1 PPC Presentation of the 2011/12 Annual Report. OPENING REMARKS MS NELISIWE MAGUBANE DIRECTOR GENERAL 11 OCTOBER 2012

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PPC Presentation of the

2011/12Annual Report

OPENING REMARKS

MS NELISIWE MAGUBANEDIRECTOR GENERAL

11 OCTOBER 2012

PRESENTATION

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INTRODUCTION

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• In November 2010 the department’s management came together for its annual strategic planning.

• During this process we came out with seven strategic objective which are aligned to government’s 12 outcomes as well as take into account the new government outcome based planning approach.

• Our strategic plan and annual performance plan were based on several assumptions that included the availability of financial and HR resources.

• As the Department of Energy, we are committed to the provision of an enabling platform for other sectors to speed up economic growth and transformation, create decent jobs and sustainable livelihood

INTRODUCTION

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During the year under review, the Department operated within an environment where:•The credibility in South Africa Energy policy trajectory was enhanced by the IPPs procurement process that we painstakingly championed, which I must add has received acclaim far and wide.•We now need to ensure that we collectively give it the final push.•On the geopolitical front, we had to contend and develop a response plan to the sanctions by the US and EU on the Islamic Republic of Iran.•The vulnerability of the refining sector was exposed with a number of refinery shutdowns which diverted some of our attention into monitoring contingency plan.

DEPARTMENT’S RESPONSE TO GOVERNMENT OUTCOMES

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DEPARTMENT’S STRATEGIC OBJECTIVES

•Energy supply is secured and demand is well managed

GOVERNMENT OUITCOMES

Government outcome 4

• An efficient, competitive and responsive energy infrastructure network


• Improved energy regulation and competition


• Efficient and diverse energy mix for universal access within a transformed energy sector


• Environmental assets and natural resources protected and continually enhanced by cleaner energy technologies


• Mitigation against, and adaptation to, the impacts of climate change, and


• Good governance for effective and efficient service delivery


DEPARTMENT OF ENERGY

PPC PRESENTATION ON THE

2011/12 ANNUAL REPORT PROGRAMME 1: SUB-PROGRAMME: CORPORATE SERVICES

Mr George MnguniDeputy Director General

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1. Introduction

2. Key focus areas for 2011/12

3. Performance against targets/predetermined objectives

4. Challenges/way forward/conclusion

2011/12 Annual Report Corporate Services

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1. Key focus areas for 2011/12

The main focus areas for Corporate Services for the year under review were the following:

• Provision of Human Resource and Auxilliary support Services;• Provision of Legal Support Services to the Ministry and the department;

and • Provision of Communication and Knowledge Management Support

Services.



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2. Key Achievement/ Partially and Non Achievements areas for Corporate Services

•HR Plan of the DoE finalised and implementation commenced;

•Organisational Structure and Framework for Occupational Classifications not achieved because of prolonged consultation process with Employee Organisations;

•Matching and placement of staff also delayed due to the aforementioned;•All HR Policies finalised on target and implementation is ongoing;

•Turnaround time for filling of vacancies improved to remarkable three months average;

•Interventions to maintain vacancy rate of 9.6% against the Cabinet approved baseline of 15% were also implemented;


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•All Performance Agreements and Workplans finalised before 30 May 2011 as required and appropriate disciplinary sanctions imposed for non-compliance;

•Performance reviews for staff also finalised before end of June;•Public Service Wellness Framework was approved and implemented in the first quarter of 2011;•The Skills Audit and plan finalised and submitted as required;

•HRD Strategy and Training plan were finalised before end of June 2011 and implemented;

•Managed to train 443 employees in administrative and functional areas;

•DoE has exceeded the 50% representation target of women; and

•All Presidential hotline cases were resolved.


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2. Key Achievement/ Partially and Non Achievements areas for Corporate Services•The Records management plan is approved by National Archives and is being implemented; •Security Risk Management Plan is in place and implementation is ongoing;

•Standard Operating procedures and Contingency plan finalised and implemented;

•Alternative office accommodation was acquired through Public Works and DoE is settling in; and

•On Legal Services front, all legal request were finalised and a target of 50% exceeded with 66% of requests received dealt with within the prescribed time- frame.


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•The draft Communication Strategy was implemented- capacity constraints impacted negatively on the finalisation of strategy;

•Communications policies and procedures could not be finalised because of capacity constraints, particularly at SMS level;

•External projects including Public Participation Programmes and DoE events were continuously managed;•Daily and Weekly media monitoring and daily media liaison services were provided as required;

•Internal Communication plan was also developed and implemented; and•Events calendar was developed and implemented on an ongoing basis.


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•The Marketing, advertising and branding plan was developed and implemented;

•Publications services were also established/developed and implemented;

•The Stakeholder Management plan was developed and implemented, except the strategy because of lack of capacity to do same in the relevant unit;

•The Draft Knowledge Management Strategy was developed, but approval was delayed due to planned relocation to alternative building and lack of space.


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• Recruitment of persons with disabilities was challenge , thus the target of 2% could not be achieved- A strategy is developed and submitted for consideration;

• Implementation of the structure at Macro-Organisational level has posed challenges relating to reporting and lines of authority- This has now been addressed through matching and placement of affected following a decision by the leadership of the DoE, after finalisation of the structure;

• Establishment of a Knowledge Management Centre as well as development and implementation of a strategy and plan- This challenge has also been addressed following relocation of DoE to the new premises.

ANNUAL FINANCIAL STATEMENTS AND THE REPORT OF THE AUDITOR GENERAL

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INTRODUCTION• The year under review, year 2011/12, is the second year that the

Department of Energy has been operating as an independent department.

• There has not been any significant increase in the Department’s budget allocation between the years 2010/11 and 2011/12.

• Of the 12% increase between the two years, 10.6% went to transfers and subsidies and only 1.4% went to the Department’s operational budget.

