EDI HOLDINGS ANNUAL REPORT (2008/9)

1. EDI HOLDINGS ANNUAL REPORT (2008/9) PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE (PPC) ON ENERGY DUMA NKOSI CHAIRPERSON: EDI Holdings PHINDILE NZIMANDE CEO: EDI Holdings 03 NOVEMBER 2009

2. PRESENTATION OUTLINE CHAIRMAN’S REPORT • Mandate of EDI Holdings • Corporate Governance • Restructuring Environment • Performance Highlights CEO’S REPORT • Performance Against Business Strategy (Balanced Scorecard) • Staff Establishment Report • Corporate Social Investment ANNUAL FINANCIAL STATEMENTS • Statement of Financial Position • Statement of Financial Performance • Cash Flow Statement PLANS FOR THE FUTURE ACKOWLEDGEMENTS

3. CHAIRMAN’S REPORT

4. CHAIRMAN’S REPORT: MANDATE OF EDI HOLDINGS • Our mandate is guided by the White Paper on Energy for South Africa (1998), the Blue Print on EDI Reform (2001) and subsequent Cabinet decisions . • The main object of the company is to restructure the electricity distribution industry and invest into financially viable independent REDs in South Africa in accordance with National Government policy in order to ensure a more effective and efficient electricity distribution industry capable of providing affordable and accessible electricity to consumers • In terms of the Cabinet Decision of 25 October 2006, the restructuring process must culminate in the creation of six wall-to-wall Regional Electricity Distributors (REDs) as public entities regulated by the National Energy Regulator of South Africa (NERSA).

5. Cape Town UniCity Ekurhuleni Metro Nelson Mandela Metro Johannesburg Metro eThekwini Metro Tshwane Metro RED 6 Provincial Boundaries RED 4 RED 2 RED 5 RED 1 RED 3 CHAIRMAN’S REPORT : 6 Wall-to-Wall RED Boundary Map

6. CHAIRMAN’S REPORT– CORPORATE GOVERNANCE • The Annual Report is presented in compliance with the Public Finance Management Act (Act No. 1 of 1999): • Fairly presents the state of affairs of the company, • Its business, • Its performance against predetermined objectives, and • Its financial position at the end of the year in terms of Generally Recognised Accounting Practice (GRAP). • The annual financial statements are the responsibility of the Accounting Authority, i.e. the Board of Directors of EDI Holdings. • The office of the Auditor-General has audited EDI Holdings’ financial statements and issued an unqualified audit report .

7. CHAIRMAN’S REPORT : CORPORATE GOVERNANCE • The Board of Directors is established as the Accounting Authority • Annual Financial Statements are presented in terms of Generally Recognised Accounting Practice • EDI Holdings’ Board directs and guides the business in compliance with applicable legislation and has formulated the necessary policies and monitoring procedures to give effect thereto, through the following Board Committees: • Audit and Risk Management Committee • Internal Audit Function • Risk Management Function • Finance and Procurement Committee • Human Capital and Remuneration Committee • Communication and Advocacy Committee • Programme Management Board Committee • Policy and Strategy Committee

8. CHAIRMAN’S REPORT : CORPORATE GOVERNANCE • EDI Holdings maintains world class systems of corporate governance by: • subscribing to the principles of good governance; • adhering to and encouraging good governance practices and the highest ethical behaviour; • continuing to comply with the broad principles set out in the King II Report; and • assessing its systems of governance for improvement on an ongoing basis. • EDI Holdings endeavours to observe all principles of corporate governance in all dealings with its stakeholders. • Regular compliance submissions are made to relevant authorities. • EDI Holdings complied with corporate governance, shareholder, statutory and treasury requirements in all its dealings.

9. CHAIRMAN’S REPORT : RESTRUCTURING ENVIRONMENT The smooth transition from the previous Chairman, Ms. Dolly Mokgatle, ensured that our focus on providing leadership and strategic direction remained intact In respect of the management of financial resources under our charge, we continued to do so in a cost-effective and efficient manner The national and provincial election campaigns also had an effect on the industry We also had to grapple with the unprecedented changes that took place at the political level, which led amongst others to a changing of leadership in the country

10. CHAIRMAN’S REPORT : PERFORMANCE HIGHLIGHTS As will be highlighted in the CEO’s Report, the Board continued to provide strategic leadership and guidance to the organisation to ensure it fulfills its mandate Amongst some of the areas where we performed well are the following: Development of a Strategic Implementation Plan to guide the restructuring journey Meaningful contribution to policy and legislative matters such as the 17th Constitutional Amendment Bill , RED Establishment Bill and Asset Transfer Regulations Intensification of RED readiness preparations ( signing of Accession to Cooperative Agreements, commencement with ring fencing and MSA Section 78 processes) Active participation in multi-stakeholder efforts to find solutions to the national energy challenge that the country experienced, particularly in the 1st quarter of 2008 calendar year Development of a rescue plan for the ailing EDI infrastructure Reaching ground-breaking agreements with Organised Labour on the transfer, migration and placement of employees affected by the restructuring .

