Supplementary and Divisional Reportoverendstudio.co.za/online_reports/eskom_ar2013/... · Strategic objectives Eskom has aligned itself around eight strategic objectives, which emerged

a

Shift performance,

grow sustainably

for the year ended 31 March 2013

Supplementary and Divisional Report

Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013

b

Contents

1

About this report 2

Structure of this report 3

About Eskom’s Group 5

Corporate structure 6

Purpose, values and strategic objectives 8

Risks that relate to material items 10

Corporate governance 18

Key performance indicators 29

Line divisions 37

Generation 38

Transmission 51

Distribution 58

Group Customer Services 64

Service functions 77

Group Capital 78

Group Technology and Commercial 84

Human Resources 94

Finance 100

Treasury 102

Eskom Shared Services 106

Strategic functions 109

Enterprise Development 110

Sustainability 121

Office of the Chief Executive 135

Subsidiary companies 139

Eskom Enterprises SOC Limited Group 140

Escap SOC Limited 143

Eskom Finance Company SOC Limited Group 144

Eskom Development Foundation NPC 145

Eskom Pension and Provident Fund 149

Appendices 151

Awards 152

Glossary 153

Abbreviations 155

Sustainability responsibilities, approval and assurance 157

Statistical tables 160

Contact details 169

1. Becoming a high-performance utility

2. Leading and partnering to keep the lights on

3. Reducing Eskom’s environmental footprint and

pursuing low-carbon growth opportunities

4. Securing future resource requirements,

5. Implementing coal haulage and the road-to-rail

migration plan

6. Pursuing private sector participation

7. Transformation

8. Ensuring Eskom’s financial sustainability

9. Reasonable assurance provided by the

independent assurance provider

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2 Eskom Holdings SOC LimitedIntegrated Report 2013

2

About the report

This report acts as a supporting document for

Eskom’s year-end Integrated Report, which is

also published in book format. It is advisable to

read the Integrated Report first.

The Integrated Report provides a concise

analysis of Eskom’s technical, financial, social and

environmental performance for the year under

review. It also examines the challenges and risks

the company faces, and the steps it is taking to

mitigate and manage these. The report explores

the opportunities open to Eskom and how it

can capitalise on them to create a technically,

financially, socially and environmentally sustainable

future for the company.

This Supplementary and Divisional report

supports and expands on the information in the

Integrated Report. It offers a detailed report

about the performance of Eskom’s operating

divisions, key strategic and support functions,

and affiliated entities for the 2012/13 year. It is

only available online.

The 2012/13 annual f inancial statements are

available online.

Reporting standardsEskom applied the Global Reporting Initiative

G3 principles when compiling this report.

These principles ensure that the company

incorporates the views of its stakeholders, as

well as internal planning reporting and risk-

management processes. The Integrated Report

details how stakeholders were consulted in the

course of 2012/13, and the outcome of these

consultations.

Eskom has declared a B+ application level in terms

of the Global Reporting Initiative G3 guidelines

based on the disclosure in the suite of reporting

as noted in the GRI table which is available

online at ww.eskom.co.za/IR2013/003.html. The

assurance provider’s report (page 157) confirms

this declaration. Where reasonable assurance

has been provided, this is indicated by RA.

Eskom’s assurance provider, KPMG Services

(Pty) Ltd, has provided assurance on selected

sustainability information. Refer (page 157)

for KPMG’s assurance report. Eskom follows a

combined assurance approach. Refer page 46 of

the Integrated Report for more details.

Eskom’s reports are also prepared with due

consideration of the King Report on Corporate

Governance (King III).

Refer to www.eskom.co.za/IR2013/031.html for

Eskom’s King III checklist.

In the 2012/13 financial year, Eskom continued the transition towards more streamlined, integrated and holistic reporting of its operations.

3

Structure of this report

This repor t focuses on Eskom’s 2012/13

performance and is structured as follows:

About the Eskom Group: Outlines the

corporate structure of the company, including

its purpose, values, and strategic objectives.

The key directorships of board and Executive

Management commit tee members are

presented.

Risks that relate to material items: The matrix

details the material issues and risks facing

Eskom and links them to the performance of

Eskom’s operating divisions, and its strategic

and support functions.

Key performance indicators: These are presented

in terms of Eskom’s progress in achieving and

maintaining these targets over the past five

years, including the year under review.

Line divisions: The performance of Eskom’s line

divisions, Generation, Transmission, Distribution

and Group Customer Services, is analysed for

the 2012/13 financial year, including highlights,

challenges and future focus.

Service functions: Outlines the operational

highlights, challenges and future focus of Eskom’s

various service functions, including Human

Resources, Finance, Treasury, Group Capital

and Group Technology and Commercial.

Strategic functions: Provides an overview

of Eskom’s strategic functions: Enterprise

Development concentrates on strategy and risk

management, regulatory and legal, corporate

affairs and information management. Sustainability

focuses on sustainable development,

environmental per formance, safety, quality,

security, technical governance, international

agreements and innovative climate-friendly

solutions to power-sector challenges.

Subsidiary companies: Presents a brief overview

of the mandate and current role of Eskom’s

subsidiaries: Eskom Enterprises SOC (state-

owned company) Limited Group, Escap SOC

Limited and Eskom Finance Company SOC

Limited Group and the Eskom Development

Foundation NPC.

Appendices: Includes coverage of awards

Eskom has won, provides a glossary of terms,

assurance documentation and provides various

statistical tables. Contact details for the

company are provided.


4

5

About the Eskom Group2


6

About the Eskom GroupCorporate structureEskom Holdings SOC Limited consists of Eskom business and four complementary subsidiaries that

provide supporting services, offer home loan finance to its employees, manage the insurance of

business risks, and manage the company’s corporate social investment.

Eskom’s legal and operating structure

Eskom Holdings SOC Limited

Business Major subsidiaries

Generation

Transmission

Distribution

Group Customer Services

Human Resources

Technology and Commercial

Finance and Group Capital

Enterprise Development

Sustainability

Eskom Enterprises SOC Limited

Rotek Industries SOC Limited

Roshcon SOC Limited

Escap SOC Limited

Eskom Finance Company

SOC Limited

Eskom Development

Foundation NPC

Employees perform testing on equipment at the Apollo substation, a major interconnection substation in Gauteng

7

Eskom’s organisational structure comprises

line functions, which operate the business;

service functions, which service the operations;

and strategic functions, which develop the

enterprise and ensure its sustainability.

Eskom’s head office is in Johannesburg and it

has operations across South Africa. It maintains

a small office in London, primarily for quality

control of equipment being manufactured in

Europe for the capacity expansion programme.

Major subsidiariesEskom has a number of subsidiaries:

• Eskom Enterprises SOC Limited group,

through Rotek and Roshcon, provides

lifecycle support and plant maintenance,

network protection and support for Eskom’s

expansion programme in South Africa.

Eskom Enterprises has two subsidiaries

with interests in electricity operations and

maintenance concessions in Africa: one

covers Mali, Senegal and Mauritania, while

the other operates in Uganda

Eskom Business organisational structure

GenerationT Govender

TransmissionMM Ntsokolo

DistributionA Noah

Group Customer ServicesT Molefe

Human ResourcesBE Bulunga

Technology and CommercialDL Marokane

Finance and Group CapitalPS O’Flaherty


EL Johnson

SustainabilitySJ Lennon

Office of the chief executive

Assurance and Forensic (internal audit)

Line functions

Service functions

Strategic functions

Chief executiveB Dames


8

• Eskom Finance Company SOC Limited

grants home loans to Eskom employees

• Escap SOC Limited, Eskom’s wholly owned

captive insurance company, manages and

insures Eskom’s business risk

• Eskom Development Foundation NPC is

a wholly owned non-profit company that

manages Eskom’s corporate social investment

Purpose, values and strategic objectivesIn 2010, Eskom’s management and employees

conducted an extensive business review.

This informed Eskom’s strategic direction up to

2016/17, which was approved by Eskom’s board

and Executive Management committee, and

also informs Eskom’s long-term planning.

Eskom’s strategic direction is encapsulated in

its purpose statement, strategic objectives, and

values. The strategic objectives are linked to

key performance indicators.

Eskom’s purpose, values and strategic objectives

About the Eskom Group continued

Our purpose:To provide sustainable electricity solutions to

grow the economy and improve the quality of

life of people in South Africa and the region

Leading and

partnering

to keep the

lights on

Reducing

Eskom’s

environmental

footprint and

pursuing low-

carbon growth

opportunities

Securing future

resource

requirements

Implementing

coal haulage

and the

road-to-rail

migration plan

Pursuing

private sector

participation

Foundation:Long-term nation building • Electricity for all • Triple bottom line

ZIISCE: Zero harm, Integrity, Innovation, Sinobuntu, Customer satisfaction, Excellence

Transformation

Ensuring

Eskom’s financial

sustainability

Becoming a

high-performance

utility

Accomplish Eskom’s purpose

Execute strategic pillars

Build foundation right, build capacity

9

PurposeThe purpose of Eskom is to provide sustainable

electricity solutions to assist the economy

to grow and to improve the quality of life of

people in South Africa and in the region.

Strategic objectivesEskom has aligned itself around eight strategic

objectives, which emerged from the 2010

review. These objectives give Eskom direction

to deliver on its purpose, vision and values.

They are reviewed on an annual basis as part of

the annual corporate plan and will be revisited

in the light of the MYPD 3 determination.

Becoming a high-performance organisationEskom continues its transformation into a

utility focused on improved customer service;

safer, more effective and efficient operations;

better service delivery; talent and skills

development and management; transparency;

and consistency in communications.

Leading and partnering to keep the lights onEskom is committed to preventing load-

shedding by taking a leading role and actively

partnering with all key stakeholders, including

the people of South Africa, in a comprehensive

supply-and-demand management strategy.

This objective primarily focuses on ensuring

security of supply for South Africa.

Reducing Eskom’s environmental footprint and pursuing low-carbon growth opportunitiesEskom is committed to reducing its

environmental footprint through reducing

emissions, reducing water use and ensuring

full compliance with environmental legislation.

Eskom is committed to reducing its carbon

footprint and helping South Africa achieve its

targets by transitioning to a cleaner energy mix.

Securing future resource requirements, mandate and the required enabling environmentEskom must engage and collaborate with

stakeholders on a national level to ensure that it

has the resources (land, coal, water, nuclear and

so on) needed for its existing and new generating

assets to operate.

Implementing coal haulage and the road-to-rail migration planEskom will continue to reduce coal trucks on

the road through various initiatives, with the

aim of improving the cost and safety of coal

logistics and, ultimately, contributing to the

security of coal supply. This includes a strategy

to migrate the transportation of coal from road

to rail.

Pursuing private-sector participationEskom acts as a catalyst for private-sector

par ticipation in South Africa’s electricity

industry by enabling independent power

producers (IPP) to enter the supply market.

This objective focuses on ensuring security

of supply for South Africa.

TransformationEskom has initiated a transformation

programme to address national and internal

transformation challenges by leveraging the

infrastructure expansion programme and

Eskom’s organisational capacity to reduce

unemployment, improve the country’s skills

pool and increase economic and workplace

equity. This programme is informed by the

government’s New Growth Path and other

national initiatives.

Ensuring financial sustainabilityEskom will ensure its going concern status

and investment-grade status are protected.

Projects will be fully funded before

implementation, cost-ref lective tariffs will be

secured and developmental activities will be

clearly quantified.


10

ValuesEskom bases the pursuit of purpose and

strategic objectives on the following values:

• Zero harm: Eskom will strive to ensure that

zero harm befalls its employees, contractors,

the public and the natural environment

• Integrity: Honesty of purpose, conduct and

discipline in actions, and respect for people

• Innovation: Value-adding creativity and

results orientated. Lead through excellence

in innovation

• Sinobuntu: Caring

• Customer satisfaction: A commitment to

meet and strive to exceed the needs of the

receivers of products and services

• Excellence: Acknowledged by all for

exceptional standards, performance and

professionalism

Risks that relate to material itemsShould any of the corporate or business risks

Eskom faces materialise and result in a significant

financial loss, lack of future funding sources,

price increases, business interruption or load-

shedding, in isolation or in aggregate, it will

have a significant negative impact on Eskom’s

shareholder and stakeholder relationships,

and its brand and reputation. All of these

may constrain Eskom’s ability to raise funding.

A strategy has been put in place to manage

these risks and to engage with stakeholders.

MYPD 3 price determinationEskom applies to NERSA, an independent

regulatory body, for the revenue it needs

to sustainably operate its business. NERSA

assesses this application in terms of the

electricity regulation Act (2006), and then

makes a determination on the electricity price

path over a number of years. MYPD 1 and 2

both spanned three years, with MYPD 2 ending

on 31 March 2013. The MYPD 3 prices are

effective from 1 April 2013 to 31 March 2018.

Eskom’s applicationOne of the goals of electricity price increases is

to move towards more cost-reflective tariffs as

defined in the Electricity Pricing Policy to enable

Eskom to keep producing electricity sustainably

while securing the financing it needs to build new

power stations and transmission lines.

Eskom submitted its revenue and tariff structure

application for MYPD 3 to NERSA in 2012.

The application was based on current regulatory

rules and policy, and Eskom’s mandate to keep

the lights on.

Eskom applied for an average annual increase

of 13% to cover its operating, capital expenditure

and debt-servicing costs over the next five years,

plus 3% a year for IPPs, for an average tariff

increase of 16% per year over the period. The

total revenue application came to R1.1 trillion.

The application assumed the following:

• Eskom’s goal would be to provide a secure

and reliable supply of electricity

• Primary energy would increase at a rate

of 8.6%, with coal increasing at 10%

• Operating costs would increase at 8%

per year

• Eskom’s application was to comply with

Electricity Pricing Policy.

• That Eskom would be allowed to claim

returns of at least 8.16%, the target

determined in NERSA’s regulation. In the

event, Eskom asked for an average of less

than 4% over the period, resulting in a pre-

tax return of 7.8% only in 2017/18

• The government would continue to

guarantee Eskom’s debt to the value of

R350 billion and Eskom would not commit

itself beyond that

• Eskom would secure financing up to the

completion of its current capacity expansion

programme


11

• Provision was to be made for the 3 725MW

renewable energy IPP programme and the

Department of Energy’s 1 020MW “peaker”

gas plant

• A mandatory energy conservation scheme

to prompt South Africa’s largest energy

users to curb their usage would be put in

place, but only implemented if necessary

Eskom road shows, NERSA’s public hearings and the tariff decisionEskom held roadshows across the country to

provide information on the MYPD 3 application

to stakeholders. Participants were urged to

provide input and ask questions.

In January and February 2013, NERSA held

public hearings on Eskom’s MYPD 3 application

in all nine provinces, during which stakeholders

submitted about 200 written comments and

made 162 oral representations.

On 28 February 2013, NERSA approved total

revenue of R863 billion over the next five

years, giving an average annual increase of

8% in electricity tariffs. The new tariffs took

effect for Eskom customers from 1 April 2013,

and will come into effect from 1 July 2013 for

municipal customers.

Implication of the approved 8% tariff increase NERSA’s decision will result in a revenue

shortfall of R225 billion over the next five

years. The disallowed revenue for the first

two years is a relatively smaller component,

approximately R33 billion, while the remainder

is in relation to the subsequent three years.

It is clear that the shortfall cannot be made up

through efficiencies alone. While Eskom will

strive to achieve additional efficiency, there is

a need to reshape the business and also discuss

alternative options with Eskom’s shareholder.

The following areas are being considered:

• Eskom’s mandate in terms of security

of supply

• Financial sustainability and associated impact

on Eskom’s credit profile

• Areas of major efficiencies, cost curtailments

and reductions

• Alternative funding options available to Eskom

• When cost reflectivity will be envisaged

• Policy and mandate implications to be

discussed with the Minister of Public

Enterprises. There is a need to ensure

alignment with the shareholder on issues

such as coal price regulation, the future

role of integrated demand management,

fur ther government suppor t, and Eskom’s

role in developing projects beyond Kusile

Power Station

Eskom has implemented the average 8%

increase for non-municipal customers on

1 April 2013 and will implement this average

increase for municipal customers on 1 July 2013.

A review of the impact of the NERSA decision

has been made by Eskom and is being discussed

with its shareholder. Eskom’s strategic response

will be shared once finalised.

Material items and risksThe following table details the material items

and risks facing Eskom and links them to the

performance of Eskom’s operating divisions,

and its strategic and support functions.


12

Material items and risks

Material item and risk Key performance indicators Treatment and controls Page

Focus on safetyThere are significant health

and safety risks associated

with an electricity business

• Number of fatalities

• Lost-time incident rate

• Eskom’s “Zero Harm”

initiative, which focuses

on the following

elements:

– Leadership

– Contractor safety

– Supervisory capacity

– Training and facilities

– Human behaviour

128 – 131

Improve operationsA significant incident

relating to Eskom’s

assets and technologies

might occur, resulting in

impairment of Eskom’s

operations, financial loss

and reputational damage.

Theft of electricity and

equipment resulting in

financial loss

• UCLF

• Energy availability factor

(EAF)

• SAIDI

• SAIFI

• System minutes lost (<1)

• Number of major

incidents

• High-performance

utility strategy

• Leadership

interventions

• Appropriate insurance

portfolio

• Operation Khanyisa

• Technologies to

help reduce tower

component theft are

being pursued

38 – 64

Being customer centricReputational risk may

arise from poor service

delivery and a lack of

understanding of what is

important to customers

• Customer service index • A centre of excellence

has been established

with structured

operating units to

improve operations

and to manage

reputational risk

64 – 69

Build strong skillsThere may be inadequate

skills within the workforce

to support Eskom’s

technology-intensive

operations

• Total number of learners

in the following streams:

– Engineering

– Technician

– Artisan

– Youth programme

• Skills development

initiatives (training,

skills transfer,

engagement with

education institutions)

• Back2Basics initiative

to standardise

operations

• Localisation of skills

through the capacity

expansion programme

97 – 99

135 – 137


13


Keep the lights onThere is the risk of load-

shedding, which would

cause severe short- and

long-term implications for

the country and Eskom.

Eskom’s strategic resolve

to keep the lights on

may compromise long-

term plant health due

to limited maintenance

opportunities, resulting

in extended energy

constraints and loss of

confidence in Eskom

• Management of

national supply/demand

constraints

• Demand-side

management energy

efficiency

• Protection systems

and operating

standards

• Black-start readiness

• Disaster risk planning

through national

disaster management

structures

• Eskom’s “keep the

lights on” strategy

• Capacity expansion

and IPP programmes

42 – 47

52 – 56

69 – 75

117 – 120

Deliver capacity expansionLate delivery and

escalating cost of capacity-

expansion projects

would lead to a loss of

stakeholder confidence,

which would affect future

build projects. Late

delivery would also place

further pressure on the

national supply-demand

system and generation

maintenance

• Generation capacity,

transmission lines and

transmission capacity

installed

• Total capital expenditure

• Project management

and assurance

processes are in place

to control project

costs and ensure

timely delivery of

projects

78 – 84


14


Reduce environmental footprint in existing fleetIf Eskom fails to embed

climate change and

sustainable development

within its organisational

culture, its access to

natural resources may

be jeopardised to the

point that the company is

unable to reliably supply

electricity. At the same

time, Eskom’s emissions

performance would

deteriorate, possibly

resulting in costly legal

contraventions, increased

public health risks due to

growing emissions, and

reputational damage

• Specific water usage

• Relative particulate

emissions

• Environmental legal

contraventions

• Emissions treatment

plans are in place.

However, they are

not always possible

to execute due to

postponed outages

• Ongoing reviews to

ensure that water-use

licences and permit

requirements are met

• Kusile and Medupi

power plants will

be fitted with flue

gas desulphurisation

technology, which

will reduce nitrogen

oxides and particulate

emissions

• Renewable-energy

projects are underway

• Eskom supports

introducing renewable

energy IPPs to the

electricity industry

• Internal energy

efficiency

49 – 50

122 – 128

Implementing coal haulage and the road-to-rail migration planFailing to successfully

implement the road-to-

rail migration strategy

would cost Eskom lost

opportunities in terms of

cost (road repairs would

not be lowered) and

reputation. Safety benefits

would also not materialise

• Amount of coal haulage

transferred from road to

rail (million tons)

• The road-to-rail

migration strategy is

being implemented

with Transnet Freight

Rail

88 – 89


15


IPP-contracted energyShould IPPs only be able

to deliver intermittent

electricity, it may

compromise Eskom’s

demand-and-supply

planning, so affecting

security of supply

• Installed IPP capacity

• Gigawatt-hours (GWh)

purchased from IPPs

• By 31 March 2013,

Eskom had signed

up power purchase

agreements with IPPs

for a total capacity

of 2 664MW. Eskom

is in the process

of implementing a

contract management

strategy for

Independent Power

Producers

55 – 56

Independent System Market OperatorThe Independent

System Market

Operator regulation

may affect Eskom and its

stakeholders by affecting

its revenue stream

• Independent System

Market Operator ring-

fenced within Eskom and

a subsidiary set up

• Eskom assisted in the

preparation of a due

diligence report that

was tabled with the

Department of Energy

• The Portfolio

Commission on

Energy decided

in March 2013 to

implement the

Independent System

Market Operator Bill

as originally tabled in

Parliament

54

Credit ratingsFurther sovereign rating

downgrades, combined

with uncertainty around

Eskom’s financial

sustainability or ability

to meet loan obligations

on time, as perceived by

the rating agencies, may

result in a lower credit

rating for Eskom. This

would negatively impact

its funding and hedging

options, and increase

borrowing costs

• Free funds from

operations (FFO)/

gross debt

• Earnings before interest,

tax, depreciation and

amortisation (EBITDA)/

gross debt

• Eskom continues to

monitor the effects

of its operations and

funding initiatives on

the ratios that impact

on its credit rating

104


16


Maximise socio-economic contribution and procurement equityConsistently failing to meet

its targets for corporate

social investment,

universal electrification

and for ensuring that its

procurement practices

benefit local businesses –

ideally black, black women

and black youth-owned

businesses – would

mean that Eskom has

effectively not fulfilled its

mandate to contribute to

the government’s New

Growth Path and other

developmental plans

• Percentage of local

content in all new build

contracts

• Percentage of

expenditure attributable

to broad-based black

economic empowerment

companies and black

women-owned

companies

• Corporate social

investment

• Government and

Eskom electrification

connections

• Eskom promotes job

creation and local-

content procurement

in all new contracts

relating to its capacity

expansion programme

• Eskom’s procurement

policies advance

B-BBEE and black

women-owned

businesses

• Eskom provides

training through

the Academy of

Learning and learner

programmes

• The drive for access

to electricity for all,

via the electrification

programme is ongoing

60 – 61

92 – 94

94 – 99

145 – 149

Employment equityFailing to meet equity

targets for disability, race

and gender in middle

and upper managerial

and professional

positions would affect

Eskom’s reputation

and labour relations,

and could jeopardise

the developmental aspect

of its mandate

• Disability, racial and

gender equity at

senior management,

professional and middle

management levels

• Eskom has

implemented

an ambitious

employment equity

plan, supported

by a long-term,

target-setting

strategy to drive the

transformation agenda

96 – 99


17


Ensure financial sustainability The revenue gap between

Eskom’s MYPD 3

application and NERSA’s

tariff determinations may

compromise business

operations and delivery

on the current Corporate

mandate. Poor liquidity

and portfolio management

would lead to insufficient

funds to meet financial

obligations, or excess

funds that would result in

increased finance costs

• Financial and liquidity

ratios

• Eskom continues to

monitor its funding

and liquidity position

• Eskom’s board is

steering the review

process regarding

the implications

of the MYPD 3

determination

• Eskom is evaluating

various scenarios

and engaging various

stakeholders in

response to this

material risk

100 – 106

Tailrace concrete reinforcing is progressing at the new Ingula pumped-storage scheme


18

Corporate governanceThe corporate governance framework for the Eskom Holdings SOC Limited Group is contained

in the integrated report. The following additional corporate governance information, not included

in the integrated report, is provided here:

• Appointment, qualification and key directorships of board and Executive Management committee

members

• Attendance at committee meetings

• Mandates of committees

• Eskom’s application of the King Code of Governance Principles for South Africa 2009 (“King III”)


1. Zola Tsotsi (66)Independent non-executive directorChairman of the boardAppointed June 2011BSc Mathematics and Chemistry –

University of Botswana, Lesotho and

Swaziland (Lesotho)

BSc Hons Chemical Engineering –

University of Surrey (UK)

Director: Torre Technologies (Pty) Ltd,

Mandla Technologies (Pty) Ltd

2. Brian Dames (47)Chief executiveAppointed June 2010BSc Hons – University of the

Western Cape

MBA – Samford University, USA

Senior Management Programme –

University of Stellenbosch

Graduate Diploma in Utility Management

– Samford University School of Business,

USA

Director: Industrial Development

Corporation, Electric Power

Research Institute

3. Paul O’Flaherty (50)Finance directorAppointed January 2010BAcc – University of the Witwatersrand

BCom – University of the Witwatersrand

CA(SA)

Chairman: Accounting Practices

Committee of the South African Institute

of Chartered Accountants

Member: JSE Issuer Regulation

Advisory Committee

4. Bernie Fanaroff (65)Independent non-executive directorAppointed May 2010PhD Radio Astronomy and Astro Physics

– University of Cambridge (UK)

BSc Hons Physics – University of

Witwatersrand

Director: SKA Organisation

5. Queendy Gungubele (54)Independent non-executive directorAppointed August 2011LLM Labour Law – University of

Johannesburg

BJuris – University of Limpopo

Advanced Diploma Labour Law –

University of Johannesburg

Certificate in management in minerals

and mining policy – University of

the Witwatersrand

Board of directors

19

6. Neo Lesela (43)Independent non-executive directorAppointed June 2011BEng Hons Industrial Engineering –

University of Salford (UK)

Director: Kahina Consulting CC

7. Bajabulile Luthuli (40)Independent non-executive directorAppointed August 2011BCom Acc – University of

KwaZulu-Natal

Higher Diploma Acc – University

of KwaZulu-Natal

8. Chwayita Mabude (43)Independent non-executive directorAppointed June 2011BCompt – University of South Africa

9. Yasmin Masithela (39)Independent non-executive directorAppointed June 2011LLM Tax Law – University of the

Witwatersrand

Higher Diploma in Company Law –

University of the Witwatersrand

LLB – University of Cape Town

BA – University of Cape Town

Non-executive director: Afrocentric

Investment Corporation Ltd

10. Collin Matjila (51)Independent non-executive directorAppointed June 2011LLB – University of the Witwatersrand

BA Law – National University of Lesotho

Senior Executive Programme – Harvard

Business School

Director: Kopano Cable Trading (Pty) Ltd

11. Boni Mehlomakulu (40)Independent non-executive directorAppointed April 2010PhD Chemical Eng – University of

Cape Town

MSc Organic Chemistry – University

of Natal

BSc Chemistry and Applied Chemistry –

University of Natal

Director: South African Bureau

of Standards

12. Mafika Mkwanazi (59)Independent non-executive directorAppointed June 2011BSc Mathematics and Applied

Mathematics – University of Zululand

BSc Electrical Engineering – University

of Natal

Director: Transnet SOC Limited,

Hulamin Ltd, Stefanutti & Stocks

Holdings Ltd

13. Phenyane Sedibe (43)Independent non-executive directorAppointed June 2011MA Social Policy – University of Durban-

Westville

BA Hons Political Science/Sociology –

University of Durban-Westville

Director: TACE Development

14. Lily Zondo (44)Independent non-executive directorAppointed October 2011BSc Hons – University of South Africa

BAcc – University of the Witwatersrand

CA(SA)

Director: Humulani Investments (Pty) Ltd


20


Zola Tsotsi (66)Independent non-executive director

Chairperson of the board

Collin Matjila (51)Independent non-executive director

Boni Mehlomakulu (40)Independent non-executive director

Yasmin Masithela (39)Independent non-executive director

Bernie Fanaroff (65)Independent non-executive director

Queendy Gungubele (54)

Independent non-executive director

Paul O’Flaherty (50)Finance director

1

3 4 5

9 10 11

Board of directors

21

Brian Dames (47)Chief executive

Mafika Mkwanazi (59) Independent non-executive director

Phenyane Sedibe (43)Independent non-executive director

Lily Zondo (44)Independent non-executive director

Neo Lesela (43)Independent non-executive director

Bajabulile Luthuli (40)Independent non-executive director

Chwayita Mabude (43)Independent non-executive director

2

6 7 8

12 13 14


22

Attendance at board and board committee meetings for 2012/13(excluding Executive Management committee)

Members BoardAudit and

riskInvestment and finance Tender

Social, ethics and

sustainabilityPeople and

governance

Total number of meetings 9 8 7 12 6 4

ZA Tsotsi 9 11 3 4

BA Dames3 9 7 5 4

BL Fanaroff 6 6 2

Q Gungubele 9 5 4

N Lesela 8 10 3

B Luthuli 7 7 7

C Mabude 9 7 6 12

Y Masithela 6 7 4

MC Matjila 7 6 11

B Mehlomakulu 7 9 6

ME Mkwanazi 8 6 10

PS O’Flaherty3 9 7 104

SPQ Sedibe 9 5 4

L Zondo 7 7 6

Changes in 2012/13 board compositionThere were no changes in the board’s

composition during the year under review.

Paul O’Flaherty has tendered his resignation as

finance director, with his last day being Eskom’s

AGM on 10 July 2013.

Eskom’s memorandum of incorporation

stipulates that the board, after obtaining the

approval of the shareholder, will appoint

executive directors. The shareholder is currently

in the process of selecting and appointing a new

finance director.


Megawatt Park, Eskom’s head office in Johannesburg

1. Z Tsotsi attended by special invitation for this meeting. He is not a member of the Investment and Finance committee.

2. C Mabude attended by special invitation for this meeting. She is not a member of the Social, Ethics and Sustainability committee.

3. Meetings attended by the directors as officials are not included above.

4. PS O’Flaherty resigned from the Tender committee effective February 2013.

23

Board committeesAudit and Risk committeeThe Audit and Risk committee is appointed

by the shareholder in accordance with the

Companies Act (2008). It fulfils the prescribed

duties set out in the Companies Act (2008),

while also focusing on risk management.

This committee comprises five independent,

non-executive directors. Three members,

C Mabude, Y Masithela and BL Fanaroff, were

appointed in 2011 and two further members,

B Luthuli and L Zondo were appointed in

2012. Collectively, members have sufficient

qualifications and experience to fulfil their

duties, including an understanding of financial

and sustainability reporting, internal financial

controls, external audit process, internal audit

process, corporate law, risk management,

sustainability issues and IT governance.

The committee’s roles and responsibilities

include:

• Serving as the Audit and Risk committee

for the Eskom Group

• Recommending the appointment of external

auditors and overseeing the external

audit process

• Monitoring the internal control system to

protect Eskom’s interests and assets

• Reviewing the accuracy, reliability and

credibility of statutory financial reporting, the

annual financial statements and the integrated

report, as presented by management before

board approval

• Reviewing any accounting and auditing

concerns

• Ensuring that an effective internal audit

function is in place and that the roles and

functions of the external and internal audit

are clear and coordinated. The committee

assesses the internal audit function’s

performance and the adequacy of available

internal audit resources

• Considering and appropriately dealing with

complaints relating to the financial statements,

accounting practices or internal audit

• Ensuring that Eskom has an effective risk

management policy and plan to protect

the company’s ability to achieve its

strategic objectives

• Ensuring that a combined assurance model is

applied

• Obtaining assurance for IT related to the

management of IT assets, governance and

controls, risks and disaster recovery

The assurance and forensic general manager

and the external auditors have unrestricted

access to the committee and board chairperson.

See the Audit and Risk committee’s report in

the annual financial statements (page 4) for

information on how it carried out its functions.

Eight committee meetings, of which two were

special meetings, were held during 2012/13.

These meetings were also attended by the

external auditors, the finance director and

relevant company officials.

Investment and Finance committeeThe committee comprises four independent

non-executive directors and two executive

directors. The committee’s role and

responsibility includes:

• Reviewing Eskom’s investment strategy

and capital programme and making

recommendations to the board

• Evaluating and approving business cases for

new ventures or projects, investment criteria

and guidelines and investments within its

delegated authority

• Investment decisions are made within a

framework of policies approved by the board

• Monitors the performance of the major

capital projects and investments

• The committee approves policies related to

Eskom’s treasury function


24

• Evaluates the company borrowing

programme and financial budgets and

recommends to the full board for approval

• Monitors the performance of Eskom’s

treasury

Seven committee meetings, of which three

were special meetings, were held during

2012/13.

Tender committeeThe committee comprises five independent

non-executive directors and the finance director.

It approves tenders and contracts within its

delegated authority and approves procurement

strategies and policies. The committee

ensures that Eskom’s procurement system is

fair, equitable, transparent, competitive and

cost effective.

Twelve committee meetings, of which one was

a special meeting, were held during 2012/13.

Social, Ethics and Sustainability committeeThe committee comprises four independent

non-executive directors, as well as the board

chairperson and the chief executive. The

committee’s roles and responsibilities include:

• Dealing with the statutory functions

contemplated in the Companies Act

(2008) and integrated performance (social,

environmental, ethics and economic

sustainability) issues

• Making recommendations on policies,

strategies and guidelines, particularly related

to safety, health, good corporate citizenship,

the environment, climate change, quality and

nuclear issues

• Scrutinising nuclear safety at Eskom’s

facilities to ensure that standards exceed

all regulatory and internal requirements

and remain consistent with international

best practice

Six committee meetings, of which two were

special meetings, were held during 2012/13.

People and Governance committeeThe committee comprises four independent

non-executive directors, the board chairperson

and the chief executive. The chief executive

recuses himself when matters relating to his

remuneration and benefits are discussed.

The committee’s roles and responsibilities

include:

• Making recommendations on remuneration

and other human resource-related policies

• Making recommendations on board and

committee composition, training and

evaluation

• Making recommendations on succession

planning

• Oversight of governance matters

Four committee meetings were held during

2012/13.

Board Build Programme Review committeeThis is a committee of the board recently

established to provide a governance,

monitoring and review-oversight role for

the capital build programme. It held its f irst

meeting in April 2013.

Executive Management committee

1. Brian Dames (47)Executive director and chief executiveSee board of directors

2. Paul O’Flaherty (50)Finance director and group executive: Group CapitalSee board of directors


25

3. Bhabhalazi Bulunga (57)Group executive: Human ResourcesAppointed February 2010BA Social Sciences – University of

Swaziland (Swaziland)

Director: Eskom Finance Corporation

SOC Ltd

4. Thava Govender (45)Group executive: GenerationAppointed September 2010BSc Hons Energy Studies Nuclear and

Fossil – University of Johannesburg

BSc Chemistry and Biochemistry –

University of Durban-Westville

Management Development Programme –

University of South Africa

5. Erica Johnson (44)Group executive: Enterprise DevelopmentAppointed February 2008MBA – University of the Witwatersrand

MSc Electrical Engineering – University

of Cape Town

BSc Electrical Engineering – University

of Cape Town

6. Steve Lennon (54)Group executive: SustainabilityAppointed September 2000PhD Physical Metallurgy – University

of the Witwatersrand

MSc Engineering Physical Metallurgy –


BSc Chemistry, Applied Chemistry –

University of Natal

Director: National Advisory Council

on Innovation

7. Dan Marokane (41)Group executive: Technology and CommercialAppointed September 2010BSc Chemical Engineering – University

of Cape Town

MSc Engineering Petroleum – Imperial

College (UK)

MBA – University of Cape Town

Director: Eskom Enterprises (SOC) Ltd,

Roshcon (SOC) Ltd, Rotek (SOC) Ltd

External member: UK High Commission

Board of Management

8. Tsholofelo Molefe (44)Group executive: Group Customer ServicesAppointed April 2011BCompt Hons Certificate in Theory of

Accounting – University of South Africa

BA Hons Accounting and Finance –

University of East London (UK)

CA(SA)

9. Ayanda Noah (46)Group executive: DistributionAppointed April 2011BSc Electrical Engineering – University

of Cape Town

MBA – International Management Centre

Executive Development Programme –


Director: Eskom Enterprises SOC

Ltd, South African National Energy

Association, Energy Access Partnership

10. Mongezi Ntsokolo (52)Group executive: TransmissionAppointed April 2011BSc Electrical Engineering – University

of the Witwatersrand

MBA – University of Stellenbosch

Chairman: Roshcon (SOC) Ltd and

Rotek (SOC) Ltd


26

Dan Marokane (41)Group executive:

Technology and Commercial

Brian Dames (47)Executive director and chief executive


Tsholofelo Molefe (44)Group executive:

Group Customer Services

Ayanda Noah (46)Group executive: Distribution

Thava Govender (45)Group executive: Generation

Erica Johnson (44)Group executive:


Bhabhalazi Bulunga (57)Group executive: Human Resources

3 4 5

7 8 9

1Executive Management committee

27

Paul O’Flaherty (50)Finance director and group executive:

Group Capital

Executive Management committee meeting attendancefor year to 31 March 2013

Total number of meetings 16

BA Dames 13

BE Bulunga 12

T Govender 14

E Johnson 14

SJ Lennon 12

D Marokane 15

TBL Molefe 14

A Noah 16

MM Ntsokolo 10

PS O’Flaherty 15

King III and the Companies Act (2008)Eskom is guided by best practices set out in

King III, the Protocol on Corporate Governance

in the Public Sector and international guidelines.

Entities in the Eskom Group record and monitor

their application of the King III principles

through an electronic reporting and auditing

system. In keeping with the “apply or explain”

doctrine, Eskom accounts for its non-application

of a principle and declares where it has adopted

an alternative governance practice. Please

refer to www.eskom.co.za/IR2013/031.html for

more information on cases where alternative

governance practices have been implemented.

Eskom has amended its memorandum of

incorporation to align with the Companies

Act (2008), based on the guidance and

standard format provided by the Minister

of Public Enterprises. It is envisaged that

the memorandum of incorporation will be

approved in 2013.Mongezi Ntsokolo (52)Group executive: Transmission

Steve Lennon (54)Group executive: Sustainability

2

6

10

Key performance indicators 3


30

Eskom’s progress in achieving its strategic objectives is measured in terms of key performance

indicators. Targets have been set for 2017/18 for each of these indicators. The table which follows

indicates Eskom’s progress in achieving and maintaining these targets over the past five years,

including the period under review. Unless otherwise stated, these figures refer to the Eskom Group.

Please refer to the glossary for explanations of the abbreviations used.