• The challenges of the inadequate baseline allocation for the Department resulting from the split of the Department of Minerals and Energy remain – however engagements between NT & DoE are in progress

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INTRODUCTION (cont)• From the 2011/12 total budget allocation of R6.2 billion, 95% went

to transfers and these are:o Integrated National Electrification Programme - R3.2 billion;o Transnet’s New Multi-Product Pipeline - R1.5 billion;o NECSA - R586 million;o Energy Efficiency Demand Side Management - R398 milliono And the balance were transfers to State Owned Entities and

other smaller programmes.

• Only 5% of the total budget was allocated for the Department’s operational needs, amounting to R305 million.

• The Department spent 99.6% of its allocated 2011/12 budget.

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FINANCIAL PERFORMANCEStatement of Financial Performance for the year ended

31 March 2012

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2011/12 BUDGET OVERVIEWMajor spending areas

DETAILS Budget Actual spend 31/03/2012

Actual % on budget spend

Rands Million R'000 R'000 %

Transfers and subsidies 5,841,947 5,829,000 99.8%

Compensation of Employees 184,869 184,837 100.0%

Goods and Services 164,877 156,337 94.8%

Payments for capital assets 9,155 4,029 44.0%

Payments for financial assets 61 59 100.0%

Totals : Major spending areas 6,200,909 6,174,262 99.6%

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2011/12 BUDGET OVERVIEWPer Programme

DETAILS Budget2011/12

Actual spend 2011/12

Actual % on budget spend

R'000 R'000 %

Totals 2011/2012 6,200,909 6,174,262 99.6%

Administration 204,561 196,259 95.9%

Energy Policy and Planning 1,545,785

1,545,690 100.0%

Energy Regulation 541,572 529,268 97.7%

National Electrification Programme

3,265,580

3,264,540 100.0%

Nuclear Energy and Regulation 643,411 638,505 99.2%

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FINANCIAL PERFORMANCEAnalysis of financial performance:• The department’s total spending for the year was R6.174 billion (99.6%) of the total budget of R6.20 billion.

•The above represents an under spending of 0.4% i.e R26.65 million.

•A total of R12.95 million (49%) of the overall balance of R26.65 million remaining are for Transfer payments

•The composition of the overall balance of R26.65 million is as follows:Compensation of Employees :R.032 million Goods & Services :R8.55 million Transfer Payments :R12.95 million Capital Assets :R5.13 million

•

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2011/12 ANNUAL REPORTPROGRAMME 1: SUB-PROGRAMME:

CHIEF FINANCIAL OFFICER

Ms Yvonne ChettyChief Financial Officer

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FINANCIAL PERFORMANCEAnalysis of financial performance: • A rollover request was submitted to NT for the unspent budget amount of R26.65 million (Subsequently 25.83 million was approved)

• The entire unspent budget amount for Goods and Services and Capital Expenditure was fully committed in the 2011/12 financial year.

Goods & Services•The Department processed payments for International membership fees to a total of R8.1 million.•These payments remained in the Department’s Commitments awaiting the release of the foreign funds by the Reserve bank•The Reserve bank transferred the funds to the relevant foreign recipients on the 2nd & 3rd of April 2012

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FINANCIAL PERFORMANCEAnalysis of financial performance: Transfer Payments•An amount of R11.8 million of the overall balance of R12.9 million within this category was attributable to funding specifically appropriated for the EDI-H was not transferred.•EDI had sufficient funding to meet their monthly obligations and other company liabilities.• A rollover request was submitted to National Treasury for this

amount to be directed towards the operational costs of the ADAM project – which was subsequently approved.

CAPEX•Funds earmarked for capital assets could not be spent due to the delay of the DoE relocation. A request for a rollover of these funds was submitted to National Treasury and approved.

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FINANCIAL PERFORMANCE

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Detailed expenditure ( Top 5 Expenditure)

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FINANCIAL PERFORMANCEStatement of Financial Position as at 31 March 2012

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2011/12R'000

ASSETSCurrent assets 26, 935

Unauthorised expenditure 14,860Cash and cash equivalents 11,853Prepayments and advances 98Receivables 124

Non-current assets 2,205

Investments 2,205

TOTAL ASSETS 29, 140

LIABILITIESCurrent liabilities 26, 935

Voted funds to be surrendered to the Revenue Fund 26, 647Dept. Revenue and NRF Receipts to be surrendered to the Revenue Fund

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Payables 70

TOTAL LIABILITIES 26, 935

NET ASSETS 2,205

Unauthorized Expenditure – R14.86m

•The unauthorized expenditure of R14.86 million is due to an Infrastructure Grant transfer payments paid to the Mthonjaneni Municipality in May 2010.

•The transfer was appropriated in the 2009/10 financial year , however the payment to the municipality was processed in March 2010, but transferred in May 2010 due to the system rejection of the banking details.

•This amount is awaiting condonation and authorization from National Treasury. The department has subsequently implemented the necessary controls to avoid a recurrence.

ANALYSIS OF FINANCIAL POSITION

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Irregular expenditure – R39.75 million•All irregular expenditure incurred in the 2010/11 financial year has been condoned.

•For 2011/12 financial year the R39.485 million irregular expenditure closing balance - 99% relates to lease payments for office accommodation. (R22.09 million of this amount is for the current year and R17.395 million is for the prior year).

•All of the above irregular expenditures have been condoned subsequently to the year end.

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FINANCIAL PERFORMANCEInvestments – R2.205 million

•The department is a 100% shareholder in The South African Nuclear Corporation Limited (NECSA) and own 2,205 shares of R1 each

Current Liabilities – R26.935 million

•The breakdown of the above is as follows;•R26.64M - surplus of voted funds, surrendered to NT•R218, 000 - departmental revenue, surrendered to NT•R67 000 - owing to SARS – paid post year end•R3, 000 - owing to GEPF – paid post year end

(NB: Surplus funds account for 99% of the current liabilities).

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FINANCIAL PERFORMANCEReport of the Auditor General

Audit opinion:

•The department received an unqualified audit opinion, without any emphasis of matter.

•The department has completed an action plan to address all outstanding AGSA findings.

•Most of the audit findings were addressed by 31 July 2012

•NB: All of the SOE’s reporting to the DoE have also received an unqualified audit opinion.

