Operation Thekgo - Principals Driving Total System Reliability & Capacity

1. Operation Thekgo - Principals Driving Total System Reliability & Capacity AMUE Convention 16 October 2007 Greg Tosen

2. Contents • Key Demand & Supply Side Challenges facing South Africa • Total System Capacity & Reliability (TSC&R) – the Thekgo Approach • TSC&R Journey (last 18 months) • Emergency Preparedness • Short-term Reliability • Reliability Enhancement & Role out • Conclusions

3. South African Electricity Situation

4. Electricity Demand and Supply – key challenges • South Africa has reached 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. Long Term Demand forecast Eskom position based on 4% electricity growth supporting 6% economic growth

6. Diversify Primary Energy Mix Existing Mix by 2025

7. Total System Capacity & Reliability Action Centre Mandate The action centre will: • Co-ordinate and integrate total system capacity and reliability of the business over the next 36 months • Oversight of the overall capacity and reliability targets • Develop the targets • Develop RACIs addressing Action Centre and Line • Oversight over all processes across the value chain to ensure the achievement of targeted capacity and reliability • Identify, mitigate risks and implement contingencies • Be the integration point across the value chain to ensure total systems capacity and reliability • Implement measures across all areas of the business to address the long term capacity requirements and reliability of the total system • Address all people, culture and stakeholder management issues pertaining to capacity and reliability • Ensure focus across the organisation on reliability and capacity as fundamental priorities. • Align existing initiatives and optimise resources and effort • Implement a robust emergency response process

8. Resilient Organisation • Ability to rebound • Ability to recover easily & quickly from adversity KPI System vulnerability Adaptive Capacity Vulnerability time System adaptive capacity Shock Reduction Readiness Response Recovery

9. Key Initiatives and Objectives – 36 months Emergency Response Command Centre • Implement an interim and end-state emergency response process including a command centre • Ensure required level of total system capacity and reliability for the next 36 months. • Immediate focus on Western Cape & Eastern Short Term Reliability • Enhance and Institutionalise Eskom’s current reliability management Framework. • Feedback Learning from the Short Term initiatives into the existing business and long term initiatives Reliability Enhancement • Reliability and capacity is positioned as a top business priority • Operation Thekgo is effectively positioned. • Ensure consistent and proactive communication with all stakeholders regarding capacity and reliability. Stakeholder & Communications Culture and Change • A robust and reliability culture supported by the correct HR processes, quality and quantity of skills.

10. The TSC&R Journey for the next 36 months May 2007 End State Design & Implement Establish Interim Emergency Response and 5 yr plan - Background and Information

11. Imperatives for Establishing the Emergency Response Command Centre Addressing the need to react differently to an emergency from an Eskom national perspective • Create a central co-ordination point that can respond to any event in an integrated manner • Reduce duplicated effort and drive alignment • Focus will mostly be on events or issues with an Eskom-wide or multiple division impact Integrated Emergency Response • Focus on communications between divisions and regions in an integrated manner • Foster consistency in communication of messages to stakeholder groups in an emergency situation Strategic Management of Stakeholders • Leadership driven response to emergencies • Strategic responses to emergencies, aligned with divisional operational response plans Strategic and Tactical Emergency Response

12. National Emergency Centres Eastern RJCC Mkondeni North East RJCC Witbank/Nelspruit Northern RJCC Pretoria/Polokwane Central RJCC Simmerpan North West RJCC Bloemfont. Western RJCC Bellville Southern RJCC East London NATIONAL CONTROL CENTRE Gx (where applicable) Gx JOC Gx JOC Gx JOC Gx JOC Gx JOC Tx Tx JOC Tx JOC Tx JOC Tx JOC Tx JOC Tx JOC Tx JOC Dx Dx JOC Dx JOC Dx JOC Dx JOC Dx JOC Dx JOC Dx JOC KSACs KSACs KSACs KSACs KSACs KSACs KSACs KSACs Other Divisions as required Other Other Other Other Other Other Other ERCC Operating Model – Regional Joint Command Centres (RJCC) ERCC Megawatt Park

13. Develop Develop Develop Develop Strategic Strategic Strategic Strategic Assess Assess Options & Options & Assess Assess Options & Options & Situation Situation Priorities Priorities Situation Situation Priorities Priorities Plan Plan Plan Plan Actions Actions Actions Actions Convene Convene Convene Convene Initial Initial Initial Initial Response Response Response Response Mobilise Mobilise Mobilise Mobilise Team Team Team Team Recovery Recovery Recovery Recovery Team Team Team Team Determine Determine Determine Determine Initial Initial Initial Initial Response Response Response Response Team Status Status Status Status Reporting Reporting Reporting Reporting Nw Activation Activation Activation Activation Further Further Further Further Actions Actions Actions Actions Emergency Response Protocols Emergency Response Protocols Alert Emergency Response Protocols Emergency Response Protocols Event Trigger Event Trigger Stand Down Stand Down Communications and Stakeholder Management Info Request Emergency Response Protocols

14. The TSC&R Journey for the next 36 months May 2007 End State Design & Implement Establish Interim Emergency Response and medium-term outlook

15. Short-term Reliability • Ensure required total system capacity and reliability for next 5 yrs Ensure proper alignment and coordination of all capacity and reliability related initiatives across all functions and areas within Eskom • Establish reliability assessment and reliability readiness Equip the organisation to live with an increase of power system risk