Key performance indicators Targets Annual actuals

Key indicator and statistics

Target 2017/183

Compacttarget

2012/13Actual

2012/13Actual

2011/12Actual

2010/11Actual

2009/10Actual

2008/09Five-year

trend

Becoming a high performance organisation

Focus on safety

Employee LTIR rate1 0.20 – 0.39RA 0.41RA 0.47RA 0.54RA 0.50RA

Fatalities (employees and

contractors), number – – 19RA 2414 RA 25RA 17RA 27RA

Improve operations

UCLF %SC,1,2 10.40 6.00 12.1215 RA 7.97RA 6.14RA 5.1RA 4.38RA

PCLF % 9.26 – 9.10 9.07 7.98 9.04 9.54

EAF %1 79.34 – 77.65RA 81.99RA 84.59RA 85.21 85.32

SAIDI hours (12MMI)SC,1,2 39.00 ≤47.0 41.89RA 45.75RA 52.61RA 54.41RA 51.51RA

SAIFI events per year

(12MMI)1 17.00 – 22.19RA 23.73RA 25.31RA 24.65RA 24.16RA

Total system minutes lost

for events <1 minutes,

minutesSC,1,2 3.40 ≤3.40 3.52RA 4.73RA 2.63RA 4.09RA 4.21RA

Major incidents number1 1 – 3RA 1RA –RA 1RA 3RA

Being customer centric

Customer service index1 89.7 – 86.8 85.6 84.4 85.1 84.7

Eskom KeyCare, index 102.0 – 105.8 105.9 101.2 98.1 101.2

Arrear debts as

percentage of revenue % 0.60 – 0.81 0.53 0.75 0.83 1.54

Customer service (large

power users), average

debtor days – – 25.2 21.8 18.9 18.9 16.4

Customer service (small

power users excluding

Soweto debt), average

debtor days – – 48.2 42.9 45.1 40.5 47.5

Customer service large

power top customers

excluding disputes,

average debtor days4 – – 12.3 14.4 15.5 15.4 16.5

Key performance indicators

31



Target 2017/183

Compacttarget

2012/13Actual

2012/13Actual

2011/12Actual

2010/11Actual

2009/10Actual

2008/09Five-year

trend

Build strong skills(11)

Total engineering learners

in the system, numberSC,1,2 2 073 1 949 2 144RA 2 273RA 1 335 955 968

Total technician learners

in the system, numberSC,1,2 805 757 835RA 844RA 692 681 588

Total artisan learners in

the system, numberSC,1,2 2 705 2 543 2 847RA 2 598RA 2 213 2 144 1 979

Youth programme,

numberSC,1,2 5 000 5 000 5 701RA 5 159 – – –

Leading and partnering to keep the lights on

Keep the lights on

Management of the

national supply/demand

constraints, load-

shedding, (yes or no)SC,1,2 No No NoRA NoRA NoRA NoRA Yes

DSM energy efficiency,

GWhSC,1,2, 7 7 7325 1 827 2 244RA 1 422RA 1 339RA – –

Internal energy efficiency,

annualised GWhSC,2,8 45.05 20.0 28.9RA 45.0RA 26.2RA – –

Deliver capital expansion

Generation capacity

installed, MWSC,1,2 8 7025 260 261RA 535RA 315RA 452RA 1 770RA

Transmission lines

installed, kmSC,1,2 6 4505 900 787RA 631RA 443RA 600RA 418RA

Transmission capacity

installed, MVASC,1,2 35 0405 3 545 3 580RA 2 525RA 5 940RA 1 630RA 1 3756

Total capital expenditure

(excluding capitalised

interest), R billion1 337.155 – 60.13 58.82 47.93 48.70 43.66

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

Reduce environmental footprint in existing fleet

Relative particulate

emissions, kg/MWhSC,1,2 0.24 0.30 0.35RA 0.31RA 0.33RA 0.39RA 0.27RA

Specific water

consumption,

L/kWh sent outSC,1,2 1.21 1.32 1.42RA 1.34RA 1.35RA 1.34RA 1.35RA

Environmental legal

contraventions, number1 8 – 47RA 50RA 63RA 55RA 114RA


32



Target 2017/183

Compacttarget

2012/13Actual

2012/13Actual

2011/12Actual

2010/11Actual

2009/10Actual

2008/09Five-year

trend

Transformation

Maximise socio-economic contribution

Corporate social

investment, Rm – – 194.3RA 87.9RA 62.3RA 58.7RA 79.5RA

Job creation, number142 84512 – 35 759 28 616 21 477 – –

Total number of

electrification

connections, number1 579 0005 – 144 558 155 213 149 914 149 901 112 965

Employment equity

Employment equity –

(group) disability, %1 3.0 – 2.4RA 2.4RA 2.4 2.3 3.2

Racial equity in senior

management (company),

% of black employees1 74.0 – 58.3RA 53.9RA 52.5 47.3 46.9

Racial equity in

professionals and middle


% of black employees1 79.0 – 69.6 65.7 64.1 62.9 62.1

Gender equity in senior


% of female employees1 38.0 – 28.2RA 24.3RA 23.5 21.6 20.7

Gender equity –

professionals and middle

management, % of female

employees1 42.0 – 34.6 32.4 31.6 30.3 29.8

Procurement equity (company)

Procurement

from B-BBEE compliant

%SC,1,2 90.0 70.0 86.3RA 73.2RA 52.3RA 28.610 63.2

Local sourcing in

procurement %SC,1,2 65.0 52.0 80.2RA 77.2 79.7 73.9 –

Procurement from black

owned, %1 50.0 – 22.1 14.6 – – –


women-owned %1 35.0 – 4.7RA 3.3RA 4.3 12.19 10.09


youth owned %1 30.0 – 1.0 – – – – –

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

Implement coal road to rail migration plan

Coal road-to-rail

migration, (additional

tonnage transported

on rail) MtSC,1,2 78.65 12.2 10.1RA 8.5 7.1 5.1 4.3

Key performance indicators continued

33



Target 2017/183

Compacttarget

2012/13Actual

2012/13Actual

2011/12Actual

2010/11Actual

2009/10Actual

2008/09Five-year

trend

Pursuing private sector participation

Pursuing private sector participation

Independent power

producers (IPP) installed

capacity, MW 4 700 – 1 135 1 008 888 – –

Ensuring Eskom’s financial sustainability

Ensure financial sustainability (shareholder compact ratios)

Cost of electricity for

the company (excluding

depreciation, including

immediate priorities),

R/MWhSC,1,2 825.09 481.60 496.35RA 374.19RA 296.36RA 255.09RA 237.29

Interest cover ratioSC,1,2,13 3.04 0.72 0.27RA 3.27RA 1.40RA 0.77RA (4.72)

Debt/equity (including

long-term provisions),

ratioSC,1,2 1.58 2.10 1.96RA 1.69RA 1.66RA 1.68RA 1.32

Free funds from

operations as % of total

debt (Group)SC,1,2 27.3 8.00 8.04 15.15 9.51 1.92 15.89

Ensure financial sustainability

Electricity revenue

per kWh (including

environmental levy),

c/kWh 120.47 – 58.49 50.27 40.27 31.95 24.67

Electricity operating

cost per kWh (including

depreciation),

c/kWh 82.51 – 54.15 41.28 32.78 28.23 25.94

Working capital ratio,

ratio 1.43 – 0.68 0.76 0.85 0.89 0.78

Free funds from

operations for the group,

Rm 101 430 – 18 110 30 483 16 953 2 356 13 865

Gross debt/EBITDA, ratio 3.00 – 16.16 6.46 7.55 8.40 (13.00)

Debt service cover ratio 1.80 – 2.01 3.50 1.90 1.43 0.75

Key:

The key performance indicator is positive over the five years from 2008 to 2013.

The key performance indicator is negative over the five years from 2008 to 2013.

The key performance indicator has been stable over the five years from 2008 to 2013.


34

Notes:RA Reasonable assurance provided by the independent assurance provide (refer page 157).

SC Key indicator forms part of the Shareholder Compact for 2012/13.

1. This measure is taken into account for short-term performance measurement (in relation to executive remuneration). For further remuneration details see

www.eskom.co.za/IR2013/027.html.

2. This measure is taken into account for long-term performance measurement (in relation to executive remuneration). For further remuneration details see

www.eskom.co.za/IR2013/028.html.

3. Financial group targets for 2017/18 are not available hence the Eskom company targets for 2017/18 have been presented.

4. Top customers’ average debtors days excluding disputes for 2009/10 onwards. For 2007/08 and 2008/09 a consolidated top customers’ debtors days figure

is provided.

5. Represents a cumulative target for the five-year period: 2013/14-2017/18.

6. This includes construction by the Transmission division.

7. The basis of measurement changed during the 2010/11 year; prior to that verified savings of 372MWRA (2009/10) and 916MWRA (2008/09) were achieved.

8. Reporting basis changed during the 2010/11 year; hence no comparatives are available prior to 2010/11.

9. For 2008/09 and 2009/10, the BWO % was calculated on the attributable spend.

10. Attributable spend based on top 295 suppliers.

11. Targets are for 2016/17, the targets for 2017/18 will be developed as part of the workforce planning exercise.

12. Job creation target as for 2015/16 as there is no target available for 2017/18.

13. The interest cover ratio includes the unwinding of interest, but excludes the impact of the remeasurement of the government loan of R17.3 billion income as this

is based on the MYPD 3 determination.

14. Reclassification of the bee sting incident of 14 February 2012 as non-work related, as the cause of death was confirmed by the specialist forensic pathologist to

be natural causes.

15. The 12.12% cumulative UCLF consists of energy losses of 7.54% (excluding losses due to the Duvha Unit 4 outage, emission control and short-term outages)

plus energy losses of 1.17% for the Duvha Unit 4 outage and energy losses of 3.41% for emission control and short-term outages (Figures are only available

from April 2012).

Key performance indicators continued

35

The Kromhoek Combined School in KwaZulu-Natal is supported by the Eskom Development Foundation

Line divisions4


38

Eskom’s line divisions are responsible for

Eskom’s day-to-day operations. This section

contains the 2012/13 operational reports for

each of Eskom’s four line divisions:

• Generation

• Transmission

• Distribution

• Group Customer Services

GenerationGeneration’s mandate is to optimally operate

and maintain Eskom’s electricity generating

assets for the duration of its economic life.

Generation has 27 power stations with a total

nominal capacity of 41 919MW, comprising

35 650MW of coal-fired stations, 1 860MW of

nuclear, 2 409MW of gas-fired and 2 000MW

hydro and pumped storage stations.

Operating highlights• There was noRA rotational load-shedding

• 30MW of additional output capacity was

achieved on Koeberg Unit 2 after plant

enhancements were carried out

• Koeberg’s operator training programme

was re-accredited by the National Nuclear

Training Academy (USA). Eskom remains the

only non-US utility to hold this status

• All business units received ISO 14001

(environmental management) certification

and all power stations ISO 9001 (quality

management systems) certification

• The power station enhancement programme

and the energy efficiency programme rollout

continued

• 36% of Eskom’s power stations performed at

an energy availability factor (EAF) of better

than 90%. Generation achieved an internal

energy efficiency performance above target

Operating challenges• The lack of adequate space to do planned

maintenance, coupled with the demand

to keep the lights on, negatively affected

the performance of the plant, with a

deterioration in plant availability and

reliability. This poor performance was

exacerbated by the unreliability of the supply

from Hydro Cahora Bassa (HCB)

• Coal-related energy losses, mainly at Tutuka

and Arnot

• Availability of strategic spares due to long

lead times

• Emissions and water-usage performance are

not at desired levels

Future focus areasThe Eskom power stations are ageing

and need focus to maintain and improve

performance. The approach since 2010 to

shift or defer maintenance when possible

without compromising safety, to ensure we

have the capacity available to meet demand

and keep the lights on, is not sustainable.

A sustainable generation business that achieves

international best quartile performance levels

for plant availability and reliability, and does

not compromise on Eskom’s zero harm goals

for safety and environmental impact, requires

Eskom to undertake maintenance according

to the pre-planned outage schedules to meet

the plant design and statutory requirements.

Adhering to the outage schedules is also

required to provide opportunities to repair,

refurbish or retrofit plant to achieve compliance

with stricter environmental standards.

The sustainable generation business strategy

includes the following:

• A five-year maintenance strategy based on

an 80:10:10 performance level: 80% EAF, 10%

PCLF, 9% UCLF and 1% OCLF. The target for

UCLF and OCLF combined is a maximum

of 10%

• In the 2013/14 financial year a 10% PCLF

level will be targeted. 8% will be used to

create a maintenance schedule with limited

flexibility and 2% will be utilised for short

term, including weekend maintenance

Line divisions

39

• Retrofitting fabric filter plant to reduce the

level of particulate emissions - as a minimum

three units at Grootvlei and three units at

Tutuka power stations respectively up to and

including 2017

• A programme to achieve Blue Drop (water

treatment) and Green Drop (sewage works)

certification by March 2016

• A programme to achieve full compliance

to environmental requirements, including:

atmospheric emission licences, waste

management permits, water-use licences,

environmental authorisations and biodiversity-

related permits

• The continuation of the implementation of

Zero Liquid Effluent Discharge projects, as

approved by the board in 2010

It is also necessary to expedite an increase in

the generation capacity, particularly to meet the

peak demand for electricity. It is thus envisaged

to build between four and nine additional

open-cycle gas turbine units of similar design to

the existing units at Ankerlig.

BenchmarkingCoal-fired stationsGeneration benchmarks the performance

of its coal-fired power stations against those

of the members of VGB (Vereinigung der

Großkesselbesitzer e.V, an association of large-

boiler owners). VGB is a European-based

technical association for electricity and heat

generation industries. VGB’s objective is to

give support and facilitate the improvement of

operating safety, environmental compatibility,

and the availability and efficiency of power

plants for electricity and heat generation, either

in operation or under construction.

It is noted, when interpreting the results of

the benchmark, that the operating regimes

of the other utilities contributing to the

VGB database may not be identical to those

of Eskom.

The graphs on the next page illustrate the

results of the benchmarking for the 2000

to 2011 calendar years (the VGB results for

2012 are not yet available). The performance

of Eskom’s coal-fired power stations has

historically been higher (better) than the VGB

benchmark with respect to availability (energy

availability factor). The availability of the top

performing stations in the VGB benchmark has

remained consistent, while the availability of

the stations in the median and worst quartiles

has been declining. The Eskom generating

units show a deteriorating availability trend.

The benchmarking information indicates

that Eskom units are on a par with the VGB

benchmark with respect to planned maintenance.

However, the UCLF trend is not on the same

level. Although in the 2011 calendar year

Eskom’s was on a par with the VGB benchmark

on the best quartile and worst quartile, the

trend for 2012 is indicating that Eskom units

will perform worse than the benchmark – this

can only be confirmed once the VGB data for

2012 becomes available. With the very tight

demand versus supply situation and the need to

keep the lights on, Eskom has focused on risk-

based and statutory maintenance rather than

the reliability and design-based maintenance

needed to improve the UCLF performance.

With respect to the use of available plant

(energy utilisation factor), all Eskom coal-fired

units are performing at a level close to, and

in many cases above the VGB best quartile,

an indication that Eskom is running its power

station units much harder than the VGB

benchmark units.


40

Line divisions continued

Benchmarking UCLF % All coal sizes 2000 – 2012108 VGB units – current year (excluding Eskom units)

20

15

10

5

0

Peak

Dem

and

Savi

ngs

(MW

)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

VGB worst quartile VGB median VGB best quartile


Benchmarking EAF % All coal sizes 2000 – 2012108 VGB units – current year (excluding Eskom units)

100

80

60

Peak

Dem

and

Savi

ngs

(MW

)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012



41

Koeberg nuclear power stationEskom is affiliated to the World Association

of Nuclear Operators and the Institute of

Nuclear Power Operations, and South Africa

is a member of the International Atomic Energy

Agency. These affiliations enable Eskom to

benchmark performance, conduct periodic

safety reviews, define standards, disseminate

best practice and train personnel. The last

International Atomic Energy Agency safety

review was conducted during August 2011 with

a follow-up review scheduled for April 2013.

Refer to the 2012 Integrated Report for

details on the World Association of Nuclear

Operators peer review that was conducted in

November 2011.

Through the Institute of Nuclear Power

Operations, Eskom has obtained accreditation

from the National Nuclear Training Academy in

the United States for its systematic approach

to training of licensed and non-licensed nuclear

operators at Koeberg. Eskom is the only non-

US utility to receive such accreditation.

PerformanceFinancial performanceKey financial statistics for Generation (year ended 31 March 2013) (R million)

Actual 2012/13

Actual 2011/12

Actual 2010/11

Operating maintenance

costs1 5 945 4 936 4 254

Total property, plant and

equipment 85 169 73 728 60 060

Capital expenditure


interest) 8 512 6 590 6 341

1. This is after the capitalisation of costs.

Benchmarking EUF % All coal sizes 2000 – 2012108 VGB units – current year (excluding Eskom units)

100

80

60

40

Peak

Dem

and

Savi

ngs

(MW

)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012




42

There has been a constant drive to address

the backlog in maintenance; however, system

constraints have hampered the execution of

the required planned maintenance. Although

there was a significant year-on-year increase

in maintenance spend, much of the increased

maintenance spend is due to unplanned

maintenance resulting from plant failure.

Maintenance expenditure is R1.2 billion

over target.

The growth in assets value is attributable to the

return-to-service units that have come online.

The asset base will grow exponentially in the

coming years due to the capacity expansion

programme.

The increased capital expenditure is attributable

mainly to increased expenditure on the

general overhauls as a result of the increase

in maintenance. The system constraints have

delayed the execution of the technical plan, since

many of the projects are outage dependent.

Technical performanceGeneration managed to keep the lights on

in 2012/13 without rotational load-shedding.

This would not have been possible without

deferring some of the maintenance outages,

acquisition of additional capacity from

municipalities and IPPs as well as the reduction

of demand through the integrated demand

management (IDM) programmes, demand

market participation and power buyback

programmes. Moreover, for the maintenance

outages that were undertaken, there has been

an improvement in due date performance and

quality of outage execution.

The deferral of maintenance outages led to an

increase in the volatility of the performance

of the generation fleet. A significant number

of the outages that were undertaken were

forced repair outages and not planned design

maintenance. There was an increase in the

UCLF compared to the target and last year’s

performance (see table on page 43).

This volatility, together with the delay in

the commissioning of the Duvha Unit 4, the

unplanned outage of Koeberg unit one, delays

in new capacity options, and coal qualities

issues at certain sites (eg Tutuka) resulted in a

slowdown of the pace at which the maintenance

backlog could be reduced. The reduction of

imports from Hydro Cahora Bassa power

generation facility was also a major contributor

to the tightness of the system. Further details

regarding Hydro Cahora Bassa are provided in

the Southern African Energy section (page 57).

Various initiatives were developed and

implemented to improve Generation’s

technical performance, while ensuring the

availability of sufficient generating capacity

to meet the electricity demand. Examples of

initiatives are discussed below in the section on

the Generation Excellence Programme.


Maintenance at the Palmiet pumped-storage scheme near Grabouw in the Western Cape

43

Unplanned capability loss factor (UCLF) breakdown

for 2012/13

14.0

11.2

8.4

5.6

2.8

0.0

% U

LF

March 2013 YTD UCLF % (12.12%)

Duvha unit 4 (1.17%)

Emissions and short-term outages related to UCLF (3.41%)

Partial load losses and other (7.54%)

Technical key performance indicators for GenerationThe technical key performance indicators are a reflection of this operating paradigm, where priority

has been given to balancing demand and supply.

Measure Unit

Compacttarget

2012/13Actual

2012/13Actual

2011/12Actual

2010/11

Power sent out by Eskom power stations GWh – 232 749 237 291 237 430

Energy availability factor (EAF)1 % – 77.65RA 81.99RA 84.59RA

Unplanned capability loss factor (UCLF)2 % 6.00 12.12RA.7 7.97RA 6.14RA

Planned capability loss factor (PCLF)3 % – 9.10 9.07 7.98

Unplanned automatic grid

separations/7 000 hours (UAGS/7 000)4 number – 4.09 3.19 3.62

Energy utilisation factor (EUF)5 % – 81.87 79.43 78.49

Unit capability factor (UCF)6 % – 78.78RA 82.96RA 85.87RA

The UCLF for 2012/13 has increased to

12.12%RA, which is higher than previous years

and an indication of aging plant and the current

deteriorating plant health condition. The current

high level of unplanned outages (UCLF) is a

reflection of the operating paradigm of “Keeping

the lights on” by balancing demand and supply

and trading off on plant availability by the

deferment of planned maintenance outages.

The figure alongside indicates a breakdown of

the UCLF into four major areas.

1. EAF measures plant availability including planned and unplanned unavailability and energy losses not under plant management control.

2. UCLF measures the lost energy due to unplanned energy losses resulting from equipment failures and other plant conditions.

3. PCLF is energy loss during the period because of planned shutdowns.

4. UAGS/7 000 indicates the number of unplanned unit trips per 7 000 operating hours.

5. EUF measures the degree to which energy was produced compared to the extent to which it could have been produced.

6. UCF measures plant availability including planned and unplanned outages.

7. The 12.12% cumulative UCLF: consists of energy losses of 7.54% (excluding losses due to the Duvha Unit 4 outage, emission control and short-term outages)

plus energy losses of 1.17% for the Duvha Unit 4 outage and energy losses of 3.41% for emission control and short-term outages (Figures are only available

from April 2012).


44

The UCLF figure is under further threat as

Generation’s normally better performing plant

is starting to show deterioration, with the likes

of Kendal, Matimba and Lethabo showing an

increase in unplanned unavailability.

The Open Cycle Gas Turbines (OCGTs) have

been utilised extensively during the year to help

keep the lights on, with a load factor of 10.4%RA

for 2012/13.

Review of the performance and impact of Hydro Cahora Bassa• Since 2010, there has been a decrease in

the EAF from Hydro Cahora Bassa due

to various problems experienced on the

generators and the high voltage direct

current transmission system (both in South

Africa and Mozambique). There was a

slight improvement in the EAF in the latter

part of 2011 and the beginning of 2012.

However, the performance is currently

at its worst. The unplanned unavailability

continues to trend in the wrong direction,

which negatively impacts the national power

system. Refer to the Transmission division

section for details (page 57)

• Longer-term events, such as the reactor

and line failures, place more pressure on

an already constrained power system and

Eskom’s ability to undertake maintenance on

its own fleet of power stations

Duvha Unit 4 return to serviceOn 9 February 2011 Duvha Unit 4 experienced

a catastrophic incident during routine statutory

turbine over-speed testing. Severe damage was

caused to the turbo generator, specifically the

high-pressure turbine, intermediate-pressure

turbine, the two low-pressure turbines,

the generator, and the exciter. The damage

extended to nearby buildings and the roof due

to flying debris.

The incident was investigated by a team of

representatives from Eskom, VGB Powertech,

who are engineering consultants to Eskom,

and two teams of investigating consultants

appointed by the insurers, TUV and Robertson

and Co SA. The investigation team conducted

exhaustive tests at the site, reconstructed

and tested equipment, interviewed staff and

examined test and other records at Duvha.

They have accepted the claim as a valid claim.

The investigators concluded that the incident

was caused by a combination of factors.

The root cause of the incident was established

to be a modification applied by Eskom in

2004 that inadvertently, when installing a new

programmable logic controller, removed a

maximum speed limit during over-speed test

conditions. The direct cause of the incident

was attributed to an operating error, in that

the operator did not follow the set procedure

while undertaking the physical over-speed test.

The operator failed to hold in the “permission”

button while raising the turbine speed. This

allowed the operator to keep raising the

originally set governor limit, which led to the

turbine speeding up and out of control.

The investigation into the incident was completed

and signed off in August 2011. The results of

the investigation were shared with all relevant

stakeholders, including Duvha employees.

All the recommendations from the investigation

have been addressed. Eskom has subsequently

implemented corrective actions and, where

appropriate, disciplinary processes have also

been followed. The modification error has since

been corrected on all the Duvha units, while

corrective actions have been applied to eliminate

contributory causes.


45

Duvha power station Unit 4 was brought back

into service on 3 January 2013, after 23 months

of repair, executing the biggest recovery

project in the history of Eskom. The Eskom

team, supported by the original equipment

manufacturer Alstom and its sub-contractors,

achieved the recovery six months later than

originally estimated by Eskom but in less than

two years. The original estimate from the

insurer’s representatives, based on the work

done by them in assessing the loss, indicated a

recovery period of about four years.

Performance improvement initiativesTwo key initiatives were implemented to

address issues affecting plant performance,

namely, the Generation Excellence Programme

and the Maintenance Backlog strategy.

Generation Excellence ProgrammeThis programme includes the Power Station

Enhancement project and the Energy Efficiency

Improvement programme. These projects

are at various stages of rollout across the

Generation fleet.

Power Station Enhancement project

The project focuses on improving performance

of the key levers affecting EAF, namely, outage

and plant availability. One element has been to

assign more technical resources to support the

project execution. The project has improved

the UCLF performance in some of the identified

focus areas, while most of the identified long-

term actions are dependent on outages for

implementation. The following stations have

verified UCLF gains for 2012/13:

• Matla power station – 1.97% (draught group

0.71% and emissions 1.26%)

• Arnot power station – 0.44% (feedwater

0.31%, feed heating 0.03%, turbine centre-

line 0.12%)

• Lethabo power station – 0.002% (medium

voltage motors 0.002%)

The power station excellence programme

actions at all stations will continue to be

implemented, including continual review to

ensure that benefits are being realised and are

being sustained.

Energy Efficiency Improvement programme

The programme aims to improve the heat rate

of the boiler units at 13 of Eskom’s coal-fired

stations by 1% by 31 December 2015. The heat

rate measures the conversion rate of heat from

the energy source (coal, diesel) to electricity

generated. Efficiency improvements will help

reduce Eskom’s environmental footprint,

including reducing its carbon emissions.

The table below shows the average heat

rate performance across 13 coal-fired power

stations. The values are the amount of energy

needed to produce one kWh of electricity, and

illustrate the improvement in the heat rate over

the past three years.

MeasureActual

2012/13Actual

2011/12Actual

2010/11

Average Eskom

coal power station

heat rate MJ/kWh 11.25 11.46 11.04

Routine maintenance at one of the coal-fired power stations


46

The table below shows some of the high impact

plant areas which were targeted to achieve the

performance gains reflected in the improved

heat rate.

Performance improvement progress detail per power station

Station ActivityPerformance

gain predicted

Matla Turbine cold-end maintenance 11.0MW

Kendal Efficient lighting 0.2MW

Lethabo Reduce mill grinding media 1.2MW

Kriel Air-heater leakage defects

repaired

20.0MW

Majuba Unit 3 – air pre-heater leakage

fixed

Unit 3 – close low-pressure

bypass warming valve to 20%

Unit 3 – refurbish high-

pressure turbine

Units 1, 2 and 3 – auto shutoff

of ACC cooling fan

0.6MW

24.0MW

3.3MW

0.8MW

Maintenance backlog reduction strategyEskom’s coal-fired generating units require

routine maintenance to ensure that they meet

their technical performance requirements,

are safe to operate and do not violate

environmental laws.

Maintenance tasks that need to be performed

regularly (see the table below) can take

anywhere from a week or two for a boiler

inspection, which must be done every 12 to 18

months, to two months for a general overhaul,

which should be done every 6 to 12 years.

During this time, the generating unit being

worked on is taken out of service, which means

that the rest of the generating fleet needs to

compensate for the commensurate decrease in

generating capacity.

Maintenance schedule for a coal-fired power station

ActivityCycle time

(years)Duration

(days)

General (major)

overhaul6-12 40-60

Interim repairs 2-3 14-35

Mini general overhaul 6 28

Boiler inspection 1-1.5 7-14

Statutory inspection

and test6 35

Main steam pipe work ad hoc 120

In recent years, the margin between supply and

demand has been too narrow for Generation

to be able to take generating units offline at

the pace required to keep up with the required

maintenance schedules while also undertaking

unscheduled repairs. As a result, a maintenance

backlog has developed.

A maintenance backlog reduction strategy

was implemented to reduce this maintenance

backlog. The units that are on backlog and

pending maintenance requirements were

assessed to ensure that safety and statutory

requirements were not violated and to

determine what flexibility existed to defer

the maintenance of units. The outage risk

assessments were submitted to Eskom’s

internal governance processes for review and

approval. More focus was put on the purchasing

of modular spares, as well as increasing Rotek’s

workshop capacity, to reduce generating unit

downtime. In 2012/13 more maintenance was

carried out than in the previous two financial

years. The PCLF at the end of March 2013 was

9.1% (6.4% design-based).


47

As at 31 March 2012, the total maintenance

backlog including additional outages was at

26 outages, of which 16 were design-based type

of maintenance and 10 were additional repair

outages. As at 31 March 2013, the total backlog

including additional outages was at 30 outages.

Of the 30 outages, 14 were design-based

type of maintenance and 16 were additional

repair outages.

Koeberg nuclear power station performanceOn 20 February 2013, Koeberg Unit 1 sustained

a reactor and turbine trip due to the de-

energisation of a 6.6kV switchboard as a result of

a busbar fault. Following repairs and during start-

up of the plant low flow was observed through a

primary circuit temperature measurement loop,

due to an isolation valve that had failed to shut.

In order to safely repair the valve, it was necessary

to completely remove all the nuclear fuel from

the reactor (and place it in interim storage in the

spent fuel pool as for a normal refuelling outage).

Return to service was achieved on 22 April 2013.

Post-Fukushima status updateThe nuclear accident at Fukushima associated

with the March 2011 tsunami off the coast

of Japan contains lessons for nuclear power

plants worldwide. Eskom, like other nuclear

utilities worldwide, undertook an assessment

of the impact of external events, including

earthquakes and tsunamis, on the safety of

Koeberg. The assessment was submitted

to and approved by the National Nuclear

Regulator who concluded that Koeberg is

adequately designed, maintained and operated

to withstand all external events considered

in the original design basis, and that there are

no findings to warrant curtailing of operations

or to question the design margins. The safety

assessment identified a number of potential

improvements to further reduce risk beyond

the design requirements. The current focus

of these improvements is on the ability of

the site to be self-sufficient for an extended

period. These are being discussed with the

National Nuclear Regulator and are being

implemented or will be installed during future

outages.

Safety performanceGeneration continually strives to reduce injuries

and harm to people and plant by focusing on

visible felt leadership in all plants and ensuring

the value of zero harm is embedded in all

aspects of the Generation business.

It is with sadness that Generation reported

an employee fatality at Kriel Power Station on

18 July 2012, as a result of an electrical contact

while working on an electrical cooling water

pump motor.

In addition to this fatality, Generation experienced

54 lost-time incidents including 46 lost time

injuries: seven noise-induced hearing losses and

one fatality during the 2012/13 financial year.

Generation’s lost-time incident rate for

employees is better than the Eskom rate

of 0.39RA.

The conveyor carries ash from Tutuka power station in Mpumalanga


48


Public exposure to radiationPublic exposure to radiation arising from

Koeberg operations remains well within the

limits set by the National Nuclear Regulator.

Exposure to radiation is measured in units of

milliSievert (mSv). The limit recommended by

the International Atomic Energy Agency for

public exposure to radiation is 1mSv per year.

However, the National Nuclear Regulator has set a

stricter limit of 0.25mSv per year for South Africa.

As shown in the graph alongside, the average

public exposure to radiation arising from

Koeberg’s operations has been below 0.005mSv

in recent years – less than 2% of the limit

imposed by the National Nuclear Regulator.

Generation: Causes of employee lost time incidents (including fatalities)

20

15

10

5

0Lost

tim

e in

cide

nts

(incl

udin

g fa

talit

ies)

OtherOccupational diseasesMotor vehicle accidentInhalation of fumesHijackingGun shotForeign body

Fall on same levelFall from heightExplosion Ergonomics/material/equipment handling Electrical contact

Contact with heat/dustCaught/cut/struck byBurnBee sting/insect biteAssaultAsbestos

55 lost time incidents in 2011/12

20

15

10

5

0Lost

tim

e in

cide

nts

(incl

udin

g fa

talit

ies)


Public individual radiation exposure due to effluents from Koeberg

0.008

0.007

0.006

0.005

0.004

0.003

0.002

0.001

mill

iSie

vert

2005-2013 = Financial year

2005 2006 2007 2008 2009 2010 2011 2012 2013

49

Environmental performanceRelative particulate emissionsRelative particulate emissions deteriorated from

0.31RA kilograms per megawatt hour sent out

(kg/MWhSO) in 2011/12 to 0.35RA kg/MWhSO

in 2012/13. The target of 0.30kg/MWhSO was

not achieved.

The emissions recovery team was established

in 2011 to work with power stations in reducing

par ticulate levels. The resulting focus has

reduced the increase in emissions at stations

that occurred because power stations’ pollution

abatement equipment was not able to process

the additional dust burden resulting from the

high ash content of coal. Outages for plant repair

and refurbishment are needed to maintain and

repair the pollution abatement equipment,

but this is not possible given the constrained

system. At some stations, particularly Tutuka

and Matla, particulate emissions remained high

for much of 2012/13 due to poor or variable

coal quality.

Water usageEskom’s total water usage (all power stations,

including return-to-service stations) was

334 275 megalitres (ML) (2011/12: 319 772ML).

Water consumption increased from 1.34RA

litres per kilowatt hour sent out (L/kWhSO)

in 2011/12 to 1.42RA L/kWhSO in 2012/13.

The increased water consumption was

influenced by many factors, including very low

rainfall at critical times, the high number of

start-ups, additional activities such as air heater

washing and the inability to obtain half station

shut downs to stop significant leaks at some

stations. At times of low rainfall, the station

dams are not being filled from natural rainwater

run off, requiring Eskom to procure water from

external (metered) water sources.

Generation division established water-

management task teams at the power stations

to address the reduction of water usage and

legal contraventions. Objectives of the water-

management task team include compiling

comprehensive plans to address all aspects of

water-management and water-use performance.

ISO certificationGeneration became the first Eskom division to

achieve ISO 14001 certification well ahead of

the target date of March 2014.

Legal contraventionsThe number of legal contraventions decreased

from 34 in 2011/12 to 33 in 2012/13; 18 of the

contraventions were water related (water leaks

and spills, sewerage spills and ash line leaks)

and 15 were exceeding of air quality particulate

emission limits. Generation division has

implemented a compliance programme which

will ensure continued improvement towards

zero contraventions.

Rotek Engineering, an Eskom subsidiary, performs a lot of the technical maintenance on plant components in Eskom


50

Environmental key performance indicators for Generation

Indicator Unit

Compacttarget

2012/13Actual

2012/13Actual

2011/12Actual

2010/11

Number of environmental legal

contraventions number – 33 34 41

Number of environmental legal

contraventions reported in terms of Eskom’s

operational health dashboard1 number – 1 1 1

Relative particulate emissions Kg/MWh sent out 0.30 0.35RA 0.31RA 0.33RA

Net raw water consumption Million litres – 334 275 319 772 327 252

Specific water use L/kWh sent out 1.32 1.42RA 1.34RA 1.35RA

Material containing polychlorinated biphenyls

thermally destructed tons – – – 3.1

Materials containing asbestos disposed

of at registered waste sites kg – – 308.3 232.4

Carbon-dioxide emissions (absolute) Mt – 227.9RA 231.9RA 230.3RA

Carbon-dioxide emissions (relative)2 kg/kWh – 0.98 0.99 0.99

Nitrogen-oxide emissions3 kt – 965RA 977RA 977RA

Sulphur-dioxide emissions kt – 1 843RA 1 849RA 1 810RA

Low-level radioactive waste generated (net) m3 – 183.1RA 184.7RA 165.3RA

Intermediate-level radioactive waste

generated (net) m3 – 34.7RA 25.4RA 39.4RA

Low-level radioactive waste disposed

of at Vaalputs m3 – 54.0RA 53.8RA 81.0RA

Intermediate-level radioactive waste disposed

of at Vaalputs4 m3 – – RA 128RA – RA

Public individual radiation exposure

due to effluents mSv – 0.0019 0.0024 0.0043

Ash produced (Mt) Mt – 35.3RA 36.21RA 36.2

Ash sold Mt – 2.4 2.3RA 2.0RA

Ash recycled % – 6.8RA 6.4RA 5.5RA

Ash disposed of on Eskom ash dumps

and dams (Mt) Mt – 32.9 33.8RA 34.16RA

1. Under certain conditions, contraventions of environmental legislation are classified in terms of the Eskom operational health dashboard index. 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. Group or divisional executives can escalate any significant environmental legal

contravention to the operational health dashboard.

2. Factor figures are calculated based on total energy generated by Eskom (but excluding electricity used by pumped-storage scheme).

3. NOx reported, as NO

2 is calculated using station specific emission factors, which have been measured intermittently between 1982 and 2006, and tonnages

of coal.

4. The number of drums disposed of at Vaalputs in 2011/12 was restated.


51

TransmissionTransmission’s mandate is to optimally plan,

operate and maintain the transmission

assets throughout their economic life, and to

provide an integrative function for the reliable

development, operation and risk management

of the interconnected power system. This

includes balancing supply and demand in

real time, trading energy internationally,

buying energy from IPPs, and operating the

transmission grid, comprising 154 substations

and 29 297 kilometres of transmission lines.

Operating highlights• Despite significant challenges, effective

supply and demand balancing ensured that

no national load-shedding occurred during

2012/13

• The number of transmission line faults per

100km has been reduced substantially

• Projects in the southern African region

have been identified and are being pursued

to support South Africa’s future electricity

requirements in line with the Integrated

Resource Plan (IRP) 2010

• Eskom signed IPP power purchase agreements

for the first tranche of the Department of

Energy’s renewables programme

• The 2012-2021 Transmission Development

Plan was published. It includes, among other

objectives, details of a network strengthening

plan to achieve Grid Code N-1 compliance

• Transmission’s maintenance activities were

successfully completed as per objectives

• Transmission successfully concluded

ISO 9001:2008 and ISO 14001:2004

cer tif ication audits and has been

recommended for certification by accredited

external auditors

Operating challenges• Although there were no fatalities, the

number of employee and contractor

lost-time incidents remains a concern.

Transmission had 10 lost time incidents in

2012/13, compared to 21 in 2011/12

• Three major incidents occurred:

– Abnormally high snowfall damaged

transmission towers in KwaZulu-Natal

in August 2012, temporarily constraining

power transfer capability to KwaZulu-Natal

– A failure of an isolator at the Athene

substation in October 2012 resulted in

an interruption to a large customer load

– A severe failure of a transformer

at Midas substation in March 2013

during a lightning storm resulted in

an extended interruption, primarily

affecting mining loads

• Purchases from Hydro Cahora Bassa

were lower than anticipated due to

equipment failure at the converter station

in Mozambique that reduced imports

from 1 500MW to 650MW for a period

of four months, followed by damage to one

overhead power line due to flooding that

again reduced imports to 650MW for a

period of almost three months

• Increased theft of transmission-tower steel

components caused several towers to

collapse during 2012/13

• Having effective risk management with

maintenance execution and commissioning

of network expansion projects


52

Future focus areas• Continue to balance supply and demand

• Connect IPPs to the grid

• Strengthen the network to achieve Grid

Code N-1 compliance, thereby improving

redundancy and reliability

• Sustain business management system

compliance (ISO 9001 and ISO 14001

certification)

• Improve the system technical performance

BenchmarkingTransmission took part in a benchmarking

exercise with 27 other transmission companies

in 2011/12. The study focused on maintenance

and plant performance and identified best

international practices for the transmission

industry. Consult the 2011/12 Divisional report

on the Eskom website for the summary of this

study. These studies have been used to identify

opportunities for continual improvement, as

well as in the Transmission Excellence Journey,

which intends to move the group towards

world-class performance for selected metrics.

PerformanceFinancial performanceKey financial statistics for transmission, as at 31 March 2013 (R million)

Actual 2012/13

Actual 2011/12

Actual 2010/11

International revenue 5 985 4 909 4 096

International energy

purchases 2 086 1 858 1 783

Maintenance and

refurbishment 634 290 98

Capital expenditure


interest) 893 1 554 1 503

Total property, plant and

equipment 26 522 21 787 17 893

Technical performanceTransmission performance has improved

compared to 2011/12 for system minutes

(for incidents of less than one system minute),

number of interruptions, as well as line faults.

In particular, a substantial reduction was

achieved in the number of line faults per 100km

which was a key focus area during 2012/2013.

There were 33RA low frequency incidents

(<49.5Hz) during the year. Regrettably 3RA

major incidents were recorded related to

severe plant failures.

Technical key performance indicators for transmission

Measure Description of measure TargetActual

2012/13Actual

2011/12Actual

2010/11

Number of system

minutes lost

Total number of system minutes lost (for

incidents of less than one system minute)SC ≤3.40 3.52RA 4.73RA 2.63RA

Number of major

incidents

Total number of incidents with a severity

greater than one system minute – 3RA 1RA – RA

Number of

interruptions Interruptions affecting the continuity of supply – 35 48 30

Number of line faults Number of transmission line faults per 100km – 1.74 2.41 2.72


The major incidents that occurred during

the year are highlighted under operational

challenges. The total system minutes lost

for major incidents, as well as for incidents

of less than one system minute, was 20.8RA.

The development and the implementation of

corrective action plans are continually pursued

to manage the technical risks with sustainable

solutions.

SC Shareholder’s compact.

53

Transmission: Causes of employee lost time incidents (including fatalities)

8

7

6

5

4

3

2

1

0Lost

tim

e in

cide

nts

(incl

udin

g fa

talit

ies)


8

7

6

5

4

3

2

1

0Lost

tim

e in

cide

nts

(incl

udin

g fa

talit

ies)





Safety performanceThere were no Transmission employee or

contractor fatalities recorded during 2012/13.

Regrettably, 10 non-fatal lost-time incidents were

recorded compared to 21 in 2011/12. Motor-

vehicle accidents have historically accounted for

many lost-time incidents and this remains a focus

area. Transmission’s lost-time incident rate is

worse than the Eskom rate of 0.39RA.

Transmission remains committed to reducing

safety incidents.

See Eskom’s overall safety strategy and initiative for more information (page 128).

Maintenance at Apollo substation, the main connection to Cahora Bassa in Mozambique


54

Environmental performanceTransmission’s objective is to continually improve

its environmental performance, as measured by

key environmental indicators.

Environmental key performance indicators for Transmission

Actual 2012/13

Actual 2011/12

Actual 2010/11

Number of environmental

legal contraventions 2 2 –

Number of environmental

legal contraventions

reported in terms of

Eskom’s operating health

dashboard1 – – –

Materials containing

asbestos disposed of at

registered waste sites

(tons) 38.94 35.4 10.5

Material containing

polychlorinated biphenyls

thermally destructed (tons) 1.4 2.6 400.7

1. Under certain conditions, contraventions of environmental legislation are

classified in terms of Eskom’s operating health dashboard index. These

include instances where censure was received from authorities; incidents of

non-reporting of incidents when legally required; where incidents were not

reported within Eskom; and where there was a repeat legal contravention

or where the contravention was not addressed adequately.

The environmental legal contraventions

recorded in 2012/13 included an incident

of an uncontrolled veld f ire as well as

inadequate oil containment at a substation

following heavy rainfall.

Oil-dam integrity, soil erosion, firebreaks

around substations, waste management, licence

and permit compliance remain high risk factors

for Transmission. In line with its commitment

to excellence, Transmission was recommended

for ISO 14001 certification in March 2013,

six months ahead of schedule.

Criminal incidentsThe theft of transmission tower steel resulted

in 10 transmission towers on the Apollo-

Dinaledi 400kV line collapsing on 30 April

2012. Since then, less severe incidents have also

occurred in Gauteng.

Security patrol frequency has been increased

and aerial inspections have been conducted

in identified high-risk areas. Public awareness

campaigns and engagement with scrap-metal

dealers in affected areas were conducted.

Technologies to help reduce tower component

theft are being pursued.

Refer to page 74 for details of the management

of energy losses.

Independent System Market Operator (ISMO)The ISMO Bill of 2011 provides for a separate

state-owned entity into which certain functions

would be separated from Eskom over time.