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2011/12 ANNUAL REPORTPROGRAMME 1: SUB-PROGRAMME:

CHIEF OPERATING OFFICER

Mrs Thandeka ZunguChief Operating Officer

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SUMMARY OF PERFORMANCE AGAINST PREDETERMINED OBJECTIVES

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Performance against Targets / Predetermined Objectives

Objective Key Focus Area(s)Promote corporategovernance

To provide Governance and Compliance support to the Ministry and DoE through the facilitation and coordination of the following functions. •Ensuring that the DoE’s outcomes oriented Strategy, Enterprise Risk Management Strategy and Fraud Prevention Plan are effectively implemented.•Monitor and Evaluate the Departments Programme Performance Information and Reporting against the pre-determined objectives.•Monitor Compliance of the DoE’s Public Entities with Legislations, Finance and Administrative requirements.•To handle and Coordinate Internal liaison in the field of Energy

BRANCH PERFORMANCE

The COO Branch(Governance and Compliance) started operating in May 2010 with less than 1% capacity and consist of the following Chief Directorates:Strategy and Risk ManagementMonitoring, Evaluation and ReportingState Owned Enterprise OversightInternational CoordinationStrategy and Risk Management•The Department held its 2nd strategic planning session in November 2011 which resulted in the production of 2011/12 – 2015/16 Strategic Plan and the 2011/12 Annual Performance Plan that are aligned to Government Outcome based approach.•The Department’ s revised Strategic Plan for 2011/12-2015/16 and the APP were tabled in Parliament in February 2012 and later presented to the Portfolio Committee on Energy and Select Committee on Economic Development.

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BRANCH PERFORMANCE(CONT)

Strategy and Risk Management (cont)•The Department has established a Risk Management Unit which includes the Anti-Fraud and Corruption function during the year.•The Risk Assessments were conducted, the Risk Register was produced and mitigation strategies were put in place to enhance the control environment.•Standard Operating Procedures for various functional Units within the DoE have been developed.

Challenges/ partial and non-achievements•Implementation of the Enterprise-Wide Risk Management Strategy for the Department•Absence of risk management tool•Provision of the department’s Service Delivery Plan

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BRANCH PERFORMANCE (CONT)

Monitoring, Evaluation and Reporting•The Monitoring and Evaluation Unit during the period under review developed the DoE’s foundational M&E guidelines, namely the M&E Framework, M&E Policies, Procedures and Quarterly Performance Reporting templates as well as Data collection instruments•Reported on the department’s performance – quarterly and annually

Challenges/partial and non-achievements:•43% target achievement•Timeliness of management reports•Development and finalisation of the Department’s Standard Operating Procedures.

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State Owned Enterprise Oversight•Provide oversight of state owned entities reporting to the Minister, monitor performance against approved plans and ensuring that all SOE Boards are fully capacitated by appointing board members for SANEDI, NERSA,CEF, and PetroSA . •The CEO of PetroSA was appointed during the 2011/12 FY. •During the year under review, oversight Quarterly meetings between the Minister and the Chairpersons of the SOE’s, the DG quarterly meetings with the CEO’s and the DoE officials and the SOE’s Executives were convened to review the entities Performance against the approved plans and implementation of improvement plans to enhance performance.•Following the Cabinet decision to halt the operations of the Electricity Distribution Industry Holdings, the branch is leading the process of winding up in collaboration with the appointed Administrator and EDIH Board

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Challenges/partial and non-achievements

•EDIH winding up by year end•Finalisation of the SOE Oversight Framework (approved draft) to accommodate the recommendations of the Presidential SOE Oversight Committee.•Sector risk management•Department’s compliance monitoring

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International Coordination

•During the year under review, the Department Coordinated the African Ministerial Energy Conference which was attended by more than 40 Energy Ministers.•The Conference produced the declaration which outlines the Energy needs for the Continent and Political commitments to alleviate Energy Poverty.•The Department was responsible for the COP17/CPMP7 preparations.•The Minister of Energy visited the following countries during the year under review: Zambia, Mozambique, Botswana and Namibia•The DoE International Relations Strategy, was developed and approved.•All International Agreements/ MOU’s signed by the DoE has been audited during the year under review.


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International Coordination (cont)•Agreements- declaration of Intent with the following Countries and Organizations were concluded: IEA, Swiss Confederation, Ghana, Lesotho, Denmark, Korea and DRC.•The SARi was signed with the United Kingdom, Germany, Denmark, Norway and European Investment Bank•The Department participated in Project Steering Committees that led to the DOI on SARi

Challenges/partial and non-achievements•Approval of the International Relations Strategy for the department – draft by year end•Approval – audit agreements signed by the department.


PROGRAMME 2 : HYDROCARBONS &

ENERGY PLANNING

Mr. Tseliso MaqubelaDeputy Director General

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INTRODUCTION

•Purpose of the Branch: Undertake integrated energy planning to promote the sustainable use of energy resources by developing appropriate policies and regulations that promote the sustainable use of petroleum, coal gas and renewable energy sources.

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A BRIEF NOTE OF LINE FUNCTIONS

•In order to achieve the government mandate this Programme performs the following functions:

• Hydrocarbons and Energy Planning Management provides overall management of the programme.

• Energy Planning promotes the sustainable use of energy resources through integrated energy planning (In terms of the National Energy Act, Act No. 34 of 2008, the Minister is required to publish and Energy Plan on a annual basis).

• Hydrocarbons develop policy and regulations to manage petroleum, coal, and natural gas.

• The Petroleum Controller is currently included under this sub-programme and is responsible for the administration and issuing of petroleum licenses, monitoring and enforcement of license conditions as prescribed by the Petroleum Product Act (Act No.120 of 1977) as amended.

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BRANCH HIGHLIGHTS • Operationalisation of the NMPP and facilitation of the linefill which

improved infrastructure for security of supply.• Compliance inspections for Petroleum Licensing and the sting

operations to uncover illegal fuel sales.• Petroleum Products Licensing Awareness Campaigns done in all

provinces.• Participation of the Department in the development of the Coal

Roadmap and the facilitation of its completion.• Implementation of the Regulatory Accounting Systems through

introducing the framework in the fuel margins.• Intervention on new Job Industry Sites to facilitate accelerated job

creation.

