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ESKOM ESKOM ANNUAL RESULTS 2003 ANNUAL RESULTS 2003

&&CORPORATE OBJECTIVES 2004 -CORPORATE OBJECTIVES 2004 -

A PRESENTATION TO THE PORTFOLIO A PRESENTATION TO THE PORTFOLIO COMMITTEE ON PUBLIC COMMITTEE ON PUBLIC

ENTERPRISESENTERPRISESTHULANI S. GCABASHETHULANI S. GCABASHE

CHIEF EXECUTIVECHIEF EXECUTIVE27 OCTOBER 200427 OCTOBER 2004

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ESKOM GROUP

Eskom Group

Eskom Holdings Limited

Subsidiaries Regulated Business

Eskom Enterprises (Pty) Ltd

Eskom Finance Company (Pty) Ltd

Escap Limited

Gallium Insurance Company Limited

Generation Division

Transmission Division

Distribution Division

Key Sales and CustomerService Division

Four corporate divisions

3

ESKOM GOVERNANCE• Continued emphasis on good

corporate governance and compliance with King II

• Promoting corporate values:

–Excellence

– Integrity

– Innovation

–Customer satisfaction

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SOCIO-ECONOMIC

FINACIAL

PEOPLE,SAFETY, HEALTH & ENVIRONMENT

TECHNICAL• Electrification

• Black economic empowerment

• Plant availability

• Plant reliability

• System minutes

• People measures• HIV / Aids• Eskom fatalities• Specific water consumption• Relative particulate emissions

• Profit before tax

• Return on assets

• Debt:equity

SUSTAINABLE DEVELOPMENT

CUSTOMERCUSTOMERCUSTOMERCUSTOMER

• World industrial electricity prices

• Sales volumes

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ESKOESKOMM

Holdings LtdHoldings Ltd

SOCIO -ECONOMIC

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IN 2003 ESKOM HAS DELIVERED• Electrified an additional 175

396 homes (2002: 205 371 homes)

• Eskom group procured goods and services to the value of R7.3bn from black economic empowered enterprises (2002:

R5.5bn)

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ELECTRIFICATION CUMULATIVE NUMBER OF HOMES ELECTRIFIED

0

300,000

600,000

900,000

1,200,000

1,500,000

1,800,000

2,100,000

2,400,000

2,700,000

3,000,000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

175 396

Electrified our 3 millionth customer in Feb 2004

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BLACK ECONOMIC EMPOWERMENT

R’m

•Spent R20.6bn since 1998

•Spent R714m with black women owned enterprises since 20020

1000

2000

3000

4000

5000

6000

7000

8000

1998 1999 2000 2001 2002 2003

Coal

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ESKOMESKOM Holdings LtdHoldings Ltd

PEOPLE, SAFETY, HEALTH & ENVIRONMENT

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PEOPLE MEASURES

Actual 2003 Actual 2002

• HR Sustainability Index 91.8% 89.8%

• Equity targets

– Racial equity 56.3% 54.6%

– Gender equity 27.8% 24.5%

– Disable persons 1.4% 0.16%

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EMPLOYMENT EQUITY (MANAGERIAL AND SUPERVISORY CATEGORIES)

56.3

0

10

20

30

40

50

60

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

%

8.8

27.8

0

5

10

15

20

25

30

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Racial equity Gender equity

10.4

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EDUCATION AND TRAINING

• Invested R 505m in the development

and training of employees

• 1 850 bursars supported

– 87% black

– 50% women

– 455 black bursars and trainees completed

training

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SAFETY

• Reduction in public electrical fatalities from 24 to 20

• Lowest number of work related fatalities in 30 years

• Disabling injury incident rate continues to improve from 0.45 to 0.37

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MANAGING THE IMPACT OF HIV/AIDS

HIV/AIDS continues to be a focus area

The group contributed R 67m to date

to the development of a vaccine

Continued education and awareness

programmes with special focus on

voluntary confidential counselling and

testing

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ENVIRONMENTAL PERFORMANCE

•Eskom’s commitment to be ISO 14001 compliant was achieved

•Contraventions reported in terms of the operational sustainability index reduced from 3 to 2

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RELATIVE PARTICULATE EMISSIONS

•Achieved 5 year

target set in 1998

•Current emissions

0.28 kg/MWh sent

out

0.00

0.10

0.20

0.30

0.40

1998 1999 2000 2001 2002 2003

kg/MWh

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SPECIFIC WATER CONSUMPTION

• 70% wet cooled technology

• Consumed 271 940 Ml of raw water

• Specific water consumption of 1.29l/kWh

• Impacted by the change in the mix of stations 0.0

0.10.20.30.40.50.60.70.80.91.01.11.2

1.31.41.5

1998 1999 2000 2001 2002 2003

l/kWh SO

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ESKOMESKOM Holdings LtdHoldings Ltd

TECHNICAL PERFORMANCE

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SUSTAINABILITY INDEX The operational sustainability index is a composite measure used to ensure the long-term sustainability of technical performance.