The System and Market Operator division,

operating under the governance of the board,

was instituted in 2011 as an internally ring-

fenced division within Eskom. Its functions

include energy planning, feasibility studies, IPP

procurements and market administration.

As part of the ISMO Bill public consultation

process, the Portfolio committee on Energy

requested a due diligence to assess the impact

of creating a Transmission System Operator

comprising the ISMO Bill, plus the addition

of the transmission grid. This due diligence

was completed in November 2012. Based on

this study, the Portfolio committee on Energy

made a decision to implement the ISMO Bill

as originally tabled, without including the

transmission grid. In addition it is to address all

issues raised by Eskom and other stakeholders.


55

Independent Power Producers (IPPs)Eskom remains committed to facilitating the

entry of IPPs into the South African electricity

market. By 31 March 2013, it had signed up

power purchase agreements for a total capacity

of 2 663.9MW with IPPs. Eskom’s board has

approved an additional 2 088.9MW, bringing

the total approved capacity up to 4 753MW.

These figures include the Department of Energy’s

renewable energy IPP procurement programme.

The amount paid for IPP and municipal

purchases for 2012/13 amounted to R2.9 billion

(2011/12: R3.3 billion).

The table below shows purchases from

operational generators with signed power

purchase agreements.

IPP and municipal purchases for 2012/2013

Actual purchases

(MW) 2012/13

Actual purchases

(GWh) 2012/13

Actual purchases

(GWh) 2011/12

Actual purchases

(GWh) 2010/11

Short- to medium-term contracts

Medium-term power purchase 288.0MW

Short-term power purchase 194.2MW 482.2 2 407.1 2 149.0

Municipal generation 585.0 1 033.1 1 958.0

WEPS 68.0 76.1 0.0

Total 1 135.2 3 516.3 4 107.0 1 833.0

Average cost per in cents/kWh 83.6 77.0

Short- to medium-term IPP programmesMedium-term power purchase programmeEskom initiated the Medium-term Power

Purchase programme (MTPPP) in 2008 to

procure base-load capacity from private

generators for the medium term until new

generation capacity, such as Medupi power

station, comes online. A price cap was

submitted to the market and all bidders capable

of meeting this within the required timeline

were accepted. A capacity of 288MWs has

been signed and is operational. Additional

capacity of 85MW was signed in February 2011,

but is not yet operational.

Short-term power purchasesEskom approved 236.4MW of short-term

power purchase agreements, of which 194.2MW

of projects were operational at the end

of March 2013. It is expected that a fur ther

35.0MW will be operational by the end of

May 2013. These contracts will expire at the

end of December 2013.

Municipal base-load purchasesEskom has been procuring energy from

City Power (Kelvin power station) and the

City of Tshwane (Rooiwal and Pretoria West

power stations) since January 2011. Eskom

has contracted a total capacity of 585MW from

these entities, although realistically the average

capacity is about 180MW. The contracted

capacity with the municipal generators was set

high in order to allow for possible additional

capacity that they could provide. These contracts

expire at the end of December 2013.

Wholesale electricity pricing system programmeEskom enters into annual contracts with

co-generators outside MTPPP and short-term

contracts. These co-generators are paid at

wholesale prices. Wholesale electricity contracts

are capped and the total collective capacity limit

is 68MW.


56

Long-term IPP programmesDepartment of Energy’s open-cycle gas turbine (“Peakers”) programmeEskom is awaiting the necessary National

Energy Regulator of South Africa (NERSA)

and Public Finance Management Act (1999)

approval to be the buyer for the Department

of Energy’s Open-cycle Gas Turbine IPP project

for 1 005MW of capacity, with completion

anticipated to be in the third quarter of

2015. The government support framework

agreement for this has been received.

Renewable energy IPP programmeThe Department of Energy formally launched the

renewable energy IPP procurement programme

in August 2011. The request for proposals called

for the commercial operation of 3 725MW of

renewable energy technologies between mid-

2014 and the end of 2016. Developers were

invited to submit proposals to finance, construct,

operate and maintain any suitable wind, solar

thermal, solar photovoltaic, biomass, biogas,

landfill gas or small hydro technologies.

On 5 November 2012, Eskom signed 28 power

purchase agreements with IPPs under the

first bid submission, totalling 1 441.7MW of

renewable energy capacity.

The procurement process for the second

round of submissions has been concluded and

Eskom’s board has approved the purchase of

1 043.8MW of renewable energy capacity.

Approval for this second phase per the

Public Finance Management Act (1999) is

being sought.

Small renewable energy IPP programmeThis programme, which falls under the

Department of Energy’s renewable energy IPP

programme, calls for 100MW to be generated

from small renewable energy technologies.

The Department of Energy has indicated

that it intends to release the final request for

proposals to the market for this programme

during the second quarter of 2013.

Southern African EnergyThe Southern African Development Community

region continued to experience significant

economic growth, which translated into growth

in electricity demand, during 2012/13. Eskom

predicted that its cross-border sales would,

however, decline due to energy projects

planned for the region, specifically Botswana’s

new Morupule B 600MW coal-fired station and

Namibia’s additional 90MW unit at NamPower’s

Ruacana hydro station. However, as the table

below illustrates, this did not materialise.

Cross-border purchases and sales of electricityThe table below represents cross-border sales

and purchase volumes. This differs from the

physical volume of energy flowing across South

Africa’s borders, which are termed imports and

exports.

• Wheeling of power by other countries via

the Eskom network – this power would

enter at one point and the same volume

would exit at another – resulting in imports

being higher than purchases and exports

being higher than sales

• Some power Eskom buys does not physically

flow into South Africa, but meets an existing

sales commitment, reducing the amount

physically exported from South Africa to

meet the sales commitment – this would

result in purchases being lower than imports

and sales being higher than exports

Cross-border sales and purchases

Actual2012/13

Actual2011/12

Actual2010/11

Sales1 GWh 13 699 13 108 13 216

Purchases GWh 7 698 9 939 10 190

Net sales GWh 6 002 3 169 3 025

1. Excludes sales to Lesotho by Distribution.


57

Botswana Power Corporation’s (BPC) Morupule

B power station was due to start generating

150MW from March 2012, with three additional

150MW tranches expected during each quarter

of 2012. Unfortunately, these units were not

commissioned and only intermittent generation

has resulted. The four units are now only

expected to be in full commercial operation by

December 2014. BPC also expected continued

supply from their existing 120MW coal-fired

Morupule A, which experienced technical

problems and has been taken out of service to

undergo refurbishment. Eskom has continued

to supply Botswana in terms of the prevailing

agreement to end December 2013, and will

continue to the extent possible in terms of a new

non-firm agreement.

NamPower successfully commissioned its

additional Ruacana unit. However, due to

the lowest water levels in several years in

the Cunene River system, generation capacity

was diminished.

Regional purchases have also been disappointing.

The bulk of purchases are from the Hydro

Cahora Bassa scheme in Mozambique, which

experienced several problems in 2012 and

2013. In July 2012, a smoothing reactor at

Mozambique’s Songo converter station

failed, lowering the converter station capacity

from its full rating of 1 500MW to 650MW.

A temporary unit, relocated from South Africa,

was installed at Songo in November 2012.

This temporary unit allows 1 300MW to be

imported. A permanent replacement unit that

will allow the return to 1 500MW is due to be

commissioned in July 2013. In January 2013, one

of the high-voltage direct current lines carrying

power to South Africa was severely damaged in

floods, again reducing the scheme’s capacity to

650MW. The line was returned to full service

on 21 April 2013, returning the capacity to

1 300MW, pending the replacement of the

reactor. Full imports of 1 500MW are therefore

expected from July/August 2013.

Given the failures of the high-voltage direct

current scheme and the resultant stranding

of energy at Songo, Eskom sold a portion

of its energy from Hydro Cahora Bassa to

Zambia’s ZESCO and the Copperbelt Energy

Corporation via the Zimbabwean network.

This further increased sales. Sales to Lesotho

and Swaziland and the three end-use

customers (Motraco in Mozambique, Skorpion

Zinc in Namibia and Namdeb Diamond Mine in

Namibia) have continued along normal trends.

The Aggreko gas plant at Resanno Garcia, in

Mozambique, commissioned in the second

quarter of 2011/12, is reliably delivering

92.5MW to Eskom and 15MW to Electricidade

de Mocambique (the Mozambican national

utility) per its agreements.

Because of the increased sales and reduced

purchases, net international sales (sales minus

purchases) reached its highest level in this

financial year.

Regional supply options, as identified in the

IRP 2010, as well as a number of transmission

strengthening projects continue to be pursued.

Specifically, hydro options in Mozambique

and Zambia are being advanced, along with

transmission projects in Mozambique, Zimbabwe,

Botswana, Zambia and Namibia. These would

allow power to be securely imported into South

Africa in future. Other projects, in various stages

of development, include potential gas-supply and

hydro options as far afield as the Democratic

Republic of Congo.


58

DistributionDistribution’s mandate is to build, operate

and maintain Eskom’s distribution assets

to provide reliable electricity supply. It also

actively collaborates with wider industry

to resolve distribution issues and enhance

stakeholder relations.

Eskom’s distribution assets in South Africa

comprise 67 488km of distribution lines,

269 535km of reticulation power lines and

6 960km of underground cables, representing

one of the largest powerline systems on the

continent.

Since 1991, Eskom has connected over 4.3 million

electrification households to the distribution

network, of which 144 558 connections were

done in the year ending 31 March 2013.

Operating highlights• Implemented several safety initiatives,

which saw an improvement in most of the safety indicators

• Sustained improvement of the system average interruption duration index (SAIDI) and the system average interruption frequency index (SAIFI)

• Nine provincial operating unit structures are now in place, with fully functional management and governance structures and ring-fenced accountability for their performance

• Electrification connections exceeded target and also created 4 320 job opportunities

Operating challenges• Employee and, in particular, contractor safety

performance and lost-time injuries

• Employee security and network infrastructure security remains a concern in certain areas

• High levels of theft of equipment and electricity, including illegal connections, affect network and service performance, increasing Eskom’s costs

• Ageing networks, making maintenance a

challenge

• Acquiring land and servitudes for electricity

infrastructure

Future focus areas• Reinforce safety practices towards zero

harm, with special attention to contractors

• Sustain Distribution’s improving technical

performance

• Identify and implement innovation to enhance

our efficiency activities

• Actively collaborate with industry players on

electricity distribution industry issues

BenchmarkingDistribution participated in a 2012 benchmarking

study, conducted by an independent international

consulting group, with comparisons drawn with

North American utilities.

The utilities participating in the benchmark

study did not have the same measurement

and reporting methodology, network design

characteristics, planning philosophy, operating

environment or practices as each other or Eskom,

resulting in a wide range of reported network

interruption performance levels. This makes any

direct comparison of the reported performance

among the utilities difficult.

According to the 2012 study, average SAIDI

performance (including major events and planned

interruptions) was between 42.5 minutes per

year and 47.5 hours per year, with a mean

of 10.1 hours per year. Eskom’s SAIDI, as at

31 March 2013, is 41.9RA hours per year. Average

SAIFI performance (including major events and

planned interruptions) was between 0.5 and

24.3 interruptions per year, with a mean of

3.2 interruptions per year. Eskom’s SAIFI, as at

March 2013, is 22.2RA interruptions per year.

Distribution’s network interruption performance

is historically impacted by its long radial overhead

lines for rural electrification customers.

Exacerbating this is the limited redundancy

where there is little or no alternative for


59

ring-feeds and back-feeding, in the event of

supply interruptions.

Distribution sees great value in conducting

benchmarking studies in order to identify

typical performance levels and best practices

among international utilities. Distribution has

conducted its modelling and identified capital

and maintenance interventions to improve its

long-term network performance considering

our local network characteristics.

Network performance strategic directionDistribution’s long-term objective is to move

to first quartile performance for distributors

with similar network characteristics but it

is recognised that achieving this will require

considerable resources. Distribution has the

following medium-term objectives for its

network performance:

• Reduce SAIDI to 39 hours per year by 2017/18

• Reduce SAIFI to 17 interruptions per year by

2017/18

The following four key strategic initiatives

are in place to improve the SAIDI and SAIFI

performance:

• Establishment of additional customer network

centres:

– to reduce travelling time

– to ensure that field staff are located close

to the customers and networks

Eight additional customer network centres

have been established in this financial year

• Increase live work from 50% to 70% to reduce

the outages experienced by customers (73%

of all planned work is currently executed by

live line techniques)

• Effective planning, refurbishment and

strengthening of networks:

– Revision of the planning criteria

To reduce the number of customers

affected by a fault and set the criteria for

the creation of redundancy on networks

– Focus on poor performing networks

76% of refurbishment and strengthening

projects on poor performing networks

have been completed in this financial

year. This has contributed to a 10%

improvement of the SAIDI performance

of the top 150 worse performing feeders

– Increased visibility of network

Re-closers installed in this financial year

to increase network visibility on the top

150 feeders have contributed positively

to the SAIDI performance

– Improvement of SAIDI for customers in the

top customer segment

Satisfactory performance has been

maintained for the Eskom top customer

segment

• Use of mobile computing devices to

improve work management and resource

utilisation

The Enterprise Digital Assistant installation

project is now complete. Currently 84% of

work orders are managed via these devices

PerformanceFinancial performanceKey financial statistics: Distribution, as at and for the year ended 31 March 2013 (R million)

2012/13 2011/12 2010/11

Grants received for

electrification 1 649 1 784 1 720

Maintenance and

refurbishment 4 006 3 851 2 947

Total property, plant

and equipment 54 019 47 842 43 982

Capital expenditure


interest) 8 317 7 941 8 190


60

Technical performanceTechnical key performance indicators for Distribution

Measure Description of measure and unit

Compact target

2012/13 2012/13 2011/12 2010/11 2009/10

SAIFI Reliability of supply index (number per year) – 22.19RA 23.73RA 25.31RA 24.65RA

SAIDI Availability of supply index (hours per year) ≤47.0 41.89RA 45.75RA 52.61RA 54.41RA

SAIFI performance improved this year but still

did not achieve the target of interruptions per

year for 2012/13. SAIDI performance improved

and achieved the target of ≤47 hours per year

for 2012/13.

These performance improvements are

attributable to:

• Benefits from Distribution’s holistic reliability

improvement investments made over the

past few years

• Better integration in the management of

all planned and unplanned interruptions,

including project work

• Focusing on poorly performing networks

• Daily management of key events

• High leadership visibility and sharper focus in

operations

Please refer to page 74 for a discussion on the

management of Eskom’s energy losses.

ElectrificationEskom has been implementing the Department

of Energy’s integrated national electrification

programme in its licensed areas of supply since

April 2001. Eskom carries the operating costs

for this, while the programme itself funds new

connections and infrastructure development.

The average cost of infrastructure development

and the cost per connection are likely to increase

as more remote rural areas are electrified.


The Cullinan technical services team fixes a distribution line

In addition, technical specifications for

network design have been enhanced to better

accommodate growth in electricity demand

and to improve the quality and reliability of

the electricity supply to these areas. In order

to ensure there is alignment in the delivery

of electrification projects, Eskom attends

most of the integrated development planning

sessions organised by local municipalities in

the country.

61

Electrification programme performance

Unit of measureActual

2012/13Actual

2011/12Actual

2010/11

Total connections number 144 558 155 213 149 914

Direct connections, excluding farm workers number 143 6821 154 249 149 112

Farm worker connections number 876 964 802

Total capital investment Rm 1 704 1 575 1 512

Reticulation and connections Rm 1 608 1 311 949

Sub-transmission infrastructure development Rm 92 260 559

Farm worker connection incentives paid Rm 4 4 4

1. Includes 3 801 municipality-funded connections.

Meeting universal access to electricity targets

in future depends on the availability of funding

via the integrated national electrification

programme. In order to accelerate the

Universal Access Programme, the Department

of Energy has increased the 2013/14 funding

allocation by R262 million, which will enable

Distribution to increase its programme by up

to 30 000 additional electrification connections

in the same financial year. The Department

of Energy has confirmed a significant increase

in the Medium Term Electrification Fund

for the next three years, commencing in

2013/14. Distribution is also pursuing efficiency

opportunities in order to unlock further funding

to achieve another 20 000 extra connections,

over and above the 30 000 mentioned above

for the 2013/14 financial year. This will assist in

achieving the Universal Access Programme’s

objectives earlier than 2025.

Electrification of grid schools and clinics

Unit of measure

Actual 2012/13

Actual 2011/12

Actual 2010/11

Capital investment Rm 36 2 158

Total connections number 142 19 854

In addition to the electrification above,

the electrification of schools is funded by

the Department of Basic Education through the

Accelerated Schools Infrastructure Delivery

Initiative. The Department of Basic Education

is in the process of rebuilding some schools

that currently have mud structures, to facilitate

safe electrification. The electrification of

clinics is funded by the Department of Energy,

through the National Electrification Fund. Both

programmes focus on electrifying specifically

identified schools and clinics. No clinics were

identified for electrification in the current year.

The table details progress on electrification

of schools and clinics.

2013 Africa Cup of NationsIn January and February 2013, South Africa hosted the 2013 African Cup of Nations football tournament. Eskom played a critical role in ensuring an adequate and secure electricity supply to the host cities in five provinces, namely Gauteng, Mpumalanga, North West, KwaZulu-Natal and Eastern Cape.

Eskom followed the same processes used for the 2010 FIFA World Cup by setting up provincial situational analysis centres to monitor and report on activities on match days. These centres reported to the national nerve centre to present a consolidated view


62

of these activities. The technical response teams were also mobilised and on stand-by during the tournament. No major electricity supply incidents were reported during the

tournament.

Safety performanceTo ensure a step change in Distribution

division’s safety performance, there has been

considerable progress made in rolling out

the prescribed measures emanating from

the Distribution Safety “Boot Camp”. These

initiatives have been grouped into six focus

areas: leadership, policy, people, physical world

of work, pre- and post-incident management

and contractor management.

There were two employee fatalities in the

2012/13 year, compared to nine employee

fatalities suffered in the previous year.

Zero fatalities were achieved in the last

quarter, largely due to the progress made

in the implementation of these initiatives.

Distribution’s lost-time incident rate is worse

than the Eskom rate of 0.39RA.


Distribution: Causes of employee lost time incidents (including fatalities)

40

35

30

25

20

15

10

5

0Lost

tim

e in

cide

nts

(incl

udin

g fa

talit

ies) 40

35

30

25

20

15

10

5

0Lost

tim

e in

cide

nts

(incl

udin

g fa

talit

ies)

128 lost time incidents in 2011/12 107 lost time incidents in 2012/13




Contractor safety is just as important and

is given high priority in Distribution. It is a

challenging area as the dispersed nature of the

business means many contractors are operating

without constant supervision. There were seven

contractor fatalities in 2012/13 (eight in 2011/12).

Initiatives to improve Distribution’s safety

performance include each unit beginning the

day with a 15-minute safety talk and translation

of key safety messages into all applicable official

languages to ensure effective communication to

all levels of staff. Leadership continue to “walk

the talk” through regular site visits and holding

work stoppages to engage employees on daily

challenges related to safety. The zero harm

campaign was launched across all operating

units to employees and all active contractors.

Other measures taken to improve Distribution’s

safety performance include:

• Conducting induction and training before

employees or contractors are deployed

to sites

63

• Using two driving simulators for training. Additional units will be established in all operating units

• Installing enhanced vehicle-safety features, for example, park-distance control systems

• Construction and utilisation of network simulators and training centres for enhanced knowledge and practical experience

• Establishing a contractor academy, in partnership with the University of Limpopo, to develop contractors’ skills

• Identifying and assessing hazardous indoor substations and putting in place an action plan to either refurbish or replace them

• Intensifying public safety awareness

In the next financial year Distribution will focus on leadership, organisational and operational safety. The leadership will ensure strong, visible and ongoing management commitment. Zero harm is a prioritised strategic objective at organisational level, and the division will implement all appropriate elements and standards for an effective safety management system. The operating units will roll out safety initiatives including behavioural safety measures and ensure corrective and preventive actions are executed.

These measures form part of Eskom’s zero

harm campaign, which has now been rolled out

in all nine operating units. Ultimately, Eskom

would like to see a culture shift entrenching

safety behaviour into operations.

Environmental performanceDistribution had four environmental legal

contraventions where protected trees were

cut without permits. A standard application

procedure together with key principles was

successfully negotiated with the National

Department of Agriculture, Forestry and

Fisheries to ensure that permits are obtained

to eliminate this risk. Although 90% of

investigations and related corrective measures

are achieved within four months, the high

number of bird species electrocuted on

Distribution networks continues to be a risk.

Various research projects and programmes

aimed at modifying existing structures have

been implemented. For example, the Eastern

Cape operating unit modified more than 1 600

structures to reduce the electrocution risk for

vultures. Waste management practices were

also identified as an area of concern.

Environmental key performance indicators for Distribution

Actual 2012/13

Actual 2011/12

Actual2010/11

Number of environmental legal contraventions 4 5 11

Number of environmental legal contraventions reported in terms of

Eskom’s operating health dashboard1 – 2 2

Materials containing asbestos disposed of at registered waste sites (in tons)13.6 71.6 285.8

Material containing polychlorinated biphenyls thermally destructed (tons)– 11.3 18.0

Number of reported bird fatalities due to distribution infrastructure480 3752 244

1. Under certain conditions, contraventions of environmental legislation are classified in terms of Eskom’s operating health dashboard index. These include instances

where censure was received from authorities, where incidents were not reported to authorities when legally required, where incidents were not reported within

Eskom, and where there was a repeat legal contravention or where the contravention was not addressed adequately. Divisional executives can escalate any

significant environmental legal contravention to the operating health dashboard.

2. The bird fatalities for 2011/12 have been restated.


64

All nine operating units within Distribution

have made progress towards implementing

an Environmental Management System, to

be certified by March 2014 in terms of ISO

14001. Effective monthly engagements with the

Department of Environmental Affairs resulted

in limited delays in obtaining environmental

authorisations for new projects. Compliance

with the requirements of the National

Water Act No 36 of 1998, as it pertains to

infrastructure developments within 500m

of a wetland, infrastructure that crosses

watercourses and replacement of vandalised

cables through watercourses, were identified as

challenges. Negotiations with the Department

of Water Affairs were initiated in this regard.

Raising environmental awareness remains a

key focus area and forms part of the rolling

out of the zero harm initiatives to Distribution

employees and contractors. More than

88% of Distribution contractors received

training in environmental authorisations and

environmental management plans, while

Distribution employees were exposed to nine

different environmental courses.

Group Customer ServicesGroup Customer Services’ mandate is to place

the customer at the centre of Eskom’s business

and manage customer relations. In this way, it

aims to guide the company towards achieving

satisfied customers who consistently rate

Eskom in the top quartile.

Another key responsibility is the managing of

power demand by means of IDM initiatives.

Operating highlights• Partnering with large industrial customers

to help Eskom manage the power system

during peak periods through demand-

response programmes

• Successful implementation and execution

of a comprehensive suite of IDM solutions to

exceed the NERSA and shareholder savings

targets

• Contact centre performance indicators

(Customer Care and Service Level) were

above target

• KeyCare customer satisfaction results for

large industrial customers were above target

• Various senior-level engagements with

stakeholders and customers (including

municipalities) on the status of the power

system and arrears were conducted

• The Grid Access Unit processed almost

700 applications for connection to the grid.

This included IPPs and generators that are

not part of the Department of Energy’s

bidding programme

• The Customer Service Group had no

fatalities, but extra focus is needed to

reverse the upward trend in its lost-time

incident rate

Operating challenges• Severe disruption in the platinum mining

sector, combined with reduced electricity

demand, resulted in reduced sales compared

to projections

• Municipal debt remains high despite

various interventions with municipalities

and numerous payments being made

intermittently. Legal processes with disputed

accounts are being followed

• Residential Gauteng and Soweto debt

remains high. Customer debt levels are

increasing and there is a negative trend

in debtors’ days of both large and small

power users

• The number of overdue and escalated work

items in all operating units requires attention


65

Future focus areas• Improve safety levels and staff wellness

• Explore further options to manage power

demand, including demand response

programmes, energy efficiency and grid access

• Address regulatory constraints to sustain

the IDM programme as a key contributor to

ensuring security of supply

• Enhance debt-management strategies

• Improve customer data for segmentation

purposes and to better understand different

customer needs

• Increase employees’ technical and business-

related skills

• Better manage non-technical energy losses

• Improve meter-reading estimations and

bedrock factors (restoration time and

customer connections) so that operating

targets are met

BenchmarkingCustomer services takes part in benchmarking

studies, conducted by an independent

international consulting group to compare its

performance with similar international utilities.

Please refer to the 2012 Integrated Report for

further details of benchmarking.

PerformanceDuring the year, the numbers of Eskom

customers in the different categories changed

as shown below.

Number of Eskom customers

Customer categoryActual

2012/13Actual

2011/12Actual

2010/11

Local customers

Redistributors 795 786 784

Residential1 4 874 004 4 713 178 4 514 998

Commercial 50 399 50 270 49 090

Industrial 2 789 2 775 2 857

Mining 1 062 1 100 1 110

Agricultural 83 877 84 095 84 393

Traction 509 508 508

Total local 5 013 435 4 852 712 4 653 740

International

Utilities 7 7 7

End users across the

border4 3 3

Total international 11 10 10

Total 5 013 446 4 852 722 4 653 750

1. Prepaid customers and public lighting included under residential.

The reduction in supply points for mining and

agriculture were influenced by recent socio-

economic events. Industrial customers again

showed a growth.

Financial indicators for Group Customer Services, as at 31 March 2013Debtors’ days are being calculated and

reported on, excluding international customers

and major disputed accounts like EB Steam,

Aurora and Pamodzi Mining. All these accounts

are litigation or arbitration matters and impact

on debt out of the control of customer

service. Soweto debtors are excluded from

the calculation of debtors days, as on average

the payments received are less the 20%.

The payment levels of top customers have

once again improved year on year and although

payment terms is 15 days, exceptional payment

terms have been negotiated to ensure that

Eskom has a quick turnaround with cash

availability in this key environment.


66

Debt in municipal entities has increased and

the negative year-on-year trend continues.

Various action plans have been put into place to

remedy the situation. The small power debt has

been under severe pressure where customers

are finding it difficult to maintain good payment

levels timeously. Debt has deteriorated in

Gauteng, Mpumalanga as well as in Limpopo

where revenue recovery projects are currently

in place.

Financial indicators for Group Customer Services, as at 31 March 2013

Actual2012/13

Actual2011/12

Actual2010/11

External (local) revenue Rm 120 678 108 260 86 454

Impairments Rm 1 020 587 669

Debtors less provisions Rm 10 173 8 835 6 955

Provision for arrear debts Rm 4 246 3 320 2 835

Integrated demand management – excluding demand market

participation and power buyback Rm 3 001 1 528 568

Power buybacks Rm 2 808 1 750 –

Demand market participation Rm 283 414 211

Total integrated demand management costs Rm 6 092 3 692 779

Large power users debtors’ days – top customers excluding

disputed days days 12.3 14.4 15.5

Large power users debtors’ days – municipalities and other days days 25.2 21.8 18.9

Small power users debtors’ days – excluding Soweto days 48.2 42.9 45.1

Technical key performance indicators for Group Customer Services

Compacttarget

2012/13Actual

2012/13Actual

2011/12Actual

2010/11

KeyCare % – 105.8 105.9 101.2

Weighted customer service index % – 86.8 85.6 84.4

Demand-side savings

Evening peak demand savings1 MW – 595RA 365RA 354RA

Energy savings1 GWh 1 827 2 244RA 1 422RA 1 339RA

Internal energy efficiency1 GWh 20.00 28.9RA 45.0RA 26.2

Energy loss %

(12-month moving average)

Total distribution loss % – 7.12RA 6.32RA 5.68RA

Total transmission loss % – 2.80RA 3.08RA 3.27RA

Total Eskom loss % – 9.08 8.65 8.25

1. Includes verified, as well as installed but not yet verified.


67

Customer service performanceA range of statistical perception and

interaction-based customer surveys, conducted

by independent research organisations, are

used to measure customers’ satisfaction with

Eskom’s service. These include:

• KeyCare, which measures the satisfaction

of Eskom’s large industrial customers

• MaxiCare, which measures the satisfaction

of Eskom’s residential, small and medium

customers

• CustomerCare, which measures the

satisfaction of those customers who have had

recent contact with Eskom’s contact centres

Results from these surveys help Eskom identify

service aspects that require improvement.

KeyCareEskom achieved a score of 105.8% in 2013

(2012:105.9%). Performance was stable, despite

the potential negative impact on Eskom’s image

and reputation caused by the magnitude of

Eskom’s MYPD 3 tariff increase application.

Customer service index (includes CustomerCare and MaxiCare)Eskom uses a composite index to measure

its service to residential, small and medium

customers. The weighted customer service

index combines two external customer

service surveys and four internal customer

service process measures. Eskom achieved a

score of 86.8% for 2012/13 (2011/12: 85.6%).

Customer perceptions (MaxiCare) are trending

positively, but remain below target. Customer

Care scores are stable and above target,

reflecting ongoing customer satisfaction with

contact centre service.

The following measures were implemented to

improve service delivery:

• An operational improvement plan was

implemented

• Meter estimations were improved on a

national level

• Mobile service hubs were launched in the

Eastern Cape and KwaZulu-Natal to take

Eskom’s service offerings to remote areas

Restoration time performance is improving, but remains below target. Performance on minor project quotations is steady and above target, while the minor project connection performance is below target and deteriorating. This bedrock factor has a significant impact on customer perception and drives increases in customer queries. The service levels of the contact centres were above target.

Online vending systemA programme to enhance the online vending system’s resilience has been initiated and should be completed by the end of June 2013.

Arrear debtAs at 31 March 2013, the total municipal arrear debt was R1 203 million (compared to R1 157 million at 31 December 2012).

During Group Customer Services engagements with the municipalities, they cited the high turnover of key municipal staff, revenue losses, poor revenue collection, insufficient grant funding, misalignment of financial year-end, budgeting processes and reliance on government grant funding as the key factors contributing to the escalating arrear debt.

Eskom has initiated the disconnection of the electricity supply at four municipalities in line with the Promotion of Administrative Justice Act No 3 (2000).


68

Group Customer Services continuously monitors payments made and assesses the municipality’s specific circumstances in order to enter into reasonable payment agreements. In addition, a significant effort goes into building stronger relationships with these municipalities.

Free basic electricityGovernment’s national electricity basic

services support tariff aims to bring relief to

low-income households and maximise the

benefits of electrification by supplying 50kWh

of free electricity per month to qualifying

customers. Eskom is a service agent to the

municipality by providing free electricity to its

direct indigent customers.

The terms and conditions under which the

service is provided and paid for, is set out in

a service level agreement between Eskom

and the municipality. National government

finances this programme in which an allocation

is provided to municipalities through the local

government equitable share.

Eskom thus provides free basic electricity in

its supply areas and this is recoverable from

municipalities at a standard tariff. Municipalities

continue to revise the qualifying criteria used

for the allocation of free basic electricity.

As a result, the number of customers’ meters

reconfigured to receive free basic electricity

decreased during the 2012/13 financial year.

Progress in rolling out free basic electricity

Unit of measure 2012/13 2011/12 2010/11 2009/10

Municipalities contracted to provide FBE number 243 243 243 243

Municipal contracts rolled out % 99 99 99 99

Customers approved by municipalities

for FBE number 1 142 077 1 196 117 1 132 421 1 308 357

Customers’ meters reconfigured to

receive FBE number 1 139 696 1 139 120 1 141 235 1 294 997

Reconfigured FBE customer meters in

the year average % 100 99 100 99

Amount invoiced to contracted

municipalities Rm 275 294 273 308


Significant progress has been made by Eskom

in terms of:

• Influencing government to review the

formula and conditions of the equitable

share grant used to provide free basic

services, including free basic electricity, and

to review and audit the criteria used to

compile indigent registers (policy regarding

determination of the poor beneficiaries of

free basic electricity)

• Agreements on joint customer awareness

campaigns to increase understanding and

collection levels of free basic electricity

Grid Access UnitThe Grid Access Unit helps IPPs and other

generators connect to Eskom’s grid in a viable

manner, so promoting Eskom’s strategic goal

of enhancing private-sector participation in

the electricity sector and keeping the lights

on. In doing so, it helps close the gap between

electricity demand and supply in South Africa.

The unit also manages service relationships

with IPPs and associated industry associations.

The Grid Access Unit is developing a small

and micro-generation framework (connections

of less than 1MW) and is facilitating the grid

connection of other non-regulated projects

such as co-generation and energy wheeling.

69

DoE Renewable Energy Procurement ProgrammeDoE RE IPP Bid 1Of the 28 successful bidders, 27 projects

will connect into the Eskom grid, while one

will connect into the municipality network.

All connection agreements between the

successful bidders and Eskom have been

finalised. The projects are currently at the

construction phase. 22 projects with a total

capacity of 1 088MW have a grid connection

date that falls within 2013/14. The other five

projects with a total capacity of 321MW have

a grid connection date in 2014/15.

DoE REIPP Bid 2A total of 19 projects were successful through

the bidding process and 18 of these projects,

with a total capacity of 1 322MW will be

connected into Eskom’s grid. The other project

will connect to a municipality. Eskom is currently

finalising the agreements and budget quotation

queries in line with the DoE financial close and

the signing ceremony of 9 May 2013.

DoE REIPP Bid 3DoE has postponed the 3rd Bid Submission

to 19 August 2013. To date Eskom has

processed 492 applications translating to a

performance level of 76%. Eskom is continually

driving the delivery of the outstanding cost

estimate letters in line with the DoE timeline.

Safety performanceGroup Customer Services is focused on

embedding the zero harm value in all aspects of

its business and is ensuring occupational, safety

and hygiene resources are in place to address

the identification and control of all risks.

Group Customer Services experienced 10 lost-

time incidents during the year. As Group

Customer Services is a recently established

group, comparative figures are not available for

2011/12. Group Customer Service’s lost-time

incident rate for employees is better than the

Eskom rate of 0.39RA.

Integrated Demand Management (IDM)The IDM business unit designs energy-efficient

solutions to reduce electricity demand for a

sustainable future. IDM is helping to reduce

current electricity system constraints, so

supporting security of supply and promoting

Eskom’s goal of “keeping the lights on”.

Operating highlights• Achieved a total peak demand savings of

595MWRA and annualised energy savings of

2 244GWhRA. This includes measured and

verified peak demand savings of 589MW

and annualised energy savings of 2 223GWh

for NERSA- and Department of Energy-

funded projects. The additional 6MW of

demand savings and 21GWh of annualised

energy savings have been installed, but will

only be verified and claimed in 2013/14

Group Customer Services: Causes of employee lost time incidents (including fatalities)

3

2

1

0Lost

tim

e in

cide

nts

(incl

udin

g fa

talit

ies)

10 lost-time incidents in 2012/13

OtherOccupational diseasesMotor vehicle accident

Inhalation of fumesHijackingGun shot

Foreign bodyFall on same levelFall from height

Ergonomics/material/equipment handling Electrical contact

ExplosionContact with heat/dustCaught/cut/struck by

BurnBee sting/insect biteAssaultAsbestos


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• The residential mass rollout programme

continues to achieve significant savings in the

residential sector. In 2012/13, the programme

was the largest contributor to IDM savings,

achieving demand savings of 178MW and

annualised energy savings of 525GWh

• There has been significant uptake of the

funding mechanisms implemented since

the 2011/12 financial year (performance

contracting, standard product and standard

offer). Combined, these products realised

18% of total IDM savings. 4 279 projects were

registered in 2012/13, coming mainly from

commercial and light industrial customers

• New technologies such as light emitting

diodes have successfully been introduced

in the residential, commercial and industrial

sectors through the new funding mechanisms

• The compact fluorescent lamp mass rollout

programme continues to find untapped

pockets of inefficient lighting, so realising

additional savings. Together with this ongoing

sustainability programme, demand savings of

171MW and annualised energy savings of

584GWh were realised in 2012/13

• The industrial sector continues to contribute

significantly to IDM’s annual demand (19%)

and energy (24%) savings

• Power Alert continued to drive savings in

critical time periods. Research showed that

over 74% of respondents have a sound

understanding of its purpose

• The solar water heating rebate programme

continued contributing towards renewable

energy awareness and social upliftment. In the

financial year, 92 410 units were installed through

all the programmes, bringing the total installed

units since the inception of IDM to 334 032

• To date an amount of R1 011 million has

been received from the DoE to be spent on

solar water heating rebates and solar water

heating mass rollouts

Operating challenges• Reduced programme funding following the

third multi-year price decision (MYPD 3) will

affect the ability to unlock savings from all

economic sectors and technologies. Funding

is not sufficient to provide attractive financial

incentives to sustain the current market

uptake and momentum

• There is uncertainty regarding Eskom’s role in

implementing energy-efficiency and demand-

side management. Clarity is required to sustain

current momentum and ensure that a long-

term strategy is followed

• Eskom will have to ensure sustainability

of the IDM programme as a key lever to

manage security of supply

Future focus areas• Formulate a strategy to ensure the IDM

programme’s sustainability, including its role

in executing a national energy-efficiency and

demand-side management programme

• Ensure sustainability of the IDM programme

and supporting industry to maintain this as

a key lever to manage security of supply

• Continue the residential mass rollout

initiative, which involves going door-to-

door in residential areas and installing

energy-efficient technologies like compact

fluorescent lamp bulbs and geyser timers

• Drive incentive programmes further into the

market while exploring new implementation

and technology opportunities

PerformanceCustomer Services, through the IDM business

unit, play a key role in helping Eskom balance

power supply and demand during periods

of generation constraint. Since 2004, when

demand-side management projects were first

initiated and measured, the demand savings in

the evening peak period (18:00 to 20:00) have

risen in line with the growing requirement for

demand reduction.


71

2005 2006 2007 2008* 2009 2010 2011 2012 2013

Verified accumulated demand savings against the accumulated

Eskom target per year (MW)

4000

3500

3000

2500

2000

1500

1000

500

0Pe

ak d

eman

d sa

ving

s (M

W)

Eskom target Verified demand savings (MW)

Excludes 67MW claimed in 2008 for DMP*

Technical key performance indicators for integrated demand management (annual)

Demand-side savings Unit

Actual2012/13

Actual2011/12

Actual2010/11

Evening peak

demand savings1 MW 595RA 365RA 354RA

Energy savings1 GWh 2 244RA 1 422RA 1 339RA

Internal energy

efficiency1 GWh 28.9RA 45.0RA 26.2RA

1. Includes verified as well as installed but not yet verified.

The total demand and energy savings realised

for 2012/13 were achieved through the demand

management programmes listed in the table

below.

Annual energy savings (measured and verified) achieved by IDM programme (MW)

Programme categoryActual

2012/13Actual

2011/12Actual

2010/11

Renewables 0.05 <0.01 –

Compact fluorescent

lamp rollout 313 215 199

Compressed air 46 12 42

Demand reduction 35 58 32

Heat pumps 11 1 –

Industrial process

optimisation 40 7 73

Lighting, heating,

ventilation and air

conditioning 39 14 2

Shower heads 81 14 –

Solar water heaters 24 26 6

Total 589 347 354

The accumulated verified demand savings for

the combined financial years 2005 to 2013 is

3 587MW. A single power station’s generator

unit contributes about 600MW to the national

grid and a typical power station has six units.

This means that demand-side management

has, since inception, achieved savings almost

equivalent to the capacity of a typical power

station. The savings for the current year are the

equivalent to the output of one generator unit.

Commercial and industrial sector initiativesMore flexible funding options introduced over the past 24 months – namely the Standard Offer and Standard Product programmes – have improved IDM penetration into the commercial and industrial sectors. Information on these programmes is available on the Eskom IDM website: www.eskom.co.za/idm.

Saving programmes are mostly implemented through intermediate parties or Energy Services Companies (ESCOs). As a service provider to the end-consumer the ESCO enters into a contractual agreement with Eskom, with a back-to-back agreement with the end-consumer, sharing in the benefits of the savings obtained.

Eskom registered 3 959 Standard Product projects and 177 Standard Offer projects in 2012/13. Both programmes provide favourable funding options to smaller ESCOs, enabling them to participate in IDM. Project approval turnaround times have also been significantly reduced.


72

The graph below shows the improved contribution the commercial and industrial sector is now delivering, mainly through the Standard Offer and Standard Product solutions, a trend that is expected to continue.

The move into the commercial and residential sectors results in project volumes increasing significantly compared to the savings value. Automated processes are being implemented

to deal with the increased volumes.


Standard offer registrations

200

150

100

50

0

100

75

50

25

0

Num

ber

of p

roje

cts

Dem

and

savi

ngs

(MW

)

Qtr 1 Qtr 2

Year 2012/2013

Qtr 3 Qtr 4

Number of projects Demand savings (MW)

Year 2012/2013

Standard product registrations

4000

3500

3000

2500

2000

1500

1000

500

0

120

100

80

60

40

20

0

Num

ber

of p

roje

cts

Dem

and

savi

ngs

(MW

)

Qtr 1 Qtr 2 Qtr 3 Qtr 4

Number of projects Demand savings (MW)

Standard Offer and Standard Product project registrations in 2012/13

Residential sector initiativesA key focus of the IDM programme is to reduce peak demand, specifically during winter. A significant portion of peak demand is contributed by the residential sector and market research has indicated significant savings opportunities in this sector. Initiatives targeting this sector are underpinned by a strong marketing and communications campaign. One of the most visible of these is the Power Alert campaign.