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BRANCH HIGHLIGHTS (CONT…)• Increase in turnaround time for processing of all applications that

meet the acceptance criteria.• Development of Standard Operating Procedures for all processes

thereby improving consistency in the application of the Law.• Blending value and break even price for biofuels established. Support

mechanism not finalised. • Regulatory on mandatory provision of Energy Data promulgated.• CCS Road Map noted and supported to Cabinet.• IEP Draft Strategy presented to Cabinet.• LFC Audit Report completed.• On behalf of the Director General the branch spearheaded

Government Response to the sanctions imposed on IRAN by US and the EU.

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WORK IN PROGRESS/AREAS OF IMPROVEMENT

• Completion of the IEP• Underestimation of the complexity of the task given the resource

constraints• Gas Amendment Bill not completed.• Petroleum Amendment Bill not completed.• Regulations on Cleaner Fuels Specifications not promulgated as was

planned.• Regulations on Mandatory Blending of Biofuels not finalised.• Integrated Energy Centre programme delayed due to administrative

and logistical challenges.• Strategic Stocks Framework not finalised• 20 Year Plan not completed

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WORK IN PROGRESS/AREAS OF IMPROVEMENT (CONT….)

• Fuel Pricing Framework Review not completed• Principles for incentivising investments in cleaner fuels not done• LPG Strategy not completed (Tactical Move)

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CHALLENGES• Reluctance to submit/provide data• Human Resource Challenges Internally/skills• Unplanned Refinery outages and impact on personnel • Quality Management System issues• Inertia

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2011/12 ANNUAL REPORTPROGRAMME 4: NUCLEAR

Mr Zizamele MbamboDeputy Director General

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PRESENTATION OUTLINE

1. Introduction (Nuclear branch mandate)2. Line Function3. Key Focus Areas for 2011/124. Highlights for the Reporting Period 2011/125. Performance Against Targets6. Challenges7. Way forward/Conclusion

INTRODUCTION

• Nuclear Branch mandate:• Implement Energy Policy• Development of nuclear technology• Service Minister’s obligations in terms of nuclear legislation, NNR

Act, Nuclear Energy Act, NRWDI• Implementation of the Radioactive Waste Management Policy

and Strategy• Establish National Radioactive Waste Disposal Institute• Establish Radwaste Fund bill• Oversight of Nuclear Organizations linked to Department• Develop required nuclear regulations

INTRODUCTION (CONT..)

• Ensure implementation of National Nuclear Disaster Management Plan

• Decommissioning and decontamination of past strategic nuclear facilities

• International Obligations• International cooperation of nuclear technology (IAEA)• Coordination of Bilateral and Multilaterals• Administer all matters related to nuclear non-proliferation as

required by national and international agreements• Nuclear Non-Proliferation Directorate ensures that all nuclear

material and equipments are accounted for and used for peaceful purpose only

LINE FUNCTIONS NOTESNuclear Branch consists of 3 Chief Directorates for the following:

1.Nuclear Safety, Liabilities and Emergency Management• Administer all matters related to nuclear safety.• Ensure nuclear liabilities (past, present and future activities) are accounted for and managed optimally.• Ensure emergency management as required by legislation and international agreements.

•Nuclear Policy and Technology1. Develop, monitor, and govern implementation of the nuclear energy policy related to nuclear power (including current IRP nuclear transaction) and other technology applications.

•Nuclear Non-Proliferation and Security•Ensure that nuclear material, facilities, equipment and related technologies are used for peaceful purposes only.

KEY FOCUS AREAS• Approved Nuclear Procurement Programme relative to IRP• Cabinet approval of phased decision making approach• Nuclear Fuel Cycle Infrastructure developed for beneficiation of uranium to

support new nuclear build priorities• Complete prefeasibility studies• Established National Waste Radioactive Disposal Institute• Approved Business Plan and Budget• Listed as schedule 3 entity in November 11• Community outreach• Standardization of security measures at ports of entry including installation of

Radiation Portal Monitors• Amendment of nuclear legislation• National Nuclear Regulator Act Amendment• Nuclear Energy Act Amendment• Nuclear Safeguards compliance inspections & audits • Funding provisions legislated for radioactive waste management

HIGHLIGHTS FOR THE REPORTING PERIOD 2011/12

•During the period under review, in November 2011, Cabinet approved the establishment of the National Nuclear Energy Executive Coordination Committee (NNEECC).•The aim of NEECC is to oversee the roll-out of the nuclear build programme.

•The NNEECC, headed by the Deputy President, is the authority for decision making, monitoring, and ensuring general oversight of the nuclear energy expansion programme.

•In May 2011, South Africa hosted an IAEA’s 2nd Regional Conference on Energy and Nuclear Power in Africa. Such events are important in order to foster exchanges and interactions on regional approaches to energy security.

HIGHLIGHTS FOR THE REPORTING PERIOD 2011/12 (CONT)

• In April 2011 South Africa participated in the Review Meeting of the Convention on Nuclear Safety(CNS), which culminated into the June 2011 Ministerial CNS.

• The Ministerial Conference was organised by the International Atomic Energy Agency.

• South Africa undertook the necessary “stress” tests (safety re-assessment) on its nuclear installations, the recommendations resulting from this exercise will be implemented to ensure safety is maintained.

HIGHLIGHTS FOR THE REPORTING PERIOD 2011/12 (CONT)

• The IAEA Self Assessment Review (Integrated Nuclear Infrastructure Review) was initiated during this reporting period.

• The Review will be completed in the coming financial year. • The purpose is to systematically and methodically evaluate the

gaps in our nuclear infrastructure that could delay or hamper progress of the nuclear new build.

• The review is conducted accordance with the International Atomic Energy Agency’s milestones approach.

• The amendments of the founding legislation as well as the development of new legislation for long-term funding provisions for radioactive waste management are being undertaken within the nuclear energy policy implementation.

HIGHLIGHTS FOR REPORTING PERIOD 2011/12 (CONT)

• Consultations continue on the installation of appropriate radiation detection equipment at identified ports of entry.

• This is a multi-stakeholder project involving both international and national stakeholders.

