Mediation andArbitration(CCMA)forwage-negotiationarbitrationtowardstheendof2013.InJanuary2014,theCCMAawardedEskom’stradeunionsa5.6%annualwageincrease(6.3%totalcostsincludingbenefits)foroneyear,backdatedto1July2013.ThiswaslargelyinlinewithEskom’sfinaloffer.

Eventhoughelectricityhasbeendeclaredanessentialservice,whichprohibitsEskomemployeesfrom engaging in industrial action, employees at some sites embarked on various forms ofunprotectedindustrialactionduringtheyear.

High-voltage line construction calls for very stringent safety measures



Managerial levelManagerial-levelemployeesareremuneratedonacost-to-company/packagebasis.Thepackageincludespensionableearnings,compulsorybenefitsandaresidualcashcomponent.Managerialemployeesalsoparticipateinanannualshort-termincentivescheme,consistingofrewardsforachievingobjectivessetbythechiefexecutiveandapprovedbyaboardcommittee.

Short-term incentive scheme for bargaining unit and managerial levelEskomhasashort-termincentiveschemeinplacethataimstoalignindividualperformancewithorganisationalstrategicobjectivesbysettingtargetsforkeyperformanceindicatorsthatcontributetotheseobjectives.

ThekeyperformanceindicatorsarelinkedtoEskom’sstrategicobjectivesandcascadedownfromtheorganisationalleveltotheindividuallevel.Employeesarecontractedtoachievetargetsforselectedkeyperformanceindicatorsandarerewardedformeetingorexceedingthesetargets.Allpermanentemployeestakepartinthescheme.Thevalueofthebonusitselfdependsontheorganisation’soverallperformance.

TheperformanceareasofEskomareweighted:safety(15%), technicalandcustomerservice(45%),energydemandandcashsavings(20%)andachievementofnewbuildmilestones(20%).

The executive management committee can reduce the incentive payable to thebargainingunitandmanageriallevelwhentheminimumrequirementsoftheschemearenotadheredto,forexamplefatalities,byamaximumof30%.

Non-executive directorsNon-executivedirectors’ feesarepaidasafixedmonthly fee,decided inaccordancewith theshareholder’sapproval.Non-executivedirectorsarereimbursedforcompany-relatedexpenses.

Executive remunerationThechiefexecutive,financedirectorandgroupexecutiveshavepermanentemploymentcontractsbasedonEskom’sstandardconditionsofservice.

Executive remuneration is based on the organisation’s performance, as assessed throughperformanceonkeyindicators,andtheindividual’scontributiontothatperformance.Itconsistsofabasicsalaryaugmentedbyshort-andlong-termincentives.Thebalancebetweenfixedandvariableremuneration(short-andlong-termincentives)isreviewedannually.

Internationalandlocalbenchmarksareconsideredindeterminingremuneration.Theremunerationstrategyisalignedwithshareholderguidelines.

Theboardapproves the remunerationof thefinancedirectorandgroupexecutives.Thechiefexecutive’sremunerationisapprovedbytheshareholder.Factorstakenintoaccountincludetheexecutive’slevelofskillandexperience,his/hercontributiontoorganisationalperformance,andthegroup’sbusinessresults.

Theremunerationofexecutivemanagementcommittee(Exco)membersconsistsofthefollowing:• Atotalguaranteedamount,consistingofafixedcashportionandcompulsorybenefits.Thisisreviewedannually

• Short-termincentives,consistingofrewardsforachievingobjectivessetbythechiefexecutiveandapprovedbyaboardcommittee(refertothekeyperformanceindicatorsonpage80)

• Long-term incentives, consistingof rewards for achievingobjectives set by the shareholder(referpage80)

In termsof their performance contracts, only 20%of executives’ performance rating is basedon individual performance; the remaining 80% is based on Eskom’s collective performance.Cognisancemustbetakenoftheresponsibilitiesandrisksthatdirectorsandexecutivescarry,giventheirbroadaccountability.

Incentives for executivesEskomhasaformalremunerationplanthatlinksmanagementremunerationtotheperformanceoftheorganisationandindividualcontribution.

Shareholdercompact Corporateplan Excocompacts Groupanddivisional

compacts

All key performance areas and key performance indicators in the shareholder’s compact areincludedintheExcocompacts.Thecompactisinessenceaperformanceagreement.• CompactsofExcomembersarefocusedontheimplementationofthecorporateplanandareassuchlinkedtotheEskomstrategicobjectives

• ThepeopleandgovernancecommitteereviewsthekeyperformanceareasandkeyperformanceindicatorsoftheExcomembers’compactsannuallytoensurealignmentwiththeshareholder’scompactandthecorporateplan

• Individualperformanceisreviewedannuallyandisbasedonaperformancecontract(compact)betweenthegroupexecutiveandchiefexecutive

• CompactsforallotherexecutivesarealignedwiththeExcocompacts• Targetsincludebothcompanyanddivisionspecificpriorities(keyperformanceareasandkeyperformanceindicators)whichlinkdirectlytotheshareholdercompactandcorporateplan

Excocompactsrelyonthreeelementstodeterminebonusesforexecutives:• Gatekeepersneedtobereachedtoqualifyforbonus:Ifgatekeepersarenotreached,thentherewillbenobonusatall

• Qualifiers determine the performance score of between 60% and 120%, depending onachievement

• Modifiersreduceperformancescoreifnotreachedandcandecreasetheperformancescorebyupto25%,dependingonhowmanymodifiersarenotreached



Long-termincentivesA number of performance shares (award performance shares) were awarded to the Excomemberson1April2010,2011,2012and2013.TheboardhassetperformanceconditionsinlinewiththeEskomshareholder’scompactoverathree-yearperformanceperiod.Performancecoversfinancialandnon-financialtargets.Awardsonlyvestif,andtotheextentthat,thesetargetsaremet.Thevestingpercentagecanbe reducedby thepeopleandgovernancecommittee ifgatekeepersarenotmet.

Long-termincentivevestingpercentages–2014:53.48%,2013:48.23%.

Thevestingratestakeintoaccountthepenaltyof0%for2014and15%for2013onthevestedamount.

Short-termincentivesShort-termincentives,consistingofrewardsforachievingsetobjectivesovera12-monthperiod,aredivision/companyspecific.

Thetablebelowcontainstheexecutivecompactareasfortheyearended31March2014.

Theconsolidatedkeyperformanceindicatortable(whichincludesthekeyperformanceindicatorsintheshareholder’scompact)showsthelink(colourcodedasindicatedbelow)betweenthekeyindicatorsinappendixA(refertopages170to175)andtheexecutivecompactkeyperformanceareas.

Executive compact key performance areas

1. Operatesafely

2. Keepthelightson

3. Deliveronthecapacityexpansionprogramme

4. Protecttheenvironment

5. Socio-economiccontributionandbuildskills

6. Transformation

7. Improveperformance

8. Chiefexecutivediscretion

The weight allocated to each person for each of the compact areas will depend on theresponsibilitiesofthatspecificindividual.

DisclosureoftheremunerationofthethreehighestpaidindividualsinEskom,asrequiredbytheKingIIIcode,isincludedinthetablebelow.

Thefollowingtablesetsoutthedirectors’andgroupexecutives’remunerationfortheyearended31March2014.Refertonote49inthefinancialstatements(www.eskom.co.za/IR2014/01.html)fordetailedremunerationinformation.

Directors’ and group executives’ remuneration

Name2013/14

R 0002012/13

R 000

Non-executivedirectors 7 077 6400

ZolaTsotsi(chairman) 1 789 1374

Othernon-executives 5 288 5026

Executivedirectors 24 428 17341

BrianDames 15 367 8464

TsholofeloMolefe1 3 170 2904

PaulO’Flaherty(formerfinancedirector) 5 891 5973

Otherexecutivemanagementcommitteemembers 28 645 33743

BhabhalaziBulunga(groupexecutive:HumanResources) 3 294 3179

ThavaGovender(groupexecutive:Generation) 4 152 4485

EricaJohnson(groupexecutive:EnterpriseDevelopment) 4 826 5972

SteveLennon(groupexecutive:Sustainability) 3 674 5430

DanMarokane(groupexecutive:TechnologyandCommercial) 4 737 4555

AyandaNoah(groupexecutive:Distribution) 3 776 4659

MongeziNtsokolo(groupexecutive:Transmission) 4 186 5463

Totalremuneration 60 150 57484

1. Appointed as finance director on 14 January 2014. Before that date, remuneration relates to the position as group executive: Group Customer Services. The prior year figure was reclassified for comparative purposes.



Eskom has continued its focus on enhancing and improving itsperformance to ensure amajor performance transformation intoa utility focused on enhancing the quality of customer service,safer,moreeffectiveandefficientplantoperationthroughprudentplantmaintenance,optimisingkey talentandensuring resiliencemeasuresareinplaceformajordisruptiveevents.ThebusinessproductivityprogrammewillidentifyandeliminateinefficienciesinthebusinesstoenableEskomtomanageitscostsandrevenue

Becoming a high-performance organisation

Eskomfocusesonthefollowingtobecomeahigh-performanceorganisation:• Safety• Improvingoperations• Beingcustomer-centric• Buildingstrongskills• Investinginappropriatetechnologies

Operating highlights• The lost-time incidence rate, including occupational diseases, has shown a significantimprovementcomparedtothepreviousyearandiswithintarget

• KoebergUnit2achieveda record runof484dayswhen itwasshutdown forascheduledrefuellingoutage–thismarksacontinuousrunfromonerefuellingoutagetoanother

• BothDistributionandTransmissions’keytechnicalindicatorshaveshowngoodimprovementcomparedtothepreviousyear

• Anumberofinformationtechnologyprojectsandimprovementsweresuccessfullycompletedduringtheyear,includingimprovementsintheonlinevendingsystemthatsuccessfullywentliveon22July2013

Operating challenges• Thenumber of fatalities is still high and there is an increasedexposure of employees andcontractorstocrime-relatedassaultincidents

• Eskom declared four power system emergencies on 19 November 2013, on 20 and21February2014aswellason6March2014.Rotationalloadsheddingwasimplementedfor14hourson6March2014(refertopage104under“Keepingthelightson”)

• Unit3atDuvhapowerstation(575MW)wastakenoutofserviceon30March2014duetoanover-pressurisationincident–itwillremainoutofserviceforaprolongedperiod.Theincidentisunderinvestigation

05

Special climbing apparatus is used to scale the wooden distribution poles


• Eskom’sunplannedcapabilitylossfactor(UCLF),ameasureofgeneratingplanthealth,andtheenergyavailabilityfactor(EAF),whichmeasuresplantavailability,deterioratedcomparedtothepreviousyearandEskomfailedtomeetitstarget

• Equipmenttheft,vandalismandenergytheft(illegalconnections)aswellastherelatedimpactonplantperformanceandthecostofsupplyingelectricityremainsachallenge

• Debt collection, especially from municipalities, is a challenge with arrear debt increasingsignificantlycomparedtothepreviousyear.Morethanonepercentofthe2013/14electricityrevenueisprovidedforasarreardebt

Future focus areas• Continuing to reinforce safety practices to achieve zero harm for Eskom’s employees andcontractors,includingmoreextensiveandfrequentpublicroadsafetycampaignsandrelatedinitiatives

• Achieving a predictable and sustainable generation performance within the Generationsustainabilitystrategyoverfiveyears

• NetworkstrengtheningtoachievegridcodeN–1compliance,aswellastheintegrationofnewgenerationsources

• Continued focus on distribution sustainability through prioritised interventions towardsrefurbishment,reliabilityimprovementsandaddressingmaintenancebacklogs

• Implementing processes in terms of the revenuemanagement strategy to enhance energyprotectionandenergylossprogrammes,andimprovedebtcollection

• Exploringalternative fundingmechanisms for theexisting learnerpipelineandcollaborationwithotherinstitutions

SafetyEskom’ssafetyprinciple is thatnooperatingconditionorurgencyofservice justifiesexposinganyonetoinjuryorsafetyorenvironmentalrisksarisingoutofEskom’sbusiness.Thisprincipleappliestoalllevelsofthecompany,thepublicandtheenvironment.Eskom’ssafetyperformanceisassessedintermsofthenumberoffatalitiesamongemployeesandcontractorsfortheyear,anditslost-timeincidencerate.Thelost-timeincidencerateisaproportionalrepresentationoftheoccurrenceoflost-timeinjuriesover12monthsper200000workinghours.

Safetyperformanceindicators

Indicator and unitTarget

2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Target

achieved?

Lost-timeincidencerate(employeesonly),index 0.24 0.36 0.31 0.401 0.41

Fatalities(employeesandcontractors),number 0 0 23 19 24

Fatalities(public),number 0 0 33 29 34

1. TwolateclassificationsofLTIRincidentsresultedintheLTIRfor2012/13changingfrom0.39to0.40.

Eskom’s internalsafetymeasuresarehavingapositiveeffect,with its lost-time incidenceratedecreasing to 0.31 in 2013/14, from0.40 in 2012/13. The company’s fatality count, however,remainshighatfivefatalities.

Regrettably, therewere18 contractor fatalities, six ofwhomdied inanaccident at the Ingulapumped-storage scheme in October 2013. Seven contractor employees were also seriouslyinjured.Eskomisconcludinganinternal investigationintotheincident.Allworkontheinclinedhigh-pressureshafthasbeenstoppedintermsoftheMineHealthandSafetyAct(1996)pendingreviewbytheminehealthandsafetyinspectorate.Thestatutoryprocessesandreviewsregardingthisaccidentarestillinprogress.Refertopage121formoreinformation.

ContractormanagementisoneofEskom’soccupationalhygieneandsafetystrategicelements.Given the strategic importance of contractors across Eskom, substantial efforts are requiredto introduce safe systems of work across the entire organisation to ensure continual safetyperformanceimprovementinEskom’sdriveforzeroharm.

AcontractorsafetyperformanceanalysiswasconductedbetweenApril2012andDecember2013.Historicalworkplacehealthandsafetykeyperformanceindicators,coveringcontractorfatalitiesand lost-time incidents, were used as lag indicators to identify problem areas. The analysishighlightedmotorvehicleaccidents, falls fromelevation,and “struck-by” incidentsas themostcommoncausesofincidents.Thenextstepistoensurethatthecontractormanagementstrategyisalignedtoaddresstheareasidentified.

Becoming a high-performance organisation (continued)

Moving coal transport from road trucks to rail has been a key focus area in terms of road safety and cost considerations


Summaryofmaincausesoffatalitiesfor2013/14Cause of death Employees Contractors Public

Vehicleaccident,number 3 4 11

Electricalcontact,number 1 1 18

Othercauses(suchasbeingstruckbyanobject,caughtbetweenobjects,falls),number

1 13 4

Total fatalities, number 5 18 33

Employeeandcontractorfatalities

Altogether 33members of the public died in incidents linked to Eskom’s activities. Of these,11deathsweretheresultofmotor-vehicleaccidents,whiletheremainingfatalitieswererelatedtoelectricalcontacts,includingthoseasaresultofcriminalactivities.

Eskom’s“zeroharm”drivecontinues.Safetyinitiativestomitigatetherisksfacedbyemployees,contractorsandmembersofthepublicinclude:• Conductingsafetyauditsofprincipalcontractorseverymonthasopposedtoeverysixmonths• Devisingcontractor-managementplanswithsafetyperformancetargets• Improvingproceduresforreportingsafetyincidentsandidentifyingrootcauses• Detailingspecificationsforpersonalprotectiveequipment• Usingsimulatorstotraintruckdriversindefensiveandall-terraindriving• Runningcampaignstoimprovedriversafetyawareness

Eskomcontinuestoimplementitsindustry-supportedsafetydrivebyrestrictingthetransportofcoal by road between Friday night and Sundaymorning, asmost coal transport-related roadfatalitiesoccurredbetweenthesetimes.Comparedtopreviousperiods,adeclinewasseeninthenumberoffatalitiesoccurringoverthisperiod,withthemajorityofincidentscausedbythepublicandnottruckdriverbehaviour.

NuclearsafetyThesocial,ethicsandsustainabilitycommitteeisresponsibleforscrutinisingsafetyatEskom’snuclearfacilitytoensurethatitexceedsallregulatoryandinternalrequirementsandalignswithinternationalbestpractice.Thecommitteealsomakesrecommendationsonpolicies,strategiesandguidelinesrelatingtonuclearissues.

Anuclearsafetyreviewboard,consistingofexperiencedinternationalnuclearpowerexpertswasestablishedin2014toprovideanadditionalandindependentexpertviewofthemanagementandperformanceoftheKoebergnuclearpowerstation.Thechairpersonofthisreviewboardprovidesareportonasix-monthlybasistotheboardsocial,ethicsandsustainabilitycommittee.

AllaspectsofelectricityproductionattheKoebergnuclearpowerstationaretheresponsibilityoftheGenerationgroupexecutive.Thenuclearsafetyassurancefunctionisaseparatedepartmentin theGeneration division, with its own technical experts reporting directly to theGenerationgroupexecutive.Inlinewithglobalbestpractice,Eskomhasathree-tiersystemofnuclearsafetygovernance.ThenextinternationalpeerreviewwillbeinJuly2014.


Causes of employees and contractor fatalities during 2013/14

1 11

2

7

7

3

1

Causes of employees and contractor fatalities during 2012/13

11

4

5

4

2

2

Assault

Electricalcontact

Struckbyanobject

Caughtbetweenorunderobjects

Gunshot

Vehicleaccidents

Falls

Contactwithheat

Assault

Electricalcontact

Struckbyanobject

Caughtbetweenorunderobjects

Gunshot

Vehicleaccidents

Falls


Life-saving Rules(Cardinal Rules)

1. Open, isolate, test, earth, bond and/or insulate before touch

No person may work on any electrical network unless trained and authorised to do so. Furthermore all hazards and risks must be

identi� ed and the apparatus must also be proven safe to work on

2. Hook up at heightsWhere there is potential for a fall, a risk assessment

must be conducted and suitable control measures must be implemented

3. Buckle upNo person may drive any vehicle on Eskom business unless

he or she and all passengers are wearing seat belts

4. Be soberNo person is allowed to work whilst under the in� uence of drugs

and/or alcohol

5. Permit to workNo person is allowed to work without the required

Permit to Work (PTW)

Issued by Group Sustainability January 2013

Zero fatalities • Zero injuries • Zero environmental incidents • Zero tolerance

ZeroHarmWe make it happen!

CE 5655 Life-Saving A3 Poster (FINAL) indd 1 2013/01/22 5:06 PM

Improving operationsThetechnicaloperationsofEskom’sGeneration,DistributionandTransmissionlinedivisionsareassessedintermsofthefollowing:

Generation• Unplanned capability loss factor (UCLF)measuresthelostenergyduetounplannedenergylossesresultingfromequipmentfailuresandotherplantconditions

• Planned capability loss factor (PCLF)measuresenergylossduringtheperiodbecauseofplannedshutdowns

• Energy availability factor (EAF)measuresplantavailabilityincludingplannedandunplannedunavailabilityandenergylossesnotunderplantmanagementcontrol

Transmission• Total system minutes lost for events <1 minute measures the cumulative number ofminutes thesystemwascompromised to thepoint thatelectricitycouldnotberelayed,duetotransmissionsystemfailuresorconstraints.Thismetriconlyconsiderseventslastinglessthanasystemminute.Onesystemminuteisequivalenttothelossoftheentiresystemforoneminuteattheannualpeak

• The number of major incidentsreferstoeventswithadurationoflongerthanonesystemminute

Distribution• System average interruption frequency index (SAIFI) is a reliability of supply index andmeasures how often on average (frequency) the customer connected would experience asustainedinterruptionperannum(numberoftimesperannum)

• System average interruption duration index (SAIDI) is an availability of supply indexandmeasures theaverageduration (hours)of a sustained interruption the customerwouldexperienceperannum(numberofhoursperannum)

Key indicators of Eskom’s technical operations performance


2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Target

achieved?

NormalUCLF,% 10.00 10.00 12.61 12.12 7.97

Less: Constrained UCLF, %1 – – 1.63 3.41 – –

Underlying UCLF, %2 – – 10.98 8.71 – –

PCLF,% 10.00 10.00 10.50 9.10 9.07

EAF,% 80.00 80.00 75.13 77.65 81.99

Totalsystemminuteslostforevents<1minute,minutes 3.80 3.40 3.05 3.52 4.73

Majorincidents,number 1 2 0 3 1

SAIFI,eventsperyear 17 20 20.2 22.2 23.7

SAIDI,hoursperyear 39 45 37.0 41.9 45.8

1. Constrained UCLF – This is UCLF that was a result of emissions and short-term related UCLF due to system constraints to meet the “Keeping the lights on” objective. This is apportioned between PCLF and OCLF.

2. Underlying UCLF – This is the UCLF that is the difference between normal and constrained UCLF and that is still within Generation control.



GenerationEskomaimstooptimallyoperateandmaintainitselectricitygeneratingassetsforthedurationoftheireconomiclife.Eskom’soperatingstrategyforgenerationconstantlyconsidersthefollowingfactorsinbalancingnationaldemandandsupply:• Electricity demand fluctuates. Eskomaimstoensure that there isenoughsupply tomeetdemand.Anundersupplyofelectricitywouldhavenegativeeconomicconsequences for thecountryandthecompany

• Plant health is deteriorating, resulting in reduced plant availability and reliability. Eskomneedstodomoreplantmaintenance,buttheconstrainedsystemdoesnotallowforsufficientplannedoutagestodosoandalsoaffectsplanstoreduceEskom’senvironmentalfootprint

• System reserve requirements. Overandabovemeetingtheexpecteddemandforelectricity,Eskomneeds tohavegenerationcapacity in reserve tocater foranunforeseen increase indemand,orunplannedplantbreakdownswhereadditionalplantcapacitywillneedtokickintoreplacethegenerationcapacitylost

• Poor-quality coalresultsininefficientenergyproduction,placesstrainongeneratingplantandnegativelyaffectsEskom’senvironmentalfootprint.AlthoughmeasuresareinplacetoensurethatsuppliersprovideEskomwithcoalofsuitablequalityandsufficientquantity,somestationscontinuetoreceivepoor-qualitycoal

• Potential delays in commissioning new capacitymeansthatthepowersystemremainstooconstrainedtodoplannedmaintenancetoexistingplant,resultinginplanthealthdeterioratingevenfurther

Asaresultofpreviousyears’defermentofmaintenancethatwasrequiredtokeepthelightsonandthefact thatnearly two-thirdsofEskom’spowerstationsarebeyondthemid-point in theirexpectedlifespan,thetechnicalperformanceofthepowerstationshasbeendecliningoverthepastfewyears.TheGenerationsustainabilitystrategyhasbeenimplementedwhichaspirestoEskom’spowerstationfleethavingonaverageanenergyavailabilityfactorof80%,with10%setasideforplannedmaintenanceoutagesand10%forunplannedoutages.

Thepowerstationenhancementprojectquickwinactionshavealmostbeencompleted.Medium-andlong-termactionsareoutagedependentandarethusimpactedbythedefermentofoutages.Whilethisprojectoperatedasastandaloneprojectin2012/13,itisnowincorporatedwithintheGenerationsustainabilitystrategy.

Moreplannedmaintenanceisnowscheduledinthewintermonths.Thepowerplantavailability(EAF)of75.1%fortheyearto31March2014(2012/13:77.7%),againstatargetof80%,reflectsthe increase in both unplannedunavailability, aswell as the increasedplannedmaintenance.Eskomaspirestoreachthe80%EAFtargetoveraperiodoffiveyearsasitincreasesitseffortsand focus indrivingsustainabilityofgenerationassets.Although thesystemwas tight,Eskomstillmanaged to schedule and complete ninemaintenance outages – a good achievement tomeetwinterdemandanddomoremaintenancethanbefore.Refertopage114,whichdealswithmaintenanceinfurtherdetail.

Plant performanceTheutilisationofavailableplantcapacity(EUF)wassignificantlyhigherthanthetargetandhigherthanthepreviousfouryearsduetotheincreasedloadingofavailableplanttomatchthedemand.TheoverallfleetEUFwasat83.55%(2012/13:81.87%).Theutilisationofthecoal-firedunitsfortheyear to31March2014was92.73%,nuclearachieved99.52%andpeaking (including theOCGTstations)achieved20.72%.

EskomdidnotmeetitsEAFtarget,mostlyduetoanincreaseinunplannedplantunavailabilityandenergylossesduetoincorrectqualitycoalbeingdelivered,mainlyatTutukaandArnotpowerstations.

Theunplannedcapability loss factor (UCLF) for theyear toMarch2014 isslightlyhigher thanpreviousyears, indicativeofageinggeneratingplant, therelateddeterioratingplanthealthandthehighutilisationoftheplant.TheUCLFfor2013/14was12.61%comparedto12.12%in2012/13and 7.97% in 2011/12. The impact on UCLF was 1.63% due to decisions by managementregardingemissioncontrol andshort-termoutagesnotundertaken inorder toensuresecurityofsupply.