The residential mass rollout programme has been the key contributor to IDM’s performance in 2012/13, delivering a total of 178MW. This programme is expected to contribute greatly to “keeping the light on” in the medium term.

The ongoing mass compact fluorescent lamps rollout programme has distributed four million

units in this financial year, realising 171MW of demand savings. Over 57 million bulbs have been installed in the residential sector to date.

Eskom contributed to the government’s residential solar water heating initiative, which aims to install a million residential solar water heaters by 2014/15, by continuing its high-pressure solar water heater rebate programme and running a contracted mass rollout programme to install low-pressure water heaters in historically disadvantaged areas. (The low-pressure solar water heater rebate programme has been terminated.)

Through these programmes, a total of 334 032 (58 316 high pressure units and 275 716 low pressure units) have been installed since inception in 2009. These have been paid for under the rebate and the contract-based mass rollout programmes.

73

The project management of the National Solar Water Heating programme is being undertaken by Eskom with the funding provided by the Department of Energy (DoE). To date an amount of R1 011 million has been received from the DoE, to be spent on solar water heating rebates and solar water heating mass rollouts as per a Memorandum of Agreement between the DoE and Eskom.

Demand response“Demand response” is a collective term for initiatives that allow the System Operator to offer consumers financial incentives to reduce their immediate electricity demand for a limited time period. Its primary aim is to bring demand and supply into balance by managing demand. Demand response helps manage peak demand and creates space for critical generation plant maintenance.

Four initiatives underpin the demand response programme: demand market participation, rewards, standby generation and power buyback.

Demand market participationDemand market participation focuses on large power users and consists of a number of product offerings in both the reserve and energy markets.

By 31 March 2013, demand market participation (excluding power and energy buybacks) had achieved the following:

• Certified supplemental demand market participation at financial year end was 388MW (Maximum certified achieved during the year was 513MW)

• Certified instantaneous demand market participation at financial year end was 232MW (Maximum certified achieved during the year was 317MW)

Customers who participate in demand market participation can also participate in power buyback schemes. As the capacity used for power buybacks cannot also be used for demand market participation, the capacity available for demand market participation

was consequently lower for the year to 31 March 2013 due to active power buybacks during that time.

Demand response rewardsThe rewards programme was a pilot project that aggregated loads from a range of smaller commercial and industrial customers to provide the System Operator with loads that can be curtailed at required times. Lessons learnt from this pilot project will be used to direct future demand response programmes.

Standby generationCustomers are contracted and compensated to run their standby generators at Eskom’s request during periods of high electricity demand.

Power buybackPower buybacks for the year were 3 551GWh of which 2 248GWh relates to “tranche 2” that was executed during the last four months of the year. The cost that has been recognised in this financial year is R2.8 billion. Note that for accounting purposes the full cost is accrued when a contract is signed and therefore there can be a timing difference from when the cost is accounted for and when the GWhs are “saved”.

Internal energy efficiencyEskom aims to improve the energy efficiency of its facilities (power plants and buildings) by undertaking energy audits and implementing efficiency programmes that focus on lighting, heating, ventilation and air-conditioning. Annualised energy savings of 28.9RAGWh (year-to-date energy savings of 3.87RAGWh) with a demand saving of 2.97RAMW were achieved for 2012/13.

Energy-efficiency marketingEskom embarked on a major drive to reduce electricity consumption among all electricity users. Two major initiatives – the immediate response initiative and the 49M campaign – comprise nine programmes in total and aim to promote immediate and long-term behavioural changes.


74

The immediate-response initiative aims to alleviate pressure on the grid by running televised Power Alerts between 17:00 and 21:00. The demand savings target for this initiative is between 250MW and 500MW during the evening peak period. On average, the alerts resulted in energy savings of 251MW during the weekday evening peak in 2012/13. On days when the Power Alert was set to red, indicating that the system was severely constrained, the average savings increased to 350MW. The Power Alert and 49M campaign support each other and the savings realised are dependent on customer behaviour.

The 49M campaign is a national, government and business supported long-term behavioural-change initiative that seeks to embed energy-efficiency attitudes and practices in all consumers, particularly residential users, with the ultimate goal of reducing their consumption by 10%. The IDM business unit provides advice and financial assistance to residential customers and corporations to “make the switch” and install energy-efficient technologies for a sustainable lifestyle.

Energy lossesThere are two broad categories of energy losses:

• Technical energy losses naturally occur when electrical energy is transferred from one point to another. The medium through which electrical energy is transferred imposes a resistance to the flow and some of the energy is dissipated as heat

• Non-technical energy losses can be calculated as the difference between total energy losses and technical losses. They are typically caused by theft (illegal connections, meter tampering), errors in data and billing, among others

For internal evaluation purposes the estimated technical losses range between 60% and 75% of total losses in Distribution networks, while 100% is estimated for the Transmission networks. The actual percentage in Distribution is influenced by factors such as network design, network topology, load distribution

on the network and network operations and maintenance regime.

In 2012/13, Eskom’s total energy losses were 9.08%, of which non-technical losses were estimated at 1.78% to 2.85%. This performance is above the 8.93% target allowed by the regulator. Distribution losses increased to 7.12%RA (2011/12: 6.32%RA), while Transmission losses decreased to 2.80%RA (2011/12: 3.08%RA).

During 2012/13 losses due to conductor theft (including theft of copper, cable, transformers and tower-related structures) totalled R50.5 million (2011/12: R63.3 million), and involved 5 187 incidents (2011/12: 9 584 incidents). These incidents not only result in financial loss but impact on Eskom’s ability to provide a quality service to customers.

Distribution energy losses have shown an increase in 2012/13 financial year. The current persistent economic hardships experienced in the country result in the distribution energy losses increase. There are two dominant factors contributing to the increase in the energy losses performance:

• Significant reduction in sales to high-voltage customers results in an increase in the distribution losses percentage

• Non-technical losses, particularly theft, have been increasing, which increases the energy losses volume. Theft has been increasing across all sectors of Eskom’s customer base resulting in an increase in losses

• Incidences of energy theft (illegal connections, meter tampering and illegal vending of prepaid electricity) were significantly higher than recorded in the past. The harsh economic conditions and the high electricity tariffs are exacerbating the problem. Increased community resistance to Eskom’s removal of illegal connections or tampered meters in some areas increase the risk further

The business will continue to focus on this problem of electricity theft, while ensuring that the technical losses are also kept in check.


75

These initiatives include, among others, continuing with the Energy Losses programme and Operation Khanyisa programmes, which have shown some positive impact on the losses, even in this very difficult economic climate.

The work carried out by Operation Khanyisa and the Revenue Loss Unit continues to bear fruits in the fight against ghost vending and meter tampering.

Following on the highly publicised case of the two perpetrators who were sentenced to a combined 111 years in prison and their assets forfeited, the law enforcement agencies are now showing a keen interest in dealing with electricity theft cases. To this end about 53 suspects were arrested for illegally selling prepaid electricity, while a number of electricity theft cases on business premises are also seeing their way to the courts.

On the other hand South Africans have rallied around the call for action made by Operation Khanyisa to report any form of electricity theft. From inception to date, over 6 200 tip-offs were received from concerned South Africans.

The other problem plaguing Eskom and the South African economy is the network equipment theft (generally referred to as conductor or copper theft). This involves theft of overhead lines, underground cables, airdac and bundle conductor, earthing equipment, transformers, pylon support lattices, etc. Even though this has shown signs of improvement in 2012/13, it is still a major problem which must be tackled by all involved.

Implementation of the new Second Hand Goods Act on 30 April 2012, followed by aggressive policing of the scrap industry by law enforcement agencies supported by industry role-players, had a huge impact on the trading in stolen material. This directly contributed to the decrease in incidents and losses recorded during the first nine months of the current financial year.

The joint industry working group (formed by Eskom, Transnet, Telkom, SAPS, NPA, BAC and SACCI) continues to contribute positively in the fight against this crime.

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

Eskom runs a very comprehensive energy efficiency awareness campaign across all media

Services functions5


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Services functions

Group CapitalGroup Capital’s mandate is to create a centre

of excellence in the prioritisation of capital

expenditure at group level and in the planning,

development, monitoring and execution of mega

projects and the Generation technical plan.

Since 2005, Eskom has been involved in a major

capacity expansion programme to increase the

country’s generation and transmission capacity

to meet the growing demand for energy.

The total cost of this phase of the programme

from inception to 2018/19 is estimated to be

R373 billion (excluding capitalised borrowing

costs). In addition to the capacity expansion

expenditure, Eskom incurs significant capital

expenditure to refurbish, maintain and

strengthen its current operating plant.

Operating highlightsAdded capacity• Added 200MW of generating capacity

through the commissioning of Komati

unit 1 on 1 March 2013 and unit 2 on

14 March 2013. It is a significant milestone

to have eight of the Komati units returned

successfully to service. The remaining unit

(unit 3) will be commissioned in the next

financial year

• An additional 31MW was commissioned at

Camden (6MW at unit 6, 20MW at unit 7

and 5MW at unit 8, when the capacity of the

units were re-certified)

• Commissioned 707km of the 765kV

transmission lines. 205km of the Duvha-

Leseding line (part of the Northern Grid

Projects) was commissioned in May 2012

and 268km of the Zeus-Mercury line and

234km of the Mercury-Perseus line were

commissioned in December 2012

Licences and agreements• The Department of Water Affairs issued

Eskom with a Water Use Licence for

the Hendrina-Gumeni 400kV line on

23 November 2012. This will enable

construction of 83km of line through

wetlands in the northern region

• Concluded a Joint Development Agreement

with PetroSA for the procurement of liquid

natural gas for the Gourikwa power station

(open-cycle gas turbine)

Construction• The Eskom board approved the execution

of the Sere Wind Farm project and Public

Finance Management Act (1999) approval was

received for this project from the Department

of Public Enterprises. The main wind turbine

generator contract has been awarded.

NERSA approval is pending

Safety• Employee safety continued to improve during

the year with only three lost-time incidents

reported. The number of contractor lost-time

incidents also continued to show improve

compared to 2012/13

Operating challenges• The targets for the transmission capacity

projects for 2012/13 have not been achieved

due to poor contractor performance,

extreme weather conditions, equipment

quality issues and environmental permits not

being granted

• Medupi construction challenges include

welding irregularities and post-weld heat

treatment irregularities, as well as the

control and instrumentation Factory

Acceptance Test failure. The project has

also been negatively affected by contractor

labour unrest leading to site closures. Eskom

is working with the contractors with a

particular focus on meeting the date for

synchronisation and commercial operation

79

• The development progress of the Biomass

Co-Firing project is not at a desired level due

to delays in the delivery of torrefied biomass

fuel. Activities related to raw pelletised

biomass fuel as the fuel of choice have been

suspended and the engineering work has

been stopped to focus on the evaluation of

torrefied biomass fuel

• Challenges around securing land continue to

delay the construction of critical transmission

infrastructure needed for a secure

transmission network. The Department of

Public Enterprises is regularly being engaged

for intervention. The negative impact of not

being able to secure the land is evident with

the Kappa-Omega 765KV line where the

project has been delayed from 2013 to 2015

• Contractor safety performance continues to

be a challenge. During the year there were

seven contractor fatalities. However, the

contractor lost-time incident rate continued

to show improvement

Future focus areas• Bring Medupi unit 6 online in December 2013

• Commission Komati unit 3, the last unit at

Komati power station

• Finalise the concentrating solar power plant

design, approve its procurement strategy

and obtain pre-notification, as per the Public

Finance Management Act (1999)

• The biomass co-firing concept:

– Fuel supply study and execution of

techno-economic and sustainability study,

as well as torrefied fuel pellets sourcing

and supply options

– Complete the biomass co-firing concept

design for Arnot power station

– At Kriel power station, the equipment

contract for the biomass co-firing concept

must be placed and initial studies on

fuel supply, and techno-economic and

sustainability need to be done

• Department of Energy approval awaited for

land acquisition at the Thyspunt site as part

of the nuclear programme development.

Conclude site characterisation, design

and execution preparation for Thyspunt,

Duynefontein and Bantamsklip

• Obtain approval as per the Public Finance

Management Act (1999) and initiate the

process to purchase properties to restart the

Generation environmental impact assessment

for a new coal-fired power station

• Further improve the Contractor safety

performance, especially the prevention

of fatalities

BenchmarkingPlease refer to the 2011/12 integrated report

for results of benchmarking of construction

costs conducted in that year.

An independent review of the schedules and

costs relating to Kusile and Ingula has been

performed and noted that the schedules

and costs to complete are achievable.

An independent review of Medupi’s schedule

and costs is also currently underway and will be

communicated when complete.

Construction of Unit 1 at Kusile power station in Mpumalanga is progressing well


80

PerformanceFinancial performanceThe table below displays the capital expenditure of the group for 2012/13.

Capital expenditure (excluding capitalised borrowing costs) across the value chain (R million)

DivisionActual

2012/13Actual

2011/12Actual

2010/11

Group Capital 37 690 39 730 30 436

Generation 8 512 6 590 6 341

Transmission 893 1 554 1 503

Distribution 8 317 7 941 8 190

Subtotal 55 412 55 815 46 470

Future fuel 2 634 1 992 1 063

Eskom Enterprises 376 473 209

Other areas including service and strategic functions 1 711 535 190

Total capital expenditure 60 133 58 815 47 932

Services functions continued

Current performanceThe Group Capital division focuses on Eskom’s

large value projects, such as the capacity

expansion programme and upgrades. The budget

for the new capacity expansion programme

from its inception in 2005 until its completion in

2018/19 is approximately R340 billion.

The capacity expansion programme includes

the 4 764MW Medupi and 4 800MW Kusile

coal-fired stations and the 1 332MW Ingula

pumped-storage scheme in the Drakensberg,

which will deliver hydroelectric power during

peak demand periods. The programme

also includes expanding and strengthening

the transmission network and renewable-

energy projects, which include the 100MW

concentrating solar power plant in Upington,

currently in development and due to be

commissioned in 2017.

The table below details the progress the capacity

expansion programme made in 2012/13.

Capacity expansion programme progress in 2012/13

Compacttarget

2012/13Actual

2012/13

Actual since

inception(2005

to 2013)

Generation

capacity MW 260 261RA,1 6 017

Power lines

built km 900 787RA 4 686

Substation

capacity

installed MVA 3 545 3 580RA 23 775

1. Includes 30MW upgrade at Koeberg and 231MW constructed by

Group Capital.

81

The table below summarises construction

progress on the three key projects – Medupi,

Kusile and Ingula power stations – as at the end

of March 2013.

Construction progress on Medupi, Kusile and Ingula, as at 31 March 2013

Key projects

Target inception

to31 March

2013

Actual inception

to31 March

2013

Actual inception

to31 March

2012

Medupi 81% 65% 39%

Kusile 46% 22% 17%

Ingula 77% 68% 41%

Progress on generating projectsApart from the technical challenges facing

Medupi, construction is on track for most

projects across the capacity expansion

programme. These were some of the

achievements during the year:

• Medupi achieved a major milestone on

11 October 2012 when the first coal was

delivered to the coal stockyard from

Exxaro mine

• The Ingula project has settled all main

underground works claims up to 31 March 2012,

and the accelerated programme has been

agreed to between Eskom and the main

contractor. Ingula successfully hosted President

Jacob Zuma and members of the Cabinet

on 10 November 2012

• Grootvlei unit 5’s outage has increased due

to the planned commissioning of an additional

30MW

The following issues are being addressed

through recovery plans and mitigation

strategies, which are continually reviewed and

monitored:

• Medupi construction challenges:

– Welding irregularities and post-weld

heat treatment irregularities in respect

of high-pressure tubing in December 2012

necessitate rework

– Control and Instrumentation Factory

Acceptance Test in December 2012 failed.

Efforts are being taken to minimise the

impact of this delay

– The project schedule has been negatively

affected by labour unrest leading to site

closures over a 10-week period from

January 2013 to March 2013

– Contractors are continually engaged to

improve on the current schedule, with

particular focus on meeting the date

for synchronisation and commercial

operation

• At Kusile, several schedule-recovery

business cases to achieve unit 1’s commercial

operation date have been approved.

However, the boiler contractor’s weld-reject

rate continues to be a problem, causing

further schedule slippage. In addition, most

contractors did not work through the

builder’s festive season break as agreed

• At Komati, a high-pressure turbine incident

on unit 3 (100MW) after first synchronisation

resulted in projected delays to May 2013

Recovery plans and mitigation strategies

are in place in all of the above cases.

These are being reviewed and monitored on

a continual basis.

Eskom is currently negotiating with contractors

and labour a new partnering agreement for

Medupi and Kusile. This will replace the current

project labour agreement and is intended

to foster an improved spirit of collaboration

on site and ensure standardisation and

consistency of labour practices.

Ongoing risks to the capacity expansion

programme relate to engineering, construction,

procurement and economic fluctuations. These

are some of the challenges the programme faces:

• Keeping a sustained focus on safety

• Shortage of project staff (such as project

managers, planners, contract managers),

suppliers and contractors


82

• Upward pressure on capital cost on the back

of high global demand for equipment

• Timely completion of environmental impact

assessments and obtaining environmental

authorisations, permits, rights and land

servitudes

• Inadequate and non-standardised processes

and tools to manage and monitor progress

• Managing the sourcing of commodities and

high-exposure items

Notwithstanding these and other challenges,

Group Capital continues to meet the

requirements of the capacity expansion

programme. Formal project assurance is used

to track project schedules, costs and safety

risks to meet the expected quality standards

and deadlines.

Power station projected completion schedule (capacity installed/first power) (MW)

Project 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Total

Grootvlei (return to service) 30 30

Komati (return to service) 100 100

Medupi (coal-fired) 794 1 588 1 588 794 4 764

Kusile (coal-fired) 800 800 800 1 600 800 4 800

Ingula (pumped-storage) 1 332 1 332

Sere wind farm (renewable) 100 100

Total (MW) 924 3 820 2 388 1 594 1 600 800 11 126

In addition, Eskom has commenced the

development of a 100MW concentrating solar

power plant in Upington that is expected to be

commissioned in 2017.

Contract placement is satisfactory across all

generation programmes. Local content from

contracts awarded in the capacity expansion

projects is indicated in the table below.


Local suppliers and service providers in Eskom’s capacity-expansion programme as at 31 March 2013

Project

Original contract value

(in R billion)1

Local content committed inception to date

Actual local-content inception to date

(R billion) % (R billion) %

Medupi power station 56 455 36 205 64.1 21 365 59.0

Kusile power station 59 188 37 813 63.9 19 503 51.6

Ingula pumped-storage scheme 11 014 4 086 37.1 4 961 121.4

Power delivery projects 10 081 7 813 77.5 2 255 28.9

Total/overall average 136 738 85 917 62.8 48 084 56.0

1. Excluding CPA and modifications.

83

Safety performanceThe Group Capital safety performance had

mixed results during the year. Sadly, there were

seven contractor fatalities during the year.

Employee safety continued to show

improvement during the year with only three

lost-time incidents reported. Group Capital’s

lost-time incident rate for employees is better

than the Eskom rate of 0.39RA.

The number of contractor lost-time incidents

increased from 101 in 2011/12 to 108 in 2012/13.

The major cause of fatalities continues to be

falls from heights.

Number of employee and contractor fatalities in Group Capital

FatalitiesActual

2012/13Actual

2011/12Actual

2010/11

Employee fatalities – – –

Contractor fatalities 7 1 2

Group Capital: Causes of employee lost time incidents (including fatalities)

3

2

1

0Lost

tim

e in

cide

nts

(incl

udin

g fa

talit

ies) 3

2

1

0Lost

tim

e in

cide

nts

(incl

udin

g fa

talit

ies)

3 lost time incidents in 2011/12 7 lost time incidents in 2012/13




Measures taken to improve contractor safety

performance include:

• Leadership commitment and drive both from

the Eskom leadership as well as the senior

management of the contractor companies

that Eskom works with

• The development of health and safety

skills among Eskom staff and those of the

contractors. In addition academic institutions

have been engaged to review the programmes

to improve safety on construction projects

• A decision was made to implement

OHSAS 18001 throughout the major projects.

This will result in improved health and safety

management systems on Eskom projects

and third party auditors will review Eskom

programmes ensuring that Eskom moves

towards world-class programming

• Rollout of the zero harm programme to

employees and contractors to embed the

Eskom value among the more than 40 000

people participating in the build programme


84

• Integration of Safety, Health and Environment

policy in the project lifecycle model and

business processes

• Safety, Health and Environment policy

integration into the commercial process

• The continued implementation of the

occupational, health and safety inspectorate

on the projects to identify and rectify gaps

For detailed information about the overall

safety strategy and initiative at an Eskom level

please refer to the page 128.


Environmental performanceEnvironmental performance indicators for Group Capital

Target2012/13

Actual2012/13

Actual2011/12

Actual2010/11

Number of environmental legal contraventions (number) 8 4 8 8

Number of environmental legal contraventions reported in

terms of Eskom’s operating health dashboard (number)1 – – 2 1

Materials containing asbestos disposed of at registered

waste sites (tons) – – 32.7 76.1

Materials containing polychlorinated biphenyls thermally

destructed (tons) – – 0.4 –

1. Under certain conditions, contraventions of environmental legislation are classified in terms of the Eskom operating health dashboard index. 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. Group or divisional executives can escalate any significant environmental legal contravention to the

operating health dashboard.

Group Capital observed a progressive decline

in the number of legal contraventions over

the period from 2009/2010 to 2012/2013.

Notably there was a decrease to four legal

contraventions from eight legal contraventions

in 2011/12. Working without authorisation and

water-related contraventions remain challenges.

The Construction Management department,

Eskom Programme Management Office and

Project Development departments of Group

Capital division are ISO 14001 certified.

The Eskom Real Estate department is on

schedule for ISO 14001 certification.

Group Technology and CommercialThe Group Technology and Commercial

division is responsible for overseeing,

monitoring and executing Eskom Group’s

engineering and procurement (including

primary energy) activities.

Group Technology and Commercial consists

of the Primary Energy, Technology and

Commercial (procurement other than primary

energy) divisions.

85

Primary EnergyPrimary Energy sources and procures the

primary energy resources (coal, water, uranium,

sorbent and biomass) that Eskom’s power

stations need to operate. These resources

must be sufficient, delivered on time and at

minimum cost, and of the required quality.

These resources must at all times be managed

in a way that strives to minimise the impact

on the environment and ensures the safety of

Eskom’s workers and the public.

Coal supply strategyDuring the past year Eskom has revised its

previous Coal Supply Strategy and developed

an implementation plan to ensure the successful

execution of the strategy. The Coal Supply

Strategy approved by the board in 2012, links

directly to Eskom’s strategic imperatives:

• Leading and partnering to keep the lights on

• Securing our future resource requirements,

mandate and the required enabling

environment

• Implementing coal haulage and the road to

rail migration plan.

Eskom faces an un-contracted demand for coal

of up to 2 100 Mt through to 2051. The Coal

Supply Strategy has been developed in the

light of, and considers the changing coal supply

landscape, the consolidation of the supplier

market into four main suppliers, the export of

Eskom grade coal to India and China, the above

inflation cost increases in the mining industry

and the lack of new coal mining projects being

developed.

Given these variables, Eskom has identified

strategies to counter potential coal supply

shortfalls and to meet Government’s and Eskom’s

transformation objectives. The approved coal

supply strategy encompasses the following five

elements:

• Progress coal supply from the Waterberg

• Drive policy changes for the dedication of

coal resources for power generation in

Mpumalanga

• Pursue new technologies for coal

beneficiation such as briquetting and

blending

• Develop black owned emerging coal

and limestone miners to secure available

resources, increase competition and

transform the supply chain

• Set up the basis of engagement for the coal

and limestone portfolio of a state owned

mining company

To this end Eskom is implementing a set of

actions to give effect to the Coal Supply

Strategy, of which the key elements are set out

on the next page:

Coal stocks at Kendal power station in Mpumalanga


86

• The creation of a mine development fund to

advance black emerging coal and limestone

mining projects

• Identify and contract with emerging miners

• Conclude a full scale combustion test at

Majuba power station with coal from the

Waterberg

• Conclude a contract with Transnet for

transportation of Waterberg coal to

Mpumalanga

• Conclude a water supply agreement with

the Department of Water Affairs for water

supply to the Waterberg area.

Securing coal is an increasing challenge as

Eskom’s coal-fired power stations require a

continuous supply of acceptable-quality coal

at fair prices. Eskom has to compete with

international buyers for South Africa’s coal

reserves, which has an effect on the coal price.

Increased specifications for the acceptable

quality of coal delivered to Eskom also

influence supply.

Eskom secures these resources through national

collaboration and effective engagement with

relevant stakeholders. Its performance is

assessed using the following indicators:

• Average coal stock days

• Coal delivery

• Coal quality, which is measured indirectly via a

power plant’s UCLF and EAF measurements

(see Generation on pages 42 to 47)

• Specific water consumption (see pages 49

to 50)

• Primary energy costs, including future fuel

• Volume of coal burnt

Operating highlights • Average coal stock levels improved to 46

days as at 31 March 2013 (March 2012: 39

days). This is the highest year-end stock

level to date despite experiencing a 3 week

transport strike as well as a 3 week strike at

a number of mines

• Medium-term contracts were secured to close

shortfalls in coal supply

• Safety performance on the coal heavy-haulage

road network has improved, with a 31%

decrease in year-on-year public fatalities

• The Tutuka coal terminal is now operational

and rail deliveries are ramping up

• The fleet size for coal road transport has been

optimised

• Construction of the Komati Water Scheme

Augmentation Project is on track for water

delivery by the end of May 2013

• Construction of Mokolo and Crocodile Water

Augmentation Project Phase 1 is progressing

well, with partial water delivery expected

by end May 2013 and full water delivery by

June 2014

• Eskom’s Water Conservation and Water

Demand Management Awareness campaign

launched during National Water Week

• Feasibility studies have commenced for the

Kriel-Matla mine water reclamation project

Operating challenges • Achieving contractual performance on coal-

supply agreements remains a challenge, as does

consistently supplying some power stations

with coal of acceptable quality

• Eskom needs to purchase more expensive coal

from the short-/medium-term market due to

poor volume performance from 5 of the 6 cost

plus mines

• Both Eskom and Transnet are experiencing

operational challenges regarding the rail

transport of coal

• Extended strikes in the transport and mining

industry affected the coal-supply value chain

from operational performance and safety

perspectives

• Removing coal trucks from the road has been a

difficult transition to manage

• A number of coal mines contracted to Eskom

are still awaiting approval of their integrated

water use licences from the Department of

Water Affairs


87

• The target for water transfers was not

achieved due to the unavailability of

infrastructure and low plant reliability on the

water schemes

• Eskom experienced poor security of diesel

and fuel oil supply

• Managing Eskom’s contractual environmental

obligation at the Kilbarchan Colliery.

Future focus areasSecuring Eskom’s coal requirements• Implement ISO 14001 (environmental

management) and OHSAS 18001

(occupational health and safety) standards

for cer tification

• Optimise stockyard operations

• Complete testing for beneficiation

(purification), which may provide a solution

to some of the coal-quality challenges

• Ramp up existing rail operations to increase

coal deliveries by rail in 2013/14

• Co-develop an integrated rail network

in Mpumalanga to increase coal-supply

flexibility to the power stations

• Build the private Majuba heavy-haul line

between Ermelo and Majuba power station

• Build a coal terminal at Grootvlei and

commence operations in the next two years

Securing Eskom’s water requirements • Conclude the water supply agreement with

the Department of Water Affairs for the

second phase of the Mokolo and Crocodile

(West) Water Augmentation Project to

ensure water security to energy and related

developments in the Lephalale area of

Limpopo Province

• Work closely with Eskom’s bulk water

suppliers to improve the health of bulk

water-supply infrastructure to ensure annual

inter-basin and water transfers

• Roll out the water-conservation and water-

demand management programme

• Diversify Eskom’s water mix through the use

of treated effluent and waste water such as

excess mine water from coal mines

• Develop and implement Eskom’s long-term

water infrastructure and resources plan

PerformanceSecuring Eskom’s coal requirementsPrimary energy inventory (R million)

Actual 2012/13

Actual 2011/12

Actual 2010/11

Coal inventory balance 5 330 3 798 3 709

Future fuel – coal 7 098 5 020 3 703

Nuclear inventory balance 856 1 217 1 029

Future fuel – nuclear 1 023 432 386

Key performance indicators in securing Eskom’s coal reserves

Indicator and unit

Compacttarget

2012/13Actual

2012/13Actual

2011/12Actual

2010/11

Coal burnt, Mt – 122.95 125.21 124.68

Coal purchased,

Mt – 126.44 124.27 126.23

Coal transported

by rail, Mt 12.2 10.1RA 8.5 7.1

Coal stock days – 46RA 39RA 41RA

The actual quantities of coal burnt and purchased

in 2012/13 are lower than the target primarily due

to the energy sent out being below target.

The amount of coal procured from Eskom’s tied

collieries has been below committed levels. This

decline in production increases the unit cost of

coal procured, as well as results in more medium

term coal having to be procured at large cost to

address the shortfall.

Secured coal for KusileEskom is progressing on securing coal and

limestone supply agreements to Kusile power

station. There are currently two contracts in

place, and additional contracts will be secured

during the course of 2013/14.


88

Coal securityDuring the course of 2012/13, Eskom held

discussions on coal security with several

government departments, including the

Department of Mineral Resources, Department

of Public Enterprises, Department of Energy

and the National Planning Commission. A draft

bill to amend the Mineral and Petroleum

Resource Development Act has been issued.

This bill takes some of the outcomes of the

above discussions into consideration.

Strategy for the Waterberg coalfields The largely untapped Waterberg coalfields

lie in the Limpopo province, 600km north-

west of Mpumalanga, where most of Eskom’s

coal-fired power stations are based. This area

does not have many water reserves, which are

necessary for mining coal, and the existing rail

infrastructure is not capable of meeting the

needs of Eskom or the export coal industry.

Eskom is working closely with Transnet Freight

Rail and the Department of Water Affairs to

develop funding models for the rail and water

infrastructure that is required to tap these

resources. Eskom is also in discussions with

mining suppliers for long-term coal-supply

contracts, and is considering a second phase

of the water-augmentation project to ensure

timely availability of water.

If the project proceeds as envisioned, rail

imports to Mpumalanga from the Waterberg

coalfields could begin in 2019.

Securing Eskom’s water requirements During 2012/13, Eskom contributed significantly

to the second revision of the National Water

Resources Strategy. The aim of this involvement

was to secure Eskom’s future water supplies.

Eskom has also worked closely with the

Department of Water Affairs to address the

backlog of water-use licences for its power

stations, capacity expansion programme and

coal suppliers.

Securing Eskom’s nuclear fuel requirements The current uranium and enriched uranium

contracts are sufficient to satisfy Koeberg’s

demand until 2017.

The current fuel-fabrication contracts cover

the period up to 2015/16.

Integrated logistics strategy for transportation of primary energy for Eskom’s coal-fired power stations Eskom is in the process of revising its integrated

logistics strategy. Central to the strategy is

a migration from road to rail for coal as well

as biomass and limestone transportation to

Eskom power stations. Eskom is also, at the

same time, investigating ways in which any

economic impact to road transporters as a

result of the migration from road to rail and

their employees can be mitigated (the Road

Change Over-strategy).

In 2009, the board approved the Long Term

Coal Logistics Strategy. Since then, a number

of other initiatives have gained impetus:

• A pilot project to investigate the use of

biomass as a primary energy resource for

Eskom’s power stations was initiated

• The use of sorbents in flue gas desulphurisation

(FGD) plants at Eskom power stations is being

implemented

• An emerging mining strategy is in development

• The Waterberg integrated strategy has been

approved by the board and includes approval

for the following items:

– Conclude memoranda of understanding

with coal suppliers in the Waterberg

– Engage with Transnet for the construction

of a rail line from Waterberg to

Mpumalanga

– Engage with Department of Water Affairs

for the construction of a water pipeline to

augment water supply to the area


89

The current transportation situation is not

improving as coal sources in close proximity to

the power stations are either being depleted

or cannot be extracted due to difficult mining

methods or environmental constraints, hence

coal is procured from sources that are far from

the power stations and this coal is being delivered

by road. Eskom is also developing an emerging

mining strategy, which will assist the smaller

miners with opening mines and establishing a

proper transportation infrastructure.

In addition, the procurement of limestone for

the use in FGD plants, and biomass in the future;

will require more resources to be transported

to the power stations. Some of these resources

are situated across the South African border,

extending the haulage routes considerably.

To this end, Eskom is currently reviewing the long

term coal logistics strategy. The updated strategy

consists of two parts:

• Integrated logistics strategy

• Road transport change-over strategies

Eskom’s road-to-rail migration strategy is in

progress and is being implemented with the

cooperation of Transnet Freight Rail. Eskom

has already built containerised coal terminals at

Camden and Tutuka power plants.

The Majuba heavy-haul line will have enough

capacity to transport 14 million tons of coal

from Ermelo to Majuba power station each year.

Approval in terms of the PFMA to proceed with

this part of the project was granted in December

2012 and the civil construction contract was

placed during February 2013. Site establishment

commenced during March 2013.

Strikes in the road-freight and colliery industries

are already putting Eskom’s coal supplies at risk.

These issues have to be addressed sensitively, and

in good time. Eskom will continue to work with

its suppliers to ensure resilient operations during

such events as strikes.

Performance – migrating coal transport from road to rail10.1 million tons of coal was transported by

rail during 2012/13. Although rail deliveries

increased by 19% over 2011/12, Eskom failed

to meet its target of coal transported by rail

due to a delay in appointing the operator of the

Tutuka Coal Terminal and operational capacity

challenges on the side of Transnet Freight Rail.

Group TechnologyGroup Technology’s mandate is to optimise

plant asset performance and support the

capacity expansion programme through the

Outage Management, Engineering and Asset

Management departments. The division has

been set up to ensure that Eskom engineering

capability is maintained at a high standard in

terms of design, operations, maintenance,

project engineering services and solutions.

Outage managementOperating highlights• An upward trajectory in key indicators including

due date performance (measurement of

on-time return of outages) rising to 70.4%

from 55% in 2011/12

• Establishment of the Outage Performance

Improvement Centre at Megawatt Park

in February 2012 to provide a platform

for performance improvement, with a

mandate to:

– Be the nucleus of all outage activities,

providing transparency on outages across

the fleet

– Assist current outages in resolving issues

through agreed escalation processes and

deployment of expert resources

– Improve outage performance by accounting

for the central, day-to-day management

of outages

– Build visibility and transparency of the

outage planning and execution value chain

– Be the central point to drive standardisation

across outages


90

• Design and implementation of a number

of key interventions that have transformed

performance:

– Capacitation of outage teams with additional

technical and project management support

from external providers

– Deployment of a SWAT team of technical

experts (engineering experts, procurement,

quality and safety representatives) to provide

on-the-ground support to outage teams

– Implementation of the process control

manuals, focusing on process standardisation

across the fleet and ensuring power station

units have the required levels of outage

readiness

– Development of best practice manuals

and boot camps defining the outage

team’s performance expectations for

successful outages

– Facilitation of technical forums to improve

collaboration and transparency as well

as develop practical solutions to specific

outage issues and challenges

Operating challengesOutage management faces signif icant

operational challenges that continue to place

a tremendous strain on the system. Historical

challenges include low levels of transparency

on outage status, execution quality issues, lack

of full process standardisation and insufficient

central support and control. Key operational

challenges include:

• Deterioration of power station units due to

maintenance backlog

• High number of unplanned and forced

outages at power stations

• High number of outages that need to be

undertaken

• Stretched resources required to work on

multiple units on outage simultaneously

Future focus areas• Safety: Implement fully the outage safety

strategy and recommendations from root

trend analyses and greater support and

coordination of site safety officers and

safety watchers

• Technical: Increase capacitation of site

teams and improved planning and the

implementation of best practice outages

• Human resources: Fill staff vacancies

(especially for key skill areas), renew focus on

increasing gender equity at professional and

management levels and great resourcing for

the 80:10:10 Generation Sustainability project

EngineeringOperating highlights• Completion of an Engineering Management

Framework, enabling the effective management

of engineering requirements within a centre-

led operating model. The framework includes

engineering processes, systems, tools, technical

governance, engineering accountability and

design base management

• Development of a comprehensive set of new

engineering processes has been completed,

including the supporting training material for

young engineers

The Engineering Management Framework

will enable a standardised work approach

throughout Eskom that will provide assurance

through a strong technical governance capability.

Operating challenges• Continued operational demand from the

aging coal plant fleet increases the need for

innovative engineering solutions

Future focus areas• Deliver innovative engineering solutions to

maintain current assets and meet the needs

of the new build design and construction

• Enrol more supplier panels to provide

expertise in support of the local engineering

industry


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Asset managementOperating highlights• Development of maintenance and outage

management process control manuals

• Development of process control manuals

training material

• Training of 73% of target audience with

balance set for the new financial year

Operating challenges• A loss of skills within the Protection,

Telecoms and Measurement department.

A retention strategy has been developed

Future focus areas• Establish the Maintenance and Operating

Centres of Excellence

• Developing asset performance tools to

provide assurance that maintenance plans

are in line with maintenance strategy

Development projectTo meet future power demand, Eskom has

embarked on a large capacity expansion

programme. The huge capital outlay associated

with this expansion drive represents a unique

opportunity for South Africa to develop a

service industry around the power plant industry.

However, the current engineering offering in

South African universities, although broad and

diversified, does not fully meet the specialised

needs of the power industry. South Africa also

faces a shortage of qualified engineers, which

could jeopardise Eskom’s delivery on capacity

expansion and retrofit programmes within

planned schedules and costs.

To catalyse the development of a local,

specialised knowledge base and generate

a pipeline of qualified engineers, Eskom

established a Power Plant Engineering Institute

in collaboration with six leading universities.

Eskom has identified broad specialisation areas

and awarded eight chairs to these universities

in the fields of emissions control technologies,

combustion engineering, energy efficiency,

plant asset management, renewable energy

technology, materials science, high-voltage

engineering alternating current and high-

voltage engineering direct current.

The Power Plant Engineering Institute launched

on 12 January 2012 with a total of 42 BSc

Engineering candidates selected from Group

Technology.

Eskom aims to be a Top 5 global utility and

to achieve this must continue to develop its

most valuable asset – people. Their increased

capabilities are essential to achieving Eskom’s goal

and ensuring long-term sustainability of initiatives.

Eskom launched a number of exciting people-

based programmes to catalyse internal leadership,

including the Top Engineers programme, driven

by Group Technology in collaboration with

partners, McKinsey & Company.

This programme will develop future engineering

leaders with a broader skill set including core

problemsolving skills. McKinsey, who support

Eskom as part of their supplier development

and localisation commitment, designed the

programme and will provide training material

and trainers. In addition, they will include the

engineers within the McKinsey teams that

currently support Eskom projects, providing

them with real-world opportunities to solve

complex problems while enjoying significant

exposure and support. Young engineers with

a maximum of five years’ experience were

selected. This full-time, one-year programme will

be based on the field (on-the-job training with

McKinsey teams) and forum (formal classroom

learning) principle. After the programme,

participants will be “change agents” who help

design and drive change to take Eskom to the

next level. In addition, there will be potential

opportunities to retain some of these engineers

in a central team, possibly within the office of

the chief executive or as a separate unit with

Group Technology. This will be reviewed and

developed after further consultation.


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Engineering Management Development programmeGroup Technology Engineering Management

team has approved the 2013 launch of

an Engineering Management Development

programme to develop and retain engineers

to fulfil the upcoming portfolio of work.

This programme seeks to complement Eskom’s

existing human resources and developmental

initiatives, and will be targeted towards the

top 5% highest potential engineers.

The programme will employ world-class

development techniques, over an 18-month

period, to expose candidates to industry best

practices through rigorous training. It will

require participants to commit at least 50% of

their time to the programme, which has been

structured to follow a modular approach over

three semesters. This will enable candidates

to balance work requirements, albeit at a

reduced level, to allow them time off to attend

the programme.

Eskom technology expertise or know-howTransmission lines are devices that transmit

power over very long distances. In order

to optimise line design to the load transfer

requirements, Eskom has developed an

optimisation process that matches the lifecycle

cost, initial cost, losses and line capability to the

requirements of the customer. This process,

which includes simple indicators to objectively

determine the best line design to use, is unique.

Eskom has, as a result, been requested to head

up a working group of Cigre (SC B2-WG51 under

R. Stephen) to document and publish this process

as a worldwide best practice.

Commercial (procurement other than primary energy)Group Commercial’s mandate is to optimally manage external spending and ensure efficient procurement, inventory management, and warehousing and logistics. It is also responsible for supplier management and development, and contract negotiations and establishment.

Group Commercial’s activities are undertaken within the ambit of a sound risk management framework that encompasses good governance, and legislative and regulatory compliance. It includes a centralised project sourcing function that executes all project-related capital procurement to ensure consistent practice, align procurement practices and obtain good value for Eskom.

Supplier development and localisation supports the government’s socio-economic development objectives, including broad-based black economic empowerment (B-BBEE) by maximising local supplier development in a manner that supports Eskom’s business plan.