Actual 2003

ThresholdActual 2002

Operational 89.6% 80.0% 88.2%

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TECHNICAL PERFORMANCE

85

87

89

91

93

Actual2002

Actual2003

Target2003

Unit Capability Factor (UCF)

0

1

2

3

4

5

6

Actual2002

Actual2003

Target2003

Unplanned Automatic Grid Separations (UAGS)

-- International median

Availa

bili

ty (

%)

Relia

bili

ty

(Nu

mb

er)

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TECHNICAL PERFORMANCE

2

3

4

5

6

Actual2002

Actual2003

Target2003

Unplanned Capability Loss Factor (UCLF)

2

3

4

5

6

Actual2002

Actual2003

Target2003

System Minutes Lost (SML)Perc

en

tag

e

Min

ute

s (<

1S

ML)

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KEY SUSTAINABILITY INITIATIVES

• Approved the Eskom sustainability strategy and performance index

• Continued participation in the United Nations Global compact

• Partnerships– Endangered Wildlife Trust– Endangered and Environmental Society of South

Africa (WESSA)

• Key research projects in support of sustainable development

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RESEARCH AND DEVELOPMENT

Invested R 558m in research projectsInvested R 558m in research projects

End use 6% Research management 4%

Future technology 5%

Environmental 9%

Transmission and distribution related 40%Generation related 15%

Business and market technology 9%

Integrated energy systems 12%

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ESKOMESKOM

FINANCIAL PERFORMANCE

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FINANCIAL• Group profit after tax at R3.5bn

(2002: R3.7bn)

• Group financial health continued to improve as measured by debt equity (Improved from 0.46 to 0.30)

• 4.8% electricity sales growth (2002: 3.5% )

• Total productivity was positive to the extent of R613m or 2.5% (2002:1.6%, R382m)

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FINANCIAL

Impact of prudent accounting

• Impairment due the delay in issuing

the license for the Second National

Operator (R649m)

• Provision for investment in

Telecoms Lesotho (R154m)

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FINANCIAL

• Group return on total assets

declined from 13.07% to 10.35%

• Eskom Holdings real rate of

return declined from 1.69% to

0.53%

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R’m

0

1000

2000

3000

4000

5000

6000

7000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

GROUP PROFIT BEFORE TAX

Impact of adjustments

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GROUP INCOME STATEMENTR’m Actual 2003 Actual 2002

Revenue 32,848 29,684 Operating expenditure (25,227) (21,363) Net operating income 7,621 8,321 Net interest expenditure (1,304) (2,775) Profit before exceptional 6,317 5,546 Exceptional items (803) - Profit after interest b/ f fair value 5,514 5,546 Fair value loss - financial instruments (283) (118) Profit before tax 5,231 5,428 Income tax expense (1,859) (1,727) Profit after tax 3,372 3,701 Other 162 6 Net profit for the year after tax 3,534 3,707

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GROUP BALANCE SHEETR'm Actual 2003 Actual 2002

Non-Current Assets 74,694 77% 65,877 80%

Current Assets 21,780 23% 16,605 20%

Total Assets 96,474 82,482

Capital & Reserves 40,683 42% 37,717 46%

Non-Current Liabilities 35,900 37% 31,701 38%

Current Liabilities 19,891 21% 13,064 16%

Total Equity 96,474 82,482

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0

0.3

0.6

0.9

1.2

1.5

1.8

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Ratio

DEBT : EQUITY

0.3

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GROUP CASH FLOW STATEMENTR'm 2003 2002

Cash flows from operations 12,664 11,808

Cash generated by trading operations 13,845 12,911

Interest received 3,345 3,559

Interest paid (3,893) (4,610)

Dividend paid (549) -

Income tax paid (84) (52)

Cash utilised in investing activities (6,980) (5,750)

Cash effects of financing activities (7,459) (3,515) Net (decrease) / increase in cash and cash equivalents (1,775) 2,543

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ESKOM ESKOM CORPORATE OBJECTIVESCORPORATE OBJECTIVES

2004 2004

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FINANCIALOBJECTIVES INDICATORS MEASURES TARGET

2004

Improving the management of resourcesLong term financial viability.Business sustainability.Economical, efficient and effective usage of resources.Focus on customer satisfaction.Excellent technical performance.Continued focus on affirmative action and actively promoting women and disability equity.

Net income after interest and before fair value adjustment

Budget (R‘m)

4 212

Net income after taxation Budget (R‘m) 2 781

Debt: equity (including long-term provisions) Financial Plan 0.56

Historic cost return on total assets Financial Plan 8.61

Productivity improvement for the year Budget % 1

Human resources sustainability index Index 80

Customer satisfaction index Index 75

Operational sustainability index Index 80

Black management, professional and supervisory staff at 31 December

Target % 57,9

Women management, professional and supervisory staff at 31 December

Target % 29.1

Disabled employees Target % 1.9

Procurement expenditure and supply of services, both capital and operating:

-Black economic empowerment (50% discretionary expenditure)

Target (R‘m)

7 465

-Women empowerment (> 5% of BEE amount) Target (R‘m)

521

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ENVIRONMENTAL

OBJECTIVES INDICATORS MEASURES TARGET 2004

Environmental(Demonstrating exemplary corporate commitment to a sustainable environment)

Contravention of environmental legislationSpecific water consumption.Relative particulate emissions.

Number

l/kWh sent out targetkg/MWh sent out target

0

1.28

0.27

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SOCIALOBJECTIVES INDICATORS MEASURES TARGET

2004

(Demonstrating exemplary corporate citizenship and harmony with society)Support for socio-economic