State of the Power System Quarterly Update

Brian Dames

Chief Executive

10 September 2013

Key messages

Significant Achievements this Winter

Live Lightly this Summer

Continued Progress with New Build and New Connections

Conclusion

2

Key Messages

• Significant achievements over winter:

• We kept the lights on in winter with the help of all South Africans, hard work and disciplined delivery on goals. Thank you to all consumers who Beat the Peak and switched off from 5pm to 9pm

• More maintenance done than in previous three winters

• Improved generation performance to power the economy

• Power bulletin and Power Alert are working

• Live lightly this summer:

• Increased maintenance must be done because our power stations are ageing

• The system will be tight all day in summer due to the load profile

• Use “summer” appliances efficiently

• Continued progress with new build programme:

• There has been progress at Medupi with most of the equipment on site; labour partnership agreement in place, Hitachi issues resolved and workplan in place, progress on C&I issues

• Progress also at Kusile and Ingula

• Sere and Majuba railway construction commenced

• Industrial unrest still a concern

3

Key messages

Significant Achievements this Winter

Live Lightly this Summer

Continued Progress with New Build and New Connections

Conclusion

4

Significant Achievements this Winter

5

• This winter was different in that long

duration generation maintenance was

implemented as planned. Of the 9 units

Eskom committed to maintain, 5 have been

completed, 3 are in execution and 1 will be

released in September 2013.

• In the last quarter the system was tight

however it was better than expected due to

a warmer winter, some savings over peak

and better generation performance.

• Winter peak demand 35 421MW on

11 June 2013 vs. 35 894MW on 7 August

2012.

• Open cycle gas turbines and reduction by

contracted industrial customers were used

to meet demand.

Week Starting Forecast

Expected Shortfall

Inc OCGTs and

operating reserves

Actual Demand

(Including

Interruptibles)

Actual Shortfall Inc

OCGTs and

operating reserves

08/Apr/2013 31600 -432 32393 -1676

15/Apr/2013 31983 -1063 32221 -498

22/Apr/2013 32690 -451 32865 -890

29/Apr/2013 32402 -949 32064 -1134

06/May/2013 33538 -2562 33641 -345

13/May/2013 33959 -3560 33901 -1839

20/May/2013 33742 -2917 34263 -1350

27/May/2013 33834 -3438 33957 -754

03/Jun/2013 34456 -1743 34666 13

10/Jun/2013 35680 -2708 35421 -1227

17/Jun/2013 35230 -1668 35171 -543

24/Jun/2013 35315 -1978 35136 -1408

01/Jul/2013 34872 178 34391 -278

08/Jul/2013 35337 -836 34805 -896

15/Jul/2013 35806 -1155 35301 105

22/Jul/2013 35748 -2162 35227 -231

29/Jul/2013 35285 -1679 35276 -1155

05/Aug/2013 34948 -425 34863 -900

12/Aug/2013 35479 -581 34683 -1537

19/Aug/2013 34952 379 34533 441

26/Aug/2013 34129 -111 32701 1277

02/Sep/2013 33608 494 33331 -158

6

Monthly Average Percentage Operating

Reserves

• While there is adequate reserve available throughout the day, there is very little

reserve available at peaks.

• The relative reserve levels available during the day are lower in summer.

0%

10%

20%

30%

40%

50%

60%

Jan

20

09

Mar

20

09

May

20

09

Jul 2

00

9

Sep

20

09

No

v 2

009

Jan

20

10

Mar

20

10

May

20

10

Jul 2

01

0

Sep

20

10

No

v 2

010

Jan

20

11

Mar

20

11

May

20

11

Jul 2

01

1

Sep

20

11

No

v 2

011

Jan

20

12

Mar

20

12

May

20

12

Jul 2

01

2

Sep

20

12

No

v 2

012

Jan

20

13

Mar

20

13

May

20

13

Jul 2

01

3

Ave

rage

Mo

nth

ly %

Op

era

tin

g R

ese

rve

s

Monthly Avg at 06:00 Monthly Avg at 15:00 Monthly Avg at Peak Monthly Avg at 22:00