• When this project is completed, South Africa will be able to prevent illicit trafficking of nuclear materials through our ports of entry.

• Following the approval of the business case for the National Radioactive Waste Disposal Institute, physical establishment of the entity remains a challenge due to lack of funding. Processes to fund the operationalisation of the Institute in progress

PERFORMANCE AGAINST TARGETSPerformance Indicator Baseline Out put Target 2011/12 Actual (2011/12) Reason for variance

Approved NuclearProcurement Programmerelative to IRP.

No Procurement Programme atpresent.

Materials Test Reactor FuelManufacturing Facilities only (inconjunction with NECSA).

National Radioactive WasteDisposal Institute Act, 2008

Achieved-Cabinet approval of PhasedDecision-Making

Approach.

Achieved- Cabinet approvedthe Phased Decision-MakingApproach & establishment ofthe NNEECC on 9 November2011.

No variance

Nuclear Fuel CycleInfrastructure developed forbeneficiation of uranium tosupport new nuclear buildpriorities.

Established National Radioactive Waste Disposal Institute (NRWDI)

No Procurement Programme atpresent.

Materials Test Reactor FuelManufacturing Facilities only (inconjunction with NECSA).

National Radioactive WasteDisposal Institute Act, 2008.

Completed pre-feasibility studies

Approved business plan & budget

Completed

Achieved

This project is not critical to the Nuclear Programme at this stage. It forms part of the Phased Decision Making Approach

Implementation of NRWDI transitional structure unfunded

PERFORMANCE AGAINST TARGETSPerformance Indicator Baseline Out put Target 2011/12 Actual

(2011/12)Reason for variance

Security measures at portsof entry standardized.5.2 Portal Radiation Monitors atmain ports of entry installed

Established security systemsat ports of entry.

Standardization of securitymeasures at main ports ofentry including installationof Radiation Portal Monitors(RPMs).

Not Achieved Consultation process withSARS, ACSA, & Transneton-going. The visit by thesupplier has been undertaken &measurements confirmed. Thetechnical report for one of threeports has been approved bySouth Africa & IAEA.

National NuclearRegulator Act amended.

Nuclear Energy Actamended.

Legislation governingnuclear sector over 10 years old.

Rescheduled due todependency on procurementprocess.

Not achieved Inputs have been receivedfrom the NNR regarding theprovisions of the NationalNuclear Regulator Act, Act 47 of 1999, that need to be amended.The proposed amendments will be taken through the relevant process which will culminate in the Bill being submitted toParliament.

PERFORMANCE AGAINST TARGETSPerformance Indicator

Baseline Out put Target 2011/12 Actual (2011/12)

Reason for variance

Funding provisionslegislated for radioactive wastemanagement.

No financial provision forlong-term management ofradioactive waste.

Draft Fund Bill approved byCabinet.

Not Achieved The Radioactive WasteManagement Fund Billdocument is currently beingdrafted. It is still an internaldocument that is not approved.Pending Comments from National Treasury

Safeguards functionremoved from nuclear operatorto State System of Accounting& Control (SSAC) of nuclearmaterials.

Safeguards functionimplementation currentlyperformed by a nuclear operator

Framework for withdrawal ofthe safeguards function from a licensed operator.

Not Achieved

PERFORMANCE AGAINST TARGETSPerformance Indicator Baseline Out put Target 2011/12 Actual

(2011/12)Reason for variance

Authorizations or denialsfor nuclear materials & relatedequipment issued.

100 authorisations or denialsfor nuclear materials & relatedequipment issued within eightweeks.

Achieved No variance to report

Nuclear safeguardscompliance inspections, audits& investigations conducted.

Four nuclear safeguardscompliance inspections, audits& investigations conducted.

Achieved No variances to report.

Performance against Targets

Performance Indicator Baseline Out put

Target 2011/12 Actual (2011/12)

Reason for variance

Participated in proceedingsin terms of Non-ProliferationTreaty, Nuclear SuppliersGroup, Zanger Committee &Pelindaba Treaty.

Participated in fourproceedings in terms of Non-Proliferation Treaty, NuclearSuppliers Group, ZangerCommittee & Pelindaba Treaty.

Partially Achieved

Participated in oneproceedings in terms of Non-Proliferation Treaty, NuclearSuppliers Group, ZangerCommittee & Pelindaba Treaty.

Number of community outreach events per annum

Three community outreach events

One community event was completed – Partially achieved

Inadequate funding to achieve this target

CHALLENGES

• Human Capacity • Financial resources• Match commitments with resources

WAY FORWARD/CONCLUSION

• Continue preparatory work to rollout of new nuclear build programme

• Continue implement phase decision making approach• Complete IAEA Integrated nuclear Infrastructure review• Implement the communication and stakeholder engagement

strategy• Legislation amendments• Human and financial resources• Operationalize National Radioactive Waste Disposal Institute

(NRWDI).• Ratify to Amended Convention of Physical Protection of

Nuclear Material



2011/12 ANNUAL REPORTPROGRAMME 3: CLEAN ENERGY & ELECTRICITY

Mr Ompi AphaneDeputy Director General

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•Role and contribution to local manufacturing and the green economy

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OUTLINE

• Energy efficiency and demand side management• Restructuring of the EDI and infrastructure rehabilitation• Pricing of electricity• Progress on SARi• CDM programmes• Appliance labelling

PRESENTATION OUTLINE

04/21/23 69

• Background

• Electricity Pricing Policy Mandate

• Electricity Pricing Policy Principles

• Protecting the poor

• Challenges and Status

• Conclusion

PREFERRED BIDDERS SALIENT TERMS: SOLAR PHOTOVOLTAIC

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Bid Window 2 Bid Window 1

Price: Fully Indexed (Ave Rand per MWh) R 1 645 R 2 758

MW allocation 417 MW 632 MW

Total Project Cost (R’million) R12 048 R21 937

Local Content Value (R’million) R5 727 R6 261

Local Content % 47.5% 28.5%

Job Creation : Construction (People) 4 557 10 386

Job Creation : Operations (People) 194 221

PREFERRED BIDDERS SALIENT TERMS: WIND

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Bid Window 2 Bid Window 1Price: Fully Indexed (Ave Rand per MWh) R 897 R 1 143