Thepartialloadlossescontinuetocontributesignificantlytothesystemtotalunplannedlosses,andcontinue to increase.TheUCLFdue to these losseswas5.24%,contributing42% to thesystemUCLF.Themainreasons for the load losseswereproblemsat thedraughtplant,coalmills,turbines,gascleaningandfeed-watersystems.

Boilertubefailuresaretypicallytheresultofweldingrepairdamage,corrosion,flyasherosion,etc.Intheyear,210UCLFboilertubefailureswererecorded,withaUCLFof2.18%,contributing17%tothesystemUCLF.ThisishigherinbothnumberandUCLFcontributioncomparedtothepreviousyearwhenatotalof191failuresandUCLFcontributionof1.95%wererecorded.

The energy efficiency improvement programme aims to improve the heat rate of the units atEskom’s13coal-firedstations.Heatratemeasurestheconversionrateofheatfromtheenergysource (coal) to electricity generated. Improvements would indicate an improvement in plantperformanceandwillhelpreduceEskom’senvironmentalfootprint,includingitscarbonemissions.

A Koeberg worker wears protective clothing that is required for the nuclear sections of the power plant



Average Eskom coal power station heat rate

2013/14 2012/13 2011/12

Averagecoalpowerstationheatrate,MJ/kWh 11.49 11.25 11.46

Theheat rate improvements in2012/13havenotbeensustained,witha2.1%deterioration in2013/14comparedto2012/13.Thisdeterioration isattributedtothedefermentofoutagesthathasimpactedtheexecutionoftechnicalplanprojects,aswellascoalqualitiesatcertainpowerstations.

Koeberg performanceKoebergUnit1wasreturnedtoserviceon22April2013,followingtheshutdownthatoccurredon20February2013torepairanelectricalswitchboardfault.

On24March2014,KoebergUnit2wasshutdownforscheduledoutagenumber20,havingbeenonlineforarecord484dayssince25November2012,whenitwasreturnedtooperationafterthepreviousoutage.ThisisthefirsttimeinKoeberg’shistorythatoneoftheunitscompletedanuninterruptedrunfromonerefuellingoutagetothenext.

BenchmarkingForbenchmarkinginformationrelatingtoEskom’scoal-firedstations,energyavailabilityandthenuclearpowerstationpleaserefertowww.eskom.co.za/IR2014/10.html

TransmissionTransmission provides an integrative function for the operation and risk management of theinterconnectedpowersystem.Thisincludesbalancingsupplyanddemandinrealtime,tradingenergyinternationally,buyingenergyfromindependentpowerproducers(IPPs),andoperatingthetransmissiongrid.

Good transmission technical performance was achieved with zero major incidents, systemminutes<1performanceat3.05compared toa targetof3.40,anda line faultperformanceof1.73comparedtoa targetof2.45faults/100km.Performancevulnerabilitiesremaindueto theageing assets and unfirm networks. Firmness relates to the degree of redundancy (N–1) asdefinedinthegridcode.

BenchmarkingTransmission took part in a benchmarking exercise with 27 other international transmissioncompaniesin2012/13.Thestudyfocusedonmaintenanceandplantperformanceandidentifiedbestinternationalpracticesforthetransmissionindustry.Thesestudieshavebeenusedtoidentifyopportunitiesforthedevelopmentofcontinualimprovementobjectivesandstrategies.Theresultsofthe2012/13studyindicatethatEskom’sTransmissionsubstationandlineassetperformanceismarginallybelowaveragewhilstasignificantimprovementhasbeenachievedwithlineassetperformanceovertheprevioustwoyears.

Criminal incidents Asustainedreductioninsecurityincidentshasmeantthatnomajorlosseswereincurredduringtheyearto31March2014.Nonetheless,theftremainsariskforEskomasexperiencedearlierinthefinancialyear,whenthetheftofcopperatasubstationresultedinaminorinterruptiontoaruralsupplypoint.

DistributionEskom’s distribution network relays electricity from the transmission network to customers,includingmunicipalitiesthatmanagetheirowndistributionnetworks.

There was a significant improvement in the SAIDI performance, achieving an average of37.0hoursin2013/14comparedto41.9in2012/13.TherewasalsoanimprovementintheSAIFIperformance,achievinganaverageof20.2eventsin2013/14comparedto22.2eventsin2012/13.

Theseimprovementsaredueto:• Theestablishmentofadditionalcustomernetworkcentrestoincreasetheoperationalfootprintandenableaquickerresponsetonetworkinterruptions

• Reducednetworkdowntimebymaximisinglive-lineworkforplannedmaintenance• Theimplementationofarevisednetworkreliabilityplanningstandardtoimprovethereliabilityofthenetwork,inlinewiththeregulatoryrequirementsoftheDistributiongridcode

• Increasednetworkvisibility,toenableremotemonitoringandswitchingofnetworkequipmenttoreducetheoutagetime

• Improvingreliabilitycenteredmaintenancetoreducetheriskofequipmentfailure• Focusedmanagementattentionthatensuresdisciplinedexecutionofallinitiatives


Koeberg Unit 2 completed an uninterrupted run from one scheduled refuelling outage to the next


BenchmarkingDistribution is currently preparing for a new benchmarking cycle, comparing technical andoperationalperformancewithinternationalutilities.

For previous year’s benchmarking information relating to Eskom’s distribution network pleaserefertowww.eskom.co.za/IR2014/11.html


Eskom technical services centres send out special trucks to do maintenance on the lower voltage distribution lines

Being customer-centricEskomaimstoensurethatitscustomersareconsistentlysatisfiedwiththelevelofservicetheyreceive.Customer-centricityextendstothecompany’srevenue-collectionpractices.Billingshouldbeaccurateandprompt,andpaymentshouldbecollectedinatimelyfashion.

Eskomassessesitscustomer-centricityintermsof:• Eskom’s customer-service index,whichcombinessixexternalandinternalcustomer-serviceassessmentstodetermineanoverallscoreforservicetoresidential,small-andmedium-sizedcustomers

• Eskom’s KeyCare rating, which measures the satisfaction of Eskom’s large industrialcustomers

• The average number of debtor days, which measures the average age of outstandingcustomerdebt

TheseindicatorshelpEskomidentifyaspectsofservicethatneedtobeimproved.

Direct electricity sales for 2013/14 by customer type

Direct electricity sales for 2012/13 by customer type

Actual(GWh)

Total 217 903

Municipality 91262

Commercial 9605

Mining 30667

Rail 3125

Residential 11017

Industrial 54658

Agriculture 5191

International 12378

Actual(GWh)

Total 216 561

Municipality 91386

Commercial 9519

Mining 31611

Rail 2996

Residential 10390

Industrial 51675

Agriculture 5193

International 13791

42.2%

6.4%1.4%

2.4%

14.6%

23.8%

4.4%4.8%

41.9%

5.7%1.4%

2.4%

14.1%

25.0%

4.4%5.1%


The residential revenuemanagement strategy, which includes Soweto, is critical to enhanceenergyprotectionandenergy lossprogrammes,and improvedebtcollectionforSoweto, largeandsmallpowerusers.Thestrategyentails:• The installation of split metering with protective enclosures and converting customers topre-paidmeterswithnewsupplygroupcodestoeliminateillegalpre-paidvending

• There isnowafocusedcreditmanagementprocessforallbusinesses,which, togetherwithdisconnections,shouldassistinrecoveringoutstandingdebt

Implementationofthestrategyisplannedforearlyinthenewfinancialyear,asthePFMAapprovalwasreceivedlateinthefinancialyear.

FormoreinformationregardingEskom’sfinancialriskmanagement,includingcreditrisk,refertonote4inthe2014annualfinancialstatements(www.eskom.co.za/IR2014/01.html).

Largepowerusers’arreardebtTherehasbeenaslightincreaseinthenumberofkeyindustrialcustomersnothonouringtheirpaymentsontime,duetocashflowproblemscausedbytheeconomicclimate.Allnon-paymentsare handled according to Eskom’s credit-management policy, with the disconnection processbeinginitiatedwherenecessary.

MunicipalarreardebtHistorically,paymentsbymunicipalitiesarestronglycorrelated to themreceiving theequitablesharefromNationalTreasury(paymentsinDecember,March,JuneandSeptember).Previouslythisfundingwassufficienttosettleoutstandingelectricitydebt,butthisisnolongerthecasewithmunicipalitiesfacingincreasedelectricitypricesandreducedfunding.

DisconnectionofsupplyisthelastresortforEskom.InlinewiththePromotionofAdministrativeJusticeAct(2000),thecompanysentdisconnectionnoticestosomeofthedefaultingmunicipalitiesduringtheyear.Nodisconnectionshaveyetbeeneffected,asallthemunicipalitiesthatreceiveddisconnectionnoticesrespondedappropriately,withtheexceptionofonemunicipality.Thismatteristhesubjectoflitigation.

The total municipal arrear debt as at 31March 2014 is R2.6 billion (2013: R1.2 billion) andnumerousmeetingswereheldwiththeDPEandNationalTreasurytodiscusssustainablewaystoaddressmunicipaldebtandimplementlonger-terminterventionstodealwiththischallenge.

SowetoarreardebtSoweto’sarreardebtcontinuestoincrease.Eskomsupplieselectricitytoabout180000householdsinSowetoandaveragepaymentfortheyearis16%(2012/13:16%).ThetotalSowetodebt,asat31March2014,stoodatR3.6billion(31March2013:R3.2billion),excludinginterestchargedonoverdueamounts.Duringtheyear,4838defaultingcustomersweredisconnected,whichisnotenoughtocurbthedebt.Theimplementationoftheresidentialrevenuemanagementstrategy,whichincludesSowetorevenuemanagement,willassisttoimprovefuturerevenuestreams.


Key performance indicators for customer-centricity


2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Target

achieved?

Customerserviceindex,% 89.7 88.7 86.6 86.8 85.6

EskomKeyCare,% 102.0 102.0 108.7 105.8 105.9

Arreardebtaspercentageofrevenue,% – 0.50 1.10 0.82 0.53

Averagedebtordaysformunicipalities,averagedays1,2 – 22.0 32.7 22.4 n/a

Averagedebtordaysforlargepowerusers(<100GWhayear),averagedays2 – 16.0 16.9 18.3 n/a

Averagedebtordaysforsmallpowerusers(excludingSowetodebt),averagedays – 42.0 50.2 48.2 42.9

Averagedebtordaysforlargepowertopcustomers(excludingdisputes),averagedays – 14.0 14.5 12.3 14.4

1. The earlier key performance indicator for large power users (including municipalities) was replaced by two key performance indicators: average debtor days for municipalities and the average debtor days for other large power users (<100 GWh per year).

2. These key performance indicators only came into effect on 31 March 2013. Data is not available for 2011/12. The calculation for debtor days excludes international customers and major disputed accounts that are involved in litigation or arbitration.

Customer satisfaction metricsKeyindustrialcustomersregardEskom’scustomerservicehighly,reporting110.84%satisfactionagainstatargetof102%ontheKeyCaremetricdespitebeingaskedtocontributesignificantlytokeepthelightson.ThisislargelyduetoEskom’sproactiveandregularinteractionwiththisgrouptokeeptheminformedonthestatusofthepowersystemandthecapacityexpansionprogrammeviaanumberofforumsaswellasregularvisitstocustomermanagement.

Eskomnarrowlymissedreachingitscustomerserviceindextarget,reportinganoverallratingof86.6%(2013/14:86.8%).Themainreasonscitedbycustomersfordissatisfactioninthiscustomergrouping were tariff increases, the threat of load shedding, metering accuracy, the speed ofinstalling new connections, the quality of supply, outagemanagement and slow response forquotationsandconnectionsonsmallprojects.

Managing electricity debtors Eskommakeseveryeffort toensure thatcustomerspay theiraccounts. Itconstantlymonitorspayments and is willing to enter into reasonable payment agreements that take into accountdefaultingcustomers’circumstances.

Electricitydebtors(beforeimpairmentprovision)increasedfromR16.7billionat31March2013toR20.2billionat31March2014.TheallowanceforimpairmentfortradeandotherreceivablesincreasedbyR1.4billion,fromR4.3billionin2012/13toR5.7billionin2013/14.


Energy losses and theftEnergylossesareachallengeforutilitiesthroughouttheworld.Therearetwobroadcategoriesofenergyloss:• Technical energy losses areanaturalresultofelectricalenergybeingtransferredfromonepointtoanotherwithsomeoftheenergybeingdissipatedasheat

• Non-technical energy losses are typically caused by theft (illegal connections, metertamperingandillegalvendingofpre-paidelectricity)orerrorsindata/billing

Forinternalevaluationpurposesthetechnicallossesaccountedforbetween60%and75%ofthetotalenergylossesintheDistributionnetworks.TheactualpercentageinDistributionisinfluencedbyfactorssuchasnetworkdesign,networktopology,loaddistributiononthenetworkandnetworkoperations.FortheTransmissionnetworks,technicallossesaccountforalloftheenergylosses.

Total energy losses (%) (12-month moving average)Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12

Totaldistributionlosses,% 6.54 7.13 7.12 6.32

Totaltransmissionlosses,% 3.40 2.34 2.80 3.08

Total Eskom losses, % 9.28 8.88 9.08 8.65

Eskom reduced its total energy losses to 8.88% during the year, from 9.08% in 2012/13(target:<9.28%).While transmission lossesare lower than target,distribution recordedhigherthantargetlosses.Interventionstomanagethelossesinclude,amongstothers,continuingwiththeenergyandrevenuelossesprogrammereductionactivitiesandtheOperationKhanyisasocialmarketingcampaign.

EquipmenttheftEskomisplaguedbynetworkequipmenttheft(generallyreferredtoasconductororcoppertheft).This includes the theft of overhead lines, underground cables, airdac and bundle conductors,earthingequipment,transformers,pylonsupportlatticesandsoforth.

Theincreaseinthevalueofmaterialstolenremainsaseriousconcern.Thisisanindicationofanorganised(syndicatedriven)criminalactivityintheconductortheftenvironment,whichisalsoexperiencedbyotherstate-ownedenterprises.

Thefightagainstnetworkequipment theft isbeingaddressedbymeansof intelligencedriveninvestigationsbytheHawks(adivisionoftheSouthAfricanPoliceServices).Italsoencompassesaggressivepolicingofthescrapmetalmarketsforstolengoods.

Thejointindustryworkinggroup(formedbyEskom,Transnet,Telkom,theSouthAfricanPoliceServices, the National Prosecuting Authority, Business Against Crime and the South AfricanChamber of Commerce and Industry) continues to contribute positively in the fight againstthiscrime.

The courts are taking this crime seriously and significant sentences are being handed out toperpetrators.Forexample,acollectivesentenceof123yearswashandedoutintheNorthWestandFreeStateprovincestoeightconvictedmembersofacrimesyndicate.

OperationKhanyisaOperationKhanyisawaslaunchedinOctober2010andaimstoraiseawarenessof,andeducatethenationabout,theimpactandconsequencesofelectricitytheft.Socialmobilisationacrossallsectorsandcomplianceinterventionsaimtoinstilacultureoflegal,safeandefficientenergyuse.Toaddresstheproblemofelectricitytheftinmunicipalities,OperationKhanyisahasalsopartneredwiththeSouthAfricanLocalGovernmentAssociation(SALGA)anddifferentmunicipalities.

Eskom’s Operation Khanyisa campaign addresses electricity theft and non-payment

Someofthekeysuccessesinclude:• Morethan8000tip-offshavebeenreceivedviaCrimeLine(SMS:32211)andEskom’stoll-freereportingline(0800112722)

• Inthe2013/14financialyear,18suspectsappearedbeforevariouscourtsinSouthAfricaonchargesrelatedtoelectricitytheft.SincethelaunchofOperationKhanyisamorethan60courtcaseshavebeenheardandover112arrestsmadeforcrimesrelatingtoelectricitytheft

• Eskomteamshaveconductedmorethantwomillionauditsofelectricitymetersandinstallationsandremovedover80000illegalconnections

OperationKhanyisa received a number of awards, both at homeand abroad for its efforts incombatingelectricitytheft.



Building strong skillsEskomconstantlyneedstosource,developandretaintechnicallyskilledworkersatalllevelsofthecompanytoensurethesustainabilityofitsbusiness.

Key performance indicators for skills development


2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Target

achieved?

Trainingspendas%ofgrossemployeebenefitcosts,%1 5.00 5.00 7.87 n/a n/a

Totalengineeringlearnersinthesystem,number 391 2007 1 962 2144 2273

Totaltechnicianlearnersinthesystem,number 652 780 815 835 844

Totalartisanlearnersinthesystem,number 1434 2619 2 383 2847 2598

Youthprogramme,number – 5000 4 325 5701 5159

1. Training spend is a new measure effective from 1 April 2013, thus comparative information prior to this date is not available.

Eskom reviewed the learner numbers anddecided to realign the learner pipeline from14.5%ofstaffcomplementtoamoresustainablelevelof6%phasedinoverthenextfiveyears.Theengineeringandartisanstargetwasnotachievedasaresultofthisdecision.

Theunderperformanceofthecountry’syouth(SYDI)programmeisduetoalackoffunding.

Alearnerhubwasestablishedtoensurecentralisedlearnermanagement,andmanagethefurtherdevelopment,placementorexitoflearners.

Eskom has also partnered with higher learning and basic education institutions to promoteaccesstoqualityeducation,particularlyinthefieldsofmathsandscience,aspartofitsexternaldevelopment programme. Another example is Eskom’s Academy of Learning (EAL) artisanoperatingandmaintenancecentreofexcellencewhichchairs the initiative thatchampions thebuilding of additional infrastructure and developing a curriculum at the further education andtrainingcollege inLephalale,andprovidessupport through leadershipandtechnicalguidance.Thefirstskillsprogramme,accommodating40demobilisedworkers,startedon21October2013andwascompletedon13December2013.Successfulcandidatesearnednationalcredits.

EAL’smandateistocloseEskom’scompetencygapbyaddressing,coordinatingandintegratingalllearningneedsofemployees,aswellasenhancingperformancethroughoutEskom,byfocusingonbusinessneeds,andcateringforallfacetsofthelearningvaluechainandlearningoperations.Asanexample,theEALweldingschoolofexcellenceisaccreditedbytheInternationalInstituteofWelding.Atotalof150weldingapprenticesareinthelearnerpipelineandthefirstgroupof50willqualify in2014.This initiativewillhelpwith thenationalshortageofweldingskills.Theearly successof this initiative is evident,with positive feedback frompotential employersandcontinuousimprovementoflearnercapabilities.

Investing in appropriate technologiesEskominvestedR156.2millionintoresearchinganddevelopingtechnologiesthatcouldreduceitscarbonfootprintandimprovetechnicalandsafetyperformance.Thisis20%lowerthanresearchinvestmentinthepreviousyear(R195.3million).

Theresearchanddevelopmentdepartmenthasmadegoodprogressonitsportfoliofortheyear,especiallyon18highpriorityprojects.Keyamongsttheseistheonlineboilermonitor,Waterbergcoalevaluationandhighfrequencyelectrostaticprecipitatorprojectswhichareallontrack.Thefocusonhigh impact,highvalueproject identificationanddeliverywill continue.This requiresincreasedeffortonprojectmanagementsystemsandpracticesandalignmentwiththerealneedsof thebusiness.For furtherdetailsonEskom’s researchactivities, refer towww.eskom.co.za/IR2014/12.html

EskomachievedISO9001certification(qualitymanagementsystems)andisintheprocessofobtainingcertificationforsafety,healthandenvironmentalmanagementforitsvariousdivisionsandunits. It is alsoworkingwith theSouthAfricanBureauofStandards to identify additionalspecialistISOstandardsthatneedtobeimplementedforitsvariousdivisions.

The underground coal gasification project next to the Majuba power station has been a highlight in Eskom’s research portfolio




Eskom remains committed to keeping the lights onwhilst at thesame timemaintaining a sound basis for sustainable operationsand financial sustainability. Eskom is achieving this by taking aleading role and actively partnering with all key stakeholders ina comprehensive supply-and-demand management strategy.At the same time,Eskom isworking hard to deliver on capacityexpansionprojectsthatwillincreaseitsgeneratingcapacity

Leading and partnering to keep the lights on

Operating highlights• Demand-savingsinitiativesachievedatotalof410MW,exceedingthetargetof379MW• Theresidentialmassroll-outprogrammehasbeenakeycontributortothedemandsavings.Phase2oftheprogrammehasbeencompletedand87MWofthesesavingshavebeenverifiedin2013/14

• Annualisedenergysavingsof19GWhwereachievedfromnewintegrateddemandmanagement(IDM) projects for the year ended 31 March 2014 relating to internal energy efficiency ofEskom’sfacilities,exceedingthetargetof15GWh

• The pilot underground coal gasification plant has been built atMajuba. Testing is ready tocommence,pendingenvironmentalandwaterpermissionsfromtherelevantstatedepartments

• 120MWofgenerationcapacityhasbeencommissioned,811kmof transmissionpower linesbuiltand3790MVAoftransmissionsubstationcapacitycommissionedduringtheyear

• Thereturn-to-serviceprogrammehasnowbeencompletedwiththesuccessfulcommissioningofthefinalunitatKomatipowerstationattheendofSeptember2013.Intotal,all23unitsofthe threemothballedpowerstationshavebeen returned toservice (3741MW)atacostofR26billion

• Despite the outage constraints, some of the refurbishment projects have progressed well,i.e.allKrielunitshavenowbeenrefurbished; the lastunit (Unit5)synchronisedon loadon15March2014.ThreeofthesixMatlaunitshavebeenrefurbished,withthethirdunit(Unit5)synchronisedonloadon25March2014

• InJune2013,apartnershipagreementwassignedbetweenEskom,contractorsandlabourtobringaboutstabilityattheMedupiandKusileconstructionsites.Sincetheconclusionoftheagreement,thesiteshaveexperiencedlessworkstoppagesandnoviolence

• EskomhastakentheinitiativeinfacilitatingtheestablishmentoftheMedupileadershipinitiativetoaddresstheconsequenceofdemobilisationofworkers

Operating challenges• As a result of contractor’s performance regarding the continued failure of the control andinstrumentationsystemsfactoryacceptancetestsontheboiler-protectionsystemattheMedupipowerstation,Eskomhassteppedinandplacedacontractwithanalternativecontractorfortheengineeringandmanufacturingoftheboiler-protectionsystems,whichformasmallpartoftheoverallscopeofthecontrolandinstrumentationsystemsworkscontract.ThecurrentcontractorofthecontrolandinstrumentationsystemforMedupiremainsboundtofulfilitsobligationsintermsofsuchcontract

06

Solar photovoltaic panels have been installed at Lethabo power station near Vereeniging


• Acquisitionofservitudesoverstate-ownedandtriballandisalengthyprocessbecauseinmanycasesthelandhasnotbeensurveyed.Thiscausessignificantdelaystotheconstructionandexpansionofthetransmissionnetwork

• Asaresultofaconstrainedpowersystem,thedifficultyinobtainingoutagesforTransmissionprojectsandGenerationcoalprojects(includingrefurbishments),continuestoposeachallengetotheexecutionofprojects

Future focus areas• ContinuedfocusonaccessingalternativefundingforEskom’sIDMprogrammeanddevelopinglowcostenergy-savingprogrammesinviewoffinancialconstraints

• Servitudeacquisitions remaina critical priorityandengagement continueswithgovernmentdepartmentstoassistindealingwiththechallengesexperiencedwithregardtoexpropriationapplications

Power system emergencies and rotational load sheddingFormanyhoursoftheday,thereservemarginismorethanadequate.However,duringpeakhoursorwhenabnormaleventsoccur,demandattimesexceedssupply.Whenthisoccurs,Eskomimplementsdemandandsupply-sidemanagementstrategies,includingthedemandresponseprogrammewhereselectedlargecustomersreducetheirdemandonrequestfromEskom.Asalastresort,Eskomwillintroducerotationalloadsheddingtoprotecttheintegrityofthepowersystem.Failuretodosocouldleadtoafullnationalpowerblackoutwithsevereconsequencesforthecountry.Clearprotocolsareinplaceintheeventthatthereisnooptionbuttoresorttoloadshedding.Theemergencyresponsecommandcentrewasactivatedonatotalof36occasionsintheyearto31March2014.Themajorityoftheactivationswereproactiveinterventions(inalertmode) to manage emerging threats. However, emergencies had to be declared on fouroccasionsduringtheyear.• Emergenciesdeclaredon19November2013,20and21February2014and6March2014Powersystememergenciesweredeclaredwhentherewasinsufficientcapacitytomeetthedemand.Instructionsweregiventolargecustomerstoreducedemandinaccordancewiththeprotocolsforstageoneloadreduction.Controlcentreswereinstructedtobereadyforloadshedding.Forthefirstthreeemergenciesrotationalsheddingwasnotrequiredastheresponsefromcustomerswasadequate tostabilise thepowersystem.Howeveron6Marchloadsheddingwasinstituted.CustomersrespondedadmirablywhenEskomdeclaredtheseemergenciesandreduceddemandby600MWinNovember2013,by340MWinFebruary2014andby1160MWinMarch2014.