Operating highlights• In 2012/13, cumulative local content actual

expenditure is R48 billion, which is 56% of

the total local content committed in the new

build projects since inception

• A total of 473 contracts were awarded in the

new build programme in 2012/13, amounting

to R4.3 billion. Of this, local content accounts

for R3.4 billion, or 80.2%RA, which is 28%

higher than the target of 52% set in the

shareholder’s compact

• Product lines for grinding media and elements

that traditionally have been imported were

opened up. A medium-voltage motor

contract has been placed solely with local

manufacturers

• Implementing a spend shift strategy has

increased average expenditure on black-

owned suppliers by about 30%

• Better supply-chain planning has resulted

in higher stock levels of fuel oil at coal

power stations and increased reliability

from upstream diesel suppliers to the

open-cycle gas turbine stations at Ankerlig

and Gourikwa

• Procurement from non-compliant suppliers

is declining due to updating the B-BBEE

certificates. The B-BBEE attributable

expenditure exceeded the 70% annual target

by 16% (R19.5 billion)


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Operating challenges• There are significant risks in the security

of supply of diesel and fuel oil, as demand

is unpredictable

• Expenditure on black women-owned

business is 5% below the annual target

• Expenditure on black-owned business is 3%

below the annual target

• Expenditure on black youth-owned business

is 4% below the annual target

• Qualifying small enterprises/exempted

micro-enterprise attributable spend is 4%

below the annual target

Future focus areas• Curb inventory growth, without

compromising on the availability of spares,

through improved collective planning and

integrated replenishment

• Implement the shipping and haulage strategy

to consolidate all shipping and haulage

activities within Eskom

• Develop and implement appropriate

contracting strategies, through targeted

supplier sourcing and development initiatives,

to improve procurement expenditure on

black-owned businesses with particular

focus on black women, youth and disabled

ownership

• Design and develop the supplier development

and localisation data management system

Operating performanceThere is a need for project sourcing excellence in support of the capacity expansion programme and schedule. The impetus is to drive down operating unit costs, allowing cash to be freed up to drive other initiatives.

Group Commercial is developing a local supplier base to support long-term requirements in areas such as nuclear equipment supply and renewable technology. The focus is on skills alignment and competency development for improved performance.

National expenditure on capacity expansion programmeEskom’s capacity expansion programme continues to support B-BBEE and industrialisation within South Africa. The annual target is 52% local content in annually placed contracts. For 2012/13, committed local content spend in capacity expansion projects was R3.4 billion, equivalent to 80.2RA% of the R4.3 billion total contracted value.

IndustrialisationEskom’s spending programmes support the government’s economic objectives, including local development, job creation and encouraging small business growth. During 2012/13, total investment expenditure on plant by suppliers was R823 million (2011/12: R646 million).

TrainingSince the inception of the new build projects, a total of 8 624 (2011/12: 7 226) people have been identified for skills development. Of these, 2 763 (2011/12: 2 342) are currently undergoing training. To date, 6 851 (2011/12: 5 915) people have completed their training at various training sites across the country.

Job creationSince the inception of capacity expansion

contracts to the end of March 2013, some

35 759 (2011/12: 28 616) jobs were created as

a direct result of the build projects. A total of

16 100 (2011/12: 13 954) people – about 45%

of the total jobs created – were employed

from districts surrounding project sites: the

Waterberg around Lephalale, from Inkangala

around Delmas, from Uthukela around

Ladysmith, and various power delivery projects.


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Eskom B-BBEE attributable spend performance

Eskom companyTarget

2013/14Actual

2012/13Actual

2011/12Actual

2010/11

Measured procurement spend (R billion) – 119.9 98.5 79.9

B-BBEE attributable spend (R billion) – 103.4RA 72.1RA 41.9RA

B-BBEE attributable spend (%)SC 70.0 86.3RA 73.2RA 52.3RA

Attributable spend on black women-owned businesses

(R billion) – 5.7RA 3.3RA 3.4RA

Black women-owned businesses as % of measured

procurement spend – 4.7RA 3.3RA 4.3

Targets are set for the company only. In the previous year, only the company B-BBEE was reported.

SC Shareholder’s compact.


B-BBEE attributable spend performanceThe table below sets out Eskom’s B-BBEE

attributable spend performance for 2012/13.

The attributable spend targets are in line

with the Codes of Good Practice, which

prescribe a minimum of 50% for the first five

years that the codes are in effect. With 80.9%

B-BBEE attributable spend, the Eskom

company exceeded its B-BBEE target for the

year. The Eskom Group achieved 82.1%RA

(R95.97RA billion). Going forward, strategies will

be put in place to improve the performance of

black women-owned businesses in particular,

which make up 5.1%RA (R5.99RA billion) of

the group measured procurement spend

of R116.9 billion.

In the final quarter of the financial year, an

overall steady improvement in key performance

areas for transformative procurement was

observed, with Eskom reaching R26 billion of

the R119.9 billion procurement on 50 + 1%

black-owned companies.

Human ResourcesBeing the custodian of people management

within Eskom, human resources is mandated

to partner and empower the line divisions to

recruit, develop, and retain skilled, committed,

engaged and accountable employees across the

company. Human resources is committed to

building skills not only internally but also in the

communities in which Eskom operates. This is

done in support of Eskom’s aspiration and duty

to grow the economy and improve the quality

of life of people in South Africa and the region.

In response to Eskom’s strategies, human

resources has defined its enabling strategy

to create a high-performance culture. The

foundation of the strategy is that people

management begins with the alignment

of human resource objectives to business

objectives.

In creating the step change required to enable

a high-performance culture, the strategy is built around the following six core themes that work together to support the execution of the overall business strategy:

• Health and safety at work

• Recruiting, retention and transformation

• Learning and development

• Performance management and culture

• Employee engagement and industrial relations

• Workforce planning and organisation design

Operating highlights• Developed the transformation framework

and five-year delivery plan focusing on creating a balanced workforce in line with the economically active population of the country and developing a skilled and competent workforce

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• Developed 341 training courses, delivered 25 909 events and recorded 200 642 learners during the financial year, exceeding the target in all three areas

• Engaged extensively with stakeholders,

locally at Medupi with the municipality

and traditional leaders, and nationally

with the offices of the National Union of

Metalworkers of South Africa, Solidarity,

National Union of Mineworkers and the

Department of Public Enterprises

• Established the Medupi Leadership Initiative,

in conjunction with Group Capital to mitigate

the impact of demobilisation on completion

of the construction

• Kusile’s Project Labour Agreement was

selected by the independent panel of

judges for the Centre for Effective Dispute

Resolution Awards 2012 as finalist in the

Excellence in Alternative Dispute Resolution

and Conflict category in London

• Established a governance framework and

model established under the Strategic

Integrated Project 1 to provide a sustainable

programme

Operating challenges• Relationship with organised labour

• Limited availability of women for technical

and leadership roles

Future focus areas• Improve relationships with employees and

organised labour to move to a partnership of

collaborative relationships

• Win the hearts and minds of employees

through effective and innovative employee

engagement

• Shift from reactive to proactive approach

regarding skills and resource planning and

development to ensure that Eskom has the

right mix of skills, in the right quantities, at

the right time and in the right place•

Build strong skills through an integrated

capacity-building approach

• Close the competency gap through Eskom

Academy of Learning and its partners

• Promote collaborative methods of work to

enable a high-performance organisation,

accompanied by appropriate rewards and

recognition system

• Move from uniform benefits to differentiated

benefits for variable pay

• Move from differentiated pay to fixed-point

scale for base pay

• Enable a transformed workplace with values-

based, effective and accountable leaders

driving transformation beyond compliance

• Enable “smell of the place” through human

rights culture and equal access to career and

development opportunities, with targeted

development where required

BenchmarkingTraining and development costs as a percentage of the wage billEskom’s R1 933 million 2012/13 (2011/12:

R1 361 million) investment in training and

development is 7.2% of the wage bill (including

1% of the wage bill that is paid as a skills levy).

This puts Eskom well within the 75th percentile

of United States utility companies (which

average 3.3%) and United Kingdom/European

utility companies (which average 3.5%)

according to a 2010 PricewaterhouseCoopers

report. The guideline for South African

companies is to spend 5% of the wage bill on

training and development.

Employer of choiceYoung engineering professionals rated Eskom

the employer of choice out of 60 engineering

and technology companies in South Africa for

five years running (Ideal Employer Ranking,

Magnet Survey, 2012).

Overall staff turnoverEskom’s overall staff turnover was 3.6% for the

period 2012/13. This places Eskom favourably

below the 25th percentile of South African

companies (9.5%). This is beneficial to Eskom,


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as the average cost of separation and replacing

scarce and critical skills ranges from 30% to

100% of an incumbent’s annual salary.

Turnover due to retirementTurnover due to retirement is 1.2%. This places

Eskom below the 75th percentile (1.2%) of

South African companies. Employees that are

50 years and older make up 26.2% of Eskom

staff and could be considered a retirement risk

within the next decade.

PerformanceEmployment equityEskom implemented an employment-equity

plan supported by a long-term, target-

setting strategy (Equity 2020) to drive its

transformational agenda for the three financial

years leading up to 2012/13. The employment-

equity plan seeks to create a workplace and

workforce profile that is diverse and inclusive,

and to ensure that diversity becomes the

“Eskom way”.

Eskom company employees profile for the top

four occupational levels (task grades nine and

above). There are no specific targets set for

each group.

The following table details the employee profile

in terms of gender and race for Eskom’s senior

management of the Eskom company workforce

at March 2013.

Eskom company employee profile for the top two occupational levels:

Employee profilesActual

2012/13Actual

2011/12Actual

2010/11

Racial equity in senior management, % of black employees 58.32RA 53.90RA 52.52

Racial equity in professionals and middle management, % of black

employees 69.57 65.69 64.05

Gender equity in senior management, % of female employees 28.21RA 24.31RA 23.51

Gender equity in professionals and middle management, % of female

employees 34.60 32.43 31.56

People with disabilitiesAs per the Employment Equity Act (1998),

Eskom continues to strive for fair representation

of people with disabilities. The Eskom group

currently has 1 137RA (2012: 1 032RA [company

currently has 1 126RA (2012: 1 022RA)] employees

with recognised disabilities. The table

below details Eskom’s disability profile at all

occupational levels.

Percentage of Eskom employees with disabilities

Actual2012/13

Actual2011/12

Actual2010/11

Group (%) 2.43RA 2.36RA 2.36

Company (%) 2.59RA 2.49RA 2.53

Although the actual disability figures are below

the target of 3% of the workforce, they are well

above the national norm of 0.7% (Employment

Equity Commission’s report, 2009) and

the government’s 2% expectation for the

public service.

Health and wellnessEskom’s integrated health and wellness

programme promotes a safe and healthy

working environment to ensure its employees

are healthy, productive, resilient and engaged

throughout their time at Eskom.

The “Road to a Safe and Healthy Lifestyle”

campaign is part of expanding the scope

from HIV/Aids to other diseases affecting the

business. The campaign is a move from the

traditional workplace programmes focused

on raising awareness and prevention of HIV

infection and promoting access to treatment


97

care and support. The focus is now on

addressing other diseases, as well as workplace-

related factors that put employees at risk of

ill health.

Eskom, as a company, is committed to forging

strategic partnerships aimed at enhancing

effectiveness in the handling of community

issues. It is in this respect that Eskom pledged

to support government to achieve its HIV

Counselling and Testing campaign objective

of testing 15 million South Africans.

Eskom’s “HIV counselling and testing”

campaign was nominated as a finalist in GBC

Health’s Business Action on Health Awards,

held in New York in May 2012.

Employee relationsEskom’s employee engagement model builds employee participation involving employees and executives in conversations about strategy, performance and people. Eskom has also built more productive and sustainable relationships with organised labour and continues to do so through a partnering model to guide these interactions. In addition, Eskom has embarked on a process to further strengthen the relationships with the trade unions, utilising the services of an external facilitator. To date, preliminary engagements between the facilitator and Exco, as well as between the facilitator and two of the trade unions, have taken place.

Eskom maintains direct lines of communication

with recognised trade unions. Eskom and the

trade unions engaged in salary and conditions

of service negotiations during 2011. The parties

could not reach an agreement and a dispute

was referred to arbitration. The arbitrator

handed down a two-year award that was still in

force during the reported financial year.

Demobilisation at MedupiThe Medupi Leadership Initiative, led by Group

Capital, was established to mitigate the impact

of demobilisation at the end of the construction

phase. Six feasible solutions are being debated

with contractors, labour and community leaders

for execution: four job-creation opportunities

and two skills development initiatives.

A governance framework and model under

government’s Strategic Integrated Project was

established to provide a sustainable programme.

The demobilisation of workers at Medupi

slowed down and was then delayed in the latter

part of 2012 and early 2013. The outcome is

that 3 000 workers will be demobilised in the

next 12 months.

Human resources sustainabilityHuman resources is responsible for measuring

and monitoring critical factors relating to the

sustainability of Eskom’s human resources.

A human resources sustainability index is

used to measure the following key aspects:

employee satisfaction, employee competence,

and employee health and wellness. The

measurements and criteria are reviewed

annually to make sure they remain applicable.

Human resources’ sustainability index has

reflected positively in terms of overall

performance, achieving a year-to-date score of

87.9% (2010/11: 82.4%). The index weighting of

work-related fatalities was increased from 4.5%

in 2012 to 9.0% in 2013.

Training and skills developmentEskom learner pipelineAll targets have been exceeded for the learner

pipeline and Engineering, Technician and Artisan

learners and for the Youth programme, which

reached an intake of 5 701RA for 2012/13 against

a target of 5 000, as tabulated below.


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Learners in Eskom’s learnership pipeline

Skills developmentCompact

targetActual

2012/13Actual

2011/12Actual

2010/11

Total learners/bursars (excluding youth programme) – 6 987RA 6 794RA 5 283RA

Engineering learners 1 949 2 144RA 2 273RA 1 335RA

Technician learners 757 835RA 844RA 692RA

Artisan learners 2 543 2 847RA 2 598RA 2 213RA

Youth programme (learners being trained to contribute

to socio-economic development) 5 000 5 701RA 5 159 N/A

Cumulative projected core, critical and scarce skills to replace

2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Artisans and trade workers 12 210 11 693 11 198 10 694 10 201 9 732

Engineers and technologists 3 101 2 942 2 792 2 648 2 504 2 376

Operators and controllers 2 562 2 496 2 419 2 342 2 263 2 196

Technicians 4 151 3 975 3 817 3 660 3 507 3 364

Total core, critical and scarce skills 22 024 21 106 20 226 19 344 18 475 17 668

• 2012/13 column represents the actual

grouping of the skills as it was at

31 March 2013 for the Eskom Group

• 2013/14 to 2017/18 represents the forecasted

supply/availability of the skills after applying

the attrition rate

• The core, critical and scarce skills to replace

represents a cumulative effect of attrition on

the selected skills over the period

Eskom’s Academy of LearningThe mandate of Eskom’s Academy of Learning is

to close Eskom’s competency gap by addressing,

coordinating and integrating all learning needs

of employees, as well as enhancing performance

throughout Eskom, by focusing on business

needs, and catering for all facets of the learning

value chain and learning operations.

During 2012/2013 the Academy devoted a

large proportion of its energy to ongoing

support for the SAP reimplementation project

with the rollout of classroom-based training

and e-learning courses for the Back2Basics

processes and systems. The year-to-date

figures show the commitment in supporting

business with the rollout of Back2Basics

with 27 390 Eskom employees and a total of

58 250 course attendees undergoing training.

More than 1 200 employees were trained as

Back2Basics facilitators.

The Academy did not allow the focus on

Back2Basics to divert it from addressing normal

training demands of the business. The total

learner attendance now exceeds the year-end

target, with a figure of 200 642. The number

of learning events delivered now exceeds

the year-end target with a figure of 25 909.

Number of courses developed to date is 341.

In March 2012 the Academy, in partnership

with Group Technology, launched the Eskom

Welding School of Excellence. A total of

150 welding apprentices are in the learner

pipeline and the first group of 50 will qualify

in 2014. This initiative will help with the national

shortage of welding skills. The early success of

this initiative is evident, with positive feedback

from potential employers and continuous

improvement of learner capabilities.


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The Engineering Centre of Excellence

commissioned a state-of-the-art training

facility that includes a power plant steam

turbine simulator to train power plant

engineers. A new government Certificate of

Competency programme was implemented

to prepare candidates to become certified

engineers. In addition, the Engineering Centre

of Excellence implemented the Distribution

Clerk of Works training curriculum to improve

the quality of workmanship on the construction

of overhead lines.

An ETAPro training programme continues

to train power station engineers to optimise

power station performance.

Eskom’s Power Plant Engineering Institute was

launched in partnership with South African

universities to:

• Increase the number of powerplant MSc and

PhD graduates

• Ensure South African universities participate

fully in the localisation of new technologies

currently being offered to Eskom by original

equipment manufacturers

• Ensure South African universities play an

active role in transferring and establishing

these new technologies in the country

• Ensure South African universities are

actively involved in solving Eskom’s specific

engineering problems

• Leverage the expertise and experience of

international universities and utilitiesSo far

there have been two intakes of masters

and doctoral students, totalling 65 Eskom

engineers doing full-time postgraduate

studies. Good progress has been made

with engineering research on topics directly

relevant to Eskom. Universities have made

good progress with appointing academic staff

in the institute’s Centres of Specialisation.

They have also made good progress in

contracting developing universities to do

related research.

The Project Management Training Centre of

Excellence, launched in October 2012, built up

relationships with academic institutions for the

development and improved professionalism of

project management staff throughout Eskom.

A Project and Construction Management

School was launched during the year to ensure

an adequate pipeline of skills is available for the

continued Eskom built environment.

Group Customer Services in partnership with

Eskom’s Academy of Learning established

a School of Customer Services within the

Professional Services Centre of Excellence on

28 June 2012 and had trained 2 313 frontline

staff by March 2013.

Total training investment per year

Training expenditure 2012/13 2011/12 2010/11 2009/10

Rm 1 933 1 361 998 758


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FinanceFinance’s mandate is to provide financial strategy,

policies, assurance and strategic financial services

(including treasury, corporate and regulatory

reporting, taxation, financial evaluation and

advisory services) to the Eskom Group.

Operating highlights• Securing 82.9% of the R300 billion funding

plan and drawing down R40.5 billion during

2012/13

• The successful introduction of inflation-

linked bonds that have met with significant

support from the investor base

• Eskom Treasury Economics Team placed

second in the Thompson Reuters ranking

• Group Finance has been ISO 9001 certified

Operating challenges• The rating agencies downgraded Eskom’s

credit rating on 17 October 2012 (Standard

& Poor’s), 1 December 2012 (Moody’s) and

11 January 2013 (Fitch). The outlook for

Standard & Poor’s and Moody’s was changed

to negative, whilst the outlook for Fitch

moved from negative to stable

• The impact of NERSA’s 8% tariff award in

terms of MYPD 3

Future focus areas• Realigning the budget and funding to the

MYPD 3 determination

• Maintain funding momentum for the build

programme

• Use alternative funding solutions for future

Eskom initiatives

• Continue renegotiation of remaining special

price agreement

Operations financial resultsEskom has achieved a group net profit of

R5.2 billion (2011/12: R13.3 billion) for the year

to 31 March 2013. Operating profit before fair

value gains and losses on embedded derivatives

and net finance costs was R9.9 billion (2011/12:

R22.0 billion). Compared to the previous year,

the 16% tariff increase resulted in a 16.4%

average increase in electricity revenue per kWh.

This increase was offset by a 31.2% increase in

operating costs compared to the previous year.

Sales and revenueGroup revenue for the year under review was

R128.9 billion (2011/12: R114.8 billion). Electricity

sales totalled 216 561GWh, a decrease of 3.7%

from the previous year (2011/12: 224 785GWh).

The decrease is mainly attributed to power

buybacks, industrial action at large customers

in the mining sector, poor market conditions

and major customer breakdowns. These were

offset by higher-than-anticipated sales to

international customers.

Primary energy costsThe primary energy costs for the year amounted

to R60.7 billion (2011/12: R46.3 billion). The cost

of primary energy for the year increased

by 36.1%, from 20.6c/kWh to 28.1ckWh.

The 7.5c/kWh increase was mainly due to:

• Coal usage costs going up by 3.9c/kWh

(52.7% of the increase)

• Cost of using open-cycle gas turbines of

1.6c/kWh (21.6% of the increase)

• The environmental levy increasing by

1c/kWh to 3.5c/kWh from 1 July 2012 (12.2%

of the increase)

• Demand-market participation, power

buyback and co-generation costs increasing

by 0.5c/kWh (6.8% of the increase)

• Other expenditure, including coal handling,

gas-fired startups, water usages and

international purchases, made up the

remaining 6.7% of the increase

As at 31 March 2013, coal stock stood at 46RA

days, up from 39RA days as at 31 March 2012.

Operating costsGroup employee numbers increased by

2 793 from 43 473 to 46 266 during the

year. Group gross employee costs (before

capitalisation) for the year amounted to

R28.7 billion (2011/12: R24.4 billion).


101

Group arrear bad debt was 0.81% of external

revenue for the year (2011/12: 0.53%).

The amount owing from electricity debtors

(before impairment provision) increased from

R14.6 billion at 31 March 2012 to R16.7 billion at

31 March 2013. The allowance for impairment

for trade and other receivables increased from

R3.3 billion to R4.3 billion between March 2012

and March 2013.

Group other operating expenses for the

year was R23.1 billion (2011/12: R15.3 billion),

consisting primarily of IDM costs, and repairs

and maintenance. IDM cost Eskom R3.0 billion

in 2012/13 (2011/12: R1.5 billion), while gross

repairs and maintenance cost R18.4 billion

(2011/12: R12.0 billion).

Fair value gains and lossesThe net fair value loss on financial instruments,

excluding embedded derivatives, was R1.7 billion

for the year (2011/12: R2.4 billion). These gains

and losses are primarily attributable to the costs

of rolling over forward exchange contracts.

View the rand exchange rates applicable to

major currencies at 31 March 2013 in the annual

financial statements.

The net impact of changes in the fair value of

the embedded derivatives (relating to the special

pricing agreements) on the income statement

was a fair value loss of R5.9 billion for the year

(2011/12: R0.3 billion gain). Embedded derivative

liabilities amounted to R11.5 billion (2011/12:

R5.5 billion). Eskom applied to NERSA to review

the last remaining special pricing agreement

that Eskom has with BHP Billiton relating to

aluminium smelters in KwaZulu-Natal.

Finance chargesAfter capitalising borrowing costs and including

the unwinding of interest on provisions, the net

finance income for the group was R3.0 billion

for the year (2011/12: R4.0 billion cost). Gross

finance income was R2.8 billion (2011/12:

R3.5 billion), while the gross finance cost was

R1.1 billion (2011/12: R10.5 billion). The finance

costs include the impact of remeasuring the

government loan, amounting to an income of

R17.3 billion. The remeasurement is based on

the new MYPD 3 price path.

The borrowing costs capitalised for the year

was R3.7 billion (2011/12: R5.0 billion), while the

unwinding of interest amounted to R2.4 billion

(2011/12: R2.0 billion).

The effective tax rate for the year was 26.4%,

which is in line with the current statutory tax

rate of 28%.

Liquidity The cash and cash equivalents decreased from

R19.4 billion at 31 March 2012 to R10.6 billion

at 31 March 2013. Cash and cash equivalents,

together with investment in securities,

amounted to R28.0 billion at 31 March 2013

(2011/12: R40.5 billion).

The group’s net cash inflow from operating

activities for the year was R27.7 billion (2011/12:

R38.5 billion). The group’s working-capital ratio

was 0.68, compared to 0.76 as at 31 March 2012.

Cash flows used for investing were R58.4 billion

for the year (2011/12: R60.0 billion). The capital-

expenditure cash flows included in this line

item, excluding capitalised interest, amounted

to R57.9 billion (2011/12: R59.5 billion).

The net cash inflows from financing activities

for the year was R21.8 billion (2011/12:

R28.7 billion). The raising of borrowings and

the issuing of securities have been managed to

match reduced capital expenditure. The debt-

to-equity ratio for the group (including long-

term provisions) was 1.84 as at 31 March 2013

(2011/12: 1.57). The free funds from operations,

as a percentage of gross debt, was 8.04%

for the group as at 31 March 2013 (2011/12:

15.15%) while the gross debt as a percentage of

earnings before interest, tax, depreciation and

amortisation was 16.16% (2011/12: 6.46%).


102


TreasuryEskom remains in a solid position from a

funding viewpoint, although its credit-rating

downgrades and the lower-than-requested

MYPD 3 tariff award may have a negative

impact on its ability to secure future funding.

Currently it has adequate short-term liquidity

reserves. At the beginning of the financial

year under review it had already pre-funded a

portion of the year.

Eskom’s Treasury has adapted its funding

to market conditions by balancing local and

international funding, and capital-market

and money-market funding. Funds for the

next 12 to 18 months will be from a number

of sources including the issuing of domestic

and international bonds, through export-credit

backed financing, and from development-

finance institutions. These are largely based on

draw-downs of loan facilities that have already

been signed with lenders. New facilities to be

contracted in the new financial year are limited

to Italian export credit agency-backed financing

and clean technology funds from development

finance institutions.

The state of the global economy and new

global banking regulations (Basel III) have

not yet materially affected Eskom’s ability to

access funding, although funding is becoming

increasingly expensive. The effect these new

requirements will have on corporate clients is

difficult to determine on a product-by-product

basis, but the overall impact will undoubtedly

be more expensive funding and difficulty

extending tenor. Eskom’s Treasury continues

to monitor the global economy and the ways it

might influence the company’s funding abilities

in coming years. Opportunities exist for

corporate entities to fund in the international

bond market at favourable yields.

The major rating agencies downgraded the

sovereign credit rating on 12 October 2012

(Standard & Poor’s), 27 November 2012

(Moody’s) and 10 January 2013 (Fitch). As a

consequence Eskom’s credit rating was also

downgraded. While this has not yet affected

Eskom directly, global issues have affected the

rand, which in turn has influenced the mark-to-

market of Eskom’s hedging activities.

Eskom continues to follow the funding plan for

the capacity expansion programme (up to the

completion of Kusile). It has largely identified

funding sources and continues to make

progress in securing the funding and drawing

down on facilities. Eskom is conscious of the

need to balance its reliance on the government

guarantee facility against the need to build its

own balance sheet, with the ultimate goal of

achieving a standalone investment-grade rating.

The reduced tariff increase for the MYPD 3

period will extend Eskom’s reliance on state

support by a number of years.

Government’s electricity pricing policy had

aimed to achieve tariffs that would reflect the

full cost of supplying electricity to customers by

the end of MYPD 2. NERSA’s MYPD 3 tariff

determination, handed down in February 2013,

granted an average 8% increase per year for

the five years of the determination period –

significantly less than the increase applied for.

Eskom is generating scenarios to determine

the likely effects of a longer phase-in to a cost-

reflective tariff. At minimum, it will have to

reduce its capital and operating expenses, and

raise significant additional funding, particularly

in the latter years of the MYPD 3 period.

Eskom continues to plan its funding around

the targets set in the Department of Energy’s

IRP 2010, the 20-year energy strategy for

the country. This will require a funding

approach that supports Eskom’s goal to

develop a standalone investment grade credit

rating and reduce reliance on state support.

This potentially includes technology or equity

partners for new projects.

103

Spread of Eskom bonds over relevant government bonds

ES33/R209 ES26/R186 ES18/R204

80

70

60

50

40

30

20

Basi

s po

ints

31 Dec 2011 31 Jan 2012 29 Feb 2012 31 Mar 2012 30 Jun 2012 30 Sep 2012 31 Dec 2012 28 Mar 2013

Comparison of international Eskom, government and benchmark bond spreads

Eskom US 10 YR Eskom US 10YR to Govi US 10YR Eskom US 10YR to US 10YRGovi US 10 YR US 10 YR

6.0

5.5

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

Yie

ld

Mar

201

1

Apr

201

1

May

201

1

Jun

2011

Jul 2

011

Aug

201

1

Sep

2011

Oct

201

1

Nov

201

1

Dec

201

1

Jan

2012

Feb

2012

Mar

201

2

Apr

201

2

May

201

2

Jun

2012

Jul 2

012

Aug

201

2

Sep

2012

Oct

201

2

Nov

201

2

Dec

201

2

Jan

2013

Feb

2013

Mar

201

3

30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30


104

FundingEskom Treasury’s priority is to secure liquidity

while managing financial risks (including interest-

rate, currency, credit and refinancing risks).

The 2012/13 financial year continued to be

dominated by the global economic crisis and

the resulting low economic growth, particularly

in the Euro zone and the United States (US),

resulting in volatile interest and currency rates

and, most importantly, uncertainty on access

and depth of the markets.

Eskom continued its small-sized regular bond

auctions in the domestic market in 2012/13.

These have been fully subscribed each time.

It also started issuing inflation-linked bonds,

which have enjoyed significant investor support

in the market. Domestic bond performance

remained stable, while the Euro bond, which

matured in March 2013, was volatile, as is to

be expected with bonds during the 12 months

before reaching maturity. The US dollar bond

was under pressure due to the large demand

for infrastructure development funds and

the volatile credit climate.The focus of Eskom

Treasury’s activities during 2012/13 remained

funding the balance of the required fund for the

committed build programme (to end of Kusile)

plus a liquidity buffer of R20 billion. Its new

funding focus remains primarily on initiatives

relating to renewable energy projects. Eskom’s

Treasury also finalised secured export credit-

backed funding.

Standalone investment-grade ratingEskom aspires to achieve cost reflective

tariffs, which in turn will lead to a standalone

investment-grade rating. Eskom’s ability to raise

debt funds on a standalone basis is a function of

its credit rating, as assigned by rating agencies.

Eskom’s credit ratings, following the sovereign

actions by the rating agencies in late 2012 and

early 2013, are “BBB” (Standard & Poor’s) and

“Baa3” (Moody’s) from a foreign currency point

of view. These ratings also imply a “negative

outlook”, reflecting that of South Africa’s rating.

Any further downgrades on the sovereign

could reduce Eskom’s credit rating to below

investment grade.

Rating agencies have raised concerns about

Eskom’s ability to finance the current capacity

expansion programme and the requirements

of the IRP 2010 without a cost-reflective tariff

adjustment. These have so far been mitigated by

government’s strong support as the shareholder.

The reduced MYPD 3 tariff award will delay

Eskom achieving a cost-reflective tariff. Eskom

will require clarity on funding for any additional

capacity that it may be tasked to build.


Summary of Eskom’s standalone credit rating as at 31 March 2013

Rating Standard & Poor’s Moody’s

Fitch

Local currency National scale

Foreign currency BBB Baa3 – AA+

Local currency BBB Baa3 BBB+ F1+

Standalone B Ba3 None None

Outlook Negative Negative Stable Stable

Action date 17 October 2012 1 December 2012 11 January 2013 16 January 2013

105

Financial sustainabilityEskom continues to make steady progress

in finalising funding for the capital-expansion

programme and remains in a strong short- to

medium-term funding and liquidity position.

The latest projections indicate that Eskom has

sufficient cash from cash on hand, investments,

net operating cash flows and current secured

facilities available to fund the business through

to the beginning of the 2014 calendar year.

Funds sourced in terms of Eskom’s R300 billion funding plan from 1 April 2010 to 31 March 2017 (R billion)

Sources

Funding sources

Apr 2010 – Mar 2013

Secured to date

Draw-downsApr 2010 –

Mar 2012

Draw-downsApr 2012 –

Mar 2013Draw-downs

to date

Amount of secured

supported by government

Bonds 90.0 44.8 32.8 11.9 44.8 32.3

Commercial paper 70.0 70.0 20.0 10.0 30.0 –

ECAs 32.9 32.9 15.5 4.0 19.5 –

World Bank 27.8 27.8 5.5 3.1 8.6 27.8

AfDB 20.9 20.9 5.9 7.5 13.3 20.9

DBSA 15.0 15.0 3.0 4.0 7.0 –

Shareholder loan 20.0 20.0 20.0 – 20.0 20.0

Other/new sources 23.4 17.4 0.9 – 0.9 4.9

Totals (R billion) 300.0 248.8 103.6 40.5 144.1 105.9

Percentages 82.9%1 – – 57.9%2 42.6%3

(% of

R300 billion)(% of secured) (% of secured)

1. As a percentage of the total R300 billion sourced.

2. As a percentage of the secured total of R248.8 billion as at 31 March 2013.

3. As a percentage of the secured total of R248.8 billion as at 31 March 2013.

By the end of the financial year, Eskom had

secured 82.9% of the funding required for the

capital expansion programme.

Of the R23.4 billion from “other sources”

required by the funding plan, Eskom Treasury

has secured about R17.4 billion. These funds

are to be applied to projects that are signed

off, particularly the renewable-energy projects.

The remaining R6 billion will come from facilities

that have been identified and are currently

being negotiated, and facilities that have been

identified but not yet negotiated. The balance

of the funding required for “other” continues

to be explored. The sources considered

include Islamic-type funding, and hybrid and

preference share instruments. The use of these

instruments will require regulatory approvals

and policy amendments.

Bond issuanceEskom’s target for 2012/13 was to raise

R9 billion with issuance of domestic debt off the

listed domestic medium-term note programme;

however, the market conditions and investor

appetite were favourable and Eskom actually

raised R11.9 billion.

At the beginning of the financial year, it became

evident that investor interest in nominal bonds

was limited. Investors preferred inflation-

linked bonds. Although this debt profile is not

favoured by Eskom given the uncertainty of

managing the refinancing risk at redemption,

it is a critical source of liquidity that needs

to be accessed. To further diversify Eskom’s

domestic funding instruments, Eskom created

two new inflation-linked bonds: the EL28 and


106

the EL29, each with an issue size of R3 billion.

The f inal maturity value, based on an average

inf lation of 6% over the period, will result in

a projected capital redemption amount of

about R8 billion each.

These bond listings proved very successful,

with issue spreads remaining fairly constant

at approximately 26 basis points over the

government benchmark bonds during

the auction period. This contrasts with spreads

on vanilla bonds of up to 60 basis points.

Eskom continues to favour domestic market

borrowing, which offers lower costs and

longer tenors relative to foreign debt. To allow

Eskom to continue sourcing funding from the

domestic market and offer investors choice,

its Treasury added fixed coupon interest

bonds to its existing list. These will mature

during the financial years ending March 2037,

2043 and 2048. The actual issuance of these

bonds depends on Eskom receiving sufficient

investor demand.

Current indications are that demand in the

inflation-linked bond market will continue to

support Eskom’s funding activities, underscored

by the recent increase in demand for longer-

dated vanilla debt, which seems to have some

momentum and could also help Eskom’s funding

activities over the next few months.

The allocated bond auction dates, per the

National Treasury auction schedule, are

used to raise funding in the bond markets.

Bond auctions accounted for the majority of

the funding from this market, with the balance

coming from reverse enquiries from investors

and bonds being sold outside the auctioning

process via Eskom’s market-making facility.

Eskom Shared ServicesShared Services was given a mandate to

integrate all activities that have a high level of

repetitive transactions and are dependent on

cycle-time efficiencies into a single unit. This is

a newly formed unit in Eskom, it is multi-

disciplined and located in seven hubs across

South Africa. Shared Services also runs a multi-

discipline contact centre supporting Eskom

employees and Eskom suppliers for the services

rendered by the Shared Services unit.

Included disciplines are:

Fleet management: Fleet was historically

managed individually by different divisions and

has now been consolidated into one service

provider with a total fleet of more than 12 000

vehicles.

Revenue management: This area provides a

billing and related services function to Eskom,

including bill determination, processing and

management of cash inflow from electricity

purchases by Eskom customers (small power

users, large power users and key customers).

Finance: The finance area is responsible for

the payment of supplier invoices, payment of

Eskom employees, international travel and

management of bank accounts.

Human resources: Shared Services manages

the recruitment process, appointments,

resignations and any other internal movement

of employees. Benefit administration and

organisational structure maintenance is also

handled in this area.

Master data management: This area focuses

on enabling Eskom to become a world-class

master data organisation with “one version of

the truth” for better decision making. This is

achieved through providing the necessary tools,

techniques, framework, methodologies and

coordination for master data management.

Setting up a master data organisation has

ensured clear visibility and accountability for

the quality of master data.

Operating highlights• Achieved ISO 9001:2008 certification

• Asset management and management of vehicle operating cost improved significantly with the consolidation of fleet ownership


107

into one single entity

• The implementation of a new vehicle on board computer, enabling the management of vehicles and drivers through exception reporting, including vehicle availability reports identifying vehicle usage and service downtime

• Expediting the replacement of vehicles not equipped with advanced safety features by acquiring some 319 additional vehicles for replacement

• The accuracy of billing index for key customers and large power users is at 99.19% and 98.39% respectively for the year, which is an exceptional performance. Accuracy of billing index for small power users is 90%, mainly because of Soweto challenges

• Implementation of Eskom Enterprise Structure in the system, ie the linking of employees to new personnel areas and sub-areas and ensuring that physical location of staff is loaded in the system for payroll distribution, access control, risk assessment and for real estate purposes

• Data quality for 16 data domains is monitored and reported monthly to the Master Data committee with results of 94% completeness and 95% correctness of master data. 369 different tests are executed monthly to arrive at these results. This is a tremendous improvement showing one version of the truth that did not exist previously

• Master Data now has its own process control manuals for both the governance and maintenance processes. The Master Data governance policy was also approved by Exco during the financial year

• A team has been set up within the Finance Shared Services to expedite payments to suppliers working with business through the performance of 80% of supplier reconciliations in a standardised manner across Eskom and following up on outstanding issues

• Payslips have been simplified, standardised and aligned to a system copy for ease of use by employees and the distribution of payslips has improved

Operating challenges • Shared Services is by nature at the end of

the value chain and therefore requires the whole process in the value chain to function and support the activities of Shared Services. The challenges experienced include:

– Payment to suppliers delayed in relation to payment terms due to issues ranging from receipting of goods and services in the system not done timeously to disputes between project managers and suppliers.

– Billing accuracy, specifically for Small Power Users (SPU) not at aspired levels due to metering data not accurate and timeous.

– The cycle time to fill vacancies of 60 days was not achieved due to various impacts in the value chain.

– Alignment of payment to due date by municipalities impacted the cash inflow forecasting.

• The vehicle maintenance is managed through a virtual shared service and this has resulted in challenges to the telephony system and human resource efficiency

• Fleet data accuracy and completeness is an area of focus and system improvements are planned for SAP release 2 to deal with this challenge.

Although the data base of suppliers has been cleaned up from a total of 81 000 (mostly duplicated and inactive) suppliers to 15 475 active suppliers, it is still a challenge to keep the data base up to date due to poor response from suppliers on expiry of documents like tax and B-BBEE certificates which are required to be updated yearly.

6Strategic functions


110

Enterprise DevelopmentThe Enterprise Development group comprises

four key strategic functions as divisions with

specialised capabilities to guide, position,

protect and enable the Eskom Group. They are:

Strategy and Risk Management; Regulation and

Legal; Corporate Affairs; and Group IT.

Each division serves specific needs and

requirements of the organisation, but the

overarching role of Enterprise Development

is to group these key strategic functions to

identify and develop integrated strategies and

step-change programmes to deal with change,

taking into account forces in the operating

environment that include market dynamics,

such as accelerating innovation cycles,

disruptive technologies, emerging markets,

value chain complexity, and regulatory and

voluntary standards; sustainability dynamics,

such as climate change, demographic shifts,

and resource constraints; and stakeholder

dynamics, including the growing engagement of

consumers, NGOs and regulators.

These integrated strategies and step-change

programmes are to be introduced into the

organisation at business unit, divisional, group

and cross-functional levels to develop Eskom

as an enterprise, enhance its organisational

efficiency and effectiveness, and enable its

intent to be a Top 5 performing utility.

Enterprise Development was established just

over a year ago and the last year has seen

each of its divisions under pressure to deliver

in terms of their own portfolios. Enterprise

Development has made great progress in

embedding quality management systems that

will form strong foundations for leading change

in this complex organisation. Focus has been

on the Group’s purpose of providing strategic

services to the organisation informed by an

integrating role, bringing together the strategic

insights of the four divisions. Currently the

Group is developing approaches for “creative

collaboration” to effectively engage the rest

of the organisation, play the required strategic

role and influence outcomes.

Strategy and Risk ManagementMandateStrategy and Risk Management’s mandate is to

lead an integrated approach to organisational

strategy, risk management and corporate

planning to ensure sustainability and resilience.

The power utility landscape within the broader

energy environment is changing with diverse

stakeholder requirements. The environment

is continually faced with key requirements of

doing business in a sustainable manner, adapting

to changes in technology, policy, market

structure and global trends.

This environment requires Eskom to

continuously look, not only at the short term,

but the long-term strategic business positioning

to meet such requirements. Strategy and Risk

Management focus primarily on ensuring that

Eskom continually adapts to the changing

landscape and responds appropriately to risks.

To this end, Strategy and Risk Management focus

on strategy development and scenario planning

that continuously shapes Eskom’s direction,

corporate planning that provides depth and

reflects what Eskom is doing operationally and

strategically, and risk and resilience management

to ensure that it is continually managing current

and emerging risks that emanate from such a

dynamic business environment.