Total Project Cost (R’million) R 10 897 R 12 724

Local Content Value (R’million) R 4 001 R 2 766


Job Creation : Construction (People) 1 579 1 869


PREFERRED BIDDERS SALIENT TERMS: SMALL HYDRO

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Bid Window 2 Bid Window 1

Price: Fully Indexed (Ave Rand per MWh) R 1 030 N/A

MW allocation 14 MW N/A

Total Project Cost (R’million) R 631 N/A

Local Content Value (R’million) R 421 N/A

Local Content % 66.7% N/A

Job Creation : Construction (People) 261 N/A

Job Creation : Operations (People) 7 N/A

PREFERRED BIDDER SALIENT TERMS: CONCENTRATED SOLAR POWER

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Bid Window 2 Bid Window 1Price: Fully Indexed (Ave Rand per MWh) R 2 512 R 2 686


Total Project Cost (R’million) R 4 483 R 11 365

Local Content Value (R’million) R 1 638 R 2 391


Job Creation : Construction (People) 662 1 165


PREFERRED BIDDERS PROVINCIAL DISTRIBUTION

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DescriptionTotal Project Cost

(ZAR million)Local content value

(ZAR million)Northern Cape 12 359 5 837 Eastern Cape 8 649 3 171 Western Cape 4 684 1 829 Free State 2 367 950 TOTAL 28 059 11 787

Designation of swh in August 2012

Product not limited to local standard

Call by SABS for submission of local content declarations by all participants in the NSHWHP, in line with SABS 1286 and in respect of the flat plate product as a national standardAnalysis of the scoring of the various existing products

WRAPPING UP PHASE - SUPPLY OF PRODUCT UP TO ~x

SYSTEMS?

11

QUALIFICATION PHASE – CONVERSION TO LOCAL PRODUCT AS SPECIFIED

22

Selection of qualified product suppliers, up to maximum of ~7 manufacturers, using certain criteria

Contracting only with qualified manufacturers

EXCLUSIVE PHASE – ONLY LOCAL STANDARD PRODUCT IS

SUPPORTED

33

SWH – MAKING THE TRANSITION TO LOCAL PRODUCT

75RESTRICTED

ENERGY EFFICIENCY TARGETS NOT ACHIEVED

76RESTRICTED

• Energy Efficiency Target Monitoring System

• This is in line with the EE Strategy, to develop a national target monitoring

system covering all segments of the economy

• Started but not completed, will make it possible to monitor whether 15% EE

target by 2015 achieved

• Savings verification mechanism

• This entails the measurement and verification protocols, standards

• Will cover the industrial, commercial, residential sectors

• Energy Efficiency Campaign Strategy

• Will improve awareness building beyond what Eskom’s 49m campaign does

• Consented to by social partners at Nedlac

77

ENERGY EFFICIENCY INSTITUTIONAL ARRANGEMENTS

Collects and transfers ring-fenced funding

Fund management and disbursement for approved projects

Transfers

Transfers

Policy framework including EEDSM strategy, action plan and funding

Dept of Energy

Programme Management

CommitteeProject Approval, monitoring and reporting

Approves ring-fenced EEDSM funding through tariff

Eskom

DBSA

Licensees and ESCOs

Nersa

Initiate EEDSM interventions and apply for funding based on savings to be achieved

Savings?NEEA

Verifies the extent of the savings and confirms that transfer of funds ok

78

Energy Efficiency Action Plan• Energy Efficiency Strategy to Cabinet in October 2012

• Action plan with various initiatives, including:

• Campaign for awareness building

• Target setting for various sectors

• Interventions in the residential (accelerated solar water heaters),

commercial (public buildings), industrial sectors

• Centralised funding mechanism, through tariff ring-fencing

• Incentive schemes (standard offer programme plus tax incentives)

• Energy Efficiency Target Monitoring System to keep track of performance relative

to baseline

• Measurement and verification system developed

• Data collection in respect of various sectors

79

EDI TARGETS NOT ACHIEVED

• Approach to Distribution Asset Management implementation and funding plan for Metros

• to map distribution infrastructure in distress, starting with Metros

• To introduce a funding mechanism that takes municipalities out of cycle of underinvestment and service delivery lapses

80

APPROACH TO DISTRIBUTION ASSET MANAGEMENT

• Backlog is R35bn (2010 terms), to be eliminated over 10 years

• Cabinet approached in October 2012 regarding the institutional

approach for ADAM

• Pilot projects to be implemented once approved, to improve

service delivery in key municipalities

• Funding is through tariff ring-fencing

• Regulatory monitoring and enforcement to prevent relapseYear 2008 2009 2010 2011 2012 2013Backlog Estimate Rbn

R 27.4 R 29.9 R 32.4 R 34.9 R 37.4 R 39.9

Slide 81

Phase 1Development of Business Case & Plan for ADAM

Project

Phase 2Implementation Projects

for NERSA audited municipalities and

critical projects identified during Phase 1

Phase 3 Development of

National Maintenance and Refurbishment /

Strengthening Backlog Plan

Phase 4 Maintenance Backlog Execution

Phase 5

Implementation of National Plan Refurbishment

& Strengthening Projects

Done

March 13Commence

March 12 2020

3a Field Audits

3b Analysis

3c Maintenance Backlog Execution (Critical Projects identified during Phase 3)

Approach to Distribution Asset Management

82

ELECTRICITY PRICING TARGETS NOT ACHIEVED

• Inclining block tariffs (IBT) approved by NERSA to cushion the poor against increasing tariffs

• Application in conventional and prepaid meters in Eskom areas done

• Municipal prepaid meters only 60% configured, mainly due to financial sustainability problems emanating from IBT

• Next round of tariff determination to be completed by March 2013 so pricing principles to be aligned with electricity pricing policy

83

PRICING AND ELECTRICITY TARIFFSPRICING AND ELECTRICITY TARIFFSMYPD methodology seeks to achieve the following objectives:

– Ensure Eskom’s sustainability as a business, limit the risk of excess or

inadequate returns, while providing incentives for new investment,

– Ensure reasonable tariff stability and smoothed changes over time

consistent with socio-economic objectives of the Government,

– Appropriately allocate commercial risk between Eskom and its

customers,

– Provide efficiency incentives without leading to unintended

consequences of regulation on performance

– ensure consistency between price control periods

Pricing and Electricity TariffsPricing and Electricity Tariffs

Sources: IRP2010, Eskom, Frost & Sullivan, EIUG

15

20

25

30

35

40

45

50

55

60

65

70

75

80

85

90

95

100

105

110

115

120

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

c/kW

h (2

009

Real

)Average Industrial Prices (2009 REAL)

Area of Industrial Prices China and India

South Africa’s Price Cone??