11. CEO’S REPORT

12. EDI Holdings Strategic Pillars Mandate INDUSTRY LEADERSHIP CREATION OVERSIGHT ADVOCACY EDI Holdings is the Catalyst & the Champion of the EDI Restructuring process; Proactive and Continuous Advocacy Provide Industry Thought Leadership, Guiding & Influencing the Restructuring Process Establishment of Viable REDs EDI Holdings plays an Oversight Role in the Success of the REDs; Through Efficiency Improvements Vision, Mission and Values

13. RESTRUCTURING HIGHLIGHTS FOR THE REPORTING PERIOD FINANCIAL Actual -11% favourable budget variance on Corporate Budget, and 15.7% budget variance on Restructuring Budget Unqualified audited financial statements CREATION A draft Business Case has been finalised and will be refined in line with the outcomes of the Deal negotiations prior to submission to National Treasury A transaction has been structured to facilitate the transfer of distribution business from current asset owners to the REDs Progressed the development of the Strategic Implementation Plan and developed a Transition Path detailing, amongst others, the need for industry consolidation and stabilising prior to carving out independent REDs 143 out of 187 municipalities have signed the Accession to Cooperative Agreements Approved funding for Ringfencing and MSA s78 for 103 municipalities, 56 of which have commenced Ringfencing their electricity distribution business.

14. RESTRUCTURING HIGHLIGHTS FOR THE REPORTING PERIOD (Continued) INDUSTRY LEADERSHIP We developed operational and functional models for the Wires Blueprint, Retail Blueprint, BP&S Blueprint, Human Capital Design and Finance Function Design A rescue plan for the ailing EDI Infrastructure has been developed and approved by the Board The Human Capital Establishment Strategy has been developed and approved Full menu of HR policies and procedures have been developed High-level Harmonisation of conditions of service have been developed OVERSIGHT We developed National Goals and Associated metrics

15. RESTRUCTURING HIGHLIGHTS FOR THE REPORTING PERIOD (Continued) ADVOCACY A refined communication and stakeholder strategy was developed and approved by the board The transfer, placement and migration agreements have been adopted by the Transitional Labour Relations Structure Key stakeholders including policy makers, current asset owners, the media and public were kept informed continuously and participated in the EDI restructuring process.

16. Organisational Scorecard (1/10)

17. Organisational Scorecard (2/10)

18. Organisational Scorecard (3/10)

19. Organisational Scorecard (4/10)

20. Organisational Scorecard (5/10)

21. Organisational Scorecard (6/10)

22. Organisational Scorecard (7/10)

23. Organisational Scorecard (8/10)

24. Organisational Scorecard (9/10)

25. Organisational Scorecard (10/10)

26. RESTRUCTURING CHALLENGES The voluntary nature of EDIR process Delays in finalising the proposed 17th Constitutional Amendment, which will give Government powers to intervene RED Establishment Bill as initially drafted would not have been constitutionally defendable Continued stakeholder ambivalence Even though the commercial transaction has been structured, negotiations with current asset owners have not yet commenced due to interdependencies with the Constitutional Amendment and SIP processes

27. Staff Establishment Report (1/3)

28. Staff Establishment Report (2/3)

29. Staff Establishment Report (3/3)

30. Staff Establishment Report (Continued) • EMPLOYMENT EQUITY • EDI Holdings exceeded its employment equity targets in some categories, whilst it was unable to achieve targets in others. The details are as follows: • “Black” employees (i.e. African, Asian and Coloured): Target = 66%; Actual = 75% • “Female” employees Target = 69%; Actual = 57% • “Disabled” employees: Target = 10%; Actual = 0% • BASIS OF REMUNERATION All EDI Holdings posts have been evaluated according to the T.A.S.K. grading systems. This system has been utilised to grade role profiles and benchmark salary structures.