• Rotationalloadsheddingon6March2014Thealreadyconstrainedsystemwasexacerbatedbyarapidchangeintheearlyhoursof6March2014,asproductionatfourunitsatpowerstationswasseverelycurtailed,withloadlossesof3226MWby08:00.Anemergencywasdeclaredat06:00andloadcurtailmentcommenced.By08:00itwasnecessarytocommencewithrotationalloadshedding,whichcontinuedfor14hours.Theload shedding reached stage three in themorning, reducingdemandbyapproximately

5000MW,thusenablingthestableoperationofthesystem.Bymid-daytheloadreductionwasreducedtostagetwoandat22:00thesystememergencywascancelledandallloadwasrestored.Stagesone,twoandthreeindicatethedegreeofseverityofthesupplyshortfall,andthusthefrequencyanddurationoftherequiredrotationalloadshedding,withthreebeingthemostsevere.Thecurtailmentofproductionat the fourunitswasmainlydue to thehandlingdifficultiesregardingwetcoalasaresultofcontinuousrainoveranumberofdaysleadinguptothisdate.After the loadshedding in2008followingheavyrains,Eskomismixingcoarsecoalwiththefinercoaltopreventthewetcoalfromcoagulatingontheconveyors.However,thelengthofthisperiodofwetweathermeantthatmanyofthecoarsestockpilesweredepleted.

Thiswastheonlyincidentofrotationalloadsheddingduringtheyear.• CommunicationtoallcustomersInaneffort to reduceelectricitydemand,an integratedcommunicationandstakeholder“Keeping the lightson”programmeencouragesallSouthAfricans to “beat thepeak” inwinterand to “live lightly” in summer.ThePowerAlert andPowerBulletinsonTVandradio have proved effective in encouraging customers to reduce their power usagewhenthepowersystemisconstrained,havingachievedacumulativeaveragesavingofapproximately350MW.Inaddition,bi-weeklystatusupdatesareissuedtothemediaandquarterlypowersystemmediabriefingsareheld,alongwithregularnational,regional,andlocalstakeholderengagementstoprovideopenandtransparentinformationonthestateofthepowersystem.

• InternationalcustomersCross-border international customers are also subjected to load reduction and loadsheddingprotocols.Customerswithdiscretionaryagreementsaredeclinedinadvanceofatightsupplysituation.Customerswithnon-firmagreementsfollowthesameloadreductionandloadsheddingaslargecustomersinSouthAfrica.Industrialend-usecustomersareinterruptedinlinewiththeiragreements.Thosewithfirmsupplyagreementscontinuetoreceivesupply,butareurgedtocutbackconsumption.

Leading and partnering to keep the lights on (continued)

• ProcurementandduediligenceprocessesregardingtheconversionoftheOCGTplantfromdieseltogas

• ThemilestonesleadinguptothecommercialoperationofMedupiUnit6areallexpectedtobecompletedinthesecondhalfof2014

• Liftingoftheworkstoppageinstructionintermsofsection54noticeoftheMinesHealthandSafetyActatIngulatoallowforworktocontinueintheinclinedhigh-pressureshafts

• For the Generation coal projects and Transmission projects, managing the requirementsregardingtheintegrationoftheprojectoutageschedules


Keeping the lights on“Keepingthelightson”referstoEskom’sabilitytoensurethatsufficientgeneratingunitsareonline,and,duringperiodsofgenerationconstraints,tobalancethepowersupplyanddemandbyusingdemand-savingsinitiativestoreduceenergyusage.“Keepingthelightson”isaboutaskingallcustomers touseelectricitymoresparingly,especiallyduringpeakhours,whendemandattimesexceedssupply,orwhenabnormaleventsoccurthatimpactontheavailablesupply.

Previously,Eskomhadnochoicebut todeferpowerstationmaintenance inorder tokeepthelightson,whichwasnotasustainableapproach.Attheendof2012,Eskom’sboardapprovedtheGenerationsustainabilitystrategy.Theplanspansfiveyears,with2013/14beingthefirstfullyearthattheplanhasbeeninplace.The“keepingthelightson”strategynowalsoincludesmanagingthe demand such that theGeneration sustainability strategy can be achieved, while avoidingrotationalloadshedding,aswellastrackingthestatusofreductioninthemaintenancebacklog.

Eskom’s“keepingthelightson”performanceisalsoassessedintermsofverifiedenergysavingsandreductionsinthemaintenancebacklog.

Key performance indicators for keeping the lights on


2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Target

achieved?

Eveningpeakdemandsavings,MW 174 379 410 595 365

Internalenergyefficiency,annualisedGWh1 0 15 19 29 45

MaintenancebacklogreductionbasedontheEskomtechnicalgovernancecommitteeapproval,number 0 0 0 n/a n/a

1. Thefiguresreportedforeachyearareforprojectsverifiedintherelevantfinancialyear.

Managing supply-and-demand constraintsDuring 2013/14 Eskom performed more planned maintenance than normal as a result ofimplementing the Generation sustainability strategy – refer to page 114, which deals withmaintenanceinfurtherdetail.Whileimplementingthisstrategyiscriticaltoensurethelong-termsustainabilityofthegeneratingassets,ithasinevitablycreatedmorepressureonthealreadytightsupply/demandbalance.

Althoughtherewassufficientcapacitytomeetthedemandduringthedayinwinter,onanumberofeveningsthepowersystemwastightwithallavailablegeneration inserviceandcontracteddemand reduction used to reduce load. The average available operating reserves over thepeakperiodinJune2013wereunder3%asdepictedonthegraph.ForEskom’srotationalloadsheddingeventthatoccurredon6March2014,refertopage104.

50

40

30

20

10

0

Jan2009

Average monthly % actual reserves including OCGTs (Excess capacity compared against actual demand)

Monthlyaverageat15:00Monthlyaverageat06:00

Apr2009

Jul2009

Oct2009

Jan2010

Apr2010

Jul2010

Oct2010

Jan2011

Apr2011

Jul2011

Oct2011

Jan2012

Apr2012

Jul2012

Oct2012

Jan2013

Apr2013

Jul2013

Oct2013

Jan2014

Eskom has managed to meet the daily peak demand with the support of customers withinterruptible load agreements (theBayside,Hillside andMozal aluminium smelters), demand-market participation (DMP) customer support, emergency DMP, demand-side management(DSM), tariffs (more expensive tariffs during peak periods encourage customers to reducedemandduringpeakperiods),municipalityassistance,independentpowerproducers(IPPs)aswellasutilisingtheopen-cyclegasturbines(OCGTs).The2012/13powerbuybackprogrammeimpactedtheGWhsoldinAprilandMay2013,however,thecostofthisprogrammewasprovidedforinthe2012/13financialyear.

Refertopage143fordetailsonelectricitypurchasesfromIPPsandpages111to114fordetailsondemand-sidelevers,whichhavecontributedtothesecurityofelectricitysupply.

Alowerthannormalreductioninsalesvolumestokeycustomersinthewinterperiodstooffsetthegrowthinsalestotheremainderofthecustomerbasedidnotmanifestitselfasstronglythisyear,resultinginadditionaldemandsontheOCGTfleet.Electricitydemandduringthepeakperiodsof17:00to21:00wasstillsignificant,hencetherequirementforOCGTgenerationduringpeakperiods.Asgenerationunitsaretakenoff-loadformaintenance,italsonecessitatedtheincreasedusageoftheseexpensivedieselburningOCGTstations.OCGTswereusedinwinteraswellassummertoensuresecurityofsupply.


Monthlyaverageatpeak Monthlyaverageat22:00


ThetotalproductionbyOCGTsreached3621GWhagainstabudgetof1284GWhin2013/14(2012/13:1905GWh).Theactual load factoron theplant for theyear to31March2014was17.16%,againstabudgetedfactorof6.08%(2012/13:9.03%).ThetotalboardapprovedspendondieselfortheOCGTsfor2013/14wasR11.3billion,ofwhichR10.6billionwasspentintheyearto31March2014(2012/13:R5.0billion).TheMYPD3decisionforOCGTpurchaseswasR2.5billionfor2013/14,whichwasR8.1billionlessthantheactualspend.

Summer andwinter have very different load profiles as depicted below.Unlikewinter, wherethe demand increases during the evening peak, the demand profile during summer is muchflatter(“TableMountain”profileasdepictedinthefigurebelow)withanincreaseddemandprofilethroughouttheday,primarilyduetoair-conditioningandgeysers.Theoutlookforthecomingyearispredictedtobeverytightduetothemaintenancerequiredbythegeneratingfleet,resultinginEskomonoccasionbeingupto1000MWshorttomeettheeveningpeakoverthewinterperiod.Thesummerperiodshortagemaynotbeashighbutwillbeforlongerperiodsascanbeseenfromtheprofilebelow.

Summer and winter load profiles

36000

34000

32000

30000

28000

26000

24000

22000

20000

00:00

Typicalwinterday Typicalsummerday

Winter peak profile

Summer flat (“Table Mountain”) profile

02:00

04:00

06:00

08:00

10:00

12:00

14:00

16:00

18:00

20:00

22:00


September – March: spring/summer

“Live lightly”• TableMountainprofile• Constrainedalldayincludingfrom17:00–21:00

• Air-conditioning,geysersandpoolpumpsprimarilyimpactdemand

• Commercial,agriculturalandresidentialcustomerscanmakethebiggestdifference

April – August: autumn/winter

“Beat the peak”• Peakprofile• Constrainedfrom17:00–21:00• Electricalheating,geysersandpoolpumpsprimarilyimpactdemand

• Residentialcustomerscanmakethebiggestdifferenceasdemandincreasesintheevenings

Between 5pm and 9pm, Geyser and Pool pump are not welcome. Please switch them off.

Between 5pm and 9pm electricity usage peaks when people return home after work. They start cooking, watching TV and bathing. All of this leads to a large demand on our limited power supply. A geyser can consume up to 39% of household power, whereas a pool pump can use up to 11%. Please help us reduce the pressure on the national grid by switching off your geyser and pool pump during peak periods. For more information please visit www.eskom.co.za/idm

534_ESKD_5-9 Activate_Kid.indd 1 2012/03/12 2:16 PM



Cross-border purchases and sales of electricityEskomisamemberoftheSouthernAfricanPowerPool(SAPP)thatprovidestheopportunityfor the various utilities in the region to ensure integrated planning and smooth and safeoperation of the interconnected transmission system. The variousmembers of the SAPPsupporteachotherduringemergenciesandwheel (transport)electricityonbehalfofeachotheracrosstheirgrids.Italsoprovidesaccesstoaday-aheadmarketwheresurplusenergycanbetradedwiththosewhoareexperiencingadeficit.

EskomhasbilateralelectricitytradingagreementswithmostSAPPmembersandcontinuestoexportandimportelectricity.EskomisawareofitsresponsibilitytoSouthAfricaregardingtheexportingofelectricitywhenthedomesticsupply-demandbalanceisconstrained.Toreducetheimpactofexports,EskomhasensuredthatthecontractswithSAPPtradingpartnersaresufficientlyflexibletoallowforthefollowingcontrols:• DuringemergencysituationsinSouthAfrica,non-firmagreements(BotswanaandNamibia)andindustrialcustomersacrosstheborder(MozalandSkorpionZinc)areinterruptedinlinewiththetermsoftheiragreements

• Theremainingfirmsupplyagreements(SwazilandandLesotho)continuetobesuppliedinfull,buttheyareurgedtoreduceconsumption.DuringloadsheddinginSouthAfricatheyarerequiredtoundertakeproportionalloadshedding

Botswana failed to bring its new Morupule B coal-fired power station into commercialoperation,resultinginasignificantsupplydeficitinthatcountry.Eskomagreedtocontinue

supplying100MWonafirmbasis(whichiswithdrawnifSouthAfricaisexposedtorotationalloadshedding)andadditionalcapacitysubjecttoavailability.

For2013/14,15%oftheinternationalsaleshaveoccurredduringpeakperiods,38%duringstandardhoursand47%duringoff-peakhours.

Cross-border purchases and sales of electricity Actual

2013/14Actual

2012/13Actual

2011/12

Sales,GWh 12 378 13791 13108

Purchases,GWh 9 425 7698 9939

Netsales,GWh 2 953 6093 3169

Theenergyexportscontinuetoexceedtheplannedlevelduetodelaysinthecommissioningofnewgenerationassetsinneighbouringcountriesandduetoadrierthannormalseasonaffecting the availability of hydro generation in neighbouring countries. Despite this, theexportsarestill1321GWhlessthanin2012/13.

TheperformanceofHidroelectricadeCahoraBassaS.A.energyimportsremainsariskduetochallengesregardingthereliabilityofthehigh-voltagedirectcurrenttransmissionlines.

Integrated demand management and energy efficiencyEskom employed various demand-management strategies to ensure security of supply, whilecreatingspacetomaintainandrefurbishitspowerstationsduringtheyear.

Demand-side managementDemand-side management (DSM) encourages customers to limit their electricity usage.Demand-side management initiatives support national security of supply and minimise thenegativeeconomicconsequencesofapowershortageforthecountry.

During2013/14,EskomspentR1.36billiononDSMwhereastheMYPD3decisionforthe2013/14financialyearwasR1.46billion.

The 49M initiative that aims to inspire and rally all South Africans behind a common goal – saving electricity – now has 135 corporate partners who have pledged their support


Demand-side management and energy efficiencyDemand-sidemanagementisdividedintotwobroadprogrammes:• The demand-response programme consists of a range of sub-programmes which offerscommercialandindustrialcustomersfinancialincentivestoreducetheirelectricityrequirementsasandwhenneeded.Beforebeingplacedonhold, the requirements for takingupdemandresponse programme products (standard product and standard offering) were amended toallowsmallercompaniestoparticipateintheprogramme.EskomspentR350million(2012/13:R3.1 billion) on demand market participation, the reduction from previous year mainly asaresultofasignificantdecreaseinthepowerbuybackprogramme.

• The residential mass roll-out programme aims to reduce residential electricity usage byencouraginghouseholdstouseenergy-efficienttechnologies.Theprogrammeisasignificantlever to reducedemandduringperiodsofsystemconstraint,but itwill require funding fromgovernmentas ithasnotbeenaccommodated in theMYPD3determination. It includes thefollowingsub-programmes:- Thecompactfluorescentlamps(CFL)programme–phase2oftheCFLroll-outhasbeencompleted,with1.2millionbulbs installed,realisingverifiedsavingsof65MWin2013/14.TheCFLroll-outphase3beganinFebruary2014

- Thesolarwater-heaterprogramme–Eskomcontributes to thegovernment’s solarwaterheatinginitiative,whichaimstoinstallonemillionsolarwaterheaters.Overtheyearended31March2014,atotalof47020solarwaterheaterswereinstalled,bringingthetotalfortherebateprogrammeandresidentialcontractsto381052sinceitsinceptionin2009


Verified accumulated demand savings against the cumulative target per year (MW)

Energy-efficiency measuresEskom’sPowerAlert and “5pm to9pm” campaigns continue to reducepowerdemandduringtheeveningpeak.Theaverageweekdayeveningpeak impact for theperiodunder review forallcolours(green,orangeandred) is224MW.Theaverageimpactfortheredflightings intheeveningpeakontheworstconstraineddayis294MW.Theimpactshowsthepositiveresponsebycustomerstothesesignals.

Eskom’s 49M campaign, a long-term behavioural-change initiative that encourages energy-efficiencypractices,particularly for residentialusers,has theultimategoalof reducingenergyconsumptionby10%.This includestargetedseasonalcampaignssuchas the“beat thepeak”campaignandthe“livelightly”campaign.Todate,133partnershavejoinedthecampaignandhavecommittedtopromoteenergyefficiencyintheirorganisation.

Internal energy-efficiency initiativesEskomcontinuestoimprovetheinternalenergyefficiencyofitsfacilities(powerplantandbuildings)by undertaking energy audits and implementing efficiency programmes that focus on lighting,heating,ventilationandair-conditioning.Annualisedenergysavingsof19GWhwereachievedfromnewIDMprojectsfortheyearended31March2014,exceedingthetargetof15GWh.

Eskom contributes to the government’s solar water heating initiative, which aims to install one million solar water heaters EskomtargetVerifieddemandsavings(MW)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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ThepilotedpowermanagementsoftwarehasbeenrolledouttoEskom’sWindows7usersandincludes theroll-outof theenhancedpowermanagement rules forbothdesktopsand laptops.Thishasalreadyresultedinenergysavings.

Decreasing the maintenance backlog Between2008and2012,Eskomhadnooptionbuttodefercertainplannedmaintenanceonitsgeneratingfleet toensuresecurityofsupply.Thisbacklog,coupledwith theburningofbelow-standardcoalandthehighutilisationoftheplant,resultedinwearandtearonplantandimpactthehealthoftheageingfleet.

In2013/14,EskomstartedrollingouttheGenerationsustainabilitystrategythatinvolvedincreasingthefleet’splannedcapabilitylossfactor(PCLF)–thatis,planneddowntimeformaintenanceandrefurbishment–to10%ofoverallenergyavailabilitytocreateagapformaintenance.Historicallymoremaintenanceisscheduledforthesummermonths,whentheelectricitydemandis lower,butmoremaintenancewasscheduledinthewintermonthsthaneverbeforeinordertoreducethe backlog. See the graph on the next page which demonstrates the increase in plannedmaintenanceoverthepreviousthreeyears.

Eskom,throughitstechnicalgovernancecommittee,prioritisedninemaintenanceitemsfortheyear,witha targetof zero itemsoutstandingby31March2014.This targetwasachievedbyDecember2013.

Maintenance plan for a coal-fired power stationCoal-firedgeneratingunitsneedtoberegularlytakenoutofservicetoconductroutinerepairs and inspections.While these units are down, the rest of the generating fleetneedstocompensateforthecommensuratedecreaseingeneratingcapacity.

Activity Cycle time (years) Duration (days)

Majorgeneraloverhaul 6-12 40-60

Interimrepairs 2-3 14-35

Minigeneraloverhaul 6 28

Boilerinspection 1-1.5 7-14

Statutoryinspectionandtest 6 35

Mainsteampipework adhoc 120

Theyear-on-yearmaintenancecosthasgrownincrementally,asshowninthefollowingtable,asaresultofextensiveplannedandunplannedmaintenance.TheUCLFof12.61%andthePCLFof10.50%areindicativeofthelevelofmaintenancethatwasexecuted.

Actual 2013/14

Actual 2012/13

Actual 2011/12

Generationoperatingmaintenancecosts,Rmillion1 7 763 5954 4936

1. This is after the capitalisation of costs, which are included in capital expenditure. The gross maintenance for Generation, before capitalisation is R14.3 billion (2012/13: R10.6 billion)

May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Monthly planned maintenance (PCLF) (%)

Apr

15

12

9

6

3

0

2011/122012/132013/14

PCLF

Delivering capacity expansionEskom’sperformanceintermsofdeliveringcapacityexpansionisassessedintermsof:• Generation capacity installed and commissionedwhichmeasuresthegeneratingcapacityaddedinMW

• Power lines built whichmeasuresthetransmissionpowerlinesbuiltinkilometres• Substation capacity installed and commissionedwhichmeasuressubstationtransformercapacityaddedinMVA

• Generation capacity milestones whichmeasuresthevarianceofachievingthemilestonesindays

• Capital expenditure (excluding interest during construction)whichmeasurestheamountspentoncapitalprojects




Project management Realising it did not have adequate engineering and project management capacityto undertake the mega projects, Eskom decided to outsource the work to executionpartnersthatweretoprovideworldclassprojectmanagement,engineeringservicesandmanagementofcontractors.

Processes were implemented for claims and variations management. Contingencystatusreportscaptureandtrackthecontractcontrols.Anoverarchingoversightclaimsandvariationscommitteeperformsregularanalysisoftheoverallcontrolandinterestedpartiesareinformedoflessonslearnt.

Eskomhasundergoneaprocesstoreviseitscontractormanagementstrategytocontrolcost and improve contractormanagement. In cases where the performance was notsatisfactorythefollowingwasdone:• Theperformancebondsforsomeofthecontractorswerecalled• Counterclaimsagainstthecontractorsarebeingfinalised• Eskom has requested that sub-contractors are replaced and that contractors’managementteamsbechanged

• Eskomassumedsomeofthemanagementrolesandincreasedoversight

Since 2005, Eskom has been expanding its generation and transmission capacity to meetthe country’s growing demand for energy. Eskom’s nominal generating capacity in 2005was36208MW.Theprogrammewill increase this by17384GWby2019/20.Thekeygenerationexpansion projects are the 4 764MW Medupi and 4 800MW Kusile coal-fired stations, andthe Ingulapumped-storagescheme in theDrakensberg,whichwilldeliver1332MWofhydro-electricityduringpeakdemandperiods.Transmissionlinelengthandsubstationcapacitywillalsoincreasesubstantially.

The capacity expansion programme has cost R213.2 billion (excluding capitalised borrowingcosts)todate.

Between2005and31March2014,theprogrammehasincreasedEskom’sgeneratingcapacityby 6 137MW, its transmission lines by 5 497km and its transmission substation capacity by27565MVA.

Technical performance for the year to 31 March 2014


2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Target

achieved

Generationcapacityinstalledandcommissioned,MW 6214 100 120 261 535

Powerlinesbuilt,km 1539 770 810.9 787 631

Substationcapacityinstalledandcommissioned,MVA 5755 3790 3 790 3580 2525

Generationcapacitymilestones,days 30.0 30.0 48.9 43.5 –

Projectschedulescontinuetobeunderstrain,whilecertainrecoveryplansarebeingimplementedinordertomitigatetheeffectsofthechallenges.

Eskom has commissioned a total of 27 565MVA substation capacity since 2005



Medupi power station• ThecumulativecostincurredonMedupiasat31March2014isR77.0billionagainstatotalbudgetofR105.0billion(excludingcapitalisedborrowingcosts)

• Theprojectschedulerecoveryprocessesarealreadyshowinggoodresults.Projectcost,timeandcommercialreviewsarealignedwiththeintegratedscheduleandpreliminarymilestonesare in place to achieve the planned synchronisation dates, aswell as the revision of theirestimatedcostatcompletion

• Thecriticalpathtofirstsynchronisationremainsthroughthedelivery,installationandtestingof theboiler-protectionsystemaspartof thecontroland instrumentationworks.Theboiler-protectionsystemfactoryacceptancetestisplannedforthefirstquarterofthenewfinancialyear

• TherearetechnicalissuessurroundingweldingontheUnit6boilerandrecoverystrategieshavebeenputinplacetoimplementsolutionstothepost-weldheattreatment.Theweldprocedurequalificationrecordre-qualificationexerciseissubstantiallycompletewithallweldsproceduresverifiedandacceptedbyEskomengineeringandtheapprovedinspectionauthority.Remedialwork is inprogressat theboilerandforwelds identifiedasbeingdefective.Boilerre-heaterworkiscompleteandhasbeensignedoffbyEskom

• Thecontrolandinstrumentationcontractorhasprogressedwellinsomeareaswhiletheystillremainlateinotherareas.Siteaccessisalsoamajorcontributingfactortocurrentdelays.Thefactoryacceptancetestinthisregardwasconductedandpassed.Therearestilloutstandingdistributedcontrolsystemrelateddefectsthatwillbedealtwithviasiteacceptancetesting

• Thecontrolandinstrumentationsolutionandmitigationstrategyisinplace:- Units5and6:ThealternativesystemsolutionisontrackforcompletionbySeptember2014(firstfires)

- Eskomhasdecidedtostep-inundersub-clause17.7(employer’sstep-inrightsandadditionalremedies)oftheMedupicontrolandinstrumentationsystemworkscontract,andhasplaceda contractwithanalternative contractor for engineeringandmanufacturingof theboiler-protectionsystemforUnits6and5,uptofactoryacceptanceteststage.Thiscontractoriscurrentlybusywiththepre-factoryacceptancetestsontheboiler-protectionsystem

- Units1to4:Initiatedcommercialprocessforaclosedenquirytoselectedgroupofsuppliersforinitiallyanearlyworkorderandthenacompleteworkenquiryforthefullsolution

• All64air-cooledcondenserfanshavebeencommissionedandareundergoingoptimisation• Thecoal-conveyorsystemisreadytotakecoalfromthemine• AreviewofthecurrentR105billionbudgetisunderwayandentailsthefollowing:- Anindependentreviewofthedeepdivesofthecontrol/costlogsofeachcontractpackageandownerdevelopmentcostsinordertoquantifythecostimpact

- The refinement of the integrated project schedule for Units 5 to 1. The organisationalstructurehasbeenreworked,withsomereorganisationdone forUnits5 to1.Anewunitbasedorganisationisinplace,whichincludespackage-basedcommercialmanagement

• ThefirstsynchronisationofMedupiUnit6isexpectedtobeinthesecondhalfof2014• The Medupi partnership agreement between Eskom, principal contractors and organisedlabourhasbeensigned,with69site-specificissuesthatwereagreed.Fourarestilloutstandingandthesearescheduledtobefinalisedinthesecondquarterof2014

• EskomhastakentheinitiativeinfacilitatingtheestablishmentoftheMedupileadershipinitiativetoaddresstheconsequenceofdemobilisationofworkersandtheimpactsonthecommunityand the local economyof Lephalale.More than 250 opportunitieswere identified, sixwereprioritisedandfundingofoverR76millionwascommittedbythecollaboratingpartnerstokick-starttheinitiative

Construction of the Medupi power station project in Lephalale is gaining momentum


Kusile power station• Thecumulativecost incurredonKusileasat31March2014 isR66.6billionagainsta totalbudgetofR118.5billion(excludingcapitalisedborrowingcosts)

• TheKusilepowerstationprojecthasalsobeenimpactedbyoverallpoorcontractorperformance• TheUnit1boilercontinuestoimpactseveralofthetop10criticalpathsforUnit1synchronisation.Specifically, access has been delayed to other contractors for the installation of theUnit 1auxiliary transformers, the transverse ash conveyor foundations, the fabric filter electricalbuilding,andthecompressedairbuilding

• TheUnit1targetdateforfirstsynchronisationisOctober2015.However,thelatestforecastindicatesJanuary2016forfirstsynchronisation.Thisdateisdrivenbythereleaseoftheareabytheboilercontractorandthestartofconstructionbyitssub-contractorsappointedforthecompressorbuilding.CompressedairisrequiredforUnit1commissioning

• TheKusileteamcontinuestoworkwiththeboilercontractorintheseareasandwithfollow-oncontractorstodevelopmitigationstrategiesforthework

Ingula pumped-storage power station• Thecumulativecost incurredon Ingulaasat31March2014 isR19.4billionagainsta totalbudgetofR25.9billion(excludingcapitalisedborrowingcosts)

• SafetycontinuestoremainakeyfocusatIngula,especiallyfollowingtheaccidentintheinclinedhigh-pressureshaft3–4on31October2013- TheMineHealthandSafetyInspectorateoftheDepartmentofMineralResourcesissuedaworkstoppageinstructionintermsofsection54oftheMinesHealthandSafetyAct(MHSA)intheinclinedhigh-pressureshaftsasaresultoftheincident.Itremainsineffectinthatnoworkisallowedtocommenceandcontinueintheinclinedhigh-pressureshafts.Thesafeworkprocedures,riskassessmentsanddocumentationapprovalrelatingtotheaboveaccidentarebeing finalised. TheMHSA section 54work stoppage instruction has not been completelylifted,buthasbeenconditionallyliftedtoallowforcleaningoftheinclinedhigh-pressureshafts

- It is estimated thatworkwill restart during June2014.Thishas set back the completionscheduleatIngula

• Although no construction work is allowed to commence and continue in the inclined high-pressureshafts,workonotherpartsof thesitecontinues.Constructionwork in the inclinedhigh-pressureshaftscanonlycommenceoncetherevisedworkmethodhasbeenapprovedbytheMineHealthandSafetyInspectorateoftheDepartmentofMineralandResources.TheaforesaiddocumentationwassubmittedtothemforapprovalattheendofApril2014.ThefullimpactoftheaccidentonthescheduleatIngulaiscurrentlybeingassessedbytheprojectteam

• As a result the projected forecast dates (after the accident) for the first unit (Unit 3)synchronisationisthesecondhalfof2015.Theaccidentwillalsoimpacttheremainingunits’synchronisationdates


The machine hall at the Ingula pumped-storage scheme project is the largest cavern in mud rock in the world

The Kusile power station project will on completion be the fourth largest coal plant in the world


Power lines and substation capacity commissionedEskomcommissioned811kmofpower linesand3790MVAofsubstationcapacity in2013/14,bringing the total power lines commissioned since 2005 to 5 497km and the total substationcapacityto27565MVA.