16. Short Term Reliability – Approach Enhance the preparedness of Eskom to address total system reliability for key periods Reliability Readiness Audit Reliability Risk Assessments Ongoing Coordination of Reliability Initiatives 18 month plan Regional Reliability Teams 5 yr plan Assess Effectiveness Action Solution Identify

17. Short Term Reliability – Approach Enhance the preparedness of Eskom to address total system reliability for key periods Reliability Readiness Audit Reliability Risk Assessments Ongoing Coordination of Reliability Initiatives Risks 18 month plan Regional Reliability Teams 5 yr plan Assess Effectiveness Action Solution Identify

18. Key Power System Risks

19. Confidence levels (2005-2006 data) 1900 MW O.R.

20. Short Term Reliability – Approach Enhance the preparedness of Eskom to address total system reliability for key periods Reliability Readiness Audit Reliability Risk Assessments Ongoing Coordination of Reliability Initiatives Plans 18 month plan Regional Reliability Teams 5 yr plan Assess Effectiveness Action Solution Identify

21. Summer ’06 Oct ’06 to Mar ‘07 Winter ’07Apr ’07 to Sep ‘07 Summer ’08 Oct ’07 to Mar ‘08 6 Month Rolling Plan Bi-Monthly Approach Philosophy 18 Month Rolling Plan Updated every 6 months • Assessing the vulnerability to the organisation from an integrated perspective. • Plan is developed using divisional input for compiling the vulnerability, and assessing the system adaptive capacity. 18 Month Rolling Plan – Approach & Classification • Green • If the Actual Supply (AS) is greater than the Required Supply (RS) and meets the 1900 MW reserve. • Yellow • If the Actual Supply (AS) is greater than the Required Supply (RS) and the deficit is less than 1000MW. • Probably use of Contracted DMP resources and EL1. • Orange • If Actual Supply (AS) deficit to RS is between 1000 MW and 2000 MW. • Probably use Interruptible loads. Classification System • Red • If Actual Supply (AS) deficit to RS is between 2000 MW and 3000 MW. • Probably use interruptible loads and have some mandatory load shedding. • Brown • If the Actual Supply (AS) deficit to RS is more than 3000MW. • Probably have rotating mandatory load shedding

22. Capacity Adequacy – Winter 2007 Ver 5

23. Short Term Reliability – Approach Enhance the preparedness of Eskom to address total system reliability for key periods Reliability Readiness Audit Reliability Risk Assessments Ongoing Coordination of Reliability Initiatives Teams 18 month plan Regional Reliability Teams 5 yr plan Assess Effectiveness Action Solution Identify

24. Reliability Risk Team Structure (R.A.C.I.) Exco Guidance re Mitigation & Implementation Support (Inform) Custodian of Overall Reliability Risk Process (Responsible) Thekgo Action Centre Exco SoS Custodians of Reliability Risk (Responsible) Integrated Reliability Risk Forum CTAD Auditing of Action Implementation & Mitigation Effectiveness (Consult) Implementation of Reliability Risk Mitigations and Actions (Accountable) Regional Reliability Teams

25. Operation Thekgo • Assessing overall reliability risks in an integrated approach for the region • Managing and controlling the activities of the resilience team • Risk, issue and deliverable management Reliability Team PMO Load Reduction Initiatives Stakeholder Management Integrated Reliability Risk Mgt Skills & Resources Network Strengthening Integrated Customer Mgt Emergency Preparedness Approach to Addressing the Reliability Situation in the Regions

26. Operation Thekgo • Assessing overall reliability risks in an integrated approach for the region • Managing and controlling the activities of the resilience team • Risk, issue and deliverable management Reliability Team PMO Load Reduction Initiatives Stakeholder Management Integrated Reliability Risk Mgt Skills & Resources Network Strengthening Integrated Customer Mgt Emergency Preparedness Approach to Addressing the Reliability Situation in the Regions

27. Region Risks Unifirm Substations Single Contingency lines

28. Operation Thekgo • Assessing overall reliability risks in an integrated approach for the region • Managing and controlling the activities of the resilience team • Risk, issue and deliverable management Reliability Team PMO Load Reduction Initiatives Stakeholder Management Integrated Reliability Risk Mgt Skills & Resources Network Strengthening Integrated Customer Mgt Emergency Preparedness Approach to Addressing the Reliability Situation in the Regions

29. DSM Role out Increased Demand Side Management target of 3000MW by 2012 Comprehensive National Demand Management Programme Virtual Power Station ESSENTIAL SUPPORT FUNCTIONS TO ALL OF THE ABOVE

30. Conclusions • The system remains extremely tight from a capacity point of view for the months and years ahead • Probability of load shedding is relatively high largely due to unexpected performance changes in generation or transmission plant. • Relief only when several new coal fired units are built and reserve margin goes over 15% (2011 to 2013) • Focus is required on current system, as well as new build programs • Integration of new projects is going to put the network under stress and close cooperation required between all divisions .

31. Risk / Shortfall Demand Supply Probability of Risk Life of Plant Thekgo value Security of Supply Risk Management Emergency Response Planning • Daily plan • Weekly Plan • Monthly Plan • 18 Month Plan • 5 Year Plan • 15 Year Plan Integration between these elements is key for Eskom to handle their current and future challenges.

32. Thank You