31. CORPORATE SOCIAL INVESTMENT

32. Corporate Social Investment – Refilwe Orphanage Care Centre (Dinokeng tsa Taemane Municipality)

33. ANNUAL FINANCIAL STATEMENTS(ABRIDGED) FOR THE YEAR ENDED 31 MARCH 2009

34. ANNUAL FINANCIAL STATEMENTS (abridged) STATEMENT OF FINANCIAL POSITION AT 31 MARCH 2009 • We present unqualified audited financial statements, which have been found by the office of the Auditor General, to present fairly, in all material respects, the financial position of the company as at 31 March 2009 and its financial performance and cash flows for the year then ended, in accordance with and in the manner required by the PFMA and the Companies Act of South Africa. • EDI Holdings continues to strive for excellence in financial management. • The company’s total operational budget allocation of R69.2m was fully expended for the financial year under review, underpinned by effective internal control systems and procedures. • The governance processes associated with the draw down and allocation of the R1.2bn Multi Year Pricing Determination (MYPD) restructuring fund has been completed and we received R118.6m from Eskom in the year under review.

35. ANNUAL FINANCIAL STATEMENTS (abridged) STATEMENT OF FINANCIAL POSITION AT 31 MARCH 2009

36. ANNUAL FINANCIAL STATEMENTS (abridged) STATEMENT OF FINANCIAL POSITION AT 31 MARCH 2009 • Non-Current Assets • No major assets acquired during financial year • 19% reduction in non-current assets due to depreciation • Revaluation of PPE R1.388m • Current Assets • Decrease in cash and cash equivalents of R26m due largely to utilisation of funds received from ESKOM on the MYPD restructuring • Net Assets • The increase of R3.5m is largely due to surplus for the year of R2.138, and the capital assets Revaluation Reserves • Current Liabilities • Government grant in respect of Eskom MYPD EDI Restructuring Funding of R118.6m received from Eskom

37. ANNUAL FINANCIAL STATEMENTS (abridged) STATEMENT OF FINANCIAL PERFORMANCE FOR YEAR ENDED 31 MARCH 2009

38. ANNUAL FINANCIAL STATEMENTS (abridged) STATEMENT OF FINANCIAL POSITION AT 31 MARCH 2009 • Transfers and Subsidies from DME • 5% increase in transfers and subsidies due to annual baseline budget increase from DME. • Expenditure • 60.3% increase in expenditure mainly due to project and travel expenses as a result of the acceleration of restructuring programme activities.

39. ANNUAL FINANCIAL STATEMENTS (abridged) CASHFLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2009

40. PLANS FOR THE FUTURE

41. CEO’s REPORT:PLANS FOR THE FUTURE • Anticipating a favourable outcome i.r.o the 17th Constitutional Amendment and RED Establishment Legislation, we are gearing ourselves for the final push in the EDI restructuring journey, duly taking advantage of the enabling legislative environment • We will also intensify our RED readiness preparations and ensure the signing of further Accession to Cooperative Agreements as well as completion of ring fencing and MSA Section 78 processes • We will intensify our stakeholder engagements through established structures as well as hold bilaterals with key stakeholders around the 17th Constitutional Amendment • We will work towards the formal signing of the collective agreements reached in the TLRS • We will continue to play our usual role in all NERT activities, also continuing to chair the Co-Generation Task Team as well as host the Programme Management Unit of NERT • We will also continue with outstanding activities/engagements related to obtaining approval and funding for the proposed business plan for the refurbishment of the ailing electricity distribution infrastructure

42. ACKNOWLEDGEMENTS

43. ACKNOWLEDGEMENTS • We acknowledge and sincerely appreciate: • The leadership and guidance of the former Minister of Minerals and Energy, Ms Buyelwa Sonjica; • The undiminished inspiration and support of the DG of Minerals and Energy, Advocate Sandile Nogxina and the entire Department • The Inter-Ministerial Committee • Parliamentary Portfolio Committee for Minerals and Energy for providing support and direction; • The Previous Chairman of the Board of Directors of EDI Holdings, Ms. Dolly Mokgatle as well as her successor, Mr. Duma Nkosi for their visionary leadership, guidance and strategic advice • Stakeholders, including all spheres of Government, Eskom, SALGA, Organised Labour, Organised Business and all Political formations; • The Board, Management and staff of EDI Holdings.

44. THANK YOU