Eskom’s transmission projects as at 31 March 2014

Existing Interconnectionsubstation Nuclearpowerstation

Notyetcomplete Town Futuregasstation

Possiblefuturegridsystem Futurerenewables Gaspowerstation

Futurehydroelectricpowerstation Renewables Futuresubstation

Futurethermalpowerstation Thermalpowerstation

Hydroelectricpowerstation Futureinterconnectionsubstation


Knowledge management across the capacity expansion programme • Implementation of project management tools across the capacity expansionprogramme,alignedtointernationalbenchmarks

• Establishmentofcommunitiesofpractice toaddressweldingqualitycontrolbeyondthetraditionalqualityassurance

• Proactive and timely identification and involvement of alternative service providersforcriticalcontroland instrumentationactivities,whilststrictlymonitoringmarkersofsuccessforincumbents

• Revisingthecontractorexecutionandsupervisionapproachtoimproveproductivity• Tripartite partnership agreement with organised labour, contractors and Eskom tocreateaclimateofharmonyacrossthecapacityexpansionprogrammeandtherebyreducedisruptionduetoindustrialaction

• Consistent commercial approach to contractors across the capacity expansionprogramme

• Safetyforumsandinterventionstodrivecontinuousimprovementinsafetyperformance

The 94km high-voltage line from the Ingula pumped-storage scheme to the Venus substation has been completed


Transmission expansion projects experienced similar obstacles to those faced by generationprojects,withadditionalchallengesposedbytheneedtosecureservitudesonstateortriballandthatfirstneededtobesurveyedandaccesstoservitudesoverprivatelyownedland.

Thedifficulty in integrating project outage scheduleswith the existing outage schedule posesafurtherchallenge,althoughitistakenintoaccountinthedevelopmentoftheGenerationoutagemanagementplan.

Capital expenditure EskomspentR59.8billiononcapitalexpenditure in2013/14,R2.5billion lessthanthebudgetofR62.3billion,excludingcapitalisedborrowingcosts,mainlyduetoconstructiondelaysinthecapacityexpansionprogramme.

Capital expenditure (excluding capitalised borrowing costs) per division (R million)1

Division Actual

2013/14Actual

2012/13Actual

2011/12

GroupCapitalGenerationTransmissionDistribution

33 47510 3261 516

10 265

376908512893

8317

39730659015547941

SubtotalFuturefuelEskomEnterprisesOtherareasincludingserviceandstrategicfunctions(includinginter-groupeliminations)

55 5822 675

453

1 093

554122634376

1711

558151992473

535

TotalEskomgroupfundedcapitalexpenditure 59 803 60133 58815

1. Capital expenditure includes additions to property, plant and equipment, intangible assets and future fuel, and excludes construction stock and capitalised borrowing costs.


Eskom’s coal-fired power stations generate around 35Mt of ash which requires various handling methodsConstruction at the Medupi power station as seen from the clean water dam

ESKOMHOLDINGSSOCLIMITED126 1272014INTEGRATEDREPORT

EnvironmentalperformanceandreducingEskom’senvironmentalandcarbonfootprintremainkeyfocusareasforEskomandeveryeffort is made to reduce the impact of existing plant throughimprovedmanagement,andwhere required,plantmodifications.Newplantandinfrastructureisdesignedtobemoreefficientandensure that negative impacts on the natural environment andhumanhealthareminimised

Reducing Eskom’s environmental footprint and pursuing low-carbon growth

Eskom continues to reduce its carbon footprint by exploring and implementing renewabletechnologiesandpurchasingenergyfromrenewableenergyIPPs.Eskombelievesabalancedapproachisnecessarytoensureenvironmentalsustainabilitywhilstsupportingeconomicgrowthandaccesstoaffordableelectricity.

Operating highlights• Water-usageandenvironmental-emissionstargetsweremet,withsubstantialimprovementinthewater-usageperformancecomparedtothepreviousyear

• Additionalmaintenanceimprovedemissionsperformanceatseveralpowerstations• Eskom’sSerewind farmproject has shown progresswith the installation of 10 of 46windturbinesby31March2014

• Eskom secured co-financing loan agreements for the proposed concentrated solar thermalstationnearUpington

Operating challenges• Eskom’srequestforavariationoftheparticulateemissionconditionsinKrielpowerstation’satmosphericemissionlicencewasdeniedandthelicencewillnotallowthecontinuousoperationofthestationatfullratedpower

• NewatmosphericemissionlicenceswerereceivedforallpowerstationswiththeexceptionofMatimbaandLethabopowerstations.Outstandinglicencesareexpectedtobereceivedearlyinthenewfinancialyear

• Waterqualityfromsomecatchmentsisdeteriorating,andhavinganegativeimpactonsomepowerstationsduetolimitedcapacitytotreatthepollutioninthewater

Future focus areas• Eskomwill continue to implement thecomplianceprogramme toachieve full compliance toenvironmentalrequirements,specifically:atmosphericemissionlicences,wastemanagementpermits,wateruselicences,environmentalauthorisationsandbiodiversityrelatedpermits

• The minimum emission standards are effective from 2015. Eskom is unable to meet theemissionsstandardsatallsiteswithintherequiredtimelines,andhassubmittedanapplicationfor a five-year postponement for some power stations in terms of section 6 of the ListedActivitiesandAssociatedMinimumEmissionStandards

• Continue to work towards Blue drop (water treatment) and Green drop (sewerage works)certificationbyMarch2016

• CompletionandcommissioningofSerewindfarmprojectinthe2014/15financialyear

07

Temperatures often reach subzero levels at the Ingula pumped storage scheme construction site


• The implementation of a carbon tax, and the resultant possible increase in tariffs remainsachallengeintermsoftheeconomicimpactthereof.NationalTreasury’sannouncementonthedefermentoftheimplementationtoJanuary2016,however,providesfurtheropportunitiesforEskomtoengagewithNationalTreasury

Reducing Eskom’s environmental footprint Eskom’soverallenvironmentalperformanceisassessedintermsofrelativeparticulateemissions,specificwaterconsumptions(waterusageforallcommissionedpowerstations)andthenumberofenvironmentallegalcontraventions.Relativeemissionsentailthemeasurementofemissionsintensity,whichistheamountofemissionsperunitofoutput.

Key performance areas for reducing Eskom’s environmental footprint


2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Target

achieved?

Relativeparticulateemissions,kg/MWhsentout 0.29 0.36 0.35 0.35 0.31

Specificwaterconsumption,L/kWhsentout1 1.21 1.39 1.35 1.42 1.34

Environmentallegalcontraventionsintermsoftheoperationalhealthdashboard2 0 0 2 23 5

1. The volume of water consumed per unit of generated power from commissioned power stations.2. Undercertainconditions,contraventionsofenvironmentallegislationareclassifiedintermsoftheEskomoperationalhealthdashboardindex.

These include instances where censure was received from authorities, non-reporting to authorities as may be legally required, non-reporting in Eskom, a repeat legal contravention, or when the contravention was not addressed adequately.

3. Increasedfrompreviouslyreportedfigure(1)duetoanadditionallegalcontraventionthatwasidentifiedduringtheyearforactivitiesassociatedwiththeundergroundcoalgasification(UCG)project,inOctober2012.

Provisions for environmental measures (R million)Actual

2013/14Actual

2012/13Actual

2011/12

Powerstation-relatedenvironmentalrestoration–nuclearplant 9 331 7177 5428

Powerstation-relatedenvironmentalrestoration–otherpowerplant 6 942 6762 4731

Mine-relatedclosure,pollutioncontrolandrehabilitation 4 366 4309 2476

Refertonote28ofthe2014annualfinancialstatementsatwww.eskom.co.za/IR2014/01.html

Reducing particulate and gaseous emissions Particulateemissionperformancewasmarginallybetterthanthetargetandremainedconsistentwith2012/13,indicatingthatmaintenancemeasuresandtechnologicaladvancesarestartingtoyieldenvironmentalbenefits.

Powerstationswithfabricfilterplantcontinuetosustainlowemissionlevels.However,challengesare experienced with emissions at many of the stations with electrostatic precipitators. Thisisdue toa rangeof factors, includingcapacity constraintsand the limitedspaceavailable formaintenance.Atsomestationsadecline in thecoalqualityand thehigh load factors togetherresultinoverburdeneddusthandlingplant.

Eskom remains committed to reducing emissions to minimise the effect of its operations intermsofhealthandtheenvironment,andtocomplywithregulatedemissionstandards.Eskomhas completedmaintenance at several stations to improve emissions performance. Given theconstrainedpowersystemsituation,theremaynotbeenoughplannedoutagesforEskomtorolloutsimilarmaintenanceacross theentirefleetbeforenewnationalemissionsstandardscome intoeffectin2015.

The programme to retrofit fabric filter plant on at least five power stations in the existing fleetcontinues,withthepossiblecompletionofthefirstunitatGrootvleipowerstationexpectedin2016.

Eskomhasreceivednewatmosphericemissionlicencesformostofitspowerstations.InthecaseofKrielpowerstation,Eskom’srequest to increasetheparticulateemissions limitandtoallowagraceperiodforwhenemissionsexceedthelimitofthenewlicence,hasbeendenied.Everyeffortwillbemadetocomplywiththeconditionsofthelicence.Thenewlimitdoesnotallowthestationtocontinuouslyoperateatitsfullratedpowerandwillrequireloadlossesduringoff-peaktime.Thiswillincreasecostifotherlevers,suchasOCGTs,havetobeusedtosupplementthisreductioninload.

Compliance with National Emission Standards Eskomhasembarkedonanextensive retrofitprogramme to reduceemissionsat thehighest emitting power stations. The execution of this programme will require longoutagesandasignificantamountofcapital(currentlyR72billioninnominalterms),andwillachieve57%compliancewiththeNationalEmissionStandardsby2026.Despitethis,EskomisunabletocomplyfullywiththenewNationalEmissionStandards,whichcomeintoeffectin2015and2020,forseveralreasons.• Implementationofcertainoftherequiredtechnologiesrequiresadditionalwaterwhichisnotpresentlyavailable

• Implementationoftherequiredtechnologiesrequiresplantoutagesof120-150daysperunitandthereisinsufficientsparecapacitytoenabletherequiredoutagestobetakenacrossthefleetbefore2015or insomecases2020without impactingontheabilitytomeetnationalelectricitydemand

• Thelongplanninghorizonsrequiredforthesecapitalprojectsmeansthatitissimplynotpossibletoexecutemostoftheretrofitsintime

Given this situation, inFebruary2014Eskomsubmittedanapplication fora five-yearpostponement of compliance to the standards in cases where compliance within thelegislatedtimeframeisnotpossible.Aresponseisexpectedfromtheauthoritieswithinsixtoninemonths.

Reducing water consumption Eskomhasformedwatermanagementtaskteamstoreducefreshwaterconsumptionandlegalcontraventionsrelatingtowateruse.

Eskommetitstargetforspecificwaterusage,reporting1.35L/kWhsentoutagainstatargetof1.39L/kWhsentout.Theimprovementonthepreviousyear’sperformanceof1.42L/kWhsentoutcanbeattributedmainlytoanincreaseintheproportionofenergygeneratedbythedry-cooledstationsduring theyear. Increasedopportunities formaintenance, implementationof initiatives

Reducing Eskom’s environmental footprint and pursuing low-carbon growth (continued)


identifiedbythewatermanagementtaskteams,goodrainsandtheincreasedrecoveryofwatercomparedtopreviousyearalsocontributedtotheimprovement.

EskomtracksthenumberofminesthatsupplycoaltoEskomonamonthlybasis,togetherwiththeirwateruse licencestatus.At theendof the2013/2014financialyear,36of the46minessupplyingEskomwithcoalhadapprovedwateruselicences,and10haveappliedfor licencesand are awaiting approval from the Department ofWater Affairs (DWA). This is a significantimprovementcomparedtothepreviousyear.

EskomcontinuestoengagewiththeDWAtocleartheremainingbacklogofwateruselicences,andproactivelymonitorsthecomplianceofallofEskom’scoalsupplierstotheNationalWaterAct.

Reducing environmental legal contraventionsTwoenvironmentallegalcontraventionsintermsoftheoperationalhealthdashboardhavebeenidentified in the year,matching the 2012/13 figure. The first contravention is associated withthe failure of Hendrina power station to effectively and timeouslymanagewater-related legalcontraventionsthattookplacebetweenOctober2012andOctober2013.Thisisbeingaddressedbythepowerstation.TheothercontraventionwasduetoEskomconstructingtheRuigtevallei-Dreunberg132kVlineonanincorrectservitudeoptionthatwasnotapprovedintheenvironmentalauthorisation.

The number of legal environmental contraventions decreased from the previous year(32 contraventions against 481 in 2012/13). A total of 13 were linked to water usage (leaksand spills, sewage spills and ash-line leaks) and 10 to power stations exceeding particulateemissionslimits.Theremainingcontraventionsrelatedtoclearingvegetationwithoutalicence,installingdistributionlineswithoutenvironmentalauthorisationandoilspills.Eskomhasinitiatedtrainingandawarenessinitiativestoensurethatemployeesandcontractorsaremadeawareofenvironmentalrisks.

Eskom aims to obtain ISO 14001 (environmental management) certification for all its powerstations.

Programmes are being implemented to achieve full compliance with atmospheric emissionlicences, waste-management permits, water-use licences, environmental authorisations andbiodiversity-relatedpermits.

Reducing Eskom’s carbon footprintClimate change strategyEskomaimstofosteracompanyculturethatconsiderssustainabledevelopmentinallactivities.Thecompany’sadaptationtoclimatechangestrategyisbasedonsixpillars:• Diversificationofthegenerationmixtolowercarbon-emittingtechnologies• Energy-efficiencymeasurestoreducedemand,greenhousegasesandotheremissions• Adaptationtothenegativeimpactsofclimatechange• Innovationthroughresearch,demonstrationanddevelopment• Investmentthroughcarbonmarketmechanisms• Progressthroughadvocacy,partnershipsandcollaboration

1. The 2012/13 number of 47 was restated due to an additional legal contravention that was identified during the year for activities associated with the development of facilities at Kusile which occurred in March 2013.


The proposed 100MW concentrated solar thermal power project near Upington will save about 450 000 tons of carbon dioxide emissions when it is commissioned


Eskom’sadaptationstrategyisintheprocessofbeingimplementedthroughoutthebusiness.Thestrategy,whichdetailshowEskomwillrespondtoandpreparefortheimpactsofclimatechange,isindustryleading.Eskomhasbeeninvitedtointernationalmeetingstopresentthisstrategyandhasparticipatedindiscussionstopreparebusinessviewsontheissue.

Eskom’s executive management committee approved a socio-economic development policyandstrategywhichsupportsEskom’sdrive forsustainablesocio-economicgrowth throughtheprovisionofelectricity.

Eskomcontinuedworkingwith thegovernmentondevelopingcarbonbudgets,adaptationandmitigationplansforclimatechange,protocolsformeasuringandevaluatingcarbonemissions,andproceduresforreportingongreenhousegases.ItactivelysupportedthegovernmentdelegationtotheCOP19conferenceandisdevelopingastrategyforCOP21.

Eskomalsocontinueditsworkwiththefollowingenvironmentalbusinessmovements:• The World Business Council for Sustainable Development,whichdevelopsmedium-termbusinesssolutionstoensureasustainableplanetby2050

• The Global Sustainable Electricity Partnership,throughwhichEskomhostedtwoworkshopsonfinancingelectrificationwiththeSouthernAfricanPowerPool

Investing in renewable energy Eskomremainscommittedtoreducingitscarbonfootprintandhelpingthecountrytransitiontoa cleaner energymix by pursuing low-carbon sources of generation capacity. It also aims tofacilitatethedevelopmentofrenewableenergyproductionintoarobustsubsectoroftheemergingpowerindustrythroughitssupportforthegovernment’sRE-IPPprogramme.

SouthAfricaisrichinnaturalresources, includingwind,sunandoceanenergies,thatcould, ifefficientlyharnessed,helpmeet thecountry’selectricityneedswhile reducing itsabsoluteandrelativecarbonemissions.

Eskom’stwokeyrenewableenergyprojects,namelytheSerewindfarmandtheconcentratedsolarthermalpowerstationnearUpington,areprogressing.• ConstructionofSereiswellunderway–thefirstwindturbinewaserectedon2December2013.Bytheendoftheyear,10ofthe46plannedturbineshadbeeninstalled,andfoundationsforafurther22turbineshadbeenlaid.The100MWwindfarmwillbefullycommissionedinthe2014/15financialyear,savingapproximately230000tonsofcarbonemissionsperyear

• The concentrated solar thermal power station has received exemption from PPPFAconditionsandco-financingloanshavebeensigned.Sixsuppliershaveappliedtoprequalifyfor theproject,duetobecommissioned in2017.TheUpingtonplantwillsaveanestimated450000tonsofcarbondioxideemissionswhenitiscommissioned

Photovoltaicsolar-panelarraysarebeinginstalledatEskomofficebuildingsandpowerstationstooffset internalelectricityusage.Thephotovoltaicproject (project Illanga) isexpected toadd150MWby2017/18.

RenewableenergyfromindependentpowerproducersEskomfacilitatesinvestmentintorenewableenergygenerationbypurchasingpowerfromIPPsthat use wind, solar power, biomass, landfill gas and small hydro technologies to generateelectricity, in accordance with the Department of Energy’s renewable energy IPP (RE-IPP)procurementprogramme.EskomisresponsibleforensuringthattheseIPPsareconnectedtothenationalgridandthatitpurchasesatargetamountofelectricityfromthem.Pleaseseepages143to145formoredetail.

Seven of the 46 turbines that will be erected at the Sere wind farm to generate around 100MW of wind power



Eskomhastosecureland,water,limestone,aswellasitsprimaryenergysources(coal,liquidfuels,gasanduranium)foritsexistingandnewgeneratingassets tooperate.Primaryenergyneeds tobeoftherequiredquality,anddeliveredontimeandatanoptimalcost.TheseresourcesmustatalltimesbemanagedinawaythatminimisestheimpactontheenvironmentandensuresthesafetyofEskom’semployees,contractorsandthepublic

SecuringcoalisagrowingchallengeasEskom’scoal-firedpowerstationsrequireacontinuoussupplyofacceptablequalitycoalatfairprices.EskomhastocompetewithinternationalbuyersforSouthAfrica’s coal reserves,whichhasanegativeeffect on the coal price.MoredetailedspecificationsfortheacceptablequalityofcoaldeliveredtoEskomalsoinfluencesupply.

Eskomsecures these resources throughnational collaborationandeffectiveengagementwithrelevantstakeholders.Thefollowingindicatorsareused:• Averagecoalstockdays• Coaldelivery(see“Implementingcoalhaulageandtheroad-to-railmigrationplan”onpage141)• Coalquality,whichismeasuredindirectlyviaapowerplant’sUCLFandEAFmeasurements(see“Becomingahigh-performanceorganisation”onpage91)

• Specificwaterconsumption(see“ReducingEskom’senvironmentalfootprint”onpage137)• Primaryenergycosts,includingfuturefuel• Volumeofcoalburnt

Operating highlights• Significantprogressmadeintheexecutionofthecoalsupplystrategy• Fourmedium-termcontractshavebeensignedforcoalsupplytoKusilepowerstationduringthecommissioningphase

• Fundadvisors have beenappointed to create amine development fund to advance black-ownedemergingminers’coalandlimestoneminingprojects

• TheKomatiwaterschemeaugmentationprojectwascommissionedanddeclaredoperationalon5June2013

• TheMokoloCrocodilewateraugmentationprojectphase1debottleneckingdeliveredwatertoMedupiforconstructionactivitiesandforthecommissioningofthefirstfewunits

Operating challenges• Even though overall coal quality was on target, negative impacts were experienced atArnot,Matla and Tutuka power stations due to foreignmaterial,mill constraints and stonecontamination,resultinginpoorqualitycoal

• Productionperformanceatsomeofthecost-plusminescontinuestobeachallenge• TheDuvhacoalconveyorwasdamagedbyfireinDecember2013,impactingcoalstockdaysandcoalcostnegatively

Eskom burns around 122Mt of coal per year

Securing Eskom’s future resource requirements08


• Duringthelastquarteroftheyeartherewasanincreaseinthenumberofcommunityprotestsaroundcoaltrucks,andthisimpactedthecoalsupplytocriticalstations

• Theprolongedrainyweatherinthelastquarteroftheyearcausedcoalandlivecoalstockpilestobecomewet.Additionalcoarsecoalhadtobeprocuredwhere lowstockpilesorwetcoalissueshadimpactedelectricityproduction

Future focus areas• Improvingtheperformanceoftheexistingcost-plusminesaswellasimprovingcoalqualityforcertainpowerstations

• Continuingwiththeroll-outofthecoalsupplystrategyimplementationplan• Conclusionoflong-termcoalandlimestonesupplyagreementsforKusilepowerstation• Developingandimplementingawaterqualitystrategytoprotectwaterresourcesandreducetheimpactofdeterioratingwaterqualityonpowerstations

• ContinuingtoimplementmeasurestoimprovecoalqualityforArnotandTutukapowerstations

Securing Eskom’s coal requirementsReliably procuring sufficient coal of theappropriate quality remainsa challenge.Even thoughEskom’s power stations are designed to use poor quality coal, in recent years some minesdeliveredfuelthatdidnotmeetEskom’scoalqualitystandards,resultinginincreasedemissions,coalashandwearontheplant.

Primary energy balances – coal and liquid fuel (R million)

Indicator and unitActual

2013/14Actual

2012/13Actual

2011/12

Coalandliquidfuelinventorybalance 5 276 5330 3798

Futurefuelbalance(coalportion) 7 763 7098 5020

Forfurtherdetailonprimaryenergycostsfortheyear,refertopage157.