The division was established by integrating

strategy, corporate planning, risk and resilience

functions, that were traditionally positioned

within the business. This approach enables

Eskom to develop corporate and functional

strategy, the corporate plan and shareholder

compact, and manage risk in an integrated

manner, while continually identifying and

establishing response capabilities.

Strategic functions

111

Operating highlights• Eskom’s strategy to shift performance and

grow sustainably has been accentuated by

specific strategic pathways of “lock-in”, these

are initiatives that protect the core business

“agility and growth”: initiatives that ensure

the business is responsive while developing

at the same time

• The 2013/14 to 2017/18 corporate plan

was drafted and shareholder compact was

finalised; this supports the alignment of the

organisation and its shareholder

• Scenario-based strategy development was

operationalised to support the development

of robust strategies

• A strategy review was undertaken to

update the corporate strategy taking into

consideration changes in the policy, business

and technology environment. This will also

form the basis of the next corporate plan

• The Integrated Risk and Resilience

Framework was developed and will allow

the organisational risks to be managed in

an integrated manner; including business

continuity management

• Eskom has conceptualised and incorporated

into the corporate plan the strategy to

address transformation in a holistic manner

Operating challenges• The Strategic Energy Planning Directives

at a national level need to be reviewed

and updated to give guidance to the

organisational plans

• The industry structure is under discussion

and plays an important part in the Eskom

planning process

• The changes associated with climate change

will potentially shift the risk profile of the

organisation

Future focus areasIn striving to shift performance and grow

sustainably, Strategy and Risk Management will:

• Research and formulate options for Eskom’s

alignment to a changing business landscape

• Review the Eskom business model taking

into account key business and technology

drivers

• Update the corporate plan following

the NERSA tariff determination and

align the shareholder compact to enable

organisational alignment with the

shareholder for 2013/14

• Focus risk management on Eskom’s

Integrated Development plan and strategic

imperatives while strengthening the business

continuity management capacity in the

organisation

• Perform a comprehensive review process on

strategy and longer-term plans in line with

the expected available funding

• Develop an organisation-wide implementation

plan to embed Eskom’s transformational

aspiration

• Deepen risk understanding and treatment

plans throughout the organisation

• Strengthen emergency and disaster

management structures

Regulation and LegalMandateRegulation and Legal’s mandate is to ensure that

Eskom conducts its business within its “licence

to operate” by ensuring good governance and

compliance with current policy, regulatory

and legal frameworks influencing the policy,

regulatory and legal frameworks required for

achieving Eskom’s strategic objectives.

In essence the division ensures good governance,

assists in managing legal, regulatory and

compliance risks while also looking ahead to

assist in creating an enabling legal and regulatory

environment to support Eskom’s objectives.


112

The division is primarily responsible for the

following activities/roles:

• Positively influencing the regulatory and policy

environment within which Eskom operates

• Providing strategic and objective legal advice

and effective business solutions

• Ensuring the necessary compliance as

required in terms of legislation and policies

applicable to Eskom

• Influencing and ensuring effective governance

and secretariat best practices to enable

Eskom to be a well-governed, ethical and

trusted company

The operating model of the division includes

a shaping, servicing and safeguarding role

and relies on strong partnerships with the

business and integration within the Enterprises

Development group. It consists of the

regulation, legal and compliance, governance

and company secretary departments.

The division reviews its strategy regularly

and has, during 2012/13 refined its mandate,

strategic objectives and priorities to align with

the Enterprises Development group objectives

and Eskom’s purpose, vision elements, values

and strategic objectives. In addition, the

division has also refined its strategic direction

to achieve effective, efficient and sustainable

transformation over the next five years in a

manner that will change the way it interacts

with the rest of the business.

This will be achieved through a transformation

plan (five-year Journey Map of “Excellence”)

that will focus on addressing inconsistent

performance by embedding quality and

developing skills, as part of its quest to transform

the division into a benchmark leader and create

measurable and sustainable value. A hallmark

of this transformation is the expressed desire

“to become the benchmark strategic function

in terms of trust, credibility and value add by

FY2017”. This aspiration, albeit bold, is a fitting

destination for Regulation and Legal.

The journey framework depicts a multiphase

transformation that is marked by five distinct

phases, each phase will be diligently monitored

and measured to improve its effectiveness,

efficiency and performance. The goal of

planning and managing each specific phase is

to yield measurable and recognisable benefits

along the way.

The first phase, FY2013, commenced with an

appraisal of the division’s current performance

and gaps (“understanding its role and mandate”)

and the final phase, FY2017, will culminate in

the division achieving its aspiration to “become

the benchmark function whose services are

credible, trusted and value adding”.

Priorities for 2012/13• For the period under review the focus in the

compliance area moved towards achieving

a greater level of proactively orientated

maturity across the various corporate and

operational groups/divisions. During this

period, the focus shifted towards:

– Development of group/divisional compliance

capacity

– Integration at a combined assurance level

– Expansion of the compliance universe

and associated guidelines

– Process and governance refinement

– Enhancement of integrated and coordinated

compliance reporting

Operating highlights• The MYPD 3 process was a comprehensive

one that included extensive stakeholder

engagement. Eskom communicated with

numerous stakeholders and engaged

with stakeholders at all the public hearings

• The revised Eskom delegation of authority

framework has been approved by the

board and executive management and

implemented with effect from 1 April 2013.

Training is to be provided and standard

delegations have been developed for groups/

divisions

Strategic functions continued

113

• The performance of the secretariat to

support the board and governance processes

has stabilised but there is room for further

improvement in this regard

• The procurement strategy for the appointment

of a new panel of attorneys was approved by

the board Tender committee on 6 February

2013 and the tender was subsequently issued

in line with the approved strategy

• As at the end of this financial year, the

Group Compliance Office prepared a more

comprehensive year-end Compliance Status

report. This report reflects the progress

made over the last 18 months in the

development of compliance

Operating challenges/risks• Due to the constrained system more

compliance breaches have been identified

especially regards environmental performance.

In addition, there has also been some non-

compliance with the Preferential Procurement

Policy Framework Act (2000) after the

exemption expired. Further, the resources

available to implement compliance effectively

in the business have been limited

• The risk that Eskom would have a shortfall

in terms of revenue materialised with the

MYPD 3 decision and is being addressed

• A high demand for legal support has

stretched the capacity and resources of the

department and in certain instances affected

turnaround times

• The management of information needs

improvement and processes put in place

in this financial year will hopefully see

improved performance in this regard next

year. The role of deputy information officer,

as required by the Promotion of Access to

Information Act (2000), has been delegated

to the divisional executive and resources

are managed in the legal and compliance

department. Fortunately, the management of

requests in terms of the Act has been good,

but there is a need for additional capacity in

terms of deputy information officers within

the groups/divisions across Eskom

Future focus areasOne of the key future focus areas will be to

support the business in terms of responding

effectively to the MYPD 3 determination. This

will include dealing with NERSA, communicating

with stakeholders and reshaping the business to

the extent necessary.

The following additional focus areas will be

prioritised:

• Support specific areas in respect of evolving

legal requirements and risks, for example, IT,

Procurement and Construction

• Ensure that the compliance framework

is implemented and is effective, including

divisional compliance processes, capability

and monitoring

• Strengthen regulatory coordination, with

a focus on NERSA and the National

Nuclear Regulator

• Ensure compliance with legislation and

licence requirements to support the

“partnering and leading to keep the lights

on” goal and general licence obligations

• Create a step change in regulation management

and strategy by focusing on the key enablers

required to achieve Eskom’s objectives

• Implement the delegation of authority,

including training

• Implement the Governance Framework

through, among other initiatives, the alignment

of governance policies to the Memorandum of

Incorporation

• Continue to focus on improving governance

and secretariat performance and support to

executive management and the board

• Embed quality and reporting processes


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Corporate AffairsMandateCorporate Affairs’ mandate is to make Eskom

a top global power company that is resilient,

reputable, trusted and highly regarded by its

stakeholders and peer group of companies

in South Africa and elsewhere in the world.

By basing Eskom’s stakeholder engagement

on international best-practice principles and

focusing on the strategic use of traditional

and new communication channels and media,

Corporate Affairs positions Eskom as a top

global power company.

Eskom recognises that it operates in an

environment where the management of a

company’s reputation is an integral part of the

company’s business chemistry. Consequently,

during the 2012 company strategic review, the

areas of reputation management, stakeholder

management, brand management and

communication were identified as step changers

to build trust and to improve Eskom’s reputation.

While Eskom’s reputation score improved

from 36.31 in the previous year to 42.6 during

the year under review, this score is still in the

weak-to-vulnerable range. According to the

Reputation Institute, “this indicates that in 2013

the general public has a stronger emotional

bond to the company than in 2012, however the

company’s reputation score is still considered

to be poor but has returned to the reputation

levels seen in 2010”.

Operating highlightsStakeholder managementEskom regards openness, transparency and

effective stakeholder engagement as key to

building the support, confidence and trust

necessary for Eskom to deliver on its mission.

Accordingly Eskom’s stakeholder engagement

was based on the AA1000 Stakeholder

Engagement Standard, an international

standard prescribing best-practice principles

and guidelines. During the period under

review stakeholder management was carried

out nationally, with tailored engagement

programmes to enable the effective execution

of specific operating units and projects based

on their stakeholder networks and geographic

locations.

• This period saw a marked increase in

engagements with national government

departments and parliamentary committees

on issues ranging from the build programme,

MYPD 3, the ISMO Bill, electrification,

transformation, public safety and job creation

• Hosting the South African President, Eskom’s

shareholder, and other stakeholders at

Medupi and Ingula power station construction

sites, created a positive profiling opportunity

for Eskom’s strategic imperative to keep the

lights on and to demonstrate the company’s

contribution to the growth and development

of South Africa

• During this year stakeholders were also

engaged on supplier development and

localisation, new build programme challenges,

land and servitude acquisition, electrification,

renewables, support to municipalities

and municipal debt. Furthermore, various

international delegations were hosted to

explore opportunities of doing business

with Eskom

Strategic Marketing• The Marketing team supports and runs

campaigns across Eskom. A new brand

campaign was launched internally and

externally in 2013, the aim being to

explain the whole electricity value chain to

customers and stakeholders. Eskom received

a Craft Certificate in Cinematography at

the prestigious Loerie Award Show on

23 September 2012 for its new corporate

television advertisement

• Other major campaigns are Operation

Khanyisa that combats electricity theft and

promotes payment for services, as well


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as the IDM and Power Alert campaigns.

Last year Power Alert was flighted on

10 DSTV stations for the first time

• The 49M campaign continued to encourage

energy efficiency and spread the company’s

strategic imperative to keep the lights

on. A total of 86 organisations have since

partnered with 49M. Research conducted

on the campaign indicates that 73% of the

respondents aware of the campaign thought

it was important to save electricity and 83%

of the respondents aware of the campaign

indicated that the campaign inspired them to

change their behaviour. Of the 73% more than

half had top of mind awareness, in other words

unprompted recollection. These people are

more likely to buy into the brand message

• 49M also bounced into the Guinness Book

of World Records as 4 000 participants

transformed kinetic energy into electric

energy by jumping on kinetic plates as part

of an Earth Hour initiative

• Continued success with Eskom flagship

sponsorships saw the Eskom Expo for Young

Scientists continue to yield a positive return in

maths and science education among the youth.

Nine learners proudly represented South

Africa at the international science fair, Intel ISEF,

in Pittsburgh, Pennsylvania, in May 2012

Internal and External Communication• Facilitated chairman and chief executive

employee engagements focused on creating

awareness of the company’s history and

achievements leading up to Eskom’s 90th

anniversary, celebrated on 1 March 2013

• An integrated internal zero harm campaign

was designed and successfully rolled out

to all regions. This included 17 national

launches, site safety, health and environment

days, facilitated team engagement sessions

and a range of collateral to support the

campaign. Further to this, two national

vehicle safety campaigns were rolled out

across the organisation

• Celebrated a significant milestone in Eskom’s

history as the company turned 90 on 1 March

2013. The anniversary provided a platform to

showcase the company’s legacy in South Africa

and pay homage to employees and pensioners

for their significant contribution to Eskom

• While Eskom did not achieve the 16%

tariff increase required, the company

demonstrated its commitment to open and

transparent communication by engaging

robustly with stakeholders during the

MYPD 3 process. In so doing, the risk of

stakeholder activism was minimised as

stakeholders engaged through the formal

Celebrating the Guinness World record achieved by the 49M campaign are Minister of Public Enterprises Mr Malusi Gigaba, Miss Earth Tamerin Jardine, Guinness World Records Official Pravin Patel, and Eskom Holdings chief executive Brian Dames


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process. Employees received daily updates

from the public hearings and all potential

issues and risks were managed through a

dedicated nerve centre

• Embraced social media by increasing Eskom’s

share of voice to 85 million people on the

digital platform, particularly on web, Twitter,

YouTube, Facebook and Mobile (MiXiT).

Eskom, the media desk and associated brands

such as the eta Awards and the Eskom Expo

for Young Scientists increased the number of

followers on these platforms

• Corporate Affairs division monitors all digital

and social media conversations online, and

identifies anything that is deemed relevant to

the organisation. Each of these conversations

is verified and tagged with a sentiment score,

algorithm, language, location, category and

author credibility

• A heightened sensitivity to risk and daily

monitoring and management of key issues have

minimised the impact of potential challenges.

Using this approach, for instance, the lights were

kept on during the African Cup of Nations

• Eskom continued to keep South Africans

informed about the state of the electricity

system through quarterly media briefings

and twice-a-week bulletins. The latter

saw an increased uptake in the media and

created an understanding of the security

of supply status

• The issue of security of supply saw

more consistent coverage in 2012, while

tonality saw an upward trend regarding

general perceptions. Eskom’s Solar Rebate

programme and energy-efficiency efforts

are some of the Eskom stories that emerged

with a more positive profile in the media in

2012 compared to 2010/11

Operating challenges• While Eskom’s RepTrakTM score improved

from 36.31 in the previous year to 42.6

during the year under review, this score is

still in the weak-to-vulnerable range

• Eskom’s share of voice in the media, even

though it improved by 4%, remained below the

recommended 35% due to a series of negative

coverage of key issues in the media space. This

negative coverage was sustained in social media

• Centralising the communication, stakeholder

and marketing functions has created short-term

performance challenges on a provincial basis

Future focus areas• Engage with stakeholders on the impact and

consequences of the MYPD 3 determination

made by NERSA

• Pilot the segmented approach to reputation

management and develop a reputation

management dashboard

• In order to keep the lights on it is imperative

that South Africans understand and reduce

electricity consumption during peak

load from 17:00 to 21:00 in winter. An

integrated communication and stakeholder

communication strategy will be implemented

during the winter period to achieve this

business priority

• Increase the company’s share of voice in the

media space and maintain it at a minimum

of 35%

• Increase and accelerate rapid adoption of 49M;

develop a long-term strategy based on 49M

research; standardise marketing programme

management in Eskom; build marketing skills

and knowledge within the organisation; and

align all programme communication strategies

with the brand strategy

• Segment and matrix stakeholders from

various stakeholder groups and pilot a

stakeholder relationship assessment and

reporting tool

• Standardise marketing management in Eskom

• Build marketing skills and knowledge within

the organisation


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Group Information Technology (IT)Key performance indicators for Group Information Technology

Key performance indicatorsActual

2012/13Actual

2011/12

Number of major incidents 8 104

Audit findings 1 remaining from previous year and 6 new (all minor) 184

Annual learner intake 188 95

ISO 9001 compliance Yes No

Successful delivery of major IT projects to scope, budget,

and time 65% 50%

Maturity level (CMMI) of IT processes, people,

and technology 2.5 to 3.0 across most areas 1.8

Information security – number of incidents

(eg virus outbreak; illegal connections) – –

Average end user satisfaction survey 93.7% 85.9%

MandateGroup IT’s mandate is ensuring effective

delivery and operations of IT systems,

IT communications, IT asset management,

data custodianship, and business processes

automation to support Eskom’s business

objectives. From the safety of Eskom’s people,

the experience of its customers, the efficiency

of its power stations, to the new power build

programme, Group IT plays a vital role in day-

to-day operations and assisting Eskom achieving

its aspiration of becoming a high-performance

organisation.

Group IT supports some of the most complex

IT business processes, managing large complex

data, integration of all IT components and IT

security operations, while facilitating large

volume of transactions and services in Africa

and meeting the IT needs of more than 50 000

users across 505 locations nationally and

internationally. The group utilises peta bytes of

storage with 11 million emails and 200 million

business transactions per month.

Information technology forms the backbone for most of the more than 6 900 processes in the Eskom business


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The diagram below shows the full set of comprehensive services provided by Group IT to the Eskom Group.


Operating highlights• Significantly stabilised the IT operations

and has not experienced major incidents or

any data losses, compared to the previous

financial year

• Improved on all previous critical key

performance indicators

• Achieved ISO 9001:2008 certification

• Increased intake to the graduate skill

developmental programme to 188 IT learners

• Stabilised the online vending system

by removing all single points of failure.

Eskom had experienced 180 days of 100%

availability before a network failure occurred

in December when a tree took down a line.

Since that incident Eskom has continued with

100% availability and offering customers sub-

second response time

• Implemented a standardised system disaster

recovery method and systems to dramatically

improve restoration times

• Delivered a customer network link upgrade

so that Eskom can improve customer data,

improve response times for customer work

requests, and ensure accurate dispatching of

field engineers

Manage incident

and problem

Manage demand Manage change Manage release Manage testing

Manage continuity Manage security Training Business enablement Project and programme

management

Media services

Data management infrastructure

Hardware and software

Electronic mailing

Content management

Business PCM development

Network management

IM business engagement

Mobile solutions Web services

Knowledge management

Business process optimisation

Infrastructure management

Architecture and strategy

Printing services Telephony Business intelligence

Access management

Application portfolio

End user computing

Communication services

Connectivity Information, knowledge and management

Business process management

Business support services

Service management

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• Mobile hubs assisted Group Customer

Services with the successful design and

delivery of mobile hubs through using VSAT

technology to deliver services directly to

the customer within rural villages. Currently

in pilot phase in KwaZulu-Natal and

Eastern Cape

• Implemented a number of smart grid

demonstration and pilot projects including

improved condition monitoring of generation,

transmission, and distribution assets

Operating challenges• One of the primary operational challenges

relates to the availability of critical and core

Information Technology skills, particularly

in SAP; Smart Plant; Microsoft; Geospatial;

Security; and Infrastructure (network;

voice; storage; server virtualisation). This

remains a key concern for many South

African companies. Core and critical skills

have been identified with the placement and

recruitment for the positions being initiated.

• SAP performance and functionality, particularly

on Supplier Relationship Management

and Performance Management, remains a

business concern and Eskom hopes that the

implementation of the new F5 Load Balancers

with significantly more capacity will alleviate

the problems. Users are still encountering

workflow issues that are related to the data

on the system. HR and Finance are embarking

on an exercise to cleanse the data.

• The Megawatt Park data centre remains a

major risk and concern, and the recent issue

of damaged power cables under the floor

has led to a request for overhead busbar

power cables. Cooling is also a major issue,

particularly towards the back of the data

centre, and options are being sought to

improve the cooling to enable the installation

of additional servers and storage.

Progress on major IT and business projects• Broader and deeper SAP Enterprise

Resource Planning – IT are in the process

of deepening and broadening SAP usage to

make full use of the functionality provided

across all areas of the business; areas

include Primary Energy, Real Estate, Human

Resources, and Commercial

• Back2Basics Engineering Tools – This

programme ensures that Eskom’s engineers

have the right tools to enable delivery of

world-class power infrastructure. As part

of the programme Eskom is digitising critical

design data of the legacy fleet (design base

back fit) on a single platform accessible

across the organisation. Group IT has also

delivered an engineering portal that allows

engineers across Eskom to collaborate,

share documents, and govern the technical

standards bodies

• The migration to Windows 7 and Windows 8

– A project that is providing Eskom employees

with the tools to effectively carry out their

responsibilities (eg enhanced collaboration

tools such as community portals), as well

as evolving end-user computing to aid

productivity improvements

• Unified Communications – The integrated

set of unified communication tools will

support collaboration while reducing

costs and improving the safety of Eskom

employees by reducing travel

• Green Data Centre – The next generation

data centre will help ensure Eskom

always keeps the lights on by providing

reliable infrastructure for Eskom’s critical

applications, processes, and data. IT has

completed the conceptual phase of this

project, and has started the design work to

deliver two Tier IV facilities


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Group IT will include the following projects,

initiatives and innovation as part of its

future focus:

• Mobility – IT is leveraging the power of mobile

to ensure Eskom employees have the most

relevant information in the palms of their

hands. For example, by supporting a range

of applications for field engineers on mobile

phones and tablets, from collaboration

applications to tools for identifying faults

• Cloud computing – To support the business

with the most efficient technologies available,

IT is piloting a range of Cloud initiatives in

areas such as the testing environment and

email archives.

• Protection of Personal Information Act

(2009) – Eskom is proactively evaluating

and modifying the systems and processes to

ensure that Eskom achieves full compliance to

the Act to ensure that customers, employees

and supplier data are responsibly protected.

Data leakage prevention, network security,

laptop encryption, and USB disabling are

some of the initiatives being piloted and

considered

• Integration platform replacement and

migration

• Smart strategy – Developing a strategy

for harnessing smart-grid and smart-utility

capabilities to improve Eskom’s efficiencies,

improve asset management and utilisation,

better manage demand-response, reduce the

carbon footprint, improve customer services

and power quality, improve grid resilience,

incorporate renewables and contribute to

the National Development Plan

• Server room upgrade nationally – Eskom will

refurbish approximately 105 server rooms

across all Eskom key sites. This initiative

will significantly improve systems and

infrastructure availability, assure national

key point security levels, both physical and

logical, as well as achieve a lower total cost

ownership through standardisation and

inherent, modern facilities with remote

monitoring capabilities

• Wide area network upgrade and resilience

– Eskom has implemented a core network

backbone that straddles the country, based

on the modern MPLS architecture, installed

WAAS compression technology to improve

network performance, removed legacy

daisy chains, implemented a new local area

network (DC LAN) with redundancy in

the two main data centres, and migrated

1 327 servers from the old LAN to the new

DC LAN, upgraded network bandwidth

for 205 sites in preparation for B2B and

centralisation of its key systems

• Voice – IT has completed installing the back-

end infrastructure to migrate the wireless

network from old equipment to the modern

technology, and is now ready to roll out

wireless access points across the organisation.

In this financial year Eskom will also be rolling

out seamless virtual private networks that

will enable all Eskom employees to make

free voice over IP (VOIP) calls from mobile

to mobile, as well as mobile to office landline

phones, resulting in cost savings for Eskom

• Load balancers – Group IT has removed a

major single point of failure for all critical

systems by procuring backend infrastructure

for the load balancers that will further

improve performance of the end user and

South African consumer-facing systems

and further improve the end-user computing

experience

• Security programme – Eskom has initiated

a major Information Security programme

to ensure that it secures and protects

Eskom’s information assets. One of the

project streams is to achieve certification to

the international standard for information

security ISO 27001/2


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SustainabilityThe Sustainability division’s mandate is to

deliver effective and innovative solutions

and decision support to enable sustainable

business performance and greater stakeholder

confidence, which will contribute to the

transformation of Eskom and South Africa.

The division’s functions include ensuring a safe

workplace for staff, and conducting research

and testing to support cost-effective, climate-

friendly and innovative approaches to energy

provision, espousing the value of sustainable

development, while being responsive to

global pressures.

The division also facilitates the deployment and

upscaling of renewable-energy technologies in

Eskom as a way to protect the environment and

reduce Eskom’s carbon footprint.

Other responsibilities include implementing

the quality value chain and maintaining Eskom’s

international profile, relationships and interfaces.

Operating highlights• Launch of the zero harm campaign

throughout the business was well received

and reinforced by management

• Approval of Eskom’s climate change

adaptation strategy as well as supporting

government to further the outcomes of

COP 17 and the National Climate Change

Response policy

• Good progress with the placing of contracts

for the Sere wind farm and the appointment

of an owner’s engineer for the concentrating

solar power plant

• Progress made with the internal energy-

efficiency programme

• The commissioning of the photovoltaic

plant at Kendal and Lethabo power stations,

Megawatt Park parking rooftop and

concentrated photovoltaic at the entrance

to Megawatt Park. These projects will save

Eskom an estimated 2 845 tons of carbon

emissions per annum

• Development of partnerships,such as the

Integrated Energy Centre’s clean coal centre

• Participation in international platforms/

initiatives like the UN Global Compact

LEAD initiatives and the Rio+20 Sustainable

Energy for All

• Improved environmental compliance (reduced

number of legal contraventions)

• Recommendation for certification to

ISO 9001 for the whole of Eskom

• Establishment of the technical governance

process, with a specific focus on plant safety

as well as establishing the base for smart

metering

• Sighting of the critically endangered white-

winged fluff tail at Ingula

• Instituted the security recovery plan, with

specific reference to national key points

Operational challenges• Eskom’s environmental performance has

deteriorated within the last reporting year.

This can be largely attributed to the tightness

of the system and the inability to obtain an

outage to conduct maintenance, with specific

reference to manage particulate emissions

and water usage

• Delay in the implementation of the

underground coal gasification project due to

environmental compliance issues

• Vulture fatalities associated with distribution

infrastructure

• Quality issues at Medupi

Future focus areasThe impact (time frames and priorities) of the

recent price increase on these future focus

areas is still being investigated.

• Continue to focus on leadership in safety and

the safety boot camps, as well as placing a

particular emphasis on contractor safety


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• Continue to participate on international

and national climate change and sustainable

development platforms (eg Caring for Climate,

National Climate Change Committee, technical

working groups for the implementation of the

National Climate Change Response policy)

• Implement the adaptation strategy and

integrating this into Eskom’s business

• Finalise the Socioeconomic Development

policy and strategy for Eskom

• Finalise Eskom’s Green Financing strategy

and exploring alternative revenue sources

• Environmental recovery (water and air

quality) to ensure compliance as a minimum

standard

• Establish Eskom’s safety, hygiene,

environmental and security inspectorate,

which is aimed at proactive assurance of safety,

hygiene, environmental and security aspects

• Construct of Sere wind farm and Megawatt

Park rooftop photovoltaics

• Conclude the commercial process for

concentrated solar power

• Commence development of photovoltaic

installations at Eskom’s other power stations

and commercial buildings

• Initiate the Eskom Factor II report as a

follow-on to the first Eskom factor project

to consider more detailed impacts within

Eskom’s supply chain, with a specific focus

on key strategic and operational issues, such

as water

• Establish a portfolio of high-impact flagship

research projects that need to be implemented

(including smart grids)

• Continue the implementation of the total

quality value chain – ISO 9001, 14001 and

OHSAS 18001 (environmental, safety),

with a view to obtain certification to

ISO 9001, 14001, OHSAS 18001, other

applicable specialist ISO standards and the

implementation of Business Excellence

during the course of next year

• Implement lifecycle quality processes in the

project and capital expansion programme to

ensure product and service quality

• Implement security recovery throughout

the business

Environmental performanceImproving environmental performance remains

a focus area for Eskom. Advances continued

to be made in areas such as biodiversity,

environmental management systems, waste

management and skills development. However,

the constrained nature of the electricity system

has hampered Eskom’s ability to do critical

maintenance and rollout projects aimed at

improving particulate emissions and water

usage performance at power stations. This has

negatively affected 2012/13’s environmental

performance indicators, with emissions, water

and legal contravention indicators all above

desired targets.

Eskom’s strategic objectives regards

environmental management as listed in the

Eskom corporate plan are:

• Avoid harming the natural environment and

so minimise financial and legal liabilities

• Reduce the carbon footprint through efficient

energy production and by diversifying the

energy mix

• Reduce particulate and gaseous emissions to

minimise the impact on human health and

comply with regulated emission standards

• Reduce fresh-water usage by using mining

water and by eliminating liquid effluent

discharge to avoid damaging water resources

• Enhance waste management by reducing,

reusing and recycling of waste

• Comply with environmental legislation as a

minimum requirement in all activities


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• Minimise the impact of Eskom’s activities on

ecosystems and enhance ecosystem services

such as functioning wetlands, improved

biodiversity, avoiding erosion by responsible

land-management practices

PerformanceEnvironmental expenditureIn 2012/13, R1.7 billion was allocated to

environmental capital projects (2011/12:

R0.6 billion) and R1.3 billion to environmental

operating projects (2011/12: R0.9 billion).

Most of the capital expenditure was on air

quality-related projects and projects related

to the capacity expansion programme.

Operating expenditure was primarily on

the capacity expansion programme and

projects relating to air quality improvement,

water management and treatment, and the

rehabilitation of coalmines.

Bird diverters are strung on high-voltage power lines by helicopter

Eskom’s environmental indicatorsEskom’s environmental indicators are displayed in the table below.

Compact target

2012/13

Actual 2012/13

Actual 2011/12

Actual 2010/11

Relative particulate emissions (in kg/MWhSO) <0.30 0.35RA 0.31RA 0.33RA

Specific water usage (in l/kWhSO) <1.32 1.42RA 1.34RA 1.35RA

Carbon-dioxide emissions (relative)(kg/kWh)2 – 0.98 0.99 0.99

Carbon-dioxide emissions (in Mt) – 227.9RA 231.9RA 230.3RA

Nitrogen-oxide emissions (in kt)3 – 964.8RA 977.0RA 977.0RA

Sulphur-dioxide emissions (in kt)1 – 1 843RA 1 849RA 1 810RA

Nitrous-oxide emissions (in t) – 2 980 2 967 2 906

Environmental legal contraventions (number)1 – 47RA 50RA 63RA

1. Under certain conditions, contraventions of environmental legislation are classified in terms of the Eskom operational health dashboard index. 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. Group or divisional executives can escalate any significant environmental legal

contravention to the operational health dashboard.

2. Factor figures are calculated based on total energy generated by Eskom (but excluding electricity used by pumped-storage scheme).

3. NOx reported, as NO

2 is calculated using station specific emission factors, which have been measured intermittently between 1982 and 2006, and tonnages of coal.


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Compliance – legal contraventionsThe number of legal contraventions has

decreased from 50RA in 2011/12 to 47RA in

2012/13. Of the contraventions, 20 were water

related (water leaks and spills, sewerage spills

and ash line leaks) and 15 were for exceeding

of particulate emission limits at power stations,

the remaining contraventions were related to

vegetation management, environmental EIA

non-compliance and oil spills.

Eskom was served with three pre-compliance

notices in terms of the National Environmental

Management Act (1998) during 2012/13.

The notices relate to inspections undertaken

in 2009 and 2010 at Lethabo, Camden and

Matimba power stations. Most of the issues

raised in the notices have been addressed.

Outstanding issues are progressing but are of a

more long-term nature, requiring authorisations

or modifications to plant.

Eskom aims to comply with all legal requirements

and has initiated several activities over the

past three years to address shortcomings.

These include internal peer reviews, training

and development and the implementation of

ISO 14001 certification. Some improvements

have been achieved.

WaterRefer to Generation at page 49 – 50 for

commentary on the deteriorating water usage

performance.

Eskom aims to reduce fresh-water usage and

eliminate liquid effluent discharge. This is

achieved through effective water-management

processes, water conservation and water-

demand practices. Eskom approved a water

management policy during the financial year.

The policy focuses on four key areas, namely:

Stakeholder Management; Corporate Water

Stewardship; Assurance and Compliance; and

Training and Development and work on these

key areas will continue over the coming years.

Eskom has established water-management

task teams to work with power stations to

address the reduction of water usage and

legal contraventions. Objectives of the water

management task team include compiling

comprehensive plans to address all aspects of

water management and water use performance.

The United Nations Global Compact’s CEO

Water Mandate is a unique public-private

initiative designed to help companies develop,

implement and disclose water-sustainability

policies and practices. As a signatory to the

compact, Eskom is committed to the CEO

Water Mandate principles and reports annually

on its progress.

Air qualityEskom aims to reduce particulate and gaseous

emissions to minimise its impact on human

health and comply with regulated emission

standards. There has been progress in

implementing the long-term air-quality strategy

during 2012/13.

All power stations are equipped with

emission-abatement technologies such as

electrostatic precipitators or fabric filter plants

to reduce particulate emissions from the flue

gas. Particulates and gaseous emissions are

monitored and reported on a regular basis.

All coal-fired power stations have fugitive

emission-management plans in place to prevent

dust dispersion from the ash-disposal sites, coal

stockyards and unpaved roads. The plan requires

stations to have dust-bucket monitoring at the

coal stockyard and ash-disposal sites to quantify

fugitive emissions. Dust-bucket monitoring has

been implemented at Lethabo, Camden and

Tutuka power stations, the remaining stations

will implement during the next financial year.

See Generation’s environmental performance

indicators for additional information on Eskom’s

power station emissions on page 49 – 50.


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Ambient air-quality monitoringMonitoring is currently undertaken at 15

ambient air-quality monitoring sites that

measure a range of pollutants including sulphur

dioxide, nitrogen dioxide, fine particulate

matter and ozone. Meteorological parameters

like wind direction, wind speed, wind velocity

and temperature are also monitored. Although

these sites measure pollutants from many

sources, they are strategically located close

to power stations and at ground level to pick

up the kind of pollutants most likely to come

from these power stations. Some monitors are

in residential areas and some in remote areas

(to measure regional air quality). Monitoring

equipment is calibrated against National

Meteorological Laboratory standards in a

laboratory accredited by the South African

National Accreditation System.

Ambient air quality is impacted by emissions

from a number of sources, including Eskom, and

the combined results from all these sources are

reflected in the concentrations measured by

the network.

Generally, there is compliance with ambient air

quality standards at the monitoring stations.

The annual ambient PM10 limit of 50μg/m3 was

exceeded at Kendal, Komati and Marapong, and

there was non-compliance with the daily PM10

limit at four sites. The recorded exceedances

could be attributed to many sources relative

to each station; increased construction activity,

proximity to power station, mining activity and

low level sources like domestic combustion. It

should be noted that power stations make only

a very minor to contribution to ambient PM10

levels because of the abatement equipment

installed at the power stations.

BiodiversityEskom aims to comply with environmental

legislation and is constantly striving to put in

place mitigation measures to ensure that its

activities do not negatively affect biodiversity.

Eskom has a number of complementary

strategic partnerships with wildlife organisations

in place. The long-standing Eskom Endangered

Wildlife Trust partnership focuses on managing

and monitoring wildlife interactions.

The Ingula Partnership (with conservation-

orientated non-governmental organisations

(NGO) BirdLife South Africa and Middelpunt

Wetlands Trust) has contributed towards

conserving a very important environmental

biome, so helping to protect a range of critically

endangered species.

The electrocution of Cape Griffon Vultures on

Distribution power lines in the Eastern Cape

Operating Unit was identified as a contributing

factor to the local extinction of the species.

The electrocutions are due to old networks

which were built in the late 1970s with bird-

unfriendly designs. The Operating Unit has

embarked on a project to retrofit the existing

designs with bird-friendly designs over the next

three years. More than 900 structures out of

a total of approximately 4 300 structures have

been completed.

Eskom have formally endorsed the ‘Best

practice guidelines for avian monitoring and

impact mitigation at proposed wind energy

development sites in southern Africa’, a guideline

aimed at assisting developers in the sustainable

development of renewable projects. As a

member of the Bird and Wind Energy Specialist

Group Eskom have committed to ensuring best

business practice by supporting a sustainable

development approach to renewable projects

in the SADC region.


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Eskom responded to a request for a partnership

in greening the Mpumalanga province, in which

the province identified areas for greening.

Through this proposal, a total of 5 270 trees,

half of which are edible and half indigenous, have

been planted by the Wildlife and Environment

Society of South Africa.

ISO 14001 environmental management system standard certificationIn 2012/13, the Generation division, Group

Capital construction management, the

telecommunications depar tment, Rotek

SOC Ltd, Roshcon SOC Ltd, Eskom Aviation

and the Sustainability Systems departments

obtained ISO 14001 certification. Progress

continues to be made towards achieving

ISO 14001 environmental management system

standard certification by March 2014.

Waste managementIn accordance with part 7 of the National

Environmental Management: Waste Act,

Eskom have commenced with the voluntary

implementation of Industrial Waste

Management Plans which focus on the efficient

recycling, reuse and recovery of all Eskom waste

streams. The Industry Waste Management

Plans will be completed for Generation first

before being consolidated across all Eskom

business Units.

Commercialisation of Ash: Eskom continues to

work with the industry and the South African

Coal Ash Association to pursue commercial

opportunities associated with the utilisation

of ash aimed at increasing the quantities of

ash which is diverted from landfill, this not

only reduces the environmental impact but

also provides opportunities for business

development.

Climate change and renewable energySouth Africa’s response to climate change

is guided by the National Climate Change

Response policy, which was approved by

Cabinet in November 2011. The policy is

founded on the principles of sustainable

growth and development of the country. Policy

process will also guide South Africa’s input to

the international negotiations in terms of what

the country can and cannot do with regards

to mitigation. This policy process has been

driven by an intergovernmental committee

led by the Department of Environmental

Affairs in partnership with all stakeholders,

including Eskom.

Eskom has been focusing on reviewing its

Climate Change strategy in line with the

government’s policy implementation process

and international discussions. Eskom aspires to

a more diverse energy mix, with the objective

of reducing relative emissions until 2025 and

subsequently reducing absolute emissions.

Eskom has also prioritised adaptation to the

impacts of climate change as this has major

implications for the security of supply.

Eskom has a comprehensive climate change

strategy based on six pillars:

Diversification of the generation mix to lower

carbon-emitting technologies

Energy efficiency measures to reduce demand

for electricity and improve the technical

efficiency of plant, thereby reducing greenhouse

gas and other emissions

Adaptation to the negative impacts of climate

change

Innovation through research, demonstration

and development

Investment through carbon market mechanisms

Progression through advocacy, partnerships

and collaboration


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Eskom continually models electricity options

that will balance the conflicting goals of

affordability, economic growth, social inclusion

and environmental protection in an optimal

manner. There is currently no single technology

option that will solve all of these challenges at

the same time, so Eskom is assessing all options,

including the trade-offs and the impacts thereof.

PartnershipsEskom has established an Eskom-NGO forum

with the intention of creating a platform for

dialogue between Eskom and members of

the environmental NGO community. In the

reporting year three engagements were held

and there was good progress on the sharing of

information, specifically on water-related issues.

However, due to the recent spying allegations

made against Eskom by members of the forum,

Eskom has postponed these activities until such

time that the investigation is concluded. These

allegations have unfortunately compromised

the relationship with certain members of the

forum. Eskom has committed to transparently

share specific outcomes of the investigation

report with NGOs concerned.

Renewable energy projectsRenewable energy plays an important role in

meeting Eskom’s diversification aspirations

and the renewable unit focuses on large

power-generation technologies, namely wind,

photovoltaic and concentrating solar power.

These will play an extremely important role

in improving relative (emissions intensity) and

reducing absolute emissions reduction.

Eskom has partnerships with a diverse set of

funding institutions that are contributing to its

two flagship renewable-energy projects, the

Sere wind farm and the Upington concentrating

solar power plant. These projects form part

of South Africa’s Renewable Energy Country

plan, which was developed in conjunction

with the Department of Public Enterprises,

the Department of Environmental Affairs, the

Department of Energy and the National Treasury.

Sere wind farmThe project development phase of the Sere

wind farm was successfully concluded in 2012/13

with the appointment of the engineering,

procurement and construction contractor for

the project’s main package. The 100MW wind

farm is Eskom’s first utility-scale renewable

energy project outside its hydro-generation

projects.

The project comprises 46 turbines to be

erected in the Matzikama district close to the

community of Koekenaap. The plant is scheduled

to be commissioned in December 2014 and will,

based on plant availability, save and estimated

230 000 tons of carbon emissions per annum.

Concentrating solar power demonstration plantSignificant progress was made towards

developing Eskom’s concentrating solar

thermal power plant in the Northern Cape,

near Upington, with commercial operation

envisaged for 2017. The project is expected

to save an estimated 450 000 tons of carbon

emissions per year.

Energy storage is a key component of the project

and it will provide for plant dispatch ability to

meet peak demand. An owner’s engineer has

been appointed for technical oversight, and a

process to conclude the procurement strategy

is underway.

Photovoltaic technologyIn 2012/13, Eskom installed photovoltaic

technology at two of its power stations, Kendal

and Lethabo, and at Megawatt Park head office

and is developing a photovoltaic programme

for the rest of its assets.

It is envisaged that an estimated 150MW

of capacity will be installed on the rooftops

of Eskom’s power stations, offices and

transmission substations for Eskom’s

internal use.


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The potential for solar boosting (the use of

solar power as an additional heating medium) is

being investigated at Eskom’s coal-fired power

stations as a supplement to coal.

BiomassBiomass is a renewable-energy source derived

from biological material of living or recently

living organisms. The plant-based material is

used directly or converted into other energy

products such as torrefied (moisture removed)

pellets or biofuel.

As par t of Eskom’s biomass research

programme, a System Johannsen Gasifier was

constructed and installed at a rural sawmill in

Melalani in the Eastern Cape in collaboration

with the University of Fort Hare. It uses wood

and other biomass as a fuel source to produce

a virtually tar-free gas, which powers an

electricity generator.

Eskom is also evaluating other biomass options,

such as the use of municipal solid waste as a

feedstock for power generation. Municipal solid

waste not only represents a continuous source

of energy that can be harnessed for generation,

but its use will also significantly decrease the

burden on landfill sites and processing facilities.