Increased Open Cycle Gas Turbine usage

7

High Usage in winter

Higher maintenance levels in winter than before

• More maintenance was done during this winter than in the three preceding years for the

same period - This is inline with the strategy towards achieving a sustainable generation

fleet

• Improved generation plant performance, although not yet stabilised

• Additional short term outages were executed as part of “unplanned outages”

Planned

Maintenance

%

2010 2011 2012 2013

Jan 11.8 10 12.5 13.07

Feb 10.6 7.6 12.8 9.7

Mar 10.7 8.4 13.5 9.1

April 11.6 8.7 13.8 7.94

May 7 6.3 10.5 10.48

June 2.6 4.5 7.41 9.76

July 1.72 2.9 5.45 7.98

Aug 6.36 5.97 5.44 7.83

Sep 10.66 8.8 5.27

Oct 8.54 9.56 8.36

Nov 9.06 7.64 9.63

Dec 12.31 15.58 13.06

Year to date

average

(August) 7.80 6.80 10.18 9.48

8

We are focused on delivering our goals

9

What Eskom said What Eskom did

Maintain at least 9 generation units between April

and August

Of the 9 units Eskom committed to maintaining over

winter to ensure long-term sustainability of the plant, 5

have been completed, 3 are in execution and 1 will be

released in September 2013

We will implement an 80:10:10 generation strategy

over 5 years

In execution – with additional resources deployed to

assist

We would sign up independent power producers

where possible

• Signed round 1&2 Renewable energy programme

(± 2000MW) of which 320 MW will be operational

by end March 2014

• Signed 1005 MW DoE (OCGT X 2) Peaker to be

operational mid-2015

• Short term and Medium Term IPPs contracted

until December 2013 - decision to continue based

on available funding

Demand-side management programme in place to

reduce demand and obtain energy savings

Continued with existing programme

Communicate with our stakeholders on the state of

the system

Intensified communication to Beat the Peak in Winter

& continued with extensive programme of

engagement with stakeholders. 49M business

partners increased to 122

We would improve coal handling and coal quality to

reduce load losses

Coal quality improvement initiatives at Tutuka and

Arnot being implemented. Coal related losses have

reduced at Tutuka but remain a concern at Arnot. 9

South Africans have kept the lights on over winter through participating in Power Alert. Average peak demand reduction of 348 MW over evening peak which is enough to power

17 million 20W lamps, or

3.8 million laptops

10

Key messages

Significant Achievements this Winter

Live Lightly this Summer

Continued Progress with New Build and New Connections

Conclusion

11

Why is Summer different?

Unlike previous Summers this one is different - far more maintenance is planned

20 000

22 000

24 000

26 000

28 000

30 000

32 000

34 000

36 000

38 000

23:00 02:00 05:00 08:00 11:00 14:00 17:00 20:00 23:00 02:00

MW Summer & Winter load profiles

Typical Winter Day Typical Summer Day

Winter : A Peak

profile - peak is

much higher but

for a shorter

period : forecast

this winter

around 36.5 GW

Summer: Table Mountain

Profile - load profile is much

flatter, peak of 32 – 33 GW, so

if there is a constraint, the

system is constrained for the

entire day

12

13

Outlook for summer

• The system remains tight in summer, with different challenges due to the

summer load profile

• Unlike winter, where the demand increases during the evening peak (5pm to

9pm), the demand profile during summer is much flatter with an increased

demand profile throughout the day, primarily due to air-conditioning and

geysers. If there is a constraint, the system is constrained for the entire

day

• Unlike winter where residential customers had the greatest impact, during the

summer, it is primarily the commercial sector that can make the biggest

difference

• The challenge is to ensure that there is sufficient generation capacity

throughout the day, as we continue with our maintenance plan and focus on

reducing unplanned outages

• Summer is typically maintenance season, but this summer maintenance will

increase based on the generation strategy as most of the maintenance is

fixed and cannot be deferred. Outages will be done to ensure that we can

comply with environmental legislation

14

Outlook for summer (ctd…)