Key performance indicators for securing Eskom’s coal requirements


2013/14Actual

2013/14Actual

2012/13Actual

2011/12Target

achieved?

Coalburnt,Mt – 122.42 122.95 125.21 –

Coalpurchased,Mt – 121.98 126.44 124.27 –

Coalstockdays,days 42 44 46 39

Overallcoalstockdaysexceededthetargetof42dayslargelyduetooverproductionofcoalattheminesattachedtoLethabo,MatlaandKendalpowerstations.Sincetheseareallcost-plusmines,thereisnofinancialbenefitinreducingtheirproduction.ProductionperformanceattheArnotandNewDenmarkcost-plusminescontinuestobeachallenge.

InDecember2013,afireontheconveyorbelttransportingcoaltoDuvhapowerstationresultedincoalbeingtransportedbyroad,coalstockdaysatthestationdecreasingto19days(minimumstock level: 23days).The recoveryof theoneconveyor streamwascompletedat theendofMarch2014andthesecondstreamisdueforcompletionbytheendofMay2014.

Althoughoverallcoalstandardsimprovedin2013/14,stone-contaminatedcoalandmillconstraintsresultinginpoor-qualitycoalstillaffectedperformanceatArnot,MatlaandTutukapowerstations.TechnologiestoscreencoalforstonesandmetalhavebeeninstalledattheTutukastockyard,ArnotpowerstationandtheArnotcolliery.Thesemeasuresassistindetectingimpuritiesincoalsothatthesecanberemovedorthecoalsortedforqualitybeforebeingfired,thuspreventingcoal-relatedplantdamage.

Coal supply strategy implementation planEskomstartedtoimplementasetofactionstogiveeffecttothecoalsupplystrategy.Someoftheactionsincludethefollowing:• EskomiscontinuingtoworkcloselywithTransnetFreightRailandtheDepartmentofWaterAffairs(DWA)todevelopfundingmodelsfortherailandwaterinfrastructurerequiredtoaccesstheWaterbergcoalfield

• TransnetFreightRaildeliveredall therequiredcoal fromExxaro in theWaterbergregiontoMajubapowerstationforthefullscalecombustiontest.ThetestwassuccessfullycompletedatMajubapowerstationon21February2014,andthefinalreportisanticipatedtobecompletedwithinthe2014/15financialyear

• Thecreationofaminedevelopmentfundtoadvanceblack-ownedemergingminers’coalandlimestoneminingprojects

Eskomhascontracted80%ofthecoalitrequiresoverthenextfiveyears.

Eskommadepresentationsbeforeparliament’smineralsportfoliocommitteetodebatethedraftMineralandPetroleumResourceDevelopmentAmendmentbill,whichaimstopromotenationalenergysecurity, including thepossibilityofdeclaringcoalastrategic resource.DespiteclaimsthatthecountryhasamplecoalbothforexportandtosupplyEskom,thecompanybelievesthatgiventheimportanceoftheresourcetothecountry,stateinterventionisrequiredtoensurethatSouthAfricahasenoughcoaltomeetitsgrowingenergyneeds.Parliamentapprovedthebillon27March2014.

Securing Eskom’s water requirementsEskomhascontinuedtoworkcloselywiththeDepartmentofWaterAffairstoaddressthebacklogofwater-uselicencesforitspowerstations,capacityexpansionprogrammeandcoalsuppliers.Waterperformanceisassessedintermsofwaterusage,measuredinmegalitres(ML),litresperkilowatt-hoursentout(L/kWhSO)andwatercosts.

Key performance indicators for securing Eskom’s water requirements


2013/14Actual

2013/14Actual

2012/13Actual

2011/12Target

achieved?

Waterusage,ML – 317 052 334275 319772 –

Waterusage,L/kWhSO1 1.39 1.35 1.42 1.34

Watercosts,Rmillion 2082 1 451 1379 165

1. The volume of water consumed per unit of generated power from commissioned power stations.

Securing Eskom’s future resource requirements (continued)


TheMokoloCrocodilewateraugmentationprojectphase1debottleneckingwascompletedandresultedinanincreaseinthewaterinfrastructurecapacity.ThethreemonthslabourstrikeandheavyrainshavedelayedthefullwaterdeliverydatetoOctober2014.Phase2ofthiswatersupplyagreementnegotiationswithDWAareprogressingwelltoensurewatersecuritytotheLephalaleareaintheLimpopoprovince.TheprojectedwaterdeliverydatehasmovedfromDecember2018toDecember2019.ThisisnotexpectedtoimpacttheretrofitoffluegasdesulphurisationcapabilityatMedupipowerstation,asthefirsttwounitscanberetrofittedfromthewateravailablefromtheexistingwaterresource.

Waterresourcesareathealthylevelsduetoaboveaveragerainfalls,however,water-treatmentworksatsomepowerstationsarestrugglingtohandlethelevelsofpollutionatstationswherethequalityofwaterfromcatchmentsisdeteriorating.

TheKilbarchanColliery,aclosedcollieryownedbyasubsidiaryofEskom, isdecantingmine-affectedwater.ToensurethatthecollierycomplieswiththeMineHealthandSafetyAct(1996),Eskomhasappointedserviceproviderstodevelopaclosureplanandremediationsolutionsinlinewiththerequiredwater-useandenvironmentalauthorisations.

Securing Eskom’s nuclear fuel requirementsThecurrenturaniumandenricheduraniumcontractsaresufficientforKoeberguntil2017,whilethecurrentfuel-fabricationcontractsaresufficienttocoverKoeberg’sdemanduntil2015/16.

Normalcommercialprocesseswillbefollowedtoenterintoappropriatecontractsforthesupplyofnuclearfuelwhentheabovecontractscometoanend.Thecontractingandpricingstrategywilldependonthemarketandpoliciesapplicableatthattime.

Primary energy balances

R millionActual

2013/14Actual

2012/13Actual

2011/12

Nuclearfuel(inventorybalance) 1 456 856 1217

Futurefuelbalance(nuclearportion) 981 1023 432

Securing Eskom’s future resource requirements (continued)

The Komati water scheme augmentation project is dedicated to supply water to two of Eskom’s power stations – Matla and Duvha in Mpumalanga


Eskom has been progressively migrating coal transport fromroadtorailoverthepastfouryears.Railtransportissafer,moreenvironmentally friendly, less damaging to roads and morecost-effective than road transport by truck. The project is beingimplementedinpartnershipwithTransnetFreightRail

Implementing coal haulage and the road-to-rail migration plan

TheMajubaheavy-haullineistheroad-to-railstrategy’sflagshipproject.Whencompleted,thisdedicatedlinewillbeabletotransport14milliontons(Mt)ofcoalfromErmelotoMajubapowerstationeachyear.Thesitefortherailroadisbeingestablishedandconstructiononsurroundingstructures(cattlecreeps,culverts,agriculturalunderpassandbridges)hasbegun.Theprojectisscheduledforcompletionin2017.

Operating highlights• Thevolumeofcoaltransportedbyrailincreasedby15%comparedtothepreviousyear

Future focus areas• ContinueworkontheMajubalineproject• Expeditetheintegratedlogisticsstrategyimplementationplanwhichincludestheformationandroll-outoftheimplementationoftheroadchange-overstrategy

• Fasttracktheformationoftheimplementationvehiclethatwillhouseskilledresourceswhocanfacilitateandassist transportersandtruckdriverswithotheropportunitiesastheroad-to-railmigrationprogrammecontinues

Migrating coal transport from road-to-railEskomtransported11.6Mtofcoalbyrail,meetingthe2013/14targetof11.5Mt.Thistargetwaslowerthanthepreviousyear’s12.2Mttargettoaccountforlowerelectricitydemand.

Key performance indicator for migrating coal transport from road-to-rail


2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Target

achieved?

Coalhaulage(road-to-rail),Mt 20.7 11.5 11.6 10.1 8.5

Coal deliveries by rail remain a challenge due to the operational performance constraintsexperienced by both Eskom and Transnet Freight Rail. Operational inefficiencies wereexperiencedacrossallEskomrailservices.InJune2013,theraildeliverieswereaffectedbyaseriesofderailmentsontheTransnetFreightRailNatcorrailline.

09

The construction of a dedicated railway comes as result of Eskom’s initiative to change transportation of coal to a number of power stations, from road trucks to rail transportation


Eskom remains committed to developing the electricity supplyindustry by facilitating the integration of independent powerproducers(IPPs)intothenationalgridandbuyingelectricityfromIPPsfornationaldistribution.IPPsplayanimportantroleinensuringsecurityofsupplyatatimewhenEskom’sgeneratingcapacityiscloselymatchedbyelectricitydemand

Pursuing private-sector participation

Eskom interfaceswith IPPs through twoorganisational units. FirstlyEskom’s grid accessunitmanages theend-to-endnetwork service relationshipwith generators and IPPs connecting toEskom’sgrid.ItsotherkeyroleistofacilitategridaccessbyensuringtheprocessisefficientandallcommercialoptionsforIPPsareavailableinatransparentandnon-discriminatorymanner.

Secondly,thebuyerishousedintheenergyplanningandmarketdevelopmentunit,whichentersintopowerpurchaseagreementswithIPPs.ThisunitalsoassiststheDepartmentofEnergy(DoE)withthecountry’sintegratedresourceplan.

Operating highlights• ThefirstprojectundertheRE-IPPwasconnectedtothegridon27September2013andthefirstIPPwascommissionedon15November2013

• Eskomhassuccessfullyfacilitatedtheconnectionof21renewableenergyindependentpowerproducer(RE-IPP)projectswithacapacityof1076MWtothegrid.Oftheseatotalof467.3MWiscurrentlyavailabletothesystem

• TheDoEapprovedanadditional1457MWpursuanttothethirdbidsubmission.Nocontractshaveyetbeensignedforthiscapacity

• Afurther1005MWofcapacitywassignedundertheDoEPeakerprogramme

Future focus areas• AssistingtheDoEwithapplicationsforthefourthroundoftheRE-IPPprogramme• Securing funding, land and environmental permissions for the transmission strengtheningprojectinpreparationformoreIPPsbeingaddedtothegrid

Key performance indicators for IPP capacity


2013/14Actual

2013/14Actual

2012/13Actual

2011/12Target

achieved

IPPpurchases,GWh 4152 3 671 3516 4107

Installing and purchasing IPP capacity Eskomhasarangeofshort-,medium-andlong-termcontractswithIPPs.Short-andmedium-termenergypurchasesfromIPPsareprimarilyintendedtohelpwidenthesupply-anddemandmarginsothatEskomcanperformmaintenance(referto“Keepingthelightson”onpages106to109).Long-termIPPpurchasesfocusonrenewableandgas-basedenergiestoreduceSouthAfrica’scarbonfootprintanddiversifytheenergymixwhilestrengtheningthecountry’senergyindustry.

10

A multi-storey video wall – located in the control room at Eskom’s national control centre in Johannesburg


Short/medium term• The medium-term power purchase programme (MTPPP)involvesEskompurchasingbase-loadcapacityfromprivategenerators.Theprogrammewasinitiatedin2008

• The wholesale electricity pricing system programme (WEPS)involvesEskomenteringintoannualcontractstopurchaseelectricityatwholesalepricesfromco-generatorsoutsideoftheambitoftheMTPPPandshort-termcontracts

• The short-term power purchase programme (STPPP),which involvesEskomcontractingprivategeneratingcapacityonashort-termbasis

• Municipal base-load contractswithCityPowerandtheCityofTshwane.Eskomcontracted585MW of generating capacity from Kelvin, Rooiwal and Pretoria West power stations.Electricitywaspurchasedat ratescomparable to theMTPPP.NERSAdidnotapproveanyfurthercostsforpurchasesfrommunicipalgeneratorsduringMYPD3,sothesecontractswerenotextendedaftertheyexpiredattheendofDecember2013

Eskom operates around 359 337km of power lines across South Africa

Long term• The DoE peaker programme isalong-termDepartmentofEnergy(DoE)initiativethatinvolvespurchasing power from the independently-owned Avon and Dedisa power plant (OCGTs),which are under construction. Eskom signed power purchase agreements with the serviceproviderthatownsbothstationsduringtheyear.Dedisa isexpectedtobecommissionedin2015,andAvonisscheduledfor2016

• The renewable energy independent power producer procurement (RE-IPP) programmeisalong-termDoEinitiativethatwaslaunchedon3August2011andcommitsEskomtosigningpowerpurchaseagreementsforrenewableenergyfromIPPs

TotalenergyprocuredfromallIPPsfortheyearamountedto3671GWhatacostofR3266million(averagecostof88c/kWh),whichisR721millionhigherthantheNERSAdecisionfor2013/14.

Thefollowingtableprovidesacomparisonoftheamountofenergypurchasedin2013/14andthecostpertypeofIPPcontract.

Actual energy procured through IPP programmes in 2013/14

IPP purchasesActual energy purchased

(GWh)Actual cost

(Rm)Actual cost

(c/kWh)

MTPPP 1478 1217.5 82

STPPP 931 815.6 88

WEPS 139 72.3 52

Municipalbaseloads 873 771.9 88

RE-IPP 250 350.5 140

Adjustment – 38.3 –

Totals/averages 3 671 3 266.1 88

InApril2014,theDepartmentofEnergyannouncedthat:• A fourth roundofbidding for the renewableenergy IPPprogrammewouldclose inAugust2014

• ThenumberandcapacityofrenewableenergyIPPstobecontractedthroughthethirdroundoftheprogrammemightbeextended

• The process to procure 800MW of co-generation power and 2 500MW of coalgenerationpowerfromIPPswasunderway

• Therevisedsolarwaterheaterprogrammemodelwouldstartusinglocallyproducedheatersinthe2014/15financialyear

Pursuing private-sector participation (continued)


Eskom’s supplier localisation drive is complemented by itscorporate social investment (CSI) programme, which aims toimprovesocietyat large through targeteddirect investments intocommunityeducation,healthanddevelopmentalprojects

Transformation

Rollingoutgovernment’suniversalelectrificationprogrammewithinEskom’sareasofoperationhas been the company’s most direct, widespread contribution to social improvement. Thecapacityexpansionprogramme,asoneofthemaindriversofindustrialisationinthecountry,hascontributedsubstantiallytotheshareholder’svisionoftransformingsocietybycreatingjobsanddevelopingskills.Eskomalsohasaninternaltransformationpolicytoensureworkplaceequity.

Operating highlights• Eskomachieved 201 788 electrification connections during 2013/14 (includingDoE fundedconnections),thehighestsince2002.TheincreasedconnectionsareinresponsetoincreasedDoEfundingintermsofitsuniversalaccessprogramme

• EskomawardedR3.1billionincontractstolocalsuppliersonthecapacityexpansionprogramme• AlltargetsforB-BBEEattributableexpendituremeasureswereexceeded

Operating challenges• Constructiondelays resulted in theCSI target for thenumberof ruraldevelopmentprojectscompletednotbeingmet.Theremainingprojectisdueforcompletioninthefirstfewmonthsof2014/15

• Theexpiry ofEskom’s exemption from thePreferentialProcurementPolicyFrameworkAct(PPPFA)requiredthatanumberofcommoditystrategiesandtargetsbereviewedandamended

• Employeenumbershavebeencapped,resultinginthereductionofopportunitiestoimproveonemploymentequity

Future focus areas• ContinuingwiththeCSIimpactstudywhichiscurrentlyunderwaytodeterminetheimpactofCSIprogrammesimplementedoverthepastthreeyears

• FindinginnovativefundingsolutionsforCSIspend• ContinuingtheelectrificationconnectionsontheacceleratedDoEuniversalaccessprogramme• Findinginnovativewaystofurtheradvanceskillsdevelopment, jobcreation, localisationandenterprise development in collaboration with other state-owned companies, and within theambitofapplicableprocurementregulations

• FinalisationofEskom’srevisedemploymentequityplan

11

Eskom achieved 201 788 electrification connections during 2013/14, the highest achieved since 2002


Maximising Eskom’s socio-economic contributionEskom’ssocio-economiccontributionismeasuredintermsofthekeyperformanceareasshowninthetablethatfollows.

Key performance indicators of Eskom’s socio-economic contribution for the group1


2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Target

achieved?

Corporatesocialinvestmentscommitted,Rmillion – 133.0 132.9 194.3 87.9

Jobcreation,number 2000 24965 25 181 35759 28616

Totalnumberofelectrificationconnections,number2 300013 184975 201 788 139881 154250

ProcurementfromB-BBEEcompliantsuppliers,% 75.0 75.0 91.8 82.1 73.2

Localsourcinginprocurement,%3 52.0 52.0 54.6 80.2 77.2

Procurementfromblack-ownedsuppliers,% 20.0 10.0 35.3 22.1 14.6

Procurementfromblackwomen-ownedsuppliers,% 9.0 5.0 7.5 5.1 3.3

Procurementfromblackyouth-ownedsuppliers,% 5.0 1.0 1.0 1.0 –

1. Group numbers are shown, except where those numbers are not available, in which case company numbers are presented.2. The reporting boundary for the number of connections was changed in March 2014 to exclude farm worker and municipality funded

connections. The target has been revised to exclude 551 farmer connections. The comparatives have been restated (876 and 963 farmer, and 3 801 and zero municipality-funded connections deducted for March 2013 and March 2012 respectively). A total of 992 farm worker, and 2 879 municipality funded connections were installed for the current year.

3. Local sourcing of procurement for capacity expansion projects only.

Corporate social investmentThe Eskom Development Foundation NPC (the Foundation) continues to implement Eskom’scorporate social investment mandate to promote transformation and social sustainability. TheFoundation focuses on initiatives to develop small- and medium-sized enterprises, education,health, food security, community development, energy and the environment. Year-to-date, theFoundationhasapprovedthecommitmentofR132.9millionforcorporatesocialinvestment(CSI),impacting357443beneficiaries.AnamountofR115.4millionwasspentduringtheyear.

CSIhighlightsfortheyearinclude:• Thegraduationof214learnerswhosuccessfullycompletedthecontractoracademyprogramme• Launch of the telematics programme with the St Johns School in the Eastern Cape. ThetelematicstechnologyenablesstudentstobenefitdirectlyfromthesubjectpresenterbasedinCapeTownthroughsatelliteconnection.Atotalof4973learnerswillbenefitfromthisinitiativeanditencouragesacultureofteachingandlearningthroughtechnology

• Thesuccessfulcompletionofsixfurthereducationandtraining(FET)collegeprojects,andfiveruraldevelopmentprojectsaslistedasfollows

Rural development projects FET colleges

SthandimfundoHighSchool CapeTown

TiyaneMagoroPre-school Boland

MqhokweniPrimarySchool Vhembe

Nzimakwecooperative Sekhukhune

PhumalangaPrimarySchool Umgungundlovu

Mnambithi

More information on Eskom’s corporate social investment initiatives can be found atwww.eskom.co.za/IR2014/04.html

ElectrificationTheGovernmentofSouthAfrica,throughtheDepartmentofEnergy(DoE),continuestofundtheelectrificationofpreviouslydisadvantagedandfarmworkerhouseholds in its licensedareasofsupply.WhiletheDoEfundsthenewconnectionsandinfrastructuredevelopment,Eskomcarriestheongoingoperatingcostsfortheseconnections,andreceivestherevenueforelectricitysold.

TheNationalCensusof2011/12identified3.4millionSouthAfricanswhoarewithoutelectricity.Themajorityof thesepeople live intheLimpopo,EasternCapeandKwaZulu-Natalprovinces.In order to achieve the United Nation’s millennium development goal of universal access toelectricityby2030,theDoEhasacceleratedtheuniversalaccessprogramme.

TheDoE’sintegratednationalelectrificationprogrammethatcommencedin2013/14,increasedits fundingby17%.At thesame time,Eskom ispursuingconstructionefficiencyopportunitiesin order to unlock savings to fund 50 000 extra connections per annum. The electrificationprogrammeisnowbeingimplementedinmoreremoteareaswheretheconstructionofnetworkinfrastructureismoreexpensiveduetothedistancesinvolvedand,insomecases,thedifficultterrainencountered.

Eskomhas in2013/14, for thefirst timesinceyear2002,achievedelectrificationofmorethan200 000 household connections in a year. Electrification performed on behalf of, and fundedby,municipalitieshasbeenexcludedfromthenumbersreportedabove.Eskomhasconnected2879municipalhouseholdsin2013/14(2012/13:3801).Theelectrificationoffarmdwellersisalsoexcludedfromthesenumbers.

Electrification of grid schools and clinicsSchool electrification is fundedby theDepartment ofBasicEducation.A total of 112 schoolsreceived electricity for the first time for a total capital outlay of R51 million. No clinics wereidentifiedforelectrificationduringtheyear.


2013/14Actual

2012/13Actual

2011/12

Capitalinvestment,Rmillion 51 36 2

Totalconnections,number 112 142 19

Transformation (continued)


Localisation, job creation and skills development through the capacity expansion programmeContractswith keysuppliersgenerally include targets for skillsdevelopmentand jobcreation.Somesuppliersarefailingtomeetthesetargetsontimeandarebeingmonitoredmorecloselytoensurecompliance.

Sincetheinceptionofthecapacityexpansionprogramme,atotalof8930individualshavebeentrainedforskillsdevelopmentagainsta targetof9377.Atotalof2476 learnersarecurrentlybeingtrainedinvariousinstitutionsthroughoutthecountry.

Asat31March2014,thereareatotalof25181jobscreatedthroughthemegaprojectsinthecapacityexpansionprogramme.Thisislessthanthepreviousyearasthecompletionofworkincertainareashasresultedinthedemobilisationofworkers.

A total of 547 contracts worth R5.6 billion were awarded through the capacity expansionprogrammeduring2013/14.Ofthis,R3.1billion(54.6%ofthetotalcontractvalue)wascommittedtolocalcontent.Todate,R98.7billion(65.3%ofthetotalcontractedvalueofR151.2billion)hasbeencommittedtolocalcontent,ofwhichR68.7billion(69.5%oflocalcommittedexpenditure)hasbeenpaidout.

InadditiontoEskom’slocalexpenditure,majorsuppliersonthecapacityexpansionprogrammecommitted to R1.4 billion to local development plans specific to their build contracts. Thesecommitments are specific to the boiler, turbine and generator packages. These values arecumulative,frominceptionofthecapacityexpansionprogrammein2005,upto31March2014.

Eskom B-BBEE attributable expenditure performanceInitiatives to ensure B-BBEE compliance have brought about improvements in Eskom’stransformationperformance.TheEskomgroup’s totalmeasuredprocurementspend(includingprimary energy) amounted to R130 billion in 2013/14, of which R119.4 billion (91.8%) wasattributabletoB-BBEEcompliantsuppliers,exceedingtheinternaltargetof75%.

Strategies are being developed to improve procurement from black-owned businesses, witha particular focus on businesses owned by black women and black youth. Total measuredprocurementspendfromblackwomen-andblackyouth-ownedbothmetorexceededthetargetfortheyear.

Improving internal transformation Eskomextendeditsemploymentequityplan,whichwassignedin2010andexpiredinMarch2013,byoneyeartoallowtimetoanalysethecompany’sinternaltransformationprogressanddevelopalong-termemploymentequityplan.ThiswasdoneinconsultationwiththeDepartmentofLabourandorganisedlabour.

Key performance indicators for internal transformation1

Employment equity – GroupTarget

2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Targets

achieved?

Peoplewithdisability,%2.50 3.00 2.77 2.43 2.36

Racialequityinseniormanagement,%ofblackemployees 74.0 61.0 59.3 58.4 53.9

Racialequityinprofessionalsandmiddlemanagement,%ofblackemployees 79.0 71.0 70.6 69.0 65.7

Genderequityinseniormanagement,%offemaleemployees 38.0 30.0 28.8 28.5 24.3

Genderequityinprofessionalsandmiddlemanagement,%offemaleemployees 42.0 36.0 34.9 34.0 32.4

1. Group numbers are shown, except where those numbers are not available, in which case company numbers are presented.

The Eskom group employs 46 919 people including fixed-term contractors. It has becomeapparentthatEskomcannotgrowitsheadcountandstrategieshavebeenputinplacetomanagethecurrentheadcount.Thefreezeonrecruitmenttolimitemployeenumbershasrestrictedtheopportunitiesfortransformation;howeverEskomiscommittedtoachievingtheemploymentequityexpectationsandisreviewingvariousoptions.Theprimaryfocuswillbeontheoccupationallevelsthatareunder-represented.

Employmentequityatseniormanagement,professionalandmiddlemanagementlevelsremainsbelowtarget,withwomenunder-representedacrossalloccupationallevels.

Theproportionofpeoplewithdisabilities is2.77%,slightlybelow the3%targetbutabove thegovernment’stargetof2%forthepublicservices.Eskomhasidentifiedthatnotallitsfacilitiescanaccommodatepeoplewithdisabilities.Toaddressthis,Eskomhasdraftedadisabilitychartertoensurethatfacilitiesbecomemoreaccessible.