To reduce greenhouse-gas emissions from its

coal-fired power stations, Eskom is exploring

co-firing of biomass fuel. Should the business

case prove feasible, Eskom aims to co-fire

biomass to replace 10% of coal usage by

weight in coal-fired power stations by 2026.

To achieve this goal, Eskom is looking to

source suitable biomass within South Africa

and sub-Saharan Africa.

The project is divided into phases:

• Co-firing technology selection – Test

burns will be conducted at Arnot and

Kriel power stations to determine the

most suitable technology and biomass fuel,

selecting between the separate milling and

co-milling of biomass with coal, and between

co-firing white biomass pellets and torrefied

biomass pellets (also known as black pellets).

An order has been placed for 2 000 tons

of torrefied biomass pellets

• Biomass fuel sourcing – sourcing biomass

fuel for sustainable application. A contract

has been placed with the Council for

Scientific and Industrial Research to conduct

a biomass fuel supply study. The study

addresses the availability of biomass fuel in

South Africa and neighbouring countries,

including transport, beneficiation, quality,

environmental, market conditions, fuel cost

and legal/regulatory issues

Ocean energyA 2002 Eskom study concluded that South

Africa had a sufficient ocean resource to

explore the option of ocean energy. A techno-

economic study and technology evaluation

are being performed to assess ocean energy

conversion technologies and determine which

technology should be researched further for

possible application in South Africa.

Occupational hygiene and safetyEskom conducts its business with an

underpinning safety principle that no operating

condition, or urgency of service, justifies

exposing anyone to negative risks arising out

of Eskom’s business or cause them injury or

damage to the environment.

Safety improvement is a key concern for the

organisation, particularly in light of the number

of recent fatalities and serious injuries of both

employees and contractors. To this end, a

number of safety improvement initiatives are

being implemented, with a view to decrease the

number of fatalities and injuries for contractors

and employees to zero.

Zero harm was introduced as an Eskom

value to further entrench and emphasise

the importance of the safety of employees,

contractors and members of the public.

Eskom’s leadership genuinely believes that all


129

incidents are preventable, and has ensured

that policies, procedures, processes, tools, and

behavioural expectations are in place to assist

their employees and contractors to achieve the

zero harm goal. Eskom’s Chief Executive sets

the direction and empowers all employees to

do what is necessary to achieve this goal.

Operating highlights• The Eskom Occupational Health and Safety

(OHS) strategy was reviewed during the year, with the development of key strategic initiatives for implementation within the organisation. These strategic elements were developed after assessing the root causes of incidents. The primary elements identified include:

– Leadership: Visible, committed and effective leadership at all levels driving, implementing, monitoring and continuously reviewing OHS management and performance

– Contractor safety: To ensure that contractors demonstrate safety excellence and care for their employees as incorporated in the value chain for suppliers

– Supervisory capacity: Hands-on site supervision and all supervisory training to include a module on OHS management

– Training and facilities: Implement simulator and practical training including training sites developed closer to business units. Training requirements will be informed by findings from incidents

– Human behaviour: Human behaviour to be a key consideration in managing OHS, monitored through culture and perception surveys, ensuring understanding of “right to refuse”, monitoring health-related issues, and embedding the zero harm philosophy

• The Health and Safety Agreement between

Eskom and the trade unions was concluded

providing for the health and safety of persons

at work

• The Blue Flag campaign, which is designed to take participating suppliers and operations to the achievement of world-class performance in safety, health and environment was rolled out during the year

• Zero harm campaigns were launched at many sites with a total of 7 500 employees attending 17 launches and 11 702 attending 64 site-safety days. This initiative supported the launch of the zero harm value and the entrenchment of this value amongst employees and contractors

• In a drive to improve the safety management systems the following business units were OHSAS 18001 certified: Matimba power station, Hendrina power station, Komati power station, the Peaking power station, Rotek, Roshcon, Eskom Telecommunications and Eskom Aviation

• In support of the global campaign “Decade of Action for Road Safety 2011-2020”, vehicle safety campaigns were rolled out across the organisation during April and December 2012 and March 2013. These campaigns focused on driver fatigue, vehicle fitness, tyre safety, knowledge of the rules of the road, roadworthiness of vehicles that transport employees, passenger safety, road conditions, defensive driving and driver alertness

• Eskom contractor OHS improvement plan provides Eskom staff with a practical, consistent system for overseeing contractors’ work and integrates safety requirements into contractor management. It also ensures compliance with legal and Eskom’s internal procedural requirements

• Eskom’s vendor management system in 2012/13 conducted safety, health and environment evaluations on new suppliers. Of these 576 suppliers were approved and 638 rejected

• Distribution division’s safety “Boot Camp” initiative has made considerable progress in rolling out the prescribed solutions that will assist in improving the division’s safety performance


130

• Several safety interventions to educate the

public about the dangers of the unsafe use

of electricity were organised across the

country. These included 7 206 school visits,

5 022 community campaigns, 375 farmer

forums and 4 453 other interventions

(including house visits, radio interviews,

community leader interactions and illegal

connections removals). Eskom’s public safety

message has reached about 28.3 million

listeners via nine regional and 26 community

radio stations

• Eskom hosted Electricity Safety Week in

August 2012, during which five identified

safety hot-spots across the country were

visited. The interventions included school

and community visits, with industrial theatre

performances, live outside broadcasts and

promotional material. Eskom reached about

3 585 school learners and 1 730 community

members through these five visits

Operating challenges• Despite significant efforts, some of which

are mentioned above, occupational health

and safety performance, although improving,

remains poor. Accidents still occur that

not only affect our employees, but also

contractors and members of the public

• Not all employees and contractors have

yet embedded the principles of zero harm

in the way they work. This results in people

not following work procedures and method

statements, endangering their own lives or

those of their colleagues

• Lessons learnt, incident feedback reports

and case studies are not always shared

and implemented within the organisation

and among contractors, resulting in repeat

incidents. An additional challenge is the

lack of competence, among Eskom and

contractor supervisory staff, to identify risk

exposure or enforce compliance to safety

procedures. This is being addressed through

a robust training programme for supervisors

Future focus areasIn addition to the divisional specific improvement

initiatives, Eskom will:

• Continue the programme to entrench the

zero harm value

• Enhance the safety management system

through the implementation of OHSAS 18001

• Uplift the training programmes in terms of

electrical and vehicle safety, competence

of supervisors and capacity development

of contractors through the Supplier

Development and Localisation initiatives

• Strengthen the behaviour-based safety

programme

Safety performanceEskom’s safety performance remains poor:

in 2012/13 there were 3RA Eskom employee

fatalities (2011/12: 13RA) and 16RA contractor

employee fatalities (2011/12: 11RA).

The Eskom employee fatalities were due to

electrical contacts. Of the 16RA contractor

employees who lost their lives, four fatalities

were due to motor vehicle accidents, two due

to electrical contact, two were security guards

who died from asphyxiation from a heating

fire, two were due to assault, four were due to

falls, one was struck by an object and another

was caught between objects.

Vehicle accidents and electrical contacts

remain the major causes of public fatalities.

The 29 reported public fatalities indicate a

positive trend compared to the 34 fatalities

of 2011/12. Eskom continues to run its intense

public-safety campaign.


131

Safety performance, 2009/10 to 2012/13

Unit measureActual

2012/13Actual

2011/12Actual

2010/11

Employee safety

Total fatalities number 3RA 13RA 7RA

Electrical contact fatalities number 3 4 3

Vehicle accident fatalities number – 4 –

Other fatalities4 number – 5 4

Lost-time incident rate, including occupational diseases1 index 0.39RA 0.41RA 0.47RA

Contractor safety

Total contractor fatalities number 16RA 11RA,2 18RA


Vehicle accident fatalities number 4 5 10

Other fatalities4 number 10 52 7

Public safety

Total public fatalities number 29 343 43


Fatalities from other causes number 6 6 21

1. The progressive lost-time incident rate is a proportional representation of the occurrence of lost-time injuries over 12 months per 200 000 working hours.

2. A fatality recorded in 2011/12 thought to have been from bee stings, was found by a pathologist to have been from natural causes. The fatality has been

re-classified as non-work related.

3. There was an electrical contact in February that was reported late.

4. Refer to page 56 of the Integrated Report for the breakdown of other fatalities.

Eskom achieved an actual lost-time incident

rate performance of 0.39RA per 200 000 person-

hours worked for 2013. Only the Distribution

and Transmission divisions had lost-time

incident rates greater than the Eskom rate.

In risk-specific terms, the leading causes of

injuries were motor vehicle accidents, electrical

contacts, falls, and being caught between and

struck by objects.

In memoriamThoughts and prayers go to the families,

friends and colleagues of the employees and

contractors who passed away in the line of duty

this past year:

Eskom employees Contractor employees

Elvis Maseko

Othusitse Jacob Mmitsi

Malungisa Patrick Shongwe

Akeem Adegbite

Derick Thulani Dlungwane

Lebohang Malangabi

Joseph Mashaba

Nditsheni Mashau

Sandile Matsebula

Malibongwe Mhambi

Khayelihle Mkhwanazi

Andries Saziso Ntobela

Olawale Olaniyan

Sydney Happy Segonyane

Albert Sikhozile Soyekwa

Refus Charles Tlaka

Sipho Gift Tseisi

Bunruang Yorkun

Bonginkosi Andries Zitha


132

Security management in EskomThe Group Security department is required

to provide Exco and the board with assurance

that Eskom Holdings SOC’s security risks are

optimally managed in a changing business and

risk environment by developing and maintaining

effective security strategies, policies and

frameworks that support the organisation by

providing advice and guidance.

The primary goal of Security is to effectively

and economically safeguard Eskom’s business

by protecting its people, assets, information,

processes, products and reputation by

preventing harm (unauthorised denial, disclosure,

modification or destruction) due to irregular

or illegal behaviour, either of employees or the

general public.

Operating highlights• Regulatory compliance

• Integration with the law enforcement

agencies and intelligence community

• Successfully supported the AFCON Cup of

Nations and the BRICS Summit

• Effectively reduced conductor theft crime

and energy losses in collaboration with

Business Against Crime

• The Security Recovery programme was

established to deal with the changing security

environment and new threats

Future focus areas• Continue to provide the necessary security

capability and capacity in alignment with

Eskom’s strategic business objectives, as well

as support Eskom’s drive to be a world-class

electricity utility

• The Security Recovery programme was

established to enhance security while

entrenching a security culture that will drive

zero harm and a safer environment, creating

in the long-term a proactive security culture

within the organisation

Quality managementEskom has undertaken to develop and

implement management systems that

are ISO 9001:2008 compliant to achieve

sustainable performance improvement with

zero deviation from requirements. The first

phase of this performance improvement

journey was the establishment of the ISO 9001

Quality Management Systems as the foundation

for good business management. This has paved

the way for the second phase, to position the

organisation for sustained success through

the implementation of business excellence to

become a high-performance organisation and

top global utility.

Operating highlights• The Finance, Primary Energy and all but two

of the Generation division power stations

received certifications for ISO 9001:2008.

The Quality Management department within

the Sustainability division has also been

certified. All the other divisions and Eskom

have been recommended for ISO 9001

Certification. This milestone has been

achieved in record time

• ISO 9001 awareness training target

exceeded. A total of 16 738 staff members

completed awareness training

Future focus areas

• Maintain and continually improve the

consolidated ISO 9001 certified, e-enabled

Quality Management System and any

other certifiable ISO standards to ensure

sustainable performance

• Entrenchment of the ISO 9001 principles

into the business processes, operations and

the quality culture

• Implement a Business Excellence programme

to support the organisation’s objective of

becoming a high-performance utility among

the “top tier global power utilities”


133

• Roll out and standardise the life-cycle

quality processes in the project and

capital expansion programme to ensure

and improve product and service quality.

This will ensure Eskom’s active involvement

in the quality of its projects through effective

control of suppliers in terms of quality

assurance and control on all project sites and

manufacturing facilities globally

Research and testingEskom’s Research, Testing and Development

department has focused on enhancing its

strengths through the establishment and

promotion of Centres of Expertise in those

areas of research that support Eskom’s

priorities. This has ensured that it maintains a

focus on the organisation’s operational needs

and the strategic challenges it is currently

facing. Eskom aims to become a highly

innovative company recognised for its research

and innovation. Focusing the research and

development on product delivery is designed

to achieve this aim.

Financial performanceThe research investment of R195.3 million was

4% higher than the previous year. A breakdown

of this expenditure is shown below.

Research investment areas

The figure above indicates that research funding

follows a similar pattern to the previous year.

An increase in memberships was implemented

to support and increase research to support

the operational needs of the business and

to enhance the focus on environmental

performance of plant. The research into

primary energy was increased to support the

need to optimise use.

Expenditure per research focus area (R million)

Power system technologies

Renewables and the environment

Research memberships

Energy policy, economics and statistics

Primary energy

Improving generation performance

Energy efficiency

Innovation and future technologies

Asset management

Health, safety and human factors

R33.01

R30.18

R40.48

R14.56

R13.10

R3.61R12.26

R16.57

R18.35

R13.21

Eskom’s extensive research portfolio varies from laboratory work to building of massive demonstration plants


134

Strategic partnershipsEskom has maintained memberships,

collaboration and partnerships with national

and international research organisations to

ensure that it remains up-to-date with the latest

global technologies and trends. The continuing

international collaboration includes organisations

such as the Electric Power Research Institute,

Doble, the International Energy Agency Clean

Coal Centre and SolarPACES, and The Welding

Institute. A new membership with the Source

Testing Association was identified as being

important in supplementing environmental

research. The agreement with the European

Commission FP7 project “OCTAVIUS”,

focused on carbon capture and storage, has

made good progress and resulted in a meeting

and conference in South Africa. Collaboration

with national universities has received special

attention, with a review of their interest and

capabilities followed by the placement of new

agreements. A bilateral agreement has been set

up with the Council for Scientific and Industrial

Research to carry out collaborative research in

areas of mutual interest and first projects in the

programme have been agreed.

TestingThe application of the specialised skills and

facilities developed primarily through the

research programme is carried out through

a testing programme and the provision of

specialised services. This is seen as an effective

way of delivering a number of the research

outputs to the organisation while ensuring

optimal use of the developed skills. Ongoing

research is often used to continuously

enhance and update the services while

further developing the skills. Specialist services

are provided in oil analysis (lubricating and

insulating), welding, non-destructive testing,

coal quality, material fatigue and corrosion.

Air-quality monitoring is centralised through

these services and reported nationally. Power

station performance testing for efficiency

improvements has been established.

Demonstration and pilot projectsThe capital expenditure for the pilot and

demonstration projects is R150.4 million,

the majority of which was invested in the

underground coal gasification pilot project.

The concentrating solar power project no longer

forms part of the pilot portfolio and has been

moved to the Renewables department. The pilot

and demonstration programme provides for the

production of scale assets that are used to assess

technologies identified through the research

process for their commercial potential for Eskom.

The primary aim is to develop a business case for

the commercial use of the applicable technology

and to ensure that key technologies that can

improve performance and fundamentally change

Eskom’s current and future technology path are

effectively appraised and the risks understood.

Eskom is currently engaged in the following

demonstration and pilot projects:

High-voltage direct currentThe purchase of a 1 000 volt high-voltage direct

current generator has been approved. This will

allow Eskom to test high-voltage, direct current

line designs at altitude and enable future

network expansion using this technology.

Municipal solid waste to energyWork is progressing with local municipalities to

bring biogas online and convert waste to energy

through thermal conversion in the short term.

Refer to the biomass project in the Climate

Change and Renewables section (page 128).

IP/MPLS telecommunicationsThis new technology is being researched to

evaluate its suitability for all systems, especially

operating security and reliability.

Low-loss distribution transformersResearch into innovative transformer core

material and construction techniques that

minimise losses and help Eskom achieve internal

energy-efficiency targets.


135

Plant monitorAn integrated system that allows for the

comprehensive monitoring, storage and analysis

of equipment operating parameters and

conditions.

Friction stir taper stud welding platformA tool used for extracting metallurgical samples

from materials used in pressurised steam-

bearing structures and then plugging the holes.

The samples are then analysed.

Underground coal gasificationEskom’s research into underground coal

gasification technology has successfully proven

that the technology works under very challenging

geological conditions, and the research objective

has therefore shifted to proving the viability of

producing electricity with this technology.

As a first step to achieving this objective, Eskom

completed a detailed design study for a 100-

140MW open-cycle gas turbine demonstration

plant. The study concluded that while the

technology is technically viable, it has limitations

due to the specific geological conditions at the

chosen site.

Further research is therefore being initiated to

improve and prove the quality of underground

coal gasification gas at the site.

Technical governanceA technical governance framework has

been established to manage governance and

compliance related to the integrity and risks

of technical work undertaken throughout the

asset lifecycle. This includes the establishment

of a Technical Governance committee, technical

governance codes and Technical Steering

committees, which are required to ensure the

effective and efficient management of technical

work throughout Eskom.

Office of the chief executiveDelivery UnitThe Delivery Unit coordinates and drives

Eskom’s performance-management programmes

by tracking, monitoring and reporting on the

implementation of the entire portfolio of

strategic transformation initiatives. The initiatives

can broadly be defined with these three

objectives:

• Value-creating: strategic or enterprise projects

• Operating: projects that enable Eskom to

become more efficient and effective

• Compliance: “must-do” projects required

to maintain regulatory compliance

Performance of the 48 strategic initiatives is

measured against the following focus areas:

• Movement and progress of the portfolio per

the standard Eskom project lifecycle model.

Currently 25% of strategic initiatives are in

the planning phase, 54% are in the execution

phase, and 21% in finalisation phase. Some

benefits have been realised but effective

identification and monitoring of these benefits

will be conducted in the next stage

• Financial management, where declared savings

are allocated to strategic initiatives. Allocation

of funding for initiatives remains problematic,

hampering the execution of initiatives

• Benefits management framework. No real

benefits tracking has been initiated as the

framework is still in its proof-of-concept

phase. The Back2Basics SAP Release 2

programme has been identified as a pilot for

this framework


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The following top six strategic initiatives

received specific focus:

• The “keep the lights on” imperative

• Back2Basics

• Leadership

• Distribution operating excellence

• Generation operating excellence

• Customer centricity

Operating highlights“Keep the lights on” programmeIncreased expenditure on the power buyback

initiative and making more use of the open-

cycle gas turbine have created a small margin

for maintenance. However, there is still much to

be done and the system remains constrained.

Refer to Generation and Transmission for more

details of this initiative.

Back2Basics programmeThis is a coordinating programme for initiatives

aimed at the standardisation, simplification and

optimisation of processes and systems in support

of Eskom’s vision of being in the Top 5 global

utilities. Overall the programme is progressing

well; however, some delays are being experienced

with the execution release approval for the

Service Tools programme release 2. There is

confidence that the Back2Basics initiatives will

meet these objectives:

• Standardise work processes to eliminate

waste

• Simplify supporting and enabling enterprise-

wide software systems architecture

• Build competencies in operating, maintenance

and outages

• Establish a platform and culture for continuous

improvement

• Optimise capital and human productivity

Leadership programmeImplementation of the leadership strategy

is on track. The Eskom Leadership Institute

has completed the full Experiential Learning

Academy initiative for the organisation’s

top 100 leaders. It has also completed four

business-driven action learning “waves”,

focusing on developing leadership capacity

and technical solutions to support Generation

operating excellence. Training and development

programmes were redesigned for supervisors,

middle management and senior managers.

These are now in the implementation phase.

To date 1 500 supervisors have attended the

programme, 302 middle managers and 276

senior managers. All three programmes run

over the 2012/13 financial year and are to be

completed only in 2013/14.

Future focus will be on developing an integrated

leadership scorecard to measure the impact

of the leadership programmes and other

interventions.

Distribution Operating Excellence programmeRefer to the Distribution division for details

of the programme (page 59).

Generation Operating Excellence programmeRefer to the Generation division for details

of the programme (page 45).

Customer Centricity programmeThe Customer Centricity programme is

required to ensure that the Group Customer

Services division’s mandate of putting the

customer at the centre of the business is

achieved and guides Eskom towards the overall

objective of achieving fully satisfied and serviced

customers who consistently rate Eskom in

the top quartile while promoting Eskom as a

company. The entire programme is on track

and progressing well, with four initiatives having

moved to the execution phase and three

initiatives completed.


137

Operating challenges• Re-engineering the business to adapt to the

limits imposed by the 8% annual average

tariff increase that the NERSA granted for

the next five years

• All projects, including strategic initiatives,

must be loaded on the SAP system to enable

proper management, reporting and tracking

of costs. The transition is moving slower

than expected, primarily due to the system

training of project managers and reporting

system developments that affect the

robustness and accuracy of project reporting

Future focus areas• Implement the benefits management

framework for the strategic initiatives. This

will include reviewing benefits claimed

initially, establishing performance baselines

and monitoring performance going forward

• Continue the transition to SAP project and

portfolio management. This will automate

the tracking and monitoring of the strategic

initiatives’ portfolio and financial performance,

and improve data integrity

• Roll out SAP release two and the Back2Basics

programme in Engineering, Outages,

Maintenance, Operations and Projects

departments

• Continue rolling out the operating excellence

programmes for Distribution and Generation,

as well as the customer-centricity and

leadership programmes

• The entire portfolio of strategic initiatives

managed by the Office of the Chief Executive

is currently under review to ensure effective

alignment with the new Eskom key focus areas

Live line maintenance is a key component of keeping the lights on every day

Leadership overviewSubsidiary companies 7


140

Subsidiary companies

Eskom Holdings SOC Limited has the following

direct subsidiaries:

• Eskom Enterprises SOC Limited

• Escap SOC Limited

• Eskom Finance Company SOC Limited

• Eskom Development Foundation NPC

Although not a subsidiary, a summary of the

Eskom Pension and Provident Fund is included.

Eskom Enterprises SOC Limited GroupEskom Enterprises provides lifecycle support,

plant maintenance, network protection and

support for the capital expansion programme

for all Eskom Holdings divisions. This is done

primarily through Eskom Enterprises’ operating

divisions and its two main subsidiaries,

Rotek Industries SOC Limited and Roshcon

SOC Limited.

Operating highlights• Good safety performance in Eskom

Enterprises, with the Telecommunications

division achieving more than two million

incident-free hours

• Implemented a new enterprising resource

planning system in Rotek and consolidated

and implemented a new payroll system

for Rotek and Roshcon to enable better

alignment with Eskom and facilitate improved

reporting

• Improved alignment ensuring that the

subsidiaries support Eskom’s main operating

businesses and its strategic intent

• Continued to support Eskom divisions

aligned to the mandate

Operating challenges• Poor safety performance in Rotek and

Roshcon

• Managing a volatile outage programme and

ensuring more optimal utilisation of assets

and resources

Future focus areas• Safety improvement initiatives in Rotek and

Roshcon

• Reposition Eskom Enterprises’ divisional assets

into Eskom Holdings (awaiting authorisation

per the Public Finance Management Act 1999)

• Integrate Rotek Industries and Roshcon

into a single company producing high-quality

products and focused on meeting Eskom’s

needs cost effectively (awaiting authorisation

per the Public Finance Management Act 1999)

• The group will continue to embed the

Back2Basics programme as part of

the continuous improvement drive

• Manage the extended interim operating and

maintenance contract for the Eskom Energie

Manantali concession while the 10-year

agreement for the continued investment is

being finalised

• Restructure South Dunes Coal Terminal and

Golang to simplify the group structure

• Finalise the long-term strategy for investments

in TAP (Pty) Limited and Eskom Uganda

Limited to align with Eskom’s Africa strategy

PerformanceThere were varying degrees of performance by

each of the operating entities. Eskom Enterprises

has performed well in terms of operating, safety

and technical performance. While Rotek and

Roshcon’s safety performance has declined in

this financial year, the technical performance

was also not in all cases aligned to the targets.

The Rotek profit was significantly higher than

target mainly due to the high workloads to meet

the outage demand. The operating concessions

have been fairly stable and remain profitable for

the period under review, bearing in mind that

these entities have a December year end.

141

Due to the nature and seasonality of the work

being done in Rotek Industries and Roshcon

there has been a need to utilise labour-broking

employees. Rotek Industries and Roshcon

have reviewed the current labour staffing

practice and are going through a governance

process to start a process of creating internal

capacity and reduce reliance on externally

sourced personnel over the next few years.

This strategy is intended to be implemented

from the 2014/15 financial year.

Eskom Enterprises SOC Limited shareholder compact

Measure UnitTarget

2012/13

Target achievedYes/No

Actual2012/13

Actual 2011/12

Safety

Fatalities Number Nil Yes Nil Nil

Fatalities – contractors Number Nil Yes Nil Nil

Lost-time incident rate – employees Rate 0.2 Yes Nil 0.17

Lost-time incident rate – contractors Rate Nil Yes Nil Nil

Technical

Eskom Telecommunications backbone

network availability

% 99.7 Yes 99.8 99.8

Use of rotary wing fleet hours 3 000 Yes 4 442 4 709

B-BBEE accreditation Certificate Maintain Yes Maintained Maintained

Financial

Operating income R million 53 Yes 197 91

EBITDA R million 119 Yes 282 108

Net profit before tax R million 119 Yes 264 163

Debtors’ days

(12 month moving average)

Days 40 No 78 79

Debtors outstanding > 90 days R million Nil No 54 50

Human resources

Racial equity % 68.00 No 50.58 67.13

Gender equity % 25.00 No 15.12 24.06

Eskom Enterprises has separate shareholder

compacts with its main operating subsidiaries.

Eskom Enterprises has a compact with Eskom

Holdings. Eskom employees are employees

seconded from Eskom to manage the assets

of Eskom Enterprises. The racial and gender

targets were before the restructuring and not

changed accordingly when all support functions

were centralised. Debtors’ days is being

proactively managed to ensure compliance to

target going forward.


142

SafetyCauses of employee lost time injuries (including fatalities)

For detailed information about Eskom’s overall safety strategy and initiative please refer to page 128.

Subsidiary companies continued

Eskom Enterprises subsidiariesEskom Enterprises has the following additional

subsidiaries:

• Eskom Uganda Limited

• Eskom Energie Manantali s.a.

• Pebble Bed Modular Reactor SOC Limited

• South Dunes Coal Terminal Company

SOC Limited

• Golang Coal SOC Limited

• Technology Services International SOC

Limited – dormant (Eskom has applied

for approval as per the Public Finance

Management Act (1999) to de-register this

subsidiary)

• Rosherville Properties SOC Limited –

dormant

Performance summaries of the main subsidiaries

are set out below.

Eskom Uganda LimitedEskom Uganda is an operations and maintenance

concession with an electricity utility in Uganda.

The concession tenure spans over 20 years and

Eskom Uganda is currently in the 10th year of

the concession.

Financial and safety performance has been good,

while risk and environmental management was

fair. Challenges requiring management attention

are: asset management, operational excellence,

stakeholder and reputational management, as

well as people and talent management. Though

the plant is old, this is being managed by plant

lifecycle management and equipment upgrades.

Eskom Enterprises SOC Limited: Causes of employee lost time incidents (including fatalities)

15

12

9

6

3

0Lost

tim

e in

cide

nts

(incl

udin

g fa

talit

ies)


15

12

9

6

3

0Lost

tim

e in

cide

nts

(incl

udin

g fa

talit

ies)


Human/operating error Industrial/political unrest Motor vehicle accident Occupational disease

Fall on same level (slip, fall and trip over)Ergonomics, handling (lifting, pushing, pulling) Fall from elevation to lower level

Electrical contact/flashContact with fumesCaught by/between/underBurn

143

Eskom Energie Manantali s.aEskom Energie Manantali s.a (EEM) is an

operating and maintenance concession with

SOGEM, an energy-management company

based in Mali, to operate and maintain SOGEM’s

electricity utility, which supplies energy to Mali,

Senegal and Mauritania.

EEM and SOGEM signed a mutual discharge

to bring to an end the initial operating and

maintenance contract. An extension of

the interim contract was approved until

30 June 2013, limited to operating and routine

maintenance. The interim contract has

addressed the exposure to onerous provisions

of the initial contract. The progress on

negotiating the details of the new concession

has slowed down but the teams continue to

work toward finalising a new 10-year contract.

The political instability and unrest in Mali

remains a concern.

Pebble Bed Modular Reactor SOC LimitedThe Pebble Bed company remains in care and

maintenance within the Eskom Enterprises

Group until direction on the future of the

company is given by government.

South Dune Coal Terminal SOC Limited and Golang SOC LimitedDue to its investments in these two companies,

Eskom is entitled to export three million tons

of coal through the Richards Bay Coal Terminal.

These export rights are being leased by Eskom

to other exporters, while Eskom determines

the long-term strategy for these investments.

Escap SOC LimitedEscap SOC Limited (Escap) is a captive short-

term insurance company, meaning it can only

insure risks of its parent company, Eskom, and

its subsidiaries. Established in 1993, this fully

owned Eskom subsidiary is licensed to offer

short-term insurance products. It provides

specialised insurance directly for all Eskom

Group’s insurable risks except for nuclear and

aviation liability. It does so by retaining risk

and transferring catastrophic risk to external

insurance, mutual or reinsurance markets.

Operating highlights• Escap’s net recognised assets exceed its risk-

based solvency capital requirements in terms

of solvency assessment and management

interim measures by R1 379 million (shareholder

compact target: R323 million)

• Net operating expenses as a percentage of

net earned premiums are 5.6% (shareholder

compact target: <10%)

• Money market investment performance is

5.8% measured in comparison to the short-

term fixed-interest composite index at 5.4%

• Return on equity is 7.3% (shareholder

compact target: greater than Eskom’s real

weighted average cost of capital, which is

currently 6.4%)

Operating challenges• Net claim expenses as a percentage of net

earned premiums are 100.1% (shareholder

compact target: <90%). This results from

increasing losses, predominantly in respect

of the Generation fleet that is being

worked extremely hard in order to keep the

lights on

• Listed share investment performance is 4.5%

measured in comparison to the shareholder

weighted index of the Johannesburg Stock

Exchange at 18.1%

Future focus areasEscap would like to see itself as a benchmark for

all captive insurance companies in the country,

the region and internationally. Therefore, it has

put together building blocks that will propel it

to achieve this goal:

• The first building block is meeting,

understanding and leveraging the implications

of the compliance requirements of Solvency

Assessment and Management (SAM), known

as Solvency 11 in the European context.

Escap is not treating this risk-based insurance


144

management regime as a tickbox exercise

but as an indepth overhaul of its processes,

procedures, systems and resources to ensure

that they are world class

• A world-class entity should be involved

in landscaping the regulatory framework

within which it is to operate. Therefore,

the second building block for Escap is

consistent participation in Quantitative

Impact Studies (QIS) and pioneering captive

insurer perspectives and interests. For South

Africa to conclude SAM legislation in January

2016 as envisaged, more of these studies

need to be carried out to ensure the new

regime meets the objectives of industry

transformation

• The third building block will involve

enhancing and improving insurance process

control manuals. Escap plans to have these

manuals reviewed by independent parties

to ensure excellent, effective and efficient

processes are implemented. Escap’s internal

control processes will need to be extended

and new processes developed and improved

• The fourth building block was insurance-

specific ISO 18001 certification. Escap

attained ISO 9001 certification in

October 2012

• The fifth building block is the compliance

universe for Escap as an insurance company.

An in-depth analysis of regulation and

legislation that Escap needs to comply with

is underway

• The sixth building block involves optimal

capital utilisation. Following analysis of

detailed stress testing models, Escap is

looking to utilise its capital to best effect

going forward for the benefit of Eskom


Shareholder compact with Eskom

Key performance areasTarget

2012/13Target

achievedActual

2012/13Actual

2011/12

Equity portfolio return (1 year) > shareholder weighted

index (SWIX) (%) > 18.1 No 4.5 2.4

Money market portfolio return (1 year), > short-term

fixed-interest composite index (STEFI)(%) > 5.4 Yes 5.8 5.8

Expense ratio (%) < 10.0 Yes 5.6 6.5

Incurred loss/claim ratio (%) < 90.0 No 100.1 89.0

Growth assets > Solvency capital requirements (Rm) 323.3 Yes 1 379.6 1 193.0

Return on equity > Eskom’s weighted average cost

of capital (%) > 6.4 Yes 7.3 11.0

Eskom Finance Company SOC Limited GroupEskom established the Eskom Finance Company

(EFC) in 1990 primarily to give its employees

access to home-loan finance, while optimising

home-ownership costs for both Eskom and its

employees. The company is mandated to:

• Finance employees’ home loans at

competitive rates

• Educate its employees on responsible home

ownership and financing

• Administer interest rate and rental subsidies

on behalf of Eskom

• Assist Eskom in developing and implementing

its housing policy

• Provide ancillary products to satisfy Eskom

employee needs

Operating highlights• Improved operational efficiency resulting

in the cost-to-income ratio of 32.2%

• Successful implementation and rollout of

the collection’s module on the company’s

145

Phoenix banking system. This has improved

the collection of delinquent loans

Operating challenges• Averting early amortisation of the Nqaba

securitisation structure due to the recent

Fitch downgrading of Eskom’s credit rating

from AAA to AA+

• Controlling reputational and financial risks

in light of the liquidity challenges

Future focus areas• Ongoing investigation into the optimal

vehicle for home loan financing for Eskom

employees

• Closely monitor operations and maintain

high quality and integrity of the company

assets during this time of uncertainty

Shareholder compact with Eskom

Key performance areasTarget

2012/13

Target achievedYes/No

Actual2012/13

Actual 2011/12

Maximise shareholder value:

Optimise home ownership cost to Eskom and its

employees in the form of economic value added R181.6 million Yes R199.4 million R166.2 million

Achieve company operational efficiency:

Cost-to-income ratio 35.4% Yes 32.3% 38.1%

Asset growth: Net loan book growth1 17.1% No 15.5% 27.2%

Maintain good customer satisfaction:

Customer satisfaction rating 97.2% Yes 97.3% 97.2%

Maintain good macro customer relationship:

Macro customer rating 3.0% Yes 4.3% 4.3%

Socioeconomic contribution, support of black economic empowerment (BEE)

Work allocated to B-BBEE attorneys2 90.0% Yes 95.0% 91.7%

Controllable expenses to B-BBEE companies2 65.0% Yes 82.9% 78.0%

Employment equity

Racial equity, managerial and supervisory staff (%) 50.0% Yes 60.0% 47.8%

Enable Eskom employees to own a home:

% Eskom employees home loans financed3 42.1% No 37.7% 37.9%

1. Limits to funding resulted in reduced product offerings, which had a negative impact on loan growth.

2. EFC endeavours to maximise the use of B-BBEE suppliers.

3. Limited product offering and marketing negatively impacted mortgage loan penetration in Eskom.

Eskom Development Foundation NPCEskom Development Foundation NPC is a

not-for-profit company that was incorporated

in December 1998. The Foundation, which

is solely funded by Eskom, is responsible for

Eskom’s corporate social investment initiatives.

The Foundation focuses on initiatives to develop

small and medium enterprises, education,

health, food security, communities, energy

and the environment. In the past year funding

was increased to ensure the sustainability

and continuity of the projects. Spending was

also increased on mobile paediatric units

for communities and further education and

training institutions.


146

Support to small and medium businesses is

provided through:

• An annual business opportunities and

Franchise Expo

• A business investment competition

• Incubator support

• The contractor academy programme

Education programmes include:

• Upgrading rural schools

• Early childhood development programmes

• Maths, science and computer-lab support

programmes

• A tertiary education support programme

• A further education and training support

programme

• An energy and sustainability programme

Health support programmes include:

• Upgrading existing infrastructure

• Providing medical equipment

• Providing mobile primary health-care

facilities to rural communities

Community development and welfare

programmes include:

• Funding specific needs related to training,

equipment or materials for hospices, old-age

homes, orphanages, the disabled, disaster

relief and so on

• Funding localised community needs through

philanthropic and strategic funds

• Supporting the employee volunteer initiative

• An annual “joy and jewels” charity fundraiser

The Foundation supports food security

by developing sustainable livelihoods in

rural communities through funding skills

development, agricultural equipment and

materials for agricultural projects.

Energy and environmental management

programmes include the Eskom energy and

sustainability programme, undertaken in

schools across South Africa in partnership

with the Wildlife and Environment Society

of South Africa.

Operating highlightsIn 2012/13, the Foundation approved funding

for initiatives to the value of R194.3RA million.

• Held the 14th annual business opportunities

and franchise expo in September 2012.

The expo provides a platform for small

and medium enterprises to showcase

their businesses and network with peers,

investors, suppliers and customers

• Ran the fifth annual business investment

competition where the Foundation identifies,

showcases and rewards small and medium

enterprises that are successful and show

potential for growth. Winning enterprises in

the agriculture, services and manufacturing

sectors receive a cash investment into their

business, energy efficient products and exhibit

at the Expo. The 2012 winner in the Trading

sector category was Archworxs. The winner

in the Agricultural sector was Tlamelo Fresh

Produce. The winner in the Manufacturing

sector was Elegant Line Chemicals. This also

has a schools category, Simamaranta, to

encourage schools that excel in practical

entrepreneurship education. The 2012 winner

was Sakhelwe High School in KwaZulu-Natal

• Obtained approval to conduct a technical

investigation into upgrading rural schools,

including additional classrooms, administration

blocks and ablution facilities

• Funding for equipment for engineering

workshops at 10 further education and

training colleges across the country has also

been approved

• Funding for paediatric mobile clinics was

approved and will deliver eye care, dental

hygiene and general health check-up services

to children in the rural schools surrounding

Kusile power station and Majuba rail area

as from 2013


147

• Approved funding towards the Soshanguve

manufacturing technology demonstration

centre in Soweto, Johannesburg and

Atlantis, Western Cape, which will focus on

manufacturing LED products

• Approved funding for the Eskom Contractor

Academy programme that aims to empower

and develop contractors and suppliers, as

well as equipping them with sustainable

business and technical competencies to

compete in the industry

• Approved funding for the construction of a

community centre in Wisani, Bushbridge

• Approved funding to assist with disaster relief

efforts in Port Alfred, Umlazi W-section,

Dassenhoek, Ntuzuma, Mnambithi, Ethekwini,

Amaoti and Kwanyuswa, Maphephetheni and

KwaMkhizwana areas

• Adopted the annual Eskom Expo for Young

Scientists and approved funding for 2012/13

and 2013/14

Shareholder compactIn line with the Foundation’s small and medium

enterprises strategy, a shareholder compact

was signed with Eskom. The compact includes

performance targets against which the

Foundation will be measured at the end of each

financial year. The shareholder compact has been

executed with Eskom, the Shareholder, in line

with the authority granted to Eskom, in its own

shareholder compact executed with the minister

of the Department of Public Enterprises.

Key performance areaKey performance indicator Measure

Target (2012/13)

Target met (Yes/No)

Actual(2012/13)

Actual(2011/12)

Ensuring financial

sustainability

% of CSI budget

committed on

projects

(%), annual

financial

statements 90% Yes 97% 97%

Reduced operating

expenditure against

budget

(%), annual

financial

statements 5% Yes 17% 8%

Contribute to job

creation, poverty

alleviation, education

and skills development

Number of

beneficiaries Plan 600 000 Yes 652 347RA 531 762

Number of small and

medium enterprises

assisted Plan 300 Yes 572 255

Number of Further

Education and Training

colleges assisted Plan 10 Yes 10 4

Number of rural

development projects

completed Plan 6 Yes 6 5

Focus on corporate

social investment in

strategic sites

Number of projects

approved in strategic

sites Plan 15 Yes 30 14

Enhancing Eskom’s

reputation

Citizenship dimension

of South African

Global RepTrack Pulse

score Survey 45.0 Yes 46.7 n/a

1. Excluding CSI spend.


148

• Percentage of CSI budget committed on projects:

The target was exceeded as a result of more

projects with both higher value and impact

being committed to in line with the new

approved CSI strategy

• Reduction of operating expenditure against

budget:

This target was exceeded due to a specific

focus to achieve a reduction on operational

costs (excluding CSI)

• Contribute to job creation, poverty alleviation,

education and skills development, number of

beneficiaries:

The target was exceeded due to an increased

number of high impact projects in the health

care and education focus areas.


education and skills development, number

of SMEs assisted:

The target was exceeded due to the increased

number of SMEs assisted through the

business incubator and contractor academy

programs funded in this financial year


education and skills development, number of

projects approved in strategic sites:

The target was exceeded due to an increased

number of high impact projects in geographic

areas that are deemed of strategic nature

such as Eskom new build sites

• Restoring confidence in the Eskom Brand –

Positioning of Eskom, perception of Eskom as a

responsible citizen:

The perception of Eskom as a good

corporate citizen has improved as per the

RepTrack study

PerformanceDuring the year, the Foundation approved

funding for 343 projects to the value of

R194.3RA million with 652 347RA beneficiaries

(2011/12: 264 projects for R87.9RA million and

531 762RA beneficiaries). Of the committed

R194.3RA million, R126.5RA million was spent

in the financial year.


The Eskom Contractor Academy provides technical and business training to suppliers

149

Eskom Development Foundation investments

Eskom Pension and Provident Fund1

Eskom intends to convert the current Eskom

Pension and Provident Fund from a defined

benefit fund to a defined contribution fund.

