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Eskom Generation – way forward

Eskom Generation – way forward. Three drivers of change impacting our business. Need for a more integrated approach in growing capacity. Market Restructuring. Continue preparation for deregulation (also requires a degree of divisional independence). Declining surplus capacity.

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Eskom Generation – way forward

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  1. Eskom Generation – way forward

  2. Three drivers of change impacting our business Need for a more integrated approach in growing capacity Market Restructuring Continue preparation for deregulation (also requires a degree of divisional independence) Declining surplus capacity Limited resource availability Need to maximise synergies & operational excellence

  3. Eskom’s strategic positioning • Our core business is electricity • Generation • Transporting • Trading (among producers, wholesalers, and bulk users) • Retail (to end users) • Our target market • South Africa • SADC and the rest of Africa connected to the SA grid • Rest of Africa

  4. Electricity demand and supply – key challenges • South Africa is approaching the end of its surplus generation capacity • 1st challenge: Avoiding mismatch between demand and supply • Excess capacity - stranded resources • Capacity shortage - constrained economic growth • 2nd challenge: Correct choice of capacity to be constructed from an array of available options that differ dramatically in terms of: • Cost (construction and operating) • Lead time to construction • Environmental impact • Operating characteristics

  5. Eskom's Installed Generating CapacityRed Solid Line until end 2004 = Actual peak demand PLUS 10% RESERVE MARGIN, thereafter @ 2.5 % growth in peak demand PLUS 10% RESERVE MARGIN.Fifty year assumed plant life. Demand Side Management initiatives NOT included

  6. 5 Year Capital Expansion Plan In October 2004, Cabinet approved the following: • Eskom to lead this current phase of creating new electricity generation capacity • Earlier Cabinet decision to exclude Eskom fromfuture build programme was reversed • Decisions on any future (beyond the current 5 year programme) build programme will be on a case by case basis • 5-year infrastructure investment plan in South Africa's electricity infrastructure amounting to R95 billion (DPE tabling of vote to parliament)

  7. Capacity Outlook - 2003 to 2022 Brownfield (Matimba B) PF • 6%+ year-on-year demand increase • Major risks of insufficient supply options • Ageing infrastructure • Shortages if new build not initiated

  8. Planning Process Flow Demand Side Participation Tariff Co-Generation Using of Waste Monontsa Brownfield Coal Western Corridor Greenfield Coal Braamhoek Steelpoort Simunye Wind Gas 3 Eskom OCGT Coega PBMR DME-IPP OCGT Saldanha Increasing Certainty Investment Decision Complete business case Concept Screening NEW CONCEPTS PHASE 1 PRE-FEASIBILITY PHASE 2 FEASIBILITY BUILD

  9. Eskom’s Return To Service (RTS) project Camden = 1 600MW Grootvlei = 1 200MW Komati = 1 000MW • 3 stations with a combined nominal capacity of 3800MW • built in the 1960’s, and were mothballed due to high excess capacity in the late 1980’s and 1990’s • An investment expenditure totalling R12 billion (nominal rand) on the return to service of the 3 stationsover the next 5 years

  10. Budget Vote “Alongside this process, using Eskom’s purchasing power, we would introduce the first significant Independent Power Producers (IPP).This allowed for the initial indicative 5-year investment figures to be provided with some degree of certainty. “ Minister Erwin’s Budget Vote Speech, 15 April 2005:

  11. SA enjoys globally competitive prices 29% gap

  12. Eskom remains committed to keep the lights burning Day Month Year

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