Employee relationsEskom’s employee engagementmodel builds employee participation and involves employeesand executives in conversations around strategy, performance and people. Eskom has alsobuiltmoreproductiveandsustainable relationshipswithorganised labourandcontinues todosothroughapartneringmodeltoguidetheseinteractions.Inaddition,Eskomhasembarkedonaprocesstofurtherstrengthentherelationshipswiththetradeunions,utilisingtheservicesofanexternalfacilitator.

Afteralengthywagedispute,EskomanditsrecognisedtradeunionsreferredthewagedisputetotheCCMAforresolution.Afinaldecision,forthemostpartinfavourofEskom,wasdeliveredinJanuary2014.Thedecisionwasonlyeffective for thefinancial year2013/14,backdated to1July2013.

Even thoughEskomhasbeendeclaredanessential service,whichprohibits employees fromengaginginindustrialaction,employeesatsomeEskomsiteshaveembarkedonvariousformsofunprotectedindustrialaction.

Transformation (continued)


Eskom’sgoing-concernstatuswillcontinuetobeakeyfocusforthecomingyearastherevenueshortfallcreatedbytheMYPD3decisioncannotbesolvedbycostsavingsandefficienciesalone–cost-reflectivetariffsremainarequirement.Eskomhastobalanceshort-term priorities with, long-term sustainability requirementsandhastoensurethatitwillbeabletorepayasignificantamountofcurrentandfutureborrowings

Ensuring Eskom’s financial sustainability

Notwithstandingthesignificanteffect that theMYPD3tariff increasehashadontheexpectedrevenue for theyear,aswellas theR225billion revenueshortfallover thefive-yearMYPD3period, Eskom has identified and largely secured funding for the current capacity expansionprogrammeuptothecompletionoftheKusilepowerstation.

Eskomhassufficientliquiditytomeetsitscurrentliabilityrequirements.Eskomremainsconfidentthatitwillbeabletoraisetheremainingfundingforthecurrentcapacityexpansionprogramme,butthismustbebalancedagainstthenegativeoutlookfromtheratingagenciesandthepossibilityofadowngradeduetothedeteriorationinthecreditmetrics.

Eskom remains focused on re-engineering the business to achieve sustainability and costefficiencybystrikingabalancebetweenreducingcostswhereappropriateandthethreesourcesoffunding:equity,debtandrevenue.Theneedforasupportivecreditratingthatreducesthecostoffundingaswellasretainingaccesstofundingmarkets,andtherefore,theneedtomigratetocost-reflectivetariffsinthefuture,willplayakeyrole.

Eskomimplementedthebusinessproductivityprogramme(BPP)whichfocusesonthereductionofthecostbase,increasedproductivityandrevisionsoftheEskombusinessmodelandstrategyinordertoclosetherevenueshortfall.CashsavingsofbetweenR50billionandR60billionaretargetedovertheMYPD3period.Pleaserefertopage73forfurtherdetailonBPP.

Eskomsubmitted a regulatory clearing account (RCA) application toNERSA for theMYPD2period during the last quarter of 2013 regarding the variances between costs and revenuesassumedinMYPD2comparedtotheactualcosts incurredandrevenuesreceivedbyEskom.Intermsoftheregulatoryrules,theregulatorcanincreasefutureelectricitytariffstocompensateEskomforanunder-recoveryofrevenueoritcanreducetariffsinthefutureifEskomhasover-recoveredrevenue.Theelectricitysub-committeehasmadearecommendationontheRCAtotheNERSAboardandadecision isawaited in thefirstquarterof thenewfinancialyear. It isanticipatedthatthisadjustmentislikelytocommencenolaterthan1April2015.

WhiletheregulatorymechanismdoesnottakeintoaccountEskom’scapitalexpenditure,otherthandepreciationonceincommercialoperationandareturnonassets,therevenueshortfallduetothelowertariffdoeshaveanimpactonthecashavailabletoEskomforcapitalexpenditure.EskomsubmittedacapitalprogrammeamountingtoR337billionovertheMYPD3periodandtheresultofthedeterminationimpliesthatEskomhastoreduceitscapitalprogrammetoR251billiontaking into account the cash position. There is an additional requirement for critical projects

12

The coal conveyor and coal stockyard at the Medupi power station project is funded by the World Bank


thatcan’tbeexecutedwithin theR251billionbudget.Thecapitalexpenditureportfoliowill bemanagedbyEskomwithinthefundsavailable,andshouldadditionalfundingnotbesecuredfortheadditionalcapitalrequirements, thecurrentcapitalportfolioofR251billionwillbereviewedtoreprioritiseprojectstoensurethatenvironmentalandregulatory legalrequirementsaremet.Eskomiscurrentlynineyearsintoacapacityexpansionprogrammewhichisfundedfromvariouslocal and international funding sourcesand relies onEskom’s credit rating,which is linked toSouthAfrica’ssovereignrating.

Theboardhasemphasisedthatbyimplementingthecorporateplanfor2014/15to2017/18andalltheapprovedinitiativestoensurethecontinuedoperationofEskom,itisaspecificprerequisitethatEskomremainsagoingconcernandfinanciallysustainable.

Operating highlights• EskomsuccessfullyraisedUSD1billionthroughaninternationalbondissueduringJuly2013• TheoriginalR300billionfundingplanthatcoveredthecapacityexpansionprogrammetotheend of Kusile, from 1 April 2010 to 31March 2017, is progressingwell with 90.5% of theR300billionsecured

• Duringtheperiod,EskomenteredintoaloanamendmentwherebythecurrencyoftheWorldBankloanwaschangedfromafloatingUSdollarloantoafixed-raterandloan,theeffectbeingthatEskomnownolongerhasaUSdollarexposuretohedge

• Eskomrestructuredacross-currencyswapandasaresultreleasedR2.3billioninMarch2014(cashreceived),andalsoreducedthecouponpayableovertheperiod

Operating challenges• Bridging the R225 billion five-year revenue shortfall resulting from the 8% MYPD 3 tariffincreasewhichisexacerbatedbythedeclineinlocalsalesvolumes(comparedtobudgetedsalesvolumes),theimpactofthedeterminationonoperationsandcapitalexpenditureandthenetimpactonEskomfundingrequirements

• Thehighcostoftheliquidfuelforopen-cyclegasturbinestomaintainsecurityofsupply• The cash flow impact of electricity theft and the increase in outstanding debt of electricitydebtorslikemunicipalitiesandresidentialcustomers

Future focus areasIn lightofEskom’sfinancial sustainability, it is imperative that the followingareundertaken tomaintainapositiveoutlookfortheorganisation’sliquidity:• DisciplinedexecutionoftheBPPworkstreamopportunitiesthatareidentified• ContinuingengagementwithNERSAonregulatoryclearingaccountrecovery• Exploringotherfundingalternativestounlockcash,includinginvestigatingadditionalequity

Performance indicators for ensuring Eskom’s financial sustainability


2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Target

achieved

Company

ElectricityrevenueperkWh,c/kWh 89.30 62.37 62.82 58.49 50.27

ElectricityoperatingcostsperkWh(includingdepreciationandamortisation),c/kWh 73.21 52.67 59.67 54.15 41.28

Interestcover,ratio 1.06 1.18 0.65 0.27 3.27

Debt:equity(includinglong-termprovisions),ratio 3.40 2.17 2.21 1.96 1.69

FFOasapercentageofgrossdebt(target>20%),%2 11.08 9.11 9.21 8.55 15.06

Group

Workingcapitalratio,ratio 0.79 0.65 0.71 0.68 0.76

Freefundsfromoperations,Rmillion1 49119 29653 27 542 18108 30483

Grossdebt/EBITDA(target<3),ratio2 6.80 7.95 10.96 16.20 6.46

Debtservicecover(target>2.5),ratio3 2.17 1.55 1.21 2.01 3.50

1. Comparative restated.2. The target reflects investment grade aspiration.3. The target reflects a loan covenant.

Actualperformancefortheyearending31March2014hasbeensignificantlydifferentfromthebudgetedoutlook,whichcanbedirectlylinkedtothereductioninlocalsalesvolumes,andtheadditionalOCGTexpenditurenecessarytoensurethesecurityofsupply.

Ensuring Eskom’s financial sustainability (continued)


ThefollowingEskomcompanyfinancialratioshavebeenrecalculatedtoreflectascenariothatassumesthatEskom’ssalesvolumeswereasbudgetedandthattheOCGTspendwasonlyatbudgetedlevels:


March 20141Actual

2014 adjusted Variance

EBITDA,Rmillion 23497 36228 12732

ElectricityoperatingcostsperkWh(includingdepreciationandamortisation),c/kWh 59.67 54.11 (5.55)

Interestcover,ratio 0.65 1.36 0.71

Freefundsfromoperations(FFO),Rmillion 25874 38612 12732

Debtservicecoverratio,ratio 1.16 1.94 0.77

FFOaspercentageofgrossdebt,% 9.21 13.74 4.53

Grossdebt/EBITDA,ratio 11.96 7.76 (4.20)

Salesvolumes,GWh 217903 227393 9490

1. The figures reflect company numbers which are not necessary comparable to those in the table on page 155, which shows group figures.

Financial results of operationsEskomachievedagroupnetprofitofR7.1billionfor2013/14(2012/13:R5.2billion).Operatingprofit before fair value gains and losses on embedded derivatives and net finance costswasR11.4billion(2012/13:R10.4billion).Comparedto2012/13,the8%tariffincreaseresultedina7.4%averageincreaseinelectricityrevenueperkilowatt-hour(kWh).Thisincreasewasoffsetbya10.2%increaseinoperatingcostsperkWhcomparedtothepreviousyear.ThedeclineinlocalsalesvolumeshasanimpactonthecalculationofoperatingcostsperkWhsold(comparedtotarget),asasignificantportionofEskom’soperatingcostbaseisfixed.

Theeffectofapplying thereplacementvalueapproach toEskom’sassets results in thegroupreportinganet lossofR12.5billion (2012/13:R8.7billion). This equates to anegative returnonassetsof1.89%(calculatedbeforeapplyingtheimpairmentprovision).Forfurtherdetailsonthereplacementvalueapproach,refertonote52intheannualfinancialstatementsavailableatwww.eskom.co.za/IR2014/01.html

Thissectionshouldbereadinconjunctionwiththesummarisedfinancialstatementsonpages164 to 166 as well as the full annual financial statements available at www.eskom.co.za/IR2014/01.html

Sales and revenueGrouprevenuefor2013/14wasR139.5billion(2012/13:R128.8billion)andtheincreaseismainlyasaresultoftheelectricitytariffincreaseof8%asdeterminedbyNERSA.Electricitysalesfortheyearamountedto217903GWh,representinga0.6%increaseonthepreviousyear(2012/13:216561GWh).Localsalestoindustrialcustomershaveincreasedby5.6%year-on-year,mainlydue to increasedoperationsbycertainkeycustomersaswellas lesspowerbuybacksduring2013/14.Thisincreaseisoffsetbyadeclineof3%intheminingsectoranda9.6%decreaseininternationalsales.Refertopages110to111formoredetailoninternationalsales.

Operating costsPrimaryenergycostsfortheyearamountedtoR69.8billion(2012/13:R60.7billion).ThisincludedR10.6billion(2012/13:R5.0billion)relatingtothefuelfortheopen-cyclegasturbines(referpages106to108under“Keepingthelightson”).Perunit,primaryenergycostsincreasedby14.2%perunitofelectricitysold, from28.05c/kWh in2012/13 to32.04c/kWh in2013/14.The3.99c/kWhincreaseismainlydueto:• Coalusagecostsincreasingby0.74c/kWh• Thecostofusingopen-cyclegasturbinesincreasingby2.54c/kWh• Demand-market participation, power-buyback and co-generation costs decreased by1.27c/kWh – this was mainly due to power-buyback costs decreasing from R2.8 billion in2012/13toR0.01billionin2013/14

• Other expenditure including coal handling, fuel for gas-fired start-ups, water usage,environmentalleviesandinternationalpurchasesmadeuptheremainderoftheincrease

TheamountpaidtotheSouthAfricanRevenueServiceregardingtheenvironmentallevyforthe2013/14financialyearwasR8.5billion(2012/13:R8.0billion).

Groupemployeenumbers, inclusiveoffixed-termcontractors, reducedby376 from47295at31March2013to46919at31March2014.Groupgrossemployeecosts(beforecapitalisation)fortheyearamountedtoR31.3billion(2012/13:R28.6billion).Theincreaseingrossemployeecostismainlyasaresultoftheincreaseincontractlabourcostrelatingtothecapacityexpansionprogramme.

Group arrear bad debt was 1.10% of external revenue for the year (2012/13: 0.82%). ThemunicipalityarreardebtaswellasresidentialarreardebtinSowetocontinuestogrow.Refertopages96to97under“Beingcustomer-centric”formoredetailonelectricitydebtors.

Thegroup’sotheroperatingexpensesfortheyearcametoR19.2billion(2012/13:R23.0billion).Themainitemsinthiscategoryare:• The company’s net repairs and maintenance cost1 (after capitalisation) of R12.9 billion(2012/13:R10.6billion).Refer topages114 to115under “Keeping the lightson” formoredetailongeneration’smaintenance,whichisonaverageabout60%ofthetotalofrepairsandmaintenancecost

• Thecompany’sdemand-sidemanagement(DSM)costforEskomamountedtoR1.4billionin2013/14(2012/13:R3.0billion).ThedecreaseisasaresultofthereducedamountallowedbyNERSAinitsMYPD3determination.Refertopages111to113under“Keepingthelightson”formoredetailonIDM

Eskom’sfocusoncostefficiencieshashadapositiveimpactontheotheritemsincludedinotheroperatingcosts.1. Asignificantamountof repairsandmaintenancecost incurredby theEskomcompany relate to its subsidiariesRoshconandRotekand

therefore the cost is eliminated against the repairs and maintenance line upon consolidation of the group results, in accordance with IFRS.




Net fair value on financial instruments and embedded derivativesThe net fair value loss on financial instruments, excluding embedded derivatives, wasR0.6billionfortheyear(2012/13:R1.7billion).Thesegainsandlossesconsistprimarilyofthecostsattributable to the rollingoverof forwardexchangecontracts,whichvary fromperiod toperioddueto the timingof theplacementof relatedprocurementcontractsandexchange-ratefluctuations.

Thenetimpactontheincomestatementofchangesinthefairvalueoftheembeddedderivatives(relatingtothenegotiatedpricingagreements)wasafairvaluegainofR2.1billionfortheyear(2012/13:R5.9billion loss).Embeddedderivative liabilitiesamounted toR9.3billion (2012/13:R11.5billion).Thelossin2012/13wasmainlyduetothedecisionat31March2013toaccountforthefulltermoftheunderlyingnegotiatedpricingagreementcontracts.TheprofitinthecurrentyearismainlyasaresultofthechangesintheUSD/ZARexchangerateandinterestrates.EskomsubmittedtheremainingcontracttoNERSAinthepreviousyearandisawaitingitsdecision.

Mar2012

Apr2012

May2012

Jun2012

Jul2012

Aug2012

Sep2012

Oct2012

Nov2012

Dec2012

Jan2013

Feb2013

Mar2013

Apr2013

May2013

Jun2013

Jul2013

Aug2013

Sep2013

Oct2013

Nov2013

Dec2013

Jan2014

Feb2014

Mar2014

Apr2014

20

15

10

5

Euro and US dollar to rand exchange rate movements

Euro USdollar

Finance costsAfter capitalising borrowing costs and including the unwinding of interest on provisions, thenet finance cost for the group for 2013/14 was R4.8 billion (2012/13: R3.0 billion income).Gross finance income was R2.5 billion (2012/13: R2.8 billion) while the gross finance costwas R17.6 billion (2012/13: R1.1 billion). The borrowing costs capitalised for the year wereR13.3 billion (2012/13: R3.7 billion), while the unwinding of interest amounted to R2.9 billion(2012/13:R2.4billion).

Thegrossfinancecost,aswellasborrowingcostscapitalisedforthe2012/13year,wereimpactedbytheremeasuringofthegovernmentloanwhichamountedtoanincomeofR17.3billion.TheremeasurementofthegovernmentloanisbasedontheMYPD3pricepathandnoremeasurementwasrequiredinthecurrentyear.

TaxationTheeffectivetaxratefor theyearwas23.3%for thegroup(2012/13:26.4%).Pleaserefer tonote42oftheannualfinancialstatementsavailableatwww.eskom.co.za/IR2014/01.htmlformoreinformation.

Liquidity and capital resourcesCashandcashequivalents,togetherwithliquidinvestmentinsecurities,amountedtoR30.6billionasat31March2014(31March2013:R28.0billion).Intermsofthelatestprojections,assumingno further drawdowns on borrowings, Eskom’s liquidity reserves cover its requirements forapproximately120days.

The group’s net cash inflow from operating activities for 2013/14wasR33.6 billion (2012/13:R27.7billion).Thegroup’sworking-capitalratiowas0.71,comparedto0.68asat31March2013.

CashflowsusedforinvestingduringtheyearstoodatR57.2billion(2012/13:R58.4billion).Thecapitalexpenditurecashflowsincludedinthisitem,excludingcapitalisedinterest,amountedtoR55.8billion(2012/13:R57.9billion).Fordetailsonthecapitalexpendituresincurredfortheyearrefertothetableonpage124.

The net cash inflows from financing activities for the year were R32.8 billion (2012/13:R21.8billion). The raisingof borrowingsand the issuingof securities havebeenmanaged tomatchthecapitalexpenditure.

Gross debt increased byR51.9 billion during the year. The debt-to-equity ratio for the group(includinglong-termprovisions)was2.06asat31March2014(2012/13:1.84).Thefreefundsfrom operations as a percentage of gross debt was 9.73% for the group at 31 March 2014(2012/13: 8.04%),while the gross debt as a percentage of earnings before interest, taxation,depreciationandamortisationwas10.96%(2012/13:16.20%).

Funding progressAsat31March2014,R271.6billionor90.5%oftheR300billionborrowingprogrammehadbeensecured.TheR300billionborrowingprogrammeisbasedontheoriginalfundingrequirementsasatApril2010andcoverstheperiod1April2010to31March2017.Furtherfundingrequirements,including those resulting from the lower than expected MYPD 3 tariff determination, are notincludedinthisborrowingprogramme.

The tracking of execution progress of the original R300 billion plan will have to be replacedovertime,withtheR251billionborrowingrequirementwhichcoverstheperiod1April2013to31March2018.Eskom’scurrent fundingplandoesnot take intoaccountallocationsofcapitalprojectsintermsoftheIRP2010post-Kusile.


Monthlyexchangerates


Progress on the original R300 billion funding plan as at 31 March 2014

Sources

Funding sources

April 2010 – March 2014

Secured to date

Drawdowns April 2010 –March 2013

Drawdowns April 2013 – March 2014

Combined drawdowns since April

2010

Amount secured/

supported by government

Bonds 90.0 65.4 44.8 20.6 65.4 42.6

Commercialpaper1 70.0 70.0 30.0 10.0 40.0 0.0

ECAs2 32.9 32.9 19.4 2.3 21.7 0.0

WorldBank 27.8 27.8 8.6 3.4 12.0 27.8

AfDB3 20.9 20.9 13.3 2.8 16.2 20.9

DBSA4 15.0 15.0 7.0 2.0 9.0 0.0

Shareholderloan 20.0 20.0 20.0 – 20.0 20.0

Other/newsources 23.4 19.64 0.9 3.59 4.5 5.0

Total (R billion) 300.0 271.6 144.1 44.7 188.7 116.2

Percentages 90.5 69.5 42.8

(%of

R300billion) (%of

secured)(%of

secured)

1. Commercial paper is issued for up to one year and then redeemed and re-issued for the same net amount. The commercial paper is thus by definitionnotfullysecuredforthefullperiod,however,Eskom’slong-termobservationsandpasttrendssupportahighlevelofconfidencethat Eskom will be able to roll over the redemptions each year. For this reason, the gross value of the commercial paper is shown under the “secured” column in the table above.

2. Export credit agencies.3. African Development Bank.4. Development Bank of South Africa.

Summary of Eskom’s credit ratings as at 31 March 2014

Rating Standard & Poor’s Moody’s

Fitch

Local currency National scale

Foreigncurrency BBB Baa3 – AAA*

Localcurrency BBB Baa3 BBB+ F1+

Standalone b- b1 B None

Outlook Negative Negative Stable Stable

Actiondate 14Oct2013 19Jul2013 11Jan2013 15Jan2014

Affirmationdate 14Oct2013 19Jul2013 12Dec2013 15Jan2014

* Adjusted from AA+ to AAA in January 2014.

FortheratingrationaleofStandard&Poor’sandMoody’s,pleaserefertotheinterimintegratedreport(www.eskom.co.za/IR2014/06.html).

Eskomcontinuestomonitortheeffectsofitsfundinginitiativesandoperationsontheratiosthatimpactonitscreditrating.Eskom’screditratingcontinuestoreflectitshighlyleveragedfinancialprofile, theexecutionrisksassociatedwith itscapacityexpansionprogrammeandadegreeofregulatoryuncertainty.

Fundsforthenext12to18monthswillbesourcedmainlyfromacombinationofissuingdomesticandinternationalbonds,exportcreditagency-backedfinancing,developmentfinanceinstitutionsandthedomesticcommercialpapermarket.Newopportunitiesfromalternativefundingsourcesandproducts,suchasIslamic(Sukuk)funding,preferenceshares,syndicatedloansandproject-basedfundingarealsobeingexploredandconsideredtocomplementthecurrentfundingsources.Eskom’scurrentfundingplandoesnottakeintoaccountallocationsofcapitalprojectsintermsoftheIRP2010post-Kusile.

Activitiesremainfocusedonfundingtheremainingbalanceofthecommittedcapacityexpansionprogrammeandthemaintenanceofaliquiditybuffer.Theadditionalcapitalrequirementswillonlybeapprovedifadditionalfundingcanbesecured.


Hitachi, one of the main suppliers for the Medupi power station project, funded the Segwati Pre-school in Shongoane village, Lephalale


Summarised group financial results13

One of the key focus areas in terms of the power line network is to increase live work to reduce the outages experienced by customers

The group financial results have been extracted from the Eskomconsolidatedfinancialstatementsfortheyearended31March2014thathavebeenpreparedinaccordancewithInternationalFinancialReporting Standards (IFRS) and in the manner required by theCompaniesActofSouthAfrica,71of2008

Theconsolidatedfinancialstatementshavebeenpreparedunderthesupervisionofthefinancedirector, Ms Tsholofelo Molefe CA(SA). These consolidated financial statements have beenreviewed by the independent auditors KPMG Inc and SizweNtsalubaGobodo Inc and wereapproved by the board of directors on 29 May 2014. The consolidated financial statements,with theaudit opinion issuedby the independentauditors,areavailableatwww.eskom.co.za/IR2014/01.html



2014Rm

2013Rm

AssetsNon-current assets 439 869 378775Property,plantandequipmentandintangibleassets 404 389 344271

Investmentinequity-accountedinvestees 318 296Futurefuelsupplies 8 744 8121Investmentinsecurities 4 841 8574Loansreceivable 8 654 8425Derivativesheldforriskmanagement 9 361 5420Otherassets 3 562 3668Current assets 64 977 53241Inventories 12 422 12251Investmentinsecurities 6 066 8776Loansreceivable 329 114Derivativesheldforriskmanagement 2 812 1906Tradeandotherreceivables 16 578 14925Otherassets 7 094 4649Cashandcashequivalents 19 676 10620Non-current assets held-for-sale 147 8Total assets 504 993 432024

EquityCapitalandreservesattributabletoownerofthecompany 119 784 109139

LiabilitiesNon-current liabilities 310 915 264446Debtsecuritiesandborrowings 234 562 190776Embeddedderivatives 7 871 10095Derivativesheldforriskmanagement 310 840Deferredtaxliabilities 19 461 15806Deferredincome 12 518 10907Employeebenefitobligations 9 922 10282Provisions 21 157 20087Otherliabilities 5 114 5653Current liabilities 74 181 58439Debtsecuritiesandborrowings 20 258 12180Embeddedderivatives 1 461 1386Derivativesheldforriskmanagement 1 197 572Provisions 9 601 6648Tradeandotherpayables 28 531 28999Taxation 1 9Otherliabilities 13 132 8645Non-current liabilities held-for-sale 113 –Total liabilities 385 209 322885Total equity and liabilities 504 993 432024

Condensed group income statementfortheyearended31March2014

Condensed group statement of financial positionat31March2014

2014Rm

Restated2013

Rm

Continuing operationsRevenue 139 506 128775

Primaryenergy1 (69 812) (60748)

Netemployeebenefitexpense (25 622) (23564)

Depreciationandamortisationexpense (11 937) (9960)

Netimpairmentloss (1 557) (1039)

Otheroperatingexpenses (19 177) (23039)

Operatingprofitbeforenetfairvaluelossandnetfinance(cost)/income 11 401 10425

Otherincome 962 1126

Netfairvaluelossonfinancialinstrumentsexcludingembeddedderivatives (620) (1655)

Netfairvaluegain/(loss)onembeddedderivatives 2 149 (5942)

Operatingprofitbeforenetfinance(cost)/income 13 892 3954

Netfinance(cost)/income (4 772) 3003

Financeincome 2 475 2796Financecost (7 247) 207

Shareofprofitofequity-accountedinvestees,netoftax 43 35

Profit before tax 9 163 6992

Incometax (2 137) (1856)

Profit for the year from continuing operations 7 026 5136

Discontinued operationsProfitfortheyearfromdiscontinuedoperations 63 47

Profit for the year 7 089 5183

Attributable to:Ownerofthecompany 7 089 5183

1. Primary energy relates primarily to the acquisition of coal, uranium, water, gas and diesel that are used in the generation of electricity together with the environmental levy.