• Additional supply and demand-side options have been identified, to meet

medium term electricity demand, but is dependent on funding availability as

a result of the MYPD3 8% determination

• Cahora Bassa continues to operate at 1300 MW with the final 200 MW

expected to be restored later this year

• The open cycle gas turbines will run harder during summer

• Approximately 2 100 MW of interruptible demand, for up to two hours a

week, is available from the aluminium smelters to help manage the

frequency of the power system during unexpected events.

• An energy conservation scheme or similar measure is needed as a safety

net

• This summer, please remember that less is more. The less electricity you

use the more electricity will be available to go around

15

Projected system outlook

• With the maintenance that needs to be done, and the available capacity the system will remain tight

• Supply and demand side levers are required to improve the picture

• Unplanned allowance must be within 4500 MW

4500 MW unplanned

allowance

Date UCLF Planned Forecast Surplus including gas

09-Sep-13 4500 5590 33172

16-Sep-13 4500 5005 33000

23-Sep-13 4500 4659 32432

30-Sep-13 4500 5234 32776

07-Oct-13 4500 4109 32558

14-Oct-13 4500 4277 32753

21-Oct-13 4500 4310 32656

28-Oct-13 4500 4587 32553

04-Nov-13 4500 5237 33070

11-Nov-13 4500 6214 32698

18-Nov-13 4500 5663 32497

25-Nov-13 4500 6138 31875

02-Dec-13 4500 6360 32058

09-Dec-13 4500 6508 31796

18-Dec-13 4500 6570 29735

23-Dec-13 4500 6760 29043

Coal stocks at sufficient levels

16

Actual Stock days F2008, F2012, F2013 vs YTD Actual F2014

25 25 22

20 19 18 17 18

15

12 13 13

40 39 39

36 38

41 41 44 43

41 39 39 38

39 40 42

43 44 45

47 47 48

49 47 48

51 50 51 52

0

10

20

30

40

50

60

APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR

Sto

ck d

ays

Months

Actual Stock days F2008,F 2012, F2013 vs YTD Actual F2014

2007/8 2011/12 2012/13 2013/14

• Coal stock days are above the expected level of 42 days and end of August

2013 at 52 days

• Gaps at two stations that are below the targeted levels are being addressed

16

Communication concept: LIVE LIGHTLY

Few of us think about how we live our lives

and the impact we have on others and our

surroundings.

We are guided by our habits and our routine,

whereby, we consume excessively in many

spheres of our lives… And we do it blindly.

Live lightly is a fresh and inspiring invitation

to re-assess our wasteful and unsustainable

everyday life behaviours.

Challenge Solution It is a social movement that relies on self-

discipline and the human drive to improve

once you know your impact.

Its momentum is sustained through

experiencing real benefits personally

Less is more this Summer.anltimately

competing with your peers.

How to Live Lightly this Summer

• Saving electricity reduces pressure on the grid and cuts your electricity bill and South Africa’s carbon emissions

• The power system remains vulnerable all day during Summer

1. Use air-conditioning efficiently

- Set air-conditioning at 23 degrees

- Close windows and doors to optimize conditioning

- Switch off 30 minutes before leaving the office

2. Continue to switch off all geysers and pool pumps from 5pm to 9pm

3. Limit pool filtering cycles to 2 cycles daily, not between 5pm & 9pm

4. Switch off all non-essential lighting

5. Respond to the Power Alert and Power Bulletin messages by switching off all appliances that are not being used

18

Key Messages

Winter review

Summer Outlook

New Build and New Connections

Conclusion

19

20

Continued Progress with New Build

• Eskom is committed to completing the new build programme and has put the

necessary resources in place to do so – under the leadership of Mr Dan Marokane

• The labour partnership agreement between contractors, labour and Eskom has been

finalised at Medupi and Kusile. This caters for working conditions, mechanism for

dispute resolution and a productivity commitment

• Despite, the recent strike, there has been overall labour stability at Medupi. Good

progress has been made and the first unit is expected on-line in the 2nd half 2014

• Technical issues with Hitachi has been resolved at Medupi and are being implemented

and we are making progress with the Alstom C&I issue.