The Board of Trustees approved the

implementation of the project on 25 May 2012

and their decision was supported by Exco on

27 July 2012 and the Eskom Investment and

Finance committee on 7 August 2012.

The market value of the assets of the Eskom

Pension and Provident Fund at 31 March 2013

was R90.6 billion (2012: R75.5 billion) and

the calculated liabilities were R82.5 billion

(2012: R63.5 billion), resulting in a surplus of

R8.1 billion (2012: R12.0 billion).

Programme

2012/13 2011/12 2010/11

No of projects

Approved Rm

Benefi-ciaries

No of projects

Approved Rm

Benefi-ciaries

No of projects

Approved R’m

Benefi-ciaries

Contractor academy1 9 19.1 225 – – – – – –

Business incubators 7 29.1 3 188 5 3.4 229 – – –

Enterprise

development– – – 3 1.1 26 4 2.0 1 241

Business investment

competition1 6.0 26 1 6.0 195 1 4.2 190

Business opportunities

and franchise expo1 6.0 36 1 5.6 56 1 4.1 51

Energy and

sustainability

programme

1 4.9 227 154 1 4.6 125 894 1 3.7 154 141

Rural infrastructure

development6 11.3 4 507 8 17.2 12 271 4 6.8 831

Health 2 16.8 28 080 – – – – – –

Education2 14 38.7 15 024 4 18.5 1 935 13 16.8 4 486

Further education and

training colleges10 17.2 6 986 4 6.2 2 918 5 5.0 4 228

Food security 2 0.3 – 4 4.7 480

Philanthropy and

welfare290 44.9 367 121 233 20.6 387 758 225 19.7 138 815

Total 343 194.3RA 652 347RA 264 87.9RA 531 762RA 254 62.3RA 303 983RA

1 Contractor Academies were executed by the Eskom Foundation but were funded by Eskom Distribution Group in the previous financial year.

2 Education projects managed by Eskom Human Resources division included.

1 Although not a subsidiary, a summary of the Eskom Pension and Provident

Fund is included.

Appendices 8


152

Appendices

AwardsNkonki SOC Integrated Reporting awardsIn June 2012, Eskom emerged as the overall

winner of the Nkonki SOC Integrated Report

Awards 2012. Eskom also scooped several other

awards in the categories of ethical leadership

and corporate citizenship as well as compliance

with laws, codes, rules and standards.

Investment Analysts Society of Southern Africa awardAt the 27th annual Investment Analyst’s Society

awards held in June 2012, Eskom emerged as

the winner in the category: basic materials

and resources. Eskom was the first non-listed

company to receive such an award.

Ernst & Young Excellence in Integrated Reporting awardsEskom was adjudged an “Excellent Integrated

Reporter” at the Ernst & Young inaugural

Excellence in Integrated Reporting Awards in

September 2012.

Institute of Risk Management in South AfricaAt the Annual Awards Ceremony of the

Institute of Risk Management in South Africa

(IRMSA) in October 2012, Eskom received

an award (runner-up in the public sector

category) for the concept and implementation

of Provincial Resilience Teams.

Loerie awardEskom received a Craft Cer tif icate in

Cinematography at the prestigious Loerie

Award Show in September 2012.

SAP implementation awardEskom, as part of the Back-to-Basics (B2B)

Programme, implemented a major SAP Solution

in October 2011. At the end of October 2012,

at the SAP Africa user conference, known as

Saphila, Eskom won the silver prize in the large

implementation category.

Mail & Guardian Greening the Future awardsEskom Ingula project received the runner-up

award for conservation in the Mail & Guardian

annual “Greening the Future” awards for its

work in biodiversity conservation at the Ingula

pumped storage scheme. The Greening the

Future awards are held every year to showcase

national projects that make a difference to the

broader environmental field.

A Malachite Kingfisher at the Bedford dam in the Ingula pumped-storage scheme conservancy

153

GlossaryBase-load plant Largely coal-fired and nuclear power stations, designed to operate continuously

Biomass co-firingCo-firing is defined as the burning of more than one fuel simultaneously within a furnace.

Biomass co-firing refers to the addition of a carbon based biological material which is derived

from living and/or recently living organisms as a supplementary fuel.

Combined cycle Technology for producing electricity from otherwise lost waste heat as it exits from one or

more gas (combustion) turbines

Demand-side management (DSM)

Planning, implementing and monitoring activities to encourage consumers to use electricity

more efficiently, including both the timing and level of demand

Free basic electricity Amount of electricity deemed sufficient to provide basic electricity services to a poor

household (50kWh/month)

Free funds from operations Cash generated from operations adjusted for working capital (excluding provisions) and net

interest paid/received and non-current assets held for risk management

Free funds from operations as a percentage of gross debt

Free funds from operations/gross debt multiplied by 100

Gigawatt One thousand megawatts

Gross debt Debt securities issued, borrowings, finance lease liabilities and financial trading liabilities plus

the after tax effect of: retirement benefit obligations and provisions for power station-related

environmental restoration and mine-related closures

Gross debt/EBITDA Gross debt/earnings before interest, tax, depreciation and amortisation

Independent non-executive director

• Not a full-time salaried employee of the company or its subsidiary

• Not a shareholder representative

• Has not been employed by the company and is not a member of the immediate family of

an individual who is, or has been in any of the past three financial years, employed by the

company in any executive capacity

• Not a professional advisor to the company

• Not a significant supplier or customer

International financial reporting standards

Global accounting standards issued by the International Accounting Standards Board that

require transparent and comparable information

Independent power producer (IPP)

Any entity other than Eskom that owns or operates, in whole or in part, one or more

independent power-production facilities

Interest cover Operating profit before net finance cost/(net finance cost but before unwinding of discount

on provisions, change in discount rate and borrowing cost capitalised)

ISO 14001 Environmental management systems certification by an accredited external organisation.

It includes an assessment of the core and support business processes. Certification is based on

prevention of pollution, compliance with legislation and continual improvement of the system

ISO 9001 Quality management systems certification by an accredited external organisation. Certification

is based on principles around customer centricity, leadership, employee involvement, process

approaches, systematic management approaches, factual approach to decision making,

mutually beneficial supplier relations, and continuous improvement. This standard forms the

foundation for other standards such as ISO 14001, OHSAS 18001, etc

Kg/MWhSO kilograms per megawatt hour sent out

Kilowatt-hour (kWh) Basic unit of electric energy equal to one kilowatt of power supplied to or taken from an

electric circuit steadily for one hour (one kilowatt-hour is 1 000 watt hours)

Load Amount of electric power delivered or required at any specific point on a system

Load-shedding Scheduled and controlled power cuts that rotate available capacity between all customers

when demand is greater than supply to avoid blackouts


154

Lost-time incident rate Proportional representation of the occurrence of lost-time injuries over 12 months per

200 000 working hours

Megawatt One million watts

Megawatt-hour (MWh) One thousand kilowatt-hours or one million watt-hours

OHSAS 18001 Occupational health and safety certification by an accredited external organisation.

This certification is designed specifically to integrate with ISO 9001 and 14001 and assesses

policy based on hazard identification, risk assessment, risk control, legal compliance and

commitment to performance improvement

Outage Period in which a generating unit, transmission line, or other facility is out of service

Off-peak Period of relatively low system demand

Peak demand Maximum power used in a given period, traditionally between 07:00 and 10:00 and 18:00

and 21:00

Power pool Two or more interconnected electricity supply systems that agree to coordinate operations

and seek improved reliability and efficiencies

Primary energy Energy in natural resources (eg coal, liquid fuels, sunlight, wind, uranium)

Pumped-storage scheme A lower and an upper reservoir with a power station/pumping plant between the two.

During off-peak periods the reversible pump/turbines use electricity to pump water from the

lower to the upper reservoir. During peak demand, water runs back into the lower reservoir

through the turbines, generating electricity

System average interruption duration index (SAIDI)

This index is used as a reliability indicator and is defined as the average outage duration for

each customer served and is commonly measured in units of time over the course of a year

System average interruption frequency index (SAIFI)

This index is used as a reliability indicator and is defined as the average number of interruptions

that a customer experiences, commonly measured over the course of a year

System minutes Global benchmark for measuring the severity of interruptions to customers. One system

minute is equivalent to the loss of the entire system for one minute at annual peak. A major

incident is an interruption with a severity ≥1 system minute

Technical losses Naturally occurring losses that depend on the power systems used

Torrefied fuel A fuel source which has been pre-treated (by means of low temperature pyrolysis) to reduce

the moisture content and enhance the fuel quality for combustion purposes.

Unplanned automatic grid separations

Measure of the reliability of the service provided to the electrical grid that logs the number

of interruptions per operating period

Unit capability factor (UCF) Measure of power-station availability indicating how well plant is operated and maintained

Unplanned capability loss factor (UCLF)

All occasions when a power station unit has to be taken out of service. Energy losses due to

outages are considered unplanned if they are not scheduled at least four weeks in advance

Watt The watt is the International System of Units’ (SI) standard unit of power. It specifies the rate

at which electrical energy is dissipated – energy per unit time

Appendices continued

155

AbbreviationsB-BBEE Broad-based black economic empowerment

EBITDA Earnings before interest, taxes, depreciation and amortisation

ESCO Energy Services Company

FFO Free funds from operations

GWh Gigawatt-hour (1 000MWh)

IDM Integrated demand management

IRP2010 Integrated Resource Plan 2010

IPP Independent power producer

ISMO Independent System Market Operator

ISO International Organisation for Standardisation

Kg Kilogram

Kt Kiloton (1 000 tons)

kWh Kilowatt-hour

kWhSO Kilowatt-hour sent out

L Litre

LA Limited assurance

LTIR Lost-time incident rate

MW Megawatt

MWh Megawatt-hour (1 000kWh)

ML Megalitre (1 000 000 litres)

mSv MilliSievert

Mt Megaton

MTPPP Medium-term Power Purchase Programme

MVA Mega volt ampere

MYPD Multi-year price determination

NERSA National Energy Regulator of South Africa

NGO Non-governmental organisation

OCLF Other capability loss factor

OHS Occupational Health and Safety

OHSAS Occupational Health and Safety Assessment Series

PCLF Planned capability loss factor (see glossary)

PFMA Public Finance Management Act (1999)


156

R South African rand

RA Reasonable assurance

SAIDI System average interruption duration index (see glossary)

SAIFI System average interruption frequency index (see glossary)

SOC State-owned company

UCF Unit capability factor (see glossary)

UCLF Unplanned capability loss factor (see glossary)

US United States

WEPS Wholesale electricity pricing scheme


157

Sustainability responsibilities, approval and assuranceSustainability key indicators report performance

on issues material to Eskom’s stakeholders.

These key indicators have been prepared

in accordance with the GRI G3 guidelines,

supported by Eskom’s internal reporting

guidelines. View Eskom’s declaration on its GRI

B+ Application Level.

The King Code advocates that sustainability

reporting and disclosure should be

independently assured. KPMG Services (Pty)

Limited provided reasonable assurance on

selected sustainability key indicators marked

with an “RA” in this report and limited

assurance on Eskom’s self-declaration of a

GRI B+ application level. KPMG’s assurance

report is presented below.

Independent assurance report on selected sustainability informationTo the Directors of Eskom Holdings SOC LimitedWe have undertaken an assurance engagement

on selected sustainability information as

described below and presented in the online

2013 Supplementary and Divisional Report

(the Report) of Eskom Holdings SOC Limited

(Eskom) for the year ended 31 March 2013.

Independence and expertiseWe have complied with the International

Federation of Accountants (IFAC) Code of

Ethics for Professional Accountants, which

includes comprehensive independence and

other requirements founded on fundamental

principles of integrity, objectivity, professional

competence and due care, confidentiality

and professional behaviour. Our engagement

was conducted by a multi-disciplinary team

of health, safety, social, environmental and

assurance specialists with extensive experience

in sustainability reporting.

Subject matter and related assuranceWe are required to provide assurance as follows:

1. Reasonable assurance on the following

key performance indicators prepared in

accordance with the Global Reporting

Initiative (GRI) G3 Guidelines, marked with

a ‘RA’ on the relevant pages of the Report:

• Technical performance parameters –

unplanned capability loss factor, unit

capability factor, energy availability factor,

system minutes lost, total system minutes

lost (<1 minute), major incidents, system

average interruption frequency index

(SAIFI), system average interruption

duration index (SAIDI), management of

the national supply/demand constraints,

OCGT load factor trend, number of low

frequency events (<49.5 Hz), and energy

losses (transmission and distribution)

• Environmental performance parameters –

coal purchased, stock days, coal road to

rail migration, specific water consumption,

liquid fuel usage (diesel and kerosene),

demand-side management (megawatts

and gigawatt-hours), internal energy

efficiency (megawatts and gigawatt-

hours), particulate emissions (total

tonnages) relative particulate emissions,

carbon dioxide emissions, sulphur

dioxide emissions, nitrogen oxide

emissions, low level radioactive waste

generated and disposed, intermediate

level radioactive waste generated and

disposed, ash (produced and recycled)

and environmental legal contraventions

• Social performance parameters – total

learner pipeline, engineers, artisans,

technicians, youth programme, disabilities

– company and group (number and

percentage), racial equity in senior

management – company (percentage of

black employees), gender equity in senior

management – company (percentage

female employees), corporate social


158

investment (committed rand value, spend

rand value and number of beneficiaries),

total employee and contractor work related

fatalities, employee work related fatalities,

contractor work related fatalities, employee

lost time incident rate (LTIR), broad-based

black economic empowerment (B-BBEE)

expenditure – company and group

(attributable spend and percentage), black

women owned (BWO) expenditure –

company and group (attributable spend and

percentage)

• Economic parameters – generation capacity

installed and commissioned, transmission

lines installed, transmission capacity installed

and commissioned (MVA), percentage of

local content in new-build contracts, cost of

electricity, debt: equity ratio (company) and

interest cover (company)

2. Limited assurance on Eskom’s self-declaration

of the GRI B+ Application Level (page 2).

Directors responsibilitiesThe Directors are responsible for the

selection, preparation and presentation of the

sustainability information, the identification of

stakeholders and stakeholder requirements

and material issues, for commitments with

respect to sustainability performance, and

establishing and maintaining appropriate

performance management and internal control

systems from which the reported information

is derived, and for such internal control as the

Directors determine is necessary to enable

the preparation of the Report that is free from

material misstatement, whether due to fraud

or error.

The Directors are also responsible for the

selection and application of the criteria

detailed below:

• The GRI G3 Guidelines applied to the

selected key performance indicators; and

• The GRI G3 Guidelines on Eskom’s self–

declaration of the GRI B+ Application Level

Our responsibilityOur responsibility is to express assurance

conclusions on the selected sustainability

information based on our work performed. We

have conducted our engagement in accordance

with the International Standard on Assurance

Engagements (ISAE 3000), Assurance

Engagements Other than the Audits or Reviews

of Historical Financial Information, issued by the

International Auditing and Assurance Standards

Board. That Standard requires that we plan and

perform our engagement to obtain assurance

about whether the selected sustainability

information is free from material misstatement.

Our procedures and the extent of our

procedures depend on our judgement, including

the risks of material misstatement of the

selected sustainability information. In making

our risk assessments, we considered internal

control relevant to Eskom’s preparation of the

Report. In a limited assurance engagement,

the evidence gathering procedures are less

than where reasonable assurance is expressed.

We believe the evidence we have obtained is

sufficient and appropriate to provide a basis for

our conclusions.

Summary of work performedOur work included the following evidence-

gathering procedures:

• Interviewing management and senior

executives to evaluate the application of

the GRI G3 Guidelines and to obtain an

understanding of the control environment

relative to the reported sustainability

information

• Inspecting documentation to corroborate

the statements of management and senior

executives in our interviews

• Testing the processes and systems to generate,

collate, aggregate, monitor and report the

selected sustainability information

• Inspecting supporting documentation and

performing analytical procedures


159

• Performing site work at the nuclear power

station (Koeberg), coal power stations (Arnot,

Tutuka, Lethabo, Kriel, Matla, Hendrina,

Duvha, Camden and Majuba), Transmission

divisions (North East and North West),

Distribution divisions (North West and

Mpumalanga), Roshcon and Rotek

• Conducting an Application Level check on

the Report to evaluate whether all disclosure

requirements of the GRI B+ Application Level

have been adhered to

• Evaluating whether the information presented

in the report is consistent with our findings,

overall knowledge and experience of

sustainability management and performance

at Eskom

Conclusions1. On the selected key performance indicators on

which we are required to express reasonable

assurance

In our opinion, the selected key performance

indicators for the year ended 31 March 2013

are fairly stated, in all material respects, in

accordance with the GRI G3 Guidelines.

2. On Eskom’s self-declaration on the GRI G3 B+

Application Level on which we are required to

express limited assurance

Based on our work performed, nothing

has come to our attention that causes us

to believe that Eskom’s self-declaration of a

B+ Application Level is not fairly stated, in

all material respects, in accordance with the

GRI G3 Guidelines.

ComparabilityThe report includes the provision of reasonable

assurance on OCGT load factor trend, total

system minutes lost, number of low frequency

events (< 49.5Hz), coal road-to-rail migration,

youth programme, corporate social investment

(number of beneficiaries) and broad-based

black economic empowerment (B-BBEE)

expenditure – group (attributable spend and

percentage) and black women owned – group

(attributable spend and percentage). We were

previously not required to provide assurance

on these key performance indicators.

Other matterThe maintenance and integrity of the Eskom’s

website is the responsibility of Eskom’s

management. Our procedures did not involve

consideration of these matters and, accordingly,

we accept no responsibility for any changes to

either the information in the Report or our

independent assurance report that may have

occurred since the initial date of presentation

on the Eskom website.

Limitation of liabilityOur work has been undertaken to enable us

to express the conclusions on the selected

sustainability information to the Directors of

Eskom in accordance with the terms of our

engagement, and for no other purpose. We do

not accept or assume liability to any party other

than Eskom, for our work, for this report, or for

the conclusions we have reached.

KPMG Services (Pty) Limited

Per PD Naidoo A JafferDirector Director

Johannesburg Johannesburg

30 May 2013


160


Statistical tablesTable 1. Ten-year statistical overview

2012/13 2011/12 2010/11 2009/10

Sales

Total sold, GWh1,2 216 561 224 785 224 446 218 591

Growth/(reduction) in GWh sales, % (3.7) 0.2 2.7 1.7

Electricity output

Power sent out by Eskom stations, GWh (net) 232 749 237 289 237 430 232 812

Coal-fired stations, GWh (net) 214 807 218 210 220 219 215 940

Hydroelectric stations, GWh (net) 1 077 1 904 1 960 1 274

Pumped storage stations, GWh (net) 3 006 2 962 2 953 2 742

Gas turbine stations, GWh (net) 1 904 709 197 49

Wind energy, GWh (net) 1 2 2 1

Nuclear power station, GWh (net) 11 954 13 502 12 099 12 806

Purchased from IPPs GWh 3 516 4 107 1 833 –

Wheeling, GWh4 2 948 3 099 3 423 3 175

Total imported for Eskom system, GWh4 7 698 9 939 10 190 10 579

Total electricity for Eskom system (Eskom stations and

purchased), GWh5 246 911 254 434 252 876 246 566

Total consumed by Eskom, GWh6 4 037 3 982 3 962 3 695

Total available for distribution, GWh2 242 874 250 452 248 914 242 871

Plant performance indicators

Total power station installed capacity, MW7 44 206 44 115 44 145 44 175

Total power station nominal capacity, MW7 41 919 41 647 41 194 40 870

Peak demand on integrated Eskom system, MW 35 525 36 212 36 664 35 850

Peak demand on integrated Eskom system, including load

reductions and non-Eskom generation, MW

36 345 37 065 36 970 35 912

Reserve margin (including imports, load reductions and

non-Eskom generation), % 20.0 16.9 14.9 16.4

Average energy availability – EAF (UCF), %8 77.7RA (78.8)RA 82.0RA (83.0)RA 84.6RA (85.9)RA 85.2(85.9)

Generation load factor, %10 63.6 65.1 66.4 66.2

Integrated Eskom system load factor (EUF), % 81.9 79.4 78.5 77.7

Environmental indicators

Specific water consumption, L/kWh sent out11 1.42RA 1.34RA 1.35RA 1.34RA

Environmental legal contraventions 47RA 50RA 63RA 55RA

Significant legal contraventions reported, number12 1 5 4 0

Customer satisfaction (Enhanced PreCare/MaxiCare),

ratio13

99.63 96.17 95.99 98.18

Net raw water consumption, ML 334 275 319 772 327 252 316 202

Liquid fuels (diesel and kerosene), ML 609.7RA 225.5RA 63.6RA 16.1RA

Coal burnt, Mt 123.0 125.2 124.7 122.7

Average calorific value, MJ/kg 19.76 19.61 19.45 19.22

Average ash content, % 28.69 28.88 29.03 29.56

Average sulphur content, % 0.88 0.79 0.78 0.81

161

2008/09 2007/08 2006/07 2005/062004/05

(15 months)2004

(12 months)2003

(12 months)

214 850 224 366 218 120 207 921 256 453 206 799 196 980

(4.2) 2.9 4.9 (18.9)3 30.5 5.0 4.8

228 944 239 109 232 445 221 988 273 404 220 152 210 218

211 941 222 908 215 211 206 606 251 914 202 171 194 046

1 082 751 2 443 1 141 903 720 777

2 772 2 979 2 947 2 867 3 675 2 981 2 732

143 1 153 62 78 – – –

2 1 2 3 – – –

13 004 11 317 11 780 11 293 16 912 14 280 12 663

– – – – – – –

– – – – – – –

12 189 11 510 11 483 10 310 12 197 9 818 8 194

241 133 250 619 243 928 232 298 285 601 229 970 218 412

3 816 4 136 3 937 3 814 5 043 4 040 3 664

237 317 246 483 239 991 228 484 280 558 225 930 214 748

44 193 43 037 42 618 42 011 42 011 42 011 42 011

40 506 38 747 37 764 36 398 36 208 36 208 36 208

35 959 36 513 34 807 33 461 34 195 34 195 31 928

36 227 37 158 35 441 33 461 34 195 34 195 31 928

10.6 5.6 7.8 12.7 – – –

85.3(86.1) 84.8(86.2) 87.5(88.6) 87.4(88.7) 89.5(89.9)9 89.5(90.0) 87.5(88.7)

67.0 72.3 72.4 69.7 69.0 69.2 66.3

78.6 85.2 82.7 79.8 78.0 77.4 76.8

1.35RA 1.32RA 1.35LA 1.32 1.279 1.26 1.29

114RA 46RA 50RA 55 57 44 36

12 6 0 1 39 2 2

99.84 97.21 100.80 101.06 93.10 8.31 8.47

323 190 322 666 313 064 291 516 347 135 277 557 271 940

28.9LA 345.9 11.3 – – – –

121.2 125.3 119.1 112.1 136.4 109.6 104.4

19.10 18.51 19.06 19.58 19.36 19.42 19.41

29.70 29.09 29.70 29.10 29.60 29.60 28.90

0.83 0.87 0.86 0.88 0.87 0.87 0.92


162

2012/13 2011/12 2010/11 2009/10

Overall thermal efficiency, % 32.0 31.4 32.6 33.1

Line losses, % 9.1 8.7 8.3 8.5

Nitrous oxide (N2O), t14 2 980 2 967 2 906 2 825

Carbon dioxide (CO2), Mt14,21 227.9RA 231.9RA 230.3RA 224.7RA

Sulphur dioxide (SO2), kt14 1 843RA 1 849RA 1 810RA 1 856RA

Nitrogen oxide (NOx) as NO

2, kt15 965RA 977RA 977RA 959RA

Relative particulate emissions, kg/MWh sent out14 0.35RA 0.31RA 0.33RA 0.39RA

Particulate emissions, kt 80.68RA 72.42RA 75.84RA 88.27RA

Ash produced, Mt 35.30RA 36.21RA 36.22RA 36.01RA

Ash sold, Mt 2.4RA 2.3RA 2.0RA 2.0RA

Asbestos disposed, tons 374.6 448.1RA 611.5RA 321.4RA

PCB thermally destructed, tons 1 408.0 14.3RA 422.9RA 19.1RA

Public individual radiation exposure due to effluents, mSv16 0.0019 0.0024 0.0043 0.0040

Low-level radioactive waste generated, cubic metres17 183.1RA 184.7RA 165.3RA 137.8

Intermediate-level radioactive waste generated,

cubic metres17

34.7RA 25.4RA 39.4RA 47.1

Low-level radioactive waste disposed of, cubic metres17 54.0RA 53.8RA 81.0RA 216.0RA

Intermediate-level radioactive waste disposed of,

cubic metres17,18

0.0RA 128.0RA 0.0RA 266.0RA

Low-level nuclear waste - fuel racks, cubic metres19

(cumulative figure)

0 (697) 0 (697) 0 (697) 0 (697)

Used nuclear fuel, number of elements discharged20

(cumulative figure)

56 (2 013) 60 (1 957) 112 (1897) 56 (1 785)

1. Sales prior to 2005 include internal sales.

2. Difference between electricity available for distribution and electricity sold is due to transmission and other losses.

3. Actual sales growth was 0.8% when compared to the 12 months 1 April 2004 to 31 March 2005.

4. Prior to 2009/10, wheeling was combined with the total imported for the Eskom system.

5. Includes Eskom electricity produced and delivered to neighbouring countries.

6. Used by Eskom for pumped storage facilities and synchronous condenser mode of operation.

7. Wording changed from nominal to installed capacity in line with VGB international and Eskom’s plant reporting standard STD 36_48.

8. Capacity hours available, times 100, divided by total capacity hours in a year.

9. Represents the 12-month moving average for 1 April 2004 to 31 March 2005.

10. kWh produced, times 100, divided by average net maximum capacity times hours in a year.

11. Volume of water consumed per unit of generated power from coal fired power stations sent out, excluding Komati power station.

12. 2002 reported in terms of the revised definition of the operational health dashboard. From 2008, repeat legal contraventions are included in the criteria.

13. Reflects the environmental element of Enhanced MaxiCare. A new calculation implemented this year includes weightings per the size of the different

customer segments. The figures for 2009/10, 2010/11, and 2011/12 have been restated. The Enhanced MaxiCare replaced the PreCare/MaxiCare from

January 2005.

14. Calculated figures based on coal characteristics and the power station design parameters. Sulphur-dioxide and carbon-dioxide emissions are based on coal

analysis and using coal burnt tonnages. Figures include coal-fired and gas turbine power stations, as well as oil consumed during power station start-ups and,

for carbon-dioxide emissions, the underground coal gasification pilot.

15. NOx reported as NO

2 is calculated using average station specific emission factors, which have been measured intermittently between 1982 and 2006, and

tonnages of coal burnt.

16. The limit set by the National Nuclear Regulator is ≤ 0.25mSv.

17. These are the net volumes produced in a 12-month moving window.

18. The number of drums disposed at Vaalputs in 2011/12 was restated.

19. Waste as a result of re-racking of spent fuel pools at Koeberg power station.

20. The gross mass of a nuclear fuel element is approximately 670kg, with UO2 mass typically between 462 and 464kg.

21. See www.eskom.co.za/IR2012/035.html for the climate change fact sheet, giving details of the relative CO2 emission factor.

RA Reasonable Assurance provided by the independent assurance provider (refer page 157).

LA Limited Assurance provided by the independent assurance provider in previous years.


163

2008/09 2007/08 2006/07 2005/062004/05

(15 months)2004

(12 months)2003

(12 months)

33.4 33.4 33.9 33.8 34.0 34.0 34.2

7.9 8.0 8.4 8.2 8.29 7.8 8.3

2 801 2 872 2 730 3 134 3 552 2 924 2 580

221.7RA 223.6LA 208.9 203.7 247.0 197.7 190.1

1 874RA 1 950LA 1 876 1 763 2 236 1 779 1 728

957LA 984 930 877 994 797 760

0.27RA 0.21LA 0.20 0.21 0.269 0.27 0.28

55.64RA 50.84 46.08 45.76 72.83 59.17 58.65

36.66LA 36.04 34.16 33.40 40.80 33.10 29.80

2.1 2.4 2.2 1.8 2.0 1.6 1.2

3 590.8LA 321.0 6 060.0 – – – –

505.6LA 17.0 10.0 – – – –

0.0045 0.0047 0.0034 0.0049 0.00799 0.0087 0.0123

140.8 180.3 94.5 90.2 80.3 81.4 100.5

23.9 16.5 49.8 52.7 47.2 36.8 30.1

189.0 270.0 135.0 91.0 – – –

473.6 418.0 436.0 52.0 – – –

0 (697) 0 (697) 0 (697) 0 (697) 0 (697) 697 –

56 (1 729) 112 (1 673) 56 (1 561) 52 (1 505) 104 (1 453) 56 (1 405) 104 (1 349)


164

Table 2. Power station commercial capacities at 31 March 2013

Name of station Location

Number and installed

capacity of generator

setsMW

Total capacity1

MW

Total nominal

capacity1

Generators in reserve storage Other

generation: installed capacity

MW2NumberCapacity

MW

Coal-fired stations (13) 37 776 35 650 1 100 –

Arnot3,9 Middelburg,

Mpumalanga

1x370; 1x390;

2x396;

2x400;

2 352 2 232 – – –

Camden4,10 Ermelo 3x200; 1x196;

2x195; 1x190;

1x185

1 561 1 481 – – –

Duvha3 Witbank 6 x 600 3 600 3 450 – – –

Grootvlei4 Balfour 4x200; 1x190;

1x160

1 150 1 090 – – –

Hendrina3,10 Mpumalanga 8x200; 1x195;

1x170

1 965 1 865 – – –

Kendal3,5 Witbank 6 x 686 4 116 3 840 – – –

Komati4,10 Middelburg,

Mpumalanga

5x100; 3x125;

1x95

970 791 1 100 –

Kriel3 Bethal 6x500 3 000 2 850 – – –

Lethabo3 Viljoensdrift 6x618 3 708 3 558 – – –

Majuba3,5 Volksrust 3x657; 3x713 4 110 3 843 – – –

Matimba3,5 Lephalale 6x665 3 990 3 690 – – –

Matla3 Bethal 6x600 3 600 3 450 – – –

Tutuka3 Standerton 6x609 3 654 3 510 – – –

Gas/liquid fuel turbine stations6(4)

2 426 2 409 – – –

Acacia Cape Town 3x57 171 171 – – –

Ankerlig Atlantis 4x149.2;

5x 48.3

1 338 1 327 – – –

Gourikwa Mossel Bay 5x149.2 746 740 – – –

Port Rex East London 3x57 171 171 – – –

Hydroelectric stations (6) 661 600 – – 61

Colley Wobbles2 Mbashe River 3x14 42 – – – 42

First Falls2 Umtata River 2x3 6 – – – 6

Gariep7 Norvalspont 4x90 360 360 – – –

Ncora2 Ncora River 2x0.4; 1x1.3 2 – – – 2

Second Falls2 Umtata River 2x5.5 11 – – – 11

Vanderkloof 7 Petrusville 2x120 240 240 – – –


165

Name of station Location

Number and installed

capacity of generator

setsMW

Total capacity1

MW

Total nominal

capacity1

Generators in reserve storage Other

generation: installed capacity

MW2NumberCapacity

MW

Pumped storage schemes8(2) 1 400 1 400 – –

Drakensberg Bergville 4 x 250 1 000 1 000 – – –

Palmiet Grabouw 2 x 200 400 400 – – –

Wind Energy (1)

Klipheuwel2 Klipheuwel 1x1.75;

1x0.66;

1x0.75

3 – – – 3

Nuclear power station (1)

Koeberg3,11 Cape Town 2x970 1 940 1 860 – – –

Total power station capacities (27) 44 206 41 919 1 100 64

1. Wording changed from nominal to installed capacity in line with VGB international and Eskom’s plant reporting standard STD 36_48. The difference between

installed and nominal capacity reflects auxiliary power consumption and reduced capacity caused by age of plant and/or low coal quality.

2. Operational but not included for capacity management purposes.

3. Base-load station.

4. Return to service station

5. Dry-cooled unit specifications are based on design back-pressure and ambient air temperature.

6. Stations used for peaking or emergency supplies.

7. Use restricted to peaking, emergencies and availability of water in Gariep and Vanderkloof dams.

8. Pumped storage facilities are net users of electricity. Water is pumped during off-peak periods so that electricity can be generated during peak periods.

9. At Arnot two units were fully uprated and four partially uprated in the Capacity Increase Project.

10. Due to technical constraints, some units at these stations have been de-rated.

11. At Koeberg, 30MW of additional output capacity was achieved on Unit 2 after plant enhancements were carried out.


166

Table 3. Environmental implications of using or saving electricity1

Factor 1 (total energy

sold)2

Factor 2 (total energy

generated)3 If electricity consumption is measured in:

kWh MWh GWh TWh

Coal use 0.57 0.54 kilogram ton thousand tons (kT) million tons

Water use4 1.54 1.46 litre kilolitre megalitre thousand megalitres

Ash produced 163 154 gram kilogram ton thousand tons (kT)

Particulate

emissions 0.37 0.35 gram kilogram ton thousand tons (kT)

CO2 emissions5 1.05 1.00 kilogram ton thousand tons (kT) million tons

SOx emissions5 8.51 8.06 gram kilogram ton thousand tons (kT)

NOx emissions6 4.46 4.22 gram kilogram ton thousand tons (kT)

Use of table: Multiply electricity consumption or saving by the relevant factor to determine the

environmental implication.

Example 1 (using factor 1): Example 3 (using factor 2):

Used 90 MWh of electricity Used 90 MWh of electricity

Water consumption: 90x1.54 = 138.6 Water consumption: 90x1.46 = 131.4

Therefore 138.6 kilolitres of water used Therefore 131.4 kilolitres of water used

Example 2 (using factor 1): Example 4 (using factor 2):

Used 90 MWh of electricity Used 90 MWh of electricity

CO2 emissions 90x1.05 = 94.5 CO

2 emissions 90x1.00 = 90.0

Therefore 94.5 tons emitted Therefore 90.0 tons emitted

1. Figures represent the 12-month period from 1 April 2012 to 31 March 2013.

2. Factor 1 figures are calculated based on total electricity sold by Eskom (based on total available to Eskom to distribute – including what Eskom purchases – less

technical electricity losses due to transmission and distribution of electricity across the country; less electricity theft; less our own internal use; and less wheeling).

That is for CO2: 227.9 Mt/216 561 GWh) = 1.05 tons per MWh.

3. Factor 2 figures are calculated based on total electricity generated by Eskom (coal, nuclear, pumped storage, wind, hydro and gas turbines), but excluding

electricity used for pumping water for the Pumped Storage schemes. That is for CO2: 227.9 Mt/(232 749 GWh-4037 GWh) = 1.00 tons per MWh

4. Volume of water used at all Eskom power stations

5. Calculated figures based on coal characteristics and the power station design parameters. Sulphur-dioxide and carbon-dioxide emissions are based on coal

analysis and using coal burnt tonnages. Figures include coal-fired and gas turbine power stations, as well as oil consumed during power station start-ups and,

for carbon-dioxide emissions, the underground coal gasification pilot.

6. NOx reported as NO

2 is calculated using average station specific emission factors, which have been measured intermittently between 1982 and 2006, and

tonnages of coal burnt.

7. Further information can also be obtained through the Eskom environmental helpline. Contact details are available on page 169.

8. For CDM related Eskom Grid Emission Factor information please go to the following link: http://www.eskom.co.za/c/article/236/cdm-calculations

or via the Eskom website>Our Company>Sustainable Development>CDM Calculations.


167

Table 4. Transmission and distribution equipment in service at 31 March 2013

2012/13 2011/12 2010/11

Power lines

Transmission power lines, km1 29 297 28 995 28 790

765 kV 1 667 1 153 1 153

533 kV DC (monopolar) 1 035 1 035 1 035

400 kV2 16 899 17 118 16 913

275 kV 7 360 7 361 7 476

220 kV 1 217 1 217 1 217

132 kV 1 119 1 111 996

Distribution power lines, km 67 488 66 9414 66 2474

132 kV and higher 44 595 44 326 43 765

88-33 kV 22 893 22 615 22 482

Reticulation power lines, km

22 kV and lower 269 535 267 0114 263 2634

Underground cables, km 6 960 6 6574 6 3264

132 kV and higher 58 49 49

33 – 88 kV 212 212 179

22 kV and lower 6 690 6 396 6 098

Total all power lines, km 373 280 369 604 364 626

Total transformer capacity, MVA 241 594 237 140 232 058

Transmission, MVA3 135 840 132 955 130 005

Distribution and reticulation, MVA 105 754 104 185 102 053

Total transformers, number 361 367 356 511 351 297

Transmission, number 412 408 405

Distribution and reticulation, number 360 955 356 103 350 892

1. Transmission power line lengths as per Geographic Information System (GIS) distances.

2. The Majuba Umfolozi No 1 (765kV Line), even though constructed at 765kV, is currently still being operated at 400kV and thus, for now, is counted under the

400kV total.

3. Base of definition: transformers rated ≥ 30 MVA and primary voltage ≥ 132 kV.

4. Distribution powerlines restated.


168

Table 5. Sale of electricity and revenue per category of customer

Customers

Category2012/13

Number2011/12

Number2010/11

Number

Local 5 013 435 4 852 712 4 653 740

Redistributors 795 786 784

Residential1 4 874 004 4 713 178 4 514 998

Commercial 50 399 50 270 49 090

Industrial 2 789 2 775 2 857

Mining 1 062 1 100 1 110

Agricultural 83 877 84 095 84 393

Traction 509 508 508

International 11 10 10

Utilities 7 7 7

End users across

the border 4 3 3

5 013 446 4 852 722 4 653 750

Sold

Category2012/13

GWh2011/12

GWh2010/11

GWh

Local 202 770 211 590 211 150

Redistributors 91 386 92 140 91 564

Residential1 10 390 10 522 10 539

Commercial 9 519 9 270 9 020

Industrial 51 675 58 632 59 611

Mining 31 611 32 617 32 630

Agricultural 5 193 5 139 4 919

Traction 2 996 3 270 2 867

International 13 791 13 195 13 296

Utilities 4 659 3 607 3 974

End users across

the border 9 132 9 588 9 322

216 561 224 785 224 446

Sales to countries in southern Africa, GWh

Sold

Category2012/13

GWh2011/12

GWh2010/11

GWh

13 791 13 195 13 296

Botswana 2 574 2 498 2 377

Mozambique 8 284 8 265 8 523

Namibia 1 822 1 507 1 559

Zimbabwe 3 7 –

Lesotho 255 184 247

Swaziland 598 596 564

Zambia 253 134 23

Short-term energy

market2

2 4 3

Revenue

Category2012/13

Rm2011/12

Rm2010/11

Rm

Local 114 307 103 863 82 119

Redistributors 49 891 44 251 34 408

Residential1 9 044 8 155 6 808

Commercial 6 972 5 925 4 563

Industrial 23 543 23 522 19 199

Mining 17 620 15 689 12 325

Agricultural 5 180 4 482 3 480

Traction 2 057 1 839 1 336

International 5 892 4 846 4 031

Utilities 3 149 2 404 1 927

End users across the border 2 743 2 442 2 104

Gross electricity revenue 120 199 108 709 86 150

The environmental levy4 included in revenue 6 464 4 290 4 335

Less: revenue capitalised3 – – (110)

Electricity revenue per note 34 in the annual financial statements 126 663 112 999 90 375


1. Pre-payments and public lighting are included under residential.

2. The short-term energy market consists of all the utilities in the southern African countries that form part of the Southern African Power Pool. Energy is traded

on a daily, weekly and monthly basis as there is no long-term bilateral contract.

3. Revenue from the sale of production while testing Generation plant not yet commissioned, capitalised to plant.

4. The Environmental levy of 2c/kWh tax, was effective from 1 July 2009 to 31 March 2011.

On 1 April 2011 the levy was raised to 2.5c/kWh. On 1 July 2012 the levy was raised to 3.5c/kWh.

The levy is payable for electricity produced from non-renewable sources (coal, nuclear and petroleum).

The levy is raised on the total electricity production volumes and is recovered through sales.

Contact details

Telephone Websites and email

Eskom head office +27 11 800 8111 Eskom website www.eskom.co.za

[email protected]

Eskom Group communications

+27 11 800 2323 Eskom integrated report www.eskom.co.za/IR2012/

Eskom media desk +27 11 800 3304

+27 11 800 3309

+27 82 805 7278

Eskom media desk [email protected]

Eskom Development Foundation NPC Ltd

+27 11 800 5279 Eskom Development Foundation NPC Ltd

www.eskom.co.za/csi

Investor relations +27 11 800 2775 Investor relations [email protected]

Ethics office advisory service +27 11 800 3700

+27 11 800 4816

+27 11 800 3189

Ethics office advisory service

[email protected]

Confidential fax line +2786 568 2969 Eskom environmental [email protected]

National sharecall number 08600 ESKOM

(08600 37566)

Promotion of Access to Information Act

[email protected]

Physical address Postal address

Eskom

Megawatt Park

2 Maxwell Drive

Sunninghill

Sandton

2157

Eskom

PO Box 1091

Johannesburg

2000

Eskom Holdings Secretariat

Bongiwe Mbomvu (Company secretary)

PO Box 1091

Johannesburg

2000

Eskom Holdings SOC Limited

Company registration number:

2002/015527/06

Back cover image: Commissioner Street, Johannesburg, 1920s


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