plastics convertors association presentation to nersa eskom revenue application: multi year price...
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PLASTICSCONVERTORSASSOCIATION
PresentationtoNERSA
ESKOM REVENUE APPLICATION: MULTI YEAR PRICE DETERMINATION.
Polokwane 12th Jan 2010
Thanks very much Nonhlanhla,I have attached to this mail my presentation and a copy of the letter sent in advance.To make arrangements please contact Ms Edith Mkhabela on 012 401 4756 .Kind regards,Mike
PresenterCV. MikeBullockParttimeemployeePCA2009-now.NationalDiplomaPlasticsTechnologyUniversityofEastLondonUK1974.Technical,salesandproductionpositionsManufacturing,trainingandtradingexperience.
MDMetalBoxCAPlasticsDiv1976-82.MDAriesPlastics1982-86.CEOPlasticsIndustryTrainingBoard1990-2000CEOPlasticsConvertorsAssociation2000-2009
ESKOMREVENUEAPPLICATION:MULTIYEARPRICEDETERMINATION.Polokwane12thJan2010
ThePlasticsSector.
Contributiontonationaleconomyperyear=R32billion.ShareofNationalGDP=5-6%Usersofelectricalenergy=2nd(afterAluminium)Annualconversionofrawmaterials=1.2mtons.Numberofemployees=40000Packagingsector=50%ofsales
ESKOMREVENUEAPPLICATION:MULTIYEARPRICEDETERMINATION.Polokwane12thJan2010
ThePlasticsIndustry
Expects Anuninterruptedsupplyof
Goodqualityelectricity
Atacompetitiveprice
ESKOMREVENUEAPPLICATION:MULTIYEARPRICEDETERMINATION.Polokwane12thJan2010
PressuresonthePlasticsIndustry.
Rawmaterialpriceincreasesbasedonworldoilprices.Wageincreasedemandsforlabouraboveinflationrate.
Worldrecession.LimitedbenefitfromFIFAWorldCupandGautrain.
ESKOMREVENUEAPPLICATION:MULTIYEARPRICEDETERMINATION.Polokwane12thJan2010
PressuresonthePlasticsIndustry(cont)
Plasticsbecominguncompetitivecomparedwithmetalandboard.
Industryalreadyathighlevelsofefficiencysolittleopportunitytoimprove.
Packagingsectorcustomersunabletoacceptaboveinflationpriceincreases.
Eskompriceincreases.
ESKOMREVENUEAPPLICATION:MULTIYEARPRICEDETERMINATION.Polokwane12thJan2010
ActionstakenbytheplasticsIndustry.
Rawmaterials.Reductionofimportdutiesfrom10%to0%over3years.
Costoflabour.NegotiatingwithintheMEIBCforaSpecialPlasticsWageTable@65%.
CostofEnergyChallengingEskom’spriceincreases.
ESKOMREVENUEAPPLICATION:MULTIYEARPRICEDETERMINATION.Polokwane12thJan2010
EskomChallenge.Impactofproposedincreases.
Industry average as %age of sales =3%
Year Increase RevaveRevave%age%age
Adjustfor
Inflation8%
RecoveryRecoveryfromfrommarginmargin
Year1 35% 4%4% 3.24% 0.76%0.76%
Year2 35% 5.5%5.5% 3.5% 2.0%2.0%
Year3 35% 7.4%7.4% 3.8% 3.6%3.6%
Industry average as %age of sales =3%
ESKOMREVENUEAPPLICATION:MULTIYEARPRICEDETERMINATION.Polokwane12thJan2010
Industry average as %age of sales =3%
ESKOMREVENUEAPPLICATION:MULTIYEARPRICEDETERMINATION.Polokwane12thJan2010
ThePlasticsRecyclingSector.Theindustryrecyclesabout175000tonsperyearofplastics.(14.5%)
Itusesabout3timestheamountofenergyfortransportation,washing,dryingandprocessingwhencomparedwithnormalplasticsprocessing.
Runbyentrepreneurswithnosubsidies.
Createsover3000fulltimeandabout15000informaljobs.
EskomChallenge.Impactofproposedincreasesonthe
PlasticsRecyclingsector..Industry average as %age of sales =11%
Year Increase RevaveRevave%age%age
Adjustfor
Inflation8%
RecoveryRecoveryfromfrommarginmargin
Year1 35% 15%15% 12% 3%3%
Year2 35% 20%20% 13% 7%7%
Year3 35% 27%27% 14% 13%13%
Industry average as %age of sales =3%
ESKOMREVENUEAPPLICATION:MULTIYEARPRICEDETERMINATION.Polokwane12thJan2010
EskomChallenge.Consequencesofproposedincreaseson
thePlasticsRecyclingsector.
Energytothesectorwouldhavetobesubsidised.
Companieswouldclosedown.
Seriousenvironmentalimpact
Increasepressureonlandfill.
Industry average as %age of sales =3%
ESKOMREVENUEAPPLICATION:MULTIYEARPRICEDETERMINATION.Polokwane12thJan2010
EskomChallenge(cont)
Supplypolicyoughttobereviewed,directorthroughMunicipality.
Introduceacompetitiveenvironmentbecausenowwearebeingaskedtofundinefficiencies.
Generatingcapacityonminesmustbemorecompetitivethanshippingincoal.
ESKOMREVENUEAPPLICATION:MULTIYEARPRICEDETERMINATION.Polokwane12thJan2010
ConclusionPlasticswillnotbeabletoabsorbtheproposedincreaseswithoutseriouslossofmarketsandjobs.
TheNationaleconomycannotaffordbleedinginasectorcontributing6%totheGDP.
Eskommustshoulderitsresponsibilitiesinaresponsiblemanner.
ESKOMREVENUEAPPLICATION:MULTIYEARPRICEDETERMINATION.Polokwane12thJan2010