• Work at the Kusile site is progressing well

• Work has commenced at Sere and is expected to be commissioned by 2014/2015

• Ingula is on track

June 2012

There is significant progress compared to one year ago

June 2013

21

22

New Connections being added to the network

• Eskom has not turned down any request for new connections and

processes all requests.

• Eskom has enough capacity for its customers for most of the day. The

challenge is meeting the few hours at peak. This is where new

arrangements should be considered with residential customers and

large customers.

• Can large customers structure their production such that they shift

their production out of the peak periods?

• Currently we have 87 projects in the pipeline with a potential total

capacity of 3525MW coming on stream in the next 10 years.

23

Required capacity per sector grouping

Economic sector Number of

projects

Additional

Demand

(MVA) Collection, Purification and Distribution of Water 1 3

Ferro chrome 10 848

Ferro manganese 1 22

Inter-urban railway transport 10 174

Manganese 1 22

Manufacture of cement, lime and plaster 1 0

Manufacture of cement, lime and plaster 3 69

Manufacture of pulp, paper and paperboard 1 2

Mining of Coal and Lignite 9 218

MINING OF COAL AND LIGNITE 1 65

Mining of Diamonds (including Alluvial Diamonds) 1 20

Mining of Gold and Uranium Ore 8 289

Mining of Iron Ore 4 313

Mnfg of basic chemicals, exc fertilizers nitrogen compounds 1 30

Other chemical and fertiliser mineral mining 1 17

Other iron and steel basic industries 1 10

Other metal ore mining, except gold and uranium 1 35

Other minerals and materials n.e.c. 2 28

Other primary non-ferrous, non-precious metals 1 65

Petrol, fuel lube oils greases, prim. from crude oil 3 40

Platinum group metals 20 918

Telecommunications 1 100

Titanium 4 237

Treating and coating of metals 1 3

Grand total 87 3525

Key messages

Significant Achievements this Winter

Live Lightly this Summer

Continued Progress with New Build and New Connections

Conclusion

24

Winter update conclusions

• Eskom continues to deliver on its mandate in the face of tough challenges – since 2008

• Eskom has not turned down applications from new customers and continues to power the economy

• Significant achievements over this winter means that Eskom is in better shape to deal with the challenges of summer 2013

• Demand side management is working because our customers are responding magnificently

• Live lightly this summer – there are benefits for all of us in doing so

• Continued progress with the new build programme is encouraging

25

26

Summer outlook conclusions

• South Africa’s power system will be tight for the next few years until the next few units from the build programme comes on-line

• The system will remain tight in Summer, as we have an ‘All day Table Mountain profile’ in the Summer months

• Despite the tight system, South Africans have rallied to the call and have demonstrated that together we can keep the lights on. We thank you, but call on you again in the summer months

• Eskom will continue to drive its maintenance plan and commit to deliver on the build programme

• Commercial and residential customers can make a difference as less is more this summer. The less electricity you use the more there is to go around. Every little bit helps.

Thank you

Voted as Most Desired Company to Work For (Sunday Times), 2nd in Community

Upliftment (Sunday Times), 2nd top Company that does most to look after the

environment and natural resource (Sunday Times), Star Award for Operation

Khanyisa, 4th most popular brand in South Africa (Finweek), Voted as Top

Engineering Company in South Africa by Engineering Students and second

best by MBA and Professionals (Mail & Guardian), Winner of the Best Integrated

Reporting Award (Nkonki)