Note: Even at the current actual price of 50c/kWh South Africa is starting to exceed international industrial prices in particular the more energy intense industries.

Sources: IRP2010, Eskom, Frost & Sullivan, EIUG

Area of Industrial Prices China and India

An Affordable Price Path?

Current PolicyPrice Path?

84

CDM PROJECT PORTFOLIOSECTOR No projects

reviewed Registration ISSUANCE

RE 68 2 -

EE 31 3 1

Fuel Switch 23 4 1

Nitrous oxide abatement

4 3 2

Bio-fuel ( vegetable oil)

5 - -

Industrial process (industrial steam to generate energy)

6 1 -

Waste Management / Methane recovery

34 5 1

Cogeneration( Furnace gas )

22 1 1

Transport 3 - -

Total 196 19 6

CDM – APPROVED PROJECT PIPELINE

CONCLUSION

• Other key programmes to ensure energy security

• Revamp regulatory framework for new generation capacity,

• ISMO legislation

• Determinations under electricity regulations to introduce IPPs

• Solar Park Concept and facilitation of the concept ,



2011/12 ANNUAL REPORTPROGRAMME 6 : PROGRAMMES AND PROJECTS

Dr Wosley BarnardDeputy Director General

88

INTEGRATED NATIONAL ELECTRIFICATION PROGRAMME (INEP)

89

90

FUNDING MODEL

INEP’S RESPONSE TO THE 12 GOVERNMENT OUTCOMES

INEP contributes to the following DoE and Government’s Outcomes Based Planning Approach:

Outcome 4 – Decent employment through inclusive economic growth;Outcome 6 – An efficient, competitive and responsive economic

infrastructure network Outcome 7 – Vibrant, equitable and sustainable rural

communities with food security for allOutcome 8 – Sustainable human settlement and improved

quality of household life andOutcome 9 – A responsive, accountable, effective and efficient

local government system.

91

92

• Over 5.4 million households were connected to the grid between 1994 and 2011/12.

• In period 2002 to 2011/12 over 50 000 households were supplied with non-grid technology (Solar panels – Renewable Energy)

• Total installed PV SHS - 55 831

• Eastern Cape - 11,412• Kwazulu Natal - 35,607• Limpopo - 8,812

ELECTRIFICATION PROGRESS

Province

Electrified Houses:

Municipalities & Eskom

Eastern Cape 985 156

Free State 360 880

Gauteng 651 005

KwaZulu Natal 889 744

Mpumalanga 526 747

Northern Cape

129 114

Limpopo 949 545

North West 639 901

Western Cape 372 605

Total 5, 503 857

•Non-grid electrification programmes will in future not only be implemented in concessionary areas, but in a limited basis in other areas in country.

Slide 93

94

Households without electricity

•Households without electricity: ~3.4 million (Informal 1.2 mil and formal 2.2 mil) •75 % in Eskom supply area and 25% in municipalities supply area.

KEY FOCUS AREAS FOR 2011/12

95

ALLOCATIONS

96

ALLOCATIONS 2011/2012 (R’000)

MUNICIPALITIES R1,096,612

ACHIEVED CONNECTIONS

42 691

ESKOM (NATIONAL) R1,737,812


106 061

NON - GRID R70,861


10 268

TOTAL ALLOCATIONS R 2,905 285

97

TOTAL ALLOCATION

R’000

Planned Connections

Total Expenditure to

dateR’000

Connections Achieved to

Date

70 861 10 000 70 860 10 268

NON GRID – SOLAR HOME SYSTEMS 2011/12 FINANCIAL YEAR

MUNIC PROGRAMME ALLOCATIONS (2011/12)PROVINCE BACKLOG CONNECTIONS BUDGET BULK INFRASTRUCTURE TOTAL ALLOCATION

EC 18.82% R 155,722,414.35 R 64,466,385.67 R 220,188,800.00

FS 5.80% R 30,717,000.00 R 39,283,000.00 R 70,000,000.00

GP 22.66% R 170,400,000.00 R 15,600,000.00 R 186,000,000.00

KZN 23.73% R 241,118,394.00 R 17,200,606.00 R 258,319,000.00

LIM 9.36% R 114,400,000.00 R 0.00 R 114,400,000.00

MP 6.61% R 68,750,080.00 R 18,249,920.00 R 87,000,000.00

NW 5.69% R 47,970,000 R 4,030,000.00 R 52,000,000.00

NC 1.45% R 21,011,600 R 25,600,600.00 R 46,612,200.00

WC 5.88% R39,668,900.00 R 22,423,100.00 R 62,092,000.00

TOTAL (Actual) 100.00% R 889,758,388.30 R 206,633,611.70 R 1,096,612,000.00

ESKOM 2011/12

Province Total Planned Capex (Incl. VAT)

Total Planned Connections

YTD Actual Connections

Eastern Cape R 564,755,000.00 20,431 18,595

Free State R 24,900,000.00 1,876 2,278

Gauteng R 144,255,000.00 12,339 14,009

KZN R 431,967,000.00 18,792 18,760

Limpopo R 184,569,000.00 18,293 23,403

Mpumalanga R 111,484,000.00 8,472 8,700

North West R 127,521,000.00 7,926 7,881

Northern Cape R 58,094,000.00 4,860 4,615

Western Cape R 90,265,000.00 6,388 7,820

Grand Total R 1,737,812,000.00 99,377 106 061

CHALLENGES

100

101

CHALLENGESMunicipalities and Eskom• Slow delivery of electrification projects by Municipalities and certain Eskom regions.• Lack of skills within Municipalities – technical and project management.• Majority of Municipalities are not performing as required - internal procurement processes

takes too long. • Eskom internal project management systems and ‘red type’ is slowing down delivery in

certain regions.• Consulting engineers and contactors not geographically spread according to backlogs in

country.• Municipalities do not have purchase bargaining power.