Condensed group statement of cash flowsfortheyearended31March2014

2014Rm

Restated2013

RmCash flows from operating activitiesProfitbeforetax 9 163 6992

Adjustmentfornon-cashitems 21 925 22620

Changesinworkingcapital (10 455) (828)

Cashgeneratedfromoperations 20 633 28784

Netcashflows(usedin)/fromfinancialtradingassets (1 471) 1701

Netcashflowsfrom/(usedin)financialtradingliabilities 4 383 (2317)

Netcashflowsfrom/(usedin)currentderivativesheldforriskmanagement 10 278 (331)

Netcashflows(usedin)/fromnon-currentassetsheld-for-sale (23) 48

Incometaxespaid (184) (216)

Netcashfromoperatingactivities 33 616 27669

Cash flows from investing activitiesProceedsfromdisposalofproperty,plantandequipment 28 36

Acquisitionsofproperty,plantandequipmentandintangibles (53 160) (55332)

Expenditureonfuturefuelsupplies (2 675) (2533)

Increaseinnon-currentloansreceivable (229) (990)

Othercashflowsfrominvestingactivities (1 171) 460

Netcashusedininvestingactivities (57 207) (58359)

Cash flows from financing activitiesDebtsecuritiesandborrowingsraised 44 142 31120

Debtsecuritiesandborrowingsrepaid (8 014) (7149)

Decreaseininvestmentinsecurities 5 748 5047

Decreaseinfinanceleaseliabilities (11) (31)

Interestreceived 2 768 2765

Interestpaid (11 838) (9968)

Netcashfromfinancingactivities 32 795 21784

Netincrease/(decrease)incashandcashequivalents 9 204 (8906)

Cashandcashequivalentsatbeginningoftheyear 10 620 19450

Foreigncurrencytranslation (23) (49)

Cashandcashequivalentsatbeginningoftheyearattributabletonon-currentassetsheld-for-sale (125) 125

Cashandcashequivalentsatendoftheyear 19 676 10620

South Africa’s homes – from fl ats and clusters to stand-alone houses and residential estates – demand 17% of the electricity used in our country. But on weekdays, between 5pm and 9pm, this demand increases and peaks at 35%, a huge jump that puts severe strain on the power supply.

Why does this happen?We arrive home from work around 5pm, Monday to Friday.

The fi rst thing we do is switch on the lights, television, our electrical space heaters, followed by the oven, the microwave and the washing machine or dishwasher. We also run hot water in the kitchen and take a bath or shower – with the geyser tucked away in the ceiling working hard to heat the water.

Millions of us follow this evening routine at the same time, which means South Africa’s households use more than one third of the electricity consumed in the country between 5pm and 9pm, on weekdays.

As the demand increases, Eskom does all it can including running some emergency power stations during the day, to balance supply and demand. This winter we need to continue with power station maintenance and the system will be tighter during the peak period from 5pm to 9pm.

What can you do to help keep the lights on this winter?

Three simple things:

1. Switch off your electrical element geyser between 5pm and 9pm; this appliance uses the most electricity of all in the home, and can account for up to 50% on your electricity bill

2. Don’t switch on your space heater between 5pm and 9pm. This appliance is energy-intensive and can account for up to 16% on your monthly electricity bill, instead, dress warmly, switch on a gas heater, and use a hot water bottle and blankets to keep warm

3. Switch off your pool pump between 5pm and 9pm; this appliance uses up to11% on your electricity bill.

Let’s switch off together … and keep South Africa powered up this winter

Visit www.eskom.co.za/idm for detailed information on saving tips for winter and Eskom’s energy effi ciency product rebates.

1923-2013

Powering your worldEskom Holdings SOC Limited Reg No 2002/015527/06

How you can help to keep the lights on this winter … especially between 5pm and 9pm weekdays


A lineman wearing a Faraday suit can work on live, high-power lines by being transported to the lines in a helicopter. Wearing the suit, they can crawl down the wires

Appendices14Contents

AppendixA:Keyperformanceindicators 170AppendixB:Otherperformanceindicators 176AppendixC:Awards 178AppendixD:Sustainabilityresponsibilities,approvalandassurancestatements 180AppendixE:Abbreviations,acronymsandglossary 185AppendixF:Contactdetails IBC


ThefollowingtableshowsthekeyperformanceindicatorsofEskom,andincludesalltheshareholder’scompactindicators.

The key performance indicators are colour coded to indicate the link to the executive compact keyperformanceareas.Refertoexecutiveremunerationonpage80.

Executive compact key performance areas

1. OperatesafelyFive-yeartrendfrom2009/10to2013/14

The key performance indicator shows apositivetrendoverthefiveyears,withthearrowindicatingtheperformanceagainsttarget

The key performance indicator shows anegative trend over the five years, with thearrowindicatingtheperformanceagainsttarget

Thekeyperformanceindicatorhasbeenstableoverthefiveyears

2. Keepthelightson

3. Deliveronthecapacityexpansionprogramme

4. Protecttheenvironment

5. Socio-economiccontributionandbuildskills

6. Transformation

7. Improveperformance

Targets Annual actuals


2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Actual

2010/11Actual

2009/10Five-year

trend

Becoming a high-performance organisation

Focusonsafety

Employeelost-timeincidencerate(LTIR),indexSC 0.24 0.36 0.31RA 0.40RA1 0.41RA 0.47RA 0.54RA

Fatalities(employeesandcontractors),number 0 0 23RA 19RA 24RA 25RA 17RA

Improveoperations

Normalunplannedcapabilitylossfactor,%SC,2 10.00 10.00 12.61RA 12.12RA 7.97RA 6.14RA 5.10RA

Less: Constrained unplanned capability loss factor, %3 – – 1.63 3.41 – – –

Underlying unplanned capability loss factor, %4 – – 10.98 8.71 – – –

Normalplannedcapabilitylossfactor,%5 10.00 10.00 10.50RA 9.10 9.07 7.98 9.04

Underlying planned capability loss factor, %6 – – 10.77 – – – –

Energyavailabilityfactor(EAF),%SC 80.00 80.00 75.13RA 77.65RA 81.99RA 84.59RA 85.21

Appendix A: Key performance indicators



2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Actual

2010/11Actual

2009/10Five-year

trend

Totalsystemminuteslostforevents<1minutes,minutesSC 3.80 3.40 3.05RA 3.52RA 4.73RA 2.63RA 4.09RA

Majorincidents,number 1 2 0RA 3RA 1RA 0RA 1RA

Systemaverageinterruptionfrequencyindex,events7 17.0 20.0 20.2RA 22.2RA 23.7RA 25.3RA 24.7RA

Systemaverageinterruptiondurationindex,hoursSC,8 39.0 45.0 37.0RA 41.9RA 45.8RA 52.6RA 54.4RA

Beingcustomer-centric

CustomerserviceindexSC 89.7 88.7 86.6 86.8 85.6 84.4 85.1

EskomKeyCare,index 102.0 102.0 108.7 105.8 105.9 101.2 98.1

Arreardebtsas%ofrevenue(group),% – 0.50 1.10 0.82 0.53 0.75 0.83

Customerservice(largepowerusers–<100GWhperannum),averagedebtors’days – 16.0 16.9 18.3 – – –

Customerservice(largepowerusers–municipalities),averagedebtors’days – 22.0 32.7 22.4 – – –

Customerservice(largepowerusers–includingmunicipalities),averagedebtors’days – – – 18.3 21.8 18.9 18.9

Customerservice(smallpowerusersexcludingSowetodebt),averagedebtors’days – 42.0 50.2 48.2 42.9 45.1 40.5

Customerservicelargepowertopcustomersexcludingdisputes,averagedebtors’days – 14.0 14.5 12.3 14.4 15.5 15.4

Buildstrongskills

Trainingspendas%ofgrossemployeebenefitcosts,%SC,9 5.00 5.00 7.87RA – – – –

Totalengineeringlearnersinthesystem,numberSC 391 2007 1 962RA 2144RA 2273RA 1335 955

Totaltechnicianlearnersinthesystem,numberSC 652 780 815RA 835RA 844RA 692 681

TotalartisanlearnersinthesystemSC,number 1434 2619 2 383RA 2847RA 2598RA 2213 2144

StrategicYouthDevelopmentProgramme,numberSC,10 – 5000 4 325RA 5701RA 5159 – –




2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Actual

2010/11Actual

2009/10Five-year

trend

Leading and partnering to keep the lights on

Keepthelightson

MaintenancebacklogreductionbasedontheEskomTechnicalGovernanceCommitteeapproval,numberSC,11 0 0 0RA – – – –

Integrateddemandmanagementsavings,MWSC,12 174.0 379.0 409.6RA 595.0RA 365.0RA – –

Internalenergyefficiency,GWhSC,13 0.0 15.0 19.4RA 28.9RA 45.0RA 26.2RA –

Delivercapitalexpansion

Generationcapacityinstalledandcommissioned,MWSC 6214 100 120RA 261RA 535RA 315RA 452RA

Transmissionlinesinstalled,kmSC 1539.0 770.0 810.9RA 787.1RA 631.0RA 443.0RA 600.0RA

Transmissioncapacityinstalledandcommissioned,MVASC 5755 3790 3 790RA 3580RA 2525RA 5940RA 1630RA

Generationnewbuildcapacitymilestones(Medupi,KusileandIngula),daysSC 30.00 30.00 48.90RA 43.48 – – –

Totalcapitalexpenditure(excludingcapitalisedborrowingcosts),Rbillion 40.8 62.3 59.8RA 60.1 58.8 47.9 48.7

Reducing Eskom’s environmental footprint and pursuing low-carbon growth

Reduceenvironmentalfootprintinexistingfleet

Relativeparticulateemissions,kg/MWhSC 0.29 0.36 0.35RA 0.35RA 0.31RA 0.33RA 0.39RA

Specificwaterconsumption,L/kWhsentoutSC,14 1.21 1.39 1.35RA 1.42RA 1.34RA 1.35RA 1.34RA

Environmentallegalcontraventionsintermsoftheoperationalhealthdashboard,number15 0 0 2 2 5 – –

Transformation (including the business productivity programme)

Maximisesocio-economiccontribution

Corporatesocialinvestment,Rmillion – 133.0 132.9RA 194.3RA 87.9RA 62.3RA 58.7RA

Jobcreation,number 2000 24965 25 181RA 35759 28616 21477 –

Totalnumberofelectrificationconnections,number16 300013 184975 201 788RA 139881 154250 145360 145284

Appendix A: Key performance indicators (continued)



2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Actual

2010/11Actual

2009/10Five-year

trend

Employmentequity–Company

Employmentequity–disability,%SC 3.00 3.00 2.99RA 2.59RA 2.49RA 2.53 2.54

Racialequityinseniormanagement,%blackemployeesSC 74.0 61.0 59.5RA 58.3RA 53.9RA 52.5 47.3

Racialequityinprofessionalsandmiddlemanagement,%blackemployeesSC 79.0 71.0 71.2RA 69.6 65.7 64.1 62.9

Genderequityinseniormanagement,%femaleemployeesSC 38.0 30.0 28.9RA 28.2RA 24.3RA 23.5 21.6

Genderequity–professionalsandmiddlemanagement,%femaleemployeesSC 42.0 36.0 35.8RA 34.6 32.4 31.6 30.3

Employmentequity–Group

Employmentequity–disability,% 2.5 3.0 2.8RA 2.4RA 2.4RA 2.4 2.3

Racialequityinseniormanagement,%blackemployees – 61.0 59.3RA 58.4 – – –

Racialequityinprofessionalsandmiddlemanagement,%blackemployees – 71.0 70.6RA 69.0 – – –

Genderequityinseniormanagement,%femaleemployees – 30.0 28.8RA 28.5 – – –

Genderequityinprofessionalsandmiddlemanagement,%femaleemployees – 36.0 34.9RA 34.0 – – –

Procurementequity–Company

Localsourcinginprocurement(newbuild),%SC,17 52.0 52.0 54.6RA 80.2RA 77.2RA 79.7RA 73.9RA

ProcurementfromB-BBEEcompliantsuppliers,%SC 75.0 75.0 93.9RA 86.3RA 73.2RA 52.3RA 28.6

Procurementfromblack-ownedsuppliers,% 20.0 10.0 32.7RA 22.1 14.6 – –

Procurementfromblackwomen-ownedsuppliers,% 9.0 5.0 7.2RA 4.7RA 3.3RA 4.3 12.1

Procurementfromblackyouth-ownedsuppliers,%SC 5.0 1.0 1.0RA 1.0 – – –




2017/18Target

2013/14Actual

2013/14Actual

2012/13Actual

2011/12Actual

2010/11Actual

2009/10Five-year

trend

Procurementequity–Group

ProcurementfromB-BBEEcompliantsuppliers,% 75.0 75.0 91.8RA 82.1RA – – –

Procurementfromblack-ownedsuppliers,% 20.0 10.0 35.3RA – – – –

Procurementfromblackwomen-ownedsuppliers,% 9.0 5.0 7.5RA 5.1RA – – –

Procurementfromblackyouth-ownedsuppliers,% 5.0 1.0 1.0RA – – – –

Implementing coal haulage and the road-to-rail migration plan

Implementcoalroadtorailmigrationplan

Coalroad-to-railmigration(additionaltonnagetransportedonrail),MtSC 20.7 11.5 11.6RA 10.1RA 8.5 7.1 5.1

Pursuing private sector participation

IPPpurchases,GWh – 4152 3 671 3516 4107 1833 –

Ensuring Eskom’s financial sustainability

Ensurefinancialsustainability(shareholdercompactratios)–Company18

Costofelectricity(excludingdepreciation),R/MWhSC 732.10 453.40 541.92RA 496.24RA 374.19RA 296.36RA 255.09RA

Interestcover,ratioSC 1.06 1.18 0.65RA 0.27RA 3.27RA 1.40RA 0.77RA

Debt:equity(includinglong-termprovisions),ratioSC,19 3.40 2.17 2.21RA 1.96RA 1.69RA 1.66RA 1.68RA

FFOas%oftotaldebt,%SC 11.08 9.11 9.21RA 8.55 15.06 12.55 7.12

Ensurefinancialsustainability–Company

ElectricityrevenueperkWh(includingenvironmentallevy),c/kWh 89.30 62.37 62.82 58.49 50.27 40.27 31.95

ElectricityoperatingcostperkWh(includingdepreciationandamortisation),c/kWh 73.21 52.67 59.67 54.15 41.28 32.78 28.23

Ensurefinancialsustainability–Group

Workingcapitalratio,ratio 0.79 0.65 0.71 0.68 0.76 0.85 0.89

Freefundsfromoperations(FFO),Rmillion19 49119 29653 27 542 18108 30483 16953 2356

Grossdebt/EBITDA,ratio19 6.80 7.95 10.96 16.20 6.46 7.55 8.40

Debtservicecoverratio,ratio 2.17 1.55 1.21 2.01 3.50 1.90 1.43

Appendix A: Key performance indicators (continued)

Notes:RA Reasonable assurance provided by the independent assurance provider (refer pages 180 to 184).SC Included in the Shareholder Compact.

1. Two late LTIR incidents resulted in the signed-off LTIR for 2012/13 changing from 0.39 to 0.40.2. Normal UCLF – measures the lost energy due to unplanned energy losses resulting from equipment failures and other plant conditions.3. Constrained UCLF – This is UCLF that was a result of emissions and short-term related UCLF due to system constraints to meet the

“Keeping the lights on” objective. This is apportioned between PCLF and OCLF.4. Underlying UCLF – This is the UCLF that is now the difference between normal and constrained UCLF and that is still within

Generation control.5. Normal PCLF – is energy loss during the period because of planned shutdowns.6. Underlying PCLF – The sum of the normal PCLF and the constrained PCLF (the apportionment of the constrained UCLF that is

assigned to PCLF).7. SAIFI is a reliability of supply index – how often on average (frequency) the customer connected would experience a sustained

interruption per annum (number of times per annum).8. SAIDI is an availability of supply index – the average duration (hours) of a sustained interruption the customer would experience per

annum (number of hours per annum).9. Training spend as a % of gross employee benefit costs is a new measure, effective from 1 April 2013.10. Includes learners trained by Eskom, as well as learners trained by Eskom’s suppliers. 11. Refer to pages 114 to 115 for the maintenance backlog reduction strategy, where the extent of the maintenance backlog is explained.12. The basis of measurement changed during the 2010/11 year; prior to that verified savings of 372MWRA (2009/10) were achieved.13. Reporting basis changed during the 2010/11 year; hence no comparatives are available prior to 2010/11.14. The volume of water consumed per unit of generated power from commissioned power stations.15. From 2012/13, environmental legal contraventions has been tracked in terms of the operational health dashboard. In defined

circumstances where the management of a legal contravention indicates specific management issues/failings, it is recorded on the Eskom operational health dashboard. Comparatives for this measure have been provided.

16. The reporting boundary for the number of connections was changed in March 2014 to exclude farm workers and municipality funded connections. The target has been revised to exclude 551 farmer connections. The comparatives have been restated (876 and 963 farmer connections, and 3 801 and zero municipality deducted for March 2013 and March 2012 respectively). A total of 992 farm worker, and 2 879 municipality funded connections were installed for the current year.

17. Local sourcing of procurement for capital expansion projects only.18. The original year to 31 March 2014 budget which was included for the shareholder compact was subsequently revised and the

differences mainly result from additional operating expenditure allocated to Generation. The revised budget ratios are as follows:(i) Cost of electricity (excluding depreciation) 463.25 R/MWh(ii) Interest cover (excluding remeasurement of the shareholder loan) 0.98(iii) Debt/equity ratio 2.19(iv) FFO as a % of gross debt 10.51%

19. Comparative restated.


Appendix B: Other performance indicators


2013/14Actual

2012/13Actual

2011/12Actual

2010/11Actual

2009/10Five-year

trend

Technical

Unitcapabilityfactor(UCF),% 76.9RA 78.8RA 83.0RA 85.9RA 85.9

OCGTloadfactortrend 19.3RA 10.4RA 3.9 1.1 0.3

Nationalloadshedding YesRA NoRA NoRA NoRA NoRA

Energylosses(Transmission),% 2.3RA 2.8RA 3.1RA 3.3RA 3.3

Energylosses(Distribution),% 7.1RA 7.1RA 6.3RA 5.7RA 5.9

Totalsystemminuteslost,number1 3.05RA 20.80RA 6.27 2.63 5.25

Environmental

Liquidfuelsusage–OCGT,ML 1 148.5RA 609.7RA 225.5RA 63.6RA 16.1RA

Environmentallegalcontraventions,number 32RA 48RA 50RA 63RA 55RA

Particulateemissions(tonnage),kt 78.92RA 80.68RA 72.42RA 75.84RA 88.27RA

Carbondioxides,Mt 233.3RA 227.9RA 231.9RA 230.3RA 224.7RA

Sulphurdioxides,kt 1 975RA 1843RA 1849RA 1810RA 1856RA

Nitrogenoxide,kt 954RA 965RA 977RA 977RA 959RA

Low-levelradioactivewastegenerated,m3 180.8RA 183.1RA 184.7RA 165.3RA 137.8

Low-levelradioactivewastedisposedof,m3 28.7RA 54.0RA 53.8RA 81.0RA 216.0

Intermediate-levelradioactivewastegenerated,m3 324.0RA 34.7RA 25.4RA 39.4RA 47.1

Intermediate-levelradioactivewastedisposedof,m3 178RA 0RA 128RA 0RA 266

Ash(produced),Mt 34.97RA 35.30RA 36.21RA 36.22RA 36.01RA

Ash(recylced),% 7.0RA 6.8RA 6.4RA 5.5RA 5.6

SocialSafety

Employeework-relatedfatalities,number 5RA 3RA 13RA 7RA 2RA

Totalcontractorfatalities,number 18RA 16RA 12RA 18RA 15RA


2013/14Actual

2012/13Actual

2011/12Actual

2010/11Actual

2009/10Five-year

trendProcurementequity–Company

B-BBEEexpenditure,Rbillion 125.4RA 103.4RA 72.1RA 41.9RA 20.8LA

Blackwomen-ownedexpenditure,Rbillion 9.6RA 5.7RA 3.3RA 3.5RA 2.5

Black-ownedexpenditure,Rbillion 43.6RA 26.5RA 14.4RA – –

Blackyouth-ownedexpenditure,Rbillion 1.3RA 1.2RA – – –

Procurementequity–Group

B-BBEEexpenditure,Rbillion 119.4RA 96.0RA – – 35.2

Blackwomen-ownedexpenditure,Rbillion 9.8RA 6.0RA – – 3.7

Black-ownedexpenditure,Rbillion 45.8RA – – – –

Blackyouth-ownedexpenditure,Rbillion 1.3RA – – – –

Socialresponsibility

Corporatesocialinvestmentcommitted,Rbillion 132.9RA 194.3RA 87.9RA 62.3RA 58.7RA

Corporatesocialinvestmentexpended,Rbillion 115.4RA 126.5RA 40.8 – –

Corporatesocialinvestment(numberofbeneficiaries),number 357 443RA 652347RA 531762 303983 590440

Employmentequity

Disabilities(company),number 1 283RA 1126RA 1022RA 1002 1073

Disabilities(group),number 1 305RA 1137RA 1032RA 1012 –

Economic

Coalstockdays 44RA 46RA 39RA 41RA 37RA

Freefundsfromoperationsas%oftotaldebt(group),% 9.69RA 8.04 15.2 9.5 1.9

RA Reasonableassuranceprovidedbytheindependentassuranceprovider(referpages180to184).LA Limitedassuranceprovidedbytheindependentassuranceprovider.

Thekeyperformanceindicatorshowsapositivetrendoverthefiveyears,withthearrowindicatingtheperformanceagainsttarget

Thekeyperformanceindicatorshowsanegativetrendoverthefiveyears,withthearrowindicatingtheperformanceagainsttarget

Thekeyperformanceindicatorhasbeenstableoverthefiveyears

Notes:1. Total system minutes is a measure of the severity of all interruptions inclusive of major incidents.2. Increased from thefigure reported in2013(47)due toanadditionalenvironmental legalcontraventionwhichwasnotclassifiedasat the

endofthepreviousfinancialyear–relatedtoactivitiesassociatedwithdevelopmentoffacilitiesatKusilewhichoccurredinMarch2013nocomparatives available as the measure was not tracked.