Non-grid programme• Slow roll-out of non-grid connections due to negative political perceptions and practical

short comings.• Current non-grid systems not addressing basic electricity needs - heating and cooking

needs.• Non-grid service providers struggle to exist financially due to small customer base and rural

location.• Regulations promulgated recently increase non-grid installation costs dramatically.

102

CHALLENGES (...2)

Electricity industry • Shortcomings in EDI are starting to have a very negative effect on the

delivery of new connections.• Municipalities use electrification funds to do upgrading of existing

networks.• Due to the nature of EDI, different electrification technical standards are

implemented by Municipalities and Eskom.

Funding and cost of connections

• More and more connections done in rural areas – connections costs increase sharply and subsidy level have to be increased accordingly.

• Electrification fund allocated in next 3 years will not increase annually above CPI - connection costs on average have increased annually by 12% over last 3 years.

103

CHALLENGES (...3)

• Pressure is increasing on fund - received 4.2 times more applications from municipalities than what was available for 2012/13 financial year. Last 6 years INEP received 50% of the funding as projected in 2003/4 to address backlogs.

• Annual budgetary process force projects to be planned and designed on an annual basis and not on a multi-year (project completion) basis.

• High energisation/switch-on cost charged by Eskom. Municipalities have to pay up front , not as previously over 10 to 15 yrs period.

• No soft loans or grants nationally or internationally available for normal grid extension, except if grid is renewable feed.

• Difference in National and Local Government financial years.

104

105

CHALLENGES (...4)INEP• Planning, Monitoring and evaluation of electrification programme limited due to

lack of resources – funding and HR;• Operational budget for 2012/13 cut for by 55%!• Limited national planning capacity within INEP – Eskom Distribution and

Transmission expansion and planning is dictating electrification roll-out.• INEP resources are stretched, since more and more operational involved in

municipal projects.

General• EIA and land clam process that took sometimes more than two years to resolve; • Late delivery of housing projects.• Sharp increase in hard ware cost (transformers, switch gear, cables) – increase in

base metals prices.• Corruption staring to became a serious issue.• Local manufactures cannot compete with low cost imported equipment

106

WAY FORWARD

107

PROPOSED SOLUTIONSINEP• Obtained IFC funding to do an analysis of INEP and the Electrification process.• Various inefficiencies have been identified within Municipalities and Eskom• Use Eskom and some Metro’s to render assistance to struggling municipalities

with project management to ensure that the electrification projects are implemented effectively (MOU signed in this regard between CoGTA and Eskom) .

• National electrification Master plan – link with PICC SIP projects.

Municipalities and Eskom• Tighter control over performance of municipalities – Provincial Energy

Forums, withdrawal of funds if not utilized immediately, re-gazetting etc.• Possibility of a national purchasing office for Eskom, when in full operations to

investigate the possibility to roll out to Municipalities – Will decrease hardware cost for projects by 10 -15 %!

108

PROPOSED SOLUTIONS (..2)Electricity industry• Standardisation of technical and supply standards? Transformers and meters?• Stimulate/protects local manufacturing of hardware – need surety of

electrification figures and annual roll-out.

Non-grid programme• Upgrade of current 50 Wp systems to 150 - 200 Wp systems – Industry to assist

with technology initiatives.• Electrification programme to be including other energy carriers? Bio-mass/gas and

LPG etc.• Increase number of connections via non-grid technology, due to increased cost of

grid extension in rural areas and low consumption levels.• Grand funding available for non-grid electrification projects, if policies are known

and connections protected for given period.• Establishment of non-grid utilities – economics of scale.• Selected non-grid projects to be rolled-out in rest of country – INEP assistance to

Municipalities

109

PROPOSED SOLUTIONS (..3)General• INEP will not request at this stage an above CPI increase in the annual

electrification budget before the various options regarding improving the efficiencies in delivery the programme more effectively is not fully been implemented and the effect been proved – Foreseen by 2014/15 updated processes will be in place the full effect been experienced .

• Revised universal access date been moved to 2025 – This was modelled taking into consideration the implementations of the various efficiency gains are implemented.

• More emphasis on non-grid options in areas where grid will not be possible or to expensive to roll out.

• Will also allow for a limited grid supply for informal settlements under certain conditions, together with a limited non-grid option where grid is not possible.

• Larger involvement of Eskom in electrification projects, espesially in the 23 District Municipalities that have been identified under the PICC SIP 6 programme.

Universal access is a function of the funding available and the choice of technology mix

04/21/23 110

% of current unelectrified formal households to be connected to the grid

Technology mix

(ba

se c

ase

)+

R1

bill

ion

+R

2 b

illio

n

Ad

diti

on

al f

un

din

g p

er

yea

r

2031

2027

2037

Mix 1All grid

100100

2018

2020

Base case2023

Mix 3(base case)Mix 2, but all

grid within 3km

7878

2018

2020

2023

Mix 4Mix 3, no temp.

solutions for informal

households

7878

2019

2021

2024

Mix 5Mix 3, but grid replaces mini-

grids

8787

2017

2019

2021

Mix 2Most cost efficient

technology mix

7070

2020

2022

2025

Mix 6Mix 3, grid

connection for informal

households

7878

Rate of electrification to reach universal access by 2023

04/21/23 111

Electrification progress towards universal accessMillion households

Cumulative households electrified

Total households to be electrifiedto reach universal access

Temporary solutions for informal households

Long-term solutions

3.8

2.7 million formal households

1.1 million informal households

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

24232221201918171615142013

11 years × ~345,000 households per year = 3.8 million households

112

Thank you

Documents

1 PPC Presentation of the 2011/12 Annual Report. OPENING REMARKS MS NELISIWE MAGUBANE DIRECTOR GENERAL 11 OCTOBER 2012