Appendix C: Awards

Eskomanditsemployeeswhereapplicable,wererecipientsofthefollowingawardsduringtheperiodunderreview:

Eskom brand

SundayTimes Eskomwasvotedas the “Mostdesiredcompany towork for”by theSundayTimesnewspaper.Awardswerealso receivedin thecategories “CommunityUpliftment” (secondplace),and“Topcompanythatdoesthemosttolookaftertheenvironmentandnaturalresources”(secondplace)

OperationKhanyisa ThecampaignreceivedanOrchidfromIndependentNewspapersforitsinnovativeapproachtopublicsectoradvertising,aswellasaLoerieadvertisingawardintheUbuntucategory

TheStarAwardfromCrimeLinewasreceivedfor thesecondyear

13thAnnualOliverEmpowermentawards

Eskomwastherecipientoftwoaccoladesattheeventheldon25April2014,namelytheSocio-economicDevelopmentawardfor the EskomDevelopment Foundation contractor academy,andtheEnterpriseandSupplierDevelopmentawardforGroupCommercial–supplierdevelopmentandlocalisation

Mail&Guardiannewspaper Eskom was voted as the Top Engineering Company byengineering students, and the second best by MBA andProfessionals

Finweek EskomwasnamedthefourthmostpopularbrandinSouthAfrica

Our Guardians

InstituteofPersonnelManagement

Eskom’s human resources function was announced as thewinner in theHumanResources Team of theYear category.TheActingchiefAdvisor forStrategyat theEALwon theHRPractitionerof theyearaward forheroutstandingcontributiontothefield

SAHumanRightsCommission

EskomwasawardedtheGoldenKeyAwardforbestpracticebyapublicinstitution

StarsofAfrica Eskom received the Stars of Africa 2013 Gold award in theEskomContractorAcademy:Incubationcategory

AfricanUtilityWeek DrSteveLennonreceivedalifetimeachievementawardforhisoutstanding contribution to the utilities industry at the AfricanUtilityWeek’sIndustryawards

VisionaryCIOoftheYear Eskomchiefinformationofficer(CIO),SalLaher,wasthewinneroftheprestigiousVisionaryCIOoftheYearaward.TheawardrecognisesanexecutiveinallindustriesacrossSouthAfricawhohasdemonstratedvisionandleadershipinusingtechnologytosupportandgrowbusiness

Our Guardians

BossoftheYear AyandaNakedi, Senior GeneralManager of the Renewablesbusinessunitwasawardedthe2013BossoftheYearaward

GeneralCounseloftheYear

AttheAfricanLegalawards,WillieduPlessis,GeneralManager(Legal Specialist), was awarded the General Counsel of theYearaward

Integrated reporting

NkonkiSOCIntegratedReporting

InJune2013,EskomemergedastheoverallwinneroftheNkonkiSOC Integrated Report Awards 2013. Eskom also scoopedseveralotherawards incategories related togovernanceandtheapplicationofKingIII

InvestmentAnalystsSocietyofSouthernAfrica

Atthe28thannualInvestmentAnalyst’sSocietyawards,EskomemergedasthewinnerforthebestpresentationinthemarketcapaboveR30billioncategory

AssociationofCharteredCertifiedAccountants

Eskom’s integrated report was the winner in the resourcescategory

Ernst&YoungExcellenceinIntegratedReporting

Eskom was adjudged an “Excellent Integrated Reporter” atthe Ernst & Young 2013 inaugural Excellence in IntegratedReportingAwardsevent

CharteredSecretariesSouthernAfricaandJSELimitedAnnualReportaward

In November 2013, Eskom emerged as the joint winner,alongsideTransnet,inthestateentitiescategory

Sustainability

DepartmentofWaterAffairs Eskom was named as the runner-up in the 2013 WaterConservationandWaterDemandManagementSectorawards(mining,industry,power)

Processes

InstituteofManagementConsultantsSouthAfrica

Eskom’s Group IT division received the award for the SAPprojectimplementation

SAPAG Eskom achieved its independent SAP Centre of ExcellenceaccreditationfromSAPglobally,withascoreof192outof200,making it one of only four companies to achieve this level ofaccreditation

EnterpriseMobilityForum Eskom won two Mobility awards – one for best enterprisesolutionforDistribution’shandheldsolutionforfieldworkersandthesecondforbestreturnoninvestmentforamobilitysolution


Sustainability assurance statementsSustainability key performance indicators, set outwithin this report,measure performance onissues material to stakeholders. These key performance indicators have been prepared inaccordancewiththeGRIG3guidelines,supportedbyEskom’sinternalreportingguidelines.

TheKingCodeadvocates thatsustainability reportinganddisclosureshouldbe independentlyassured. KPMG Services Proprietary Limited provided reasonable assurance on selectedsustainabilitykeyindicatorsmarkedwithan“RA”inappendicesAandBofthisreport.

Theboardhaveappliedtheircollectivemindtothepreparationandpresentationoftheintegratedreportandhaveconcluded that it ispresented inaccordancewith the International IntegratedReportingFrameworkVersion1.0.

Theboardbelievestheintegratedreportisafairpresentationoftheintegratedperformanceofthegroupandappropriatelytakesintoconsiderationthecompletenessofthematerialitemsitdealswithand thereliabilityofdataand informationpresented, in linewith thecombinedassuranceprocessfollowed.

MC Matjila TBL MolefeInterim chief executive Finance director29May2014 29May2014

Independent assurance report on selected sustainability information to the directors of Eskom Holdings SOC LimitedWehaveundertakenareasonableassuranceengagementonselectedsustainabilityinformationasdescribedbelowandpresentedinthe2014integratedreport(thereport)ofEskomHoldingsSOCLimited(Eskom)fortheyearended31March2014.Thisengagementwasconductedbyamultidisciplinary team includinghealth, safety,environmentalandassurancespecialistswithextensiveexperienceinsustainabilityreporting.

Subject matterWearerequired toprovidereasonableassuranceon the followingkeyperformance indicatorspreparedinaccordancewiththeGlobalReportingInitiative(GRI)G3guidelines,markedwithan“RA”andpresentedinthetableinAppendixA(keyperformanceindicators)andAppendixB(otherperformanceindicators):• Technicalperformanceparameters:- Unplannedcapabilitylossfactor(UCLF)- Unitcapabilityfactor(UCF)- Energyavailabilityfactor(EAF)- Plannedcapabilitylossfactor(PCLF)- Systemminuteslost(<1minute)- Totalsystemminuteslost- Majorincidents

Appendix D: Sustainability responsibilities, approval and assurance statements

- Systemaverageinterruptionfrequencyindex(SAIFI)- Systemaverageinterruptiondurationindex(SAIDI)- Managementofthenationalsupply/demandconstraints- OCGTloadfactortrend- Energylosses(transmissionanddistribution)- Integrateddemandmanagement(megawatts)- Internalenergyefficiency(gigawatts).

• Environmentalperformanceparameters- Coalroadtorailmigration- Specificwaterconsumption- Liquidfuelusage(dieselandkerosene)- Particulateemissions(totaltonnages)- Relativeparticulateemissions- Carbondioxideemissions- Sulphurdioxideemissions- Nitrogenoxidesemissions- Lowlevelradioactivewaste(generatedanddisposed)- Intermediatelevelradioactivewaste(generatedanddisposed)- Ash(producedandrecycled)- Environmentallegalcontraventionsintermsoftheoperationalhealthdashboard

• Socialperformanceparameters- Engineeringlearners- Technicianlearners- Artisanlearners- Strategicyouthdevelopmentprogramme- Broad-basedblackeconomicempowerment(B-BBEE)expenditure(companyandgroup–attributablespendandpercentage)

- Blackwomen-ownedexpenditure(companyandgroup–attributablespendandpercentage)- Black-ownedexpenditure(companyandgroup–attributablespendandpercentage)- Blackyouth-ownedexpenditure(companyandgroup–attributablespendandpercentage)- Corporate social investment (committed rand value, spend rand value and number ofbeneficiaries)

- Totalemployeeandcontractorwork-relatedfatalities- Employeework-relatedfatalities- Contractorwork-relatedfatalities- Employeelost-timeincidencerate(LTIR)- Disabilities(companyandgroup–numberandpercentage)- Racialequityinseniormanagement(companyandgroup–percentageofblackemployees)- Gender equity in senior management (company and group – percentage of femaleemployees)

- Racialequityinprofessionalsandmiddlemanagement(companyandgroup–percentageofblackemployees)

- Genderequityinprofessionalsandmiddlemanagement(companyandgroup–percentageoffemaleemployees)

- Jobcreation- Trainingspendasapercentageofgrossemployeebenefitcosts


• Economicparameters:- Generationcapacityinstalledandcommissioned- Transmissionlinesinstalled- Transmissioncapacityinstalledandcommissioned(MVA)- Totalnumberofelectrificationconnections- MaintenancebacklogreductionbasedonEskomtechnicalgovernancecommitteeapproval- Generationnewbuildcapacitymilestones- Coalpurchasedstockdays- Costofelectricity(excludingdepreciation)- Capitalexpenditure(excludingcapitalisedborrowingcosts)- Debt:equityratio(company)- Interestcover(company)- Freefundsfromoperations(companyandgroup–percentageoftotaldebt))- Percentageoflocalcontentinnew-buildcontracts

Directors’ responsibilitiesThedirectorsareresponsiblefortheselection,preparationandpresentationofthesustainabilityinformationinaccordancewiththeGRIG3guidelines.Thisresponsibilityincludestheidentificationofstakeholdersandstakeholderrequirementsandmaterialissues,forcommitmentswithrespectto sustainability performance,and for thedesign, implementationandmaintenanceof internalcontrolrelevanttothepreparationofthereportthatisfreefrommaterialmisstatement,whetherduetofraudorerror.

Our independence and quality controlWehavecompliedwiththeCodeofEthicsforProfessionalAccountantsissuedbytheInternationalEthicsStandardBoard forAccountants,which includes independenceandother requirementsfoundedonfundamentalprinciplesofintegrity,objectivity,professionalcompetenceandduecare,confidentialityandprofessionalbehaviour.

In accordance with International Standard on Quality Control 1, KPMG Services ProprietaryLimited maintains a comprehensive system of quality control including documented policiesand procedures regarding compliance with ethical requirements, professional standards andapplicablelegalandregulatoryrequirements.

Our responsibilityOur responsibility is toexpressanopinionon theselectedsustainability informationbasedontheevidencewehaveobtained.Wehaveconductedourengagement inaccordancewith theInternationalStandardonAssuranceEngagements(ISAE3000),AssuranceEngagementsOtherthanAuditsorReviewsofHistoricalFinancialInformation,issuedbytheInternationalAuditingandAssuranceStandardsBoard.Thatstandardrequiresthatweplanandperformourengagementtoobtainreasonableassuranceaboutwhethertheselectedsustainabilityinformationisfreefrommaterialmisstatement.

A reasonable assurance engagement in accordance with ISAE 3000 involves performingprocedurestoobtainevidenceaboutthequantificationoftheselectedsustainabilityinformationand relateddisclosures.Thenature, timingandextent of procedures selecteddependon thepractitioner’sjudgement,includingtheassessmentoftherisksofmaterialmisstatement,whetherduetofraudorerror.Inmakingthoseriskassessmentsweconsideredinternalcontrolrelevant

to Eskom’s preparation of the selected sustainability information. A reasonable assuranceengagementalsoincludes:• AssessingthesuitabilityinthecircumstancesofEskom’suseofthecriteria,asthebasisforpreparingtheselectedsustainabilityinformation;

• Evaluatingtheappropriatenessofquantificationmethodsandreportingpoliciesused,andthereasonablenessofestimatesmadebyEskom;and

• Evaluating the overall presentation of the selected sustainability information and whethertheinformationpresentedinthereportisconsistentwithourfindings,overallknowledgeandexperienceofsustainabilitymanagementandperformanceatEskom.

Ourworkincludedthefollowingevidence-gatheringprocedures:• Interviewing management and senior executives to evaluate the application of theGRIG3guidelinesandtoobtainanunderstandingofthecontrolenvironmentrelativetothereportedsustainabilityinformation.

• Inspectingdocumentationtocorroboratethestatementsofmanagementandseniorexecutivesinourinterviews.

• Testing theprocessesand systems togenerate, collate, aggregate,monitor and report theselectedsustainabilityinformation.

• Inspectingsupportingdocumentationandperforminganalyticalprocedures.• Performing sitework at the nuclear power station (Koeberg), coal power stations (Majuba,Grootvlei,Lethabo,Kriel,Matla,HendrinaandKendal),Transmissiondivisions (CentralandNorthern), theDistributiondivisions (Limpopo,WesternCapeandKwaZulu-Natal),RoshconandRotek.

Webelievethattheevidencewehaveobtainedissufficientandappropriatetoprovideabasisforouropinion.

OpinionIn our opinion, the selected sustainability information for the year ended 31 March 2014 isprepared,inallmaterialrespects,inaccordancewiththeGRIG3guidelines.

Other mattersThereportincludestheprovisionofreasonableassuranceonthefollowingindicators.Wewerepreviouslynotrequiredtoprovideassuranceonthesekeyperformanceindicators.• Plannedcapabilitylossfactor(PCLF)• Black-ownedexpenditure(companyandgroup–attributablespendandpercentage)• Blackyouth-ownedexpenditure(companyandgroup–attributablespendandpercentage)• Racialequityinseniormanagement(group–percentageofblackemployees)• Genderequityinseniormanagement(group–percentageoffemaleemployees)• Racialequity inprofessionalandmiddlemanagement(companyandgroup–percentageofblackemployees

• Genderequityinprofessionalandmiddlemanagement(companyandgroup–percentageoffemaleemployees)

• Jobcreation• Trainingspendasapercentageofgrossemployeebenefits• Totalnumberofelectrificationconnections• MaintenancebacklogreductionbasedonEskomtechnicalgovernancecommitteeapproval• Generationnewbuildcapacitymilestone

Appendix D: Sustainability responsibilities, approval and assurance statements (continued)


• Capitalexpenditure(excludingcapitalisedborrowingcosts)• Freefundsfromoperations(companyandgroup–percentage)

Ourreportdoesnotextendtoanydisclosuresorassertionsrelatingtofutureperformanceplansand/orstrategiesdisclosedinthereport.

ThemaintenanceandintegrityofEskom’swebsiteistheresponsibilityofEskom’smanagement.Ourproceduresdidnot involveconsiderationof thesemattersand,accordinglyweacceptnoresponsibilityforanychangestoeithertheinformationinthereportorourindependentassurancereportthatmayhaveoccurredsincetheinitialdateofpresentationontheEskomwebsite.

Restriction of liabilityOurworkhasbeenundertakentoenableustoexpressanopinionontheselectedsustainabilityinformationtothedirectorsofEskominaccordancewiththetermsofourengagement,andfornootherpurpose.WedonotacceptorassumeliabilitytoanypartyotherthanEskom,forourwork,forthisreport,orfortheopinionwehavereached.

KPMG Services Proprietary Limited

Per PD Naidoo HG MotauDirector Director

Johannesburg Johannesburg29May2014 29May2014

Abbreviations and acronyms

B-BBEE Broad-basedblackeconomicempowerment

BPP Businessproductivityprogramme

DoE DepartmentofEnergy

DPE DepartmentofPublicEnterprises

EAF Energyavailabilityfactor(seeglossary)

EBITDA Earningsbeforeinterest,taxation,depreciationandamortisation

EUF Energyunavailabilityfactor

GW Gigawatt

GWh Gigawatthour(1000MWh)

IIRC InternationalIntegratedReportingCouncil

IPP Independentpowerproducer(seeglossary)

IRP2010 IntegratedResourcePlan2010

KingIII ThethirdKingCommission:CodeofCorporateGovernance

kt Kiloton(1000tons)

kV Kilovolt

kWh Kilowatthour(seeglossary)

ML Megalitre(1millionlitres)

mSv Millisievert

Mt Milliontons

MVA Megavoltampere

MW Megawatt(1millionwatts)

MWh Megawatt-hour(1000kWh)

MYPD Multi-yearpricedetermination

NERSA NationalEnergyRegulatorofSouthAfrica

OCGT Open-cyclegasturbines

OHSAS Occupationalhealthandsafetystandards

PCLF Plannedcapabilitylossfactor

PPPFA PreferentialProcurementPolicyFrameworkAct

RCA Regulatoryclearingaccount

RTS Return-to-servicepowerstations

SAIDI Systemaverageinterruptiondurationindex

SAIFI Systemaverageinterruptionfrequencyindex

UCLF Unplannedcapabilitylossfactor(seeglossary)

Appendix E: Abbreviations, acronyms and glossaryAppendix D: Sustainability responsibilities, approval and assurance statements (continued)


Glossary49M The49MinitiativeaimstoinspireandrallyallSouthAfricans

behindacommongoal–saveelectricityandcreateabettereconomic,socialandenvironmentalfutureforall

Back2Basicsprogramme Anefficiencyprogrammethatfocusesongettingthebasicsrightbysimplifying,standardisingandoptimisingourprocesses,systemsanddata,togetherwithcomprehensiveprocessdocumentation

Base-loadplant Largelycoal-firedandnuclearpowerstations,designedtooperatecontinuously

Dailypeak MaximumamountofenergydemandedinonedaybyconsumersDecommission Toremoveafacility(egreactor)fromserviceandstoreitsafelyDebt:equityincludinglong-termprovisions

Netfinancialassetsandliabilitiesplusnon-currentretirementbenefitobligationsandnon-currentprovisionsdividedbytotalequity

Debtservicecoverratio Cashgeneratedfromoperations/(netinterestpaidplusdebtrepaidexcludingrepaymentsoncommercialpaper)

Demand-sidemanagement Planning,implementingandmonitoringactivitiestoencourageconsumerstouseelectricitymoreefficiently,includingboththetimingandlevelofdemand

ElectricityrevenueperkWh Electricityrevenueincludingenvironmentallevy/kWhsalestotalElectricityoperatingcostsperkWh

Electricityrelatedcosts:(Primaryenergycosts,nettransferpricing,employeebenefitcost,depreciationandamortisationplusimpairmentlossandotheroperatingexpenses)/externalsalesinkWh

Embeddedderivative Financialinstrumentthatcausescashflowsthatwouldotherwiseberequiredbymodifyingacontractaccordingtoaspecifiedvariablesuchascurrency

Energyavailabilityfactor(EAF)

Measureofpower-stationavailability,takingaccountofenergylossesnotunderthecontrolofplantmanagementandinternalnon-engineeringconstraints

Energyefficiency Programmestoreduceenergyusedbyspecificend-usedevicesandsystems,typicallywithoutaffectingservicesprovided

Forcedoutage Shutdownofageneratingunit,transmissionlineorotherfacilityforemergencyreasonsoraconditioninwhichgeneratingequipmentisunavailableforloadduetounanticipatedbreakdown

Freebasicelectricity Amountofelectricitydeemedsufficienttoprovidebasicelectricityservicestoapoorhousehold(50kWh/month)

Freefundsfromoperations Cashgeneratedfromoperationsadjustedforworkingcapital(excludingprovisions)andnetinterestpaid/receivedandnon-currentassetsheldforriskmanagement

Freefundsfromoperationsasapercentageofgrossdebt

Freefundsfromoperations/grossdebtmultipliedby100

Gigawatt OnethousandmegawattsGrossdebt Debtsecuritiesissued,borrowings,financeleaseliabilitiesand

financialtradingliabilitiesplustheaftertaxeffectof:retirementbenefitobligationsandprovisionsforpowerstation-relatedenvironmentalrestorationandmine-relatedclosures

Grossdebt/EBITDA Grossdebt/earningsbeforeinterest,taxation,depreciationandamortisation

Independentnon-executivedirector

Someonewhois:– Notafull-timesalariedemployeeofthecompanyoritssubsidiary

– Notashareholderrepresentative– Hasnotbeenemployedbythecompanyandisnotamemberoftheimmediatefamilyofanindividualwhois,orhasbeeninanyofthepastthreefinancialyears,employedbythecompanyinanyexecutivecapacity

– Notaprofessionaladvisortothecompany– Notasignificantsupplierorcustomer

Internationalfinancialreportingstandards

GlobalaccountingstandardsissuedbytheInternationalAccountingStandardsBoardthatrequiretransparentandcomparableinformation

Independentpowerproducer(IPP)

Anyentity,otherthanEskom,thatownsoroperates,inwholeorinpart,oneormoreindependentpower-generationfacilities

Interestcover Operatingprofitbeforenetfinancecost/(netfinancecostbutbeforeunwindingofdiscountonprovisions,changeindiscountrateandborrowingcostcapitalised)

Kilowatt-hour(kWh) Basicunitofelectricenergyequaltoonekilowattofpowersuppliedtoortakenfromanelectriccircuitsteadilyforonehour(onekilowatt-houris1000watthours)

Load Amountofelectricpowerdeliveredorrequiredatanyspecificpointonasystem

Loadmanagement Activitiestoinfluencethelevelandshapeofdemandforelectricitysothatdemandconformstothepresentsupplysituation,long-termobjectivesandconstraints

Loadshedding Scheduledandcontrolledpowercutsthatrotateavailablecapacitybetweenallcustomerswhendemandisgreaterthansupplytoavoidblackouts

Appendix E: Abbreviations, acronyms and glossary (continued)


Lost-timeinjury(LTI) Aworkinjury,includinganyoccupationaldisease/illnessorfatality,whicharisesoutofandinthecourseofemploymentandwhichrenderstheinjuredemployeeorcontractorunabletoperformhis/herregular/normalworkononeormorefullcalendardaysorshiftsotherthanthedayorshiftonwhichtheinjuryoccurred

Lost-timeincidencerate(LTIR)

Proportionalrepresentationoftheoccurrenceoflost-timeinjuriesover12monthsper200000workinghours

Maximumdemand HighestdemandofloadwithinaspecifiedperiodMegawatt OnemillionwattsMegawatt-hour(MWh) Onethousandkilowatt-hoursor1millionwatt-hoursOpen-cyclegasturbines(OCGT)

Liquidfuelturbinepowerstationsthatformpartofpeak-loadplantandrunonkeroseneanddiesel.Designedtooperateinperiodsofpeakdemand

Outage Periodinwhichageneratingunit,transmissionline,orotherfacilityisoutofservice

Off-peak PeriodofrelativelylowsystemdemandPeakdemand Maximumpowerusedinagivenperiod,traditionallybetween

07:00-10:00and18:00-21:00Peakingcapacity Generatingequipmentnormallyoperatedonlyduringhoursof

highestdaily,weeklyorseasonalloadsPeak-loadplant Gasturbines,hydroelectricorapumped-storageschemeused

duringpeak-loadperiodsPrimaryenergy Energyinnaturalresources(egcoal,liquidfuels,sunlight,wind,

uranium)Pumped-storagescheme Alowerandanupperreservoirwithapowerstation/pumping

plantbetweenthetwo.Duringoff-peakperiodsthereversiblepump/turbinesuseelectricitytopumpwaterfromthelowertotheupperreservoir.Duringpeakdemand,waterrunsbackintothelowerreservoirthroughtheturbines,generatingelectricity

Reservemargin Differencebetweennetsystemcapabilityandthesystem’smaximumloadrequirements(peakloadorpeakdemand)

Returnonaverageequity Profit/lossfortheyearaftertax/averagetotalequityReturnonaveragetotalassets

Profit/lossfortheyearaftertax/averagetotalassets

Systemminutes Globalbenchmarkformeasuringtheseverityofinterruptionstocustomers.Onesystemminuteisequivalenttothelossoftheentiresystemforoneminuteatannualpeak.Amajorincidentisaninterruptionwithaseverity≥1systemminute

Technicallosses Naturallyoccurringlossesthatdependonthepowersystemsused

Unitcapabilityfactor(UCF) Measureofpowerstationavailabilityindicatinghowwellplantisoperatedandmaintained

Unplannedcapabilitylossfactor(UCLF)

Alloccasionswhenapowerstationunithastobetakenoutofservice.Energylossesduetooutagesareconsideredunplannediftheyarenotscheduledatleastfourweeksinadvance

Usednuclearfuel Nuclearfuelirradiatedin,andpermanentlyremoved,fromanuclearreactor.Usednuclearfuelisstoredon-siteinusedfuelpoolsorstoragecasks

Workingcapitalratio (Totalcurrentassetslessfinancialinstrumentswithgroupcompanieslessinvestmentsinsecuritieslessembeddedderivativeassetslessderivativesheldforriskmanagementlessfinancialtradingassetslesscashandcashequivalents)/(Totalcurrentliabilitieslessfinancialinstrumentswithgroupcompanieslessdebtsecuritiesissuedlessborrowingslessembeddedderivativeliabilitieslessderivativesheldforriskmanagementlessfinancialtradingliabilities)

Watt ThewattistheInternationalSystemofUnits’(SI)standardunitofpower.Itspecifiestherateatwhichelectricalenergyisdissipated–energyperunittime

Appendix E: Abbreviations, acronyms and glossary (continued)

EskomHoldingsSOCLimited190

Telephone numbers Websites and email addresses

Eskomheadoffice +27118008111 Eskomwebsite [email protected]

EskomStrategicMarketing +27118002323 Eskomintegratedreport www.eskom.co.za/IR2014

Eskommediadesk +27118003304+27118003343+27118003378+27828057278

Eskommediadesk [email protected]

EskomDevelopmentFoundation

+27118006128 EskomDevelopmentFoundation

www.eskom.co.za/[email protected]

Investorrelations +27118002775 Investorrelations [email protected]

Ethicsofficeadvisoryservice

+27118003700+27118004816+27118003187

Ethicsofficeadvisoryservice

[email protected]

Confidentialreportingline 0800112722 Eskomenvironmental [email protected]

NationalSharecallnumber 08600ESKOM(0860037566)

PromotionofAccesstoInformationAct

[email protected]

Physical address Postal address

Eskom,MegawattPark,2MaxwellDrive,Sunninghill,Sandton,2157

Eskom,POBox1091,Johannesburg,2000

Company secretary Company registration number

EskomHoldingsSecretariat

AnnamarievanderMerwe

(Interimcompanysecretary)

POBox1091

Johannesburg

2000

EskomHoldingsSOCLimited2002/015527/06

Appendix F: Contact details

Switch off between 5pm and 9pm

4 ACTIONS IN4HOURS

Switch off pool pumps

In winter consumers tend to use more electricity due to heating and this creates a higher demand.

There is sufficient capacity to meet the demand most of the day in winter. The concern is during the evening peak between 5pm and 9pm. If that can be reduced by as much as 2000MW, the supply will be adequate.

Eskom remain determined to avoid load-shedding and is asking all South Africans to pull together over the next several months.

Households can help reduce the load and Beat The Peak by following these four easy steps, especially during weekdays:

• Switch off geysers and pool pumps • Switch off non-essential lights • Find alternatives to electric heaters • Respond to the Power Alert and the Power Bulletin messages on both radio and TV

Eskom is confident that together we can keep the lights on throughout winter if we all do our bit to “Beat The Peak”.

Switch off geysers

Switch off all non-essential

lighting

Let’s Beat The Peak together.Eskom Holdings SOC Limited Reg No 2002/015527/06

Switch off electrical heating

9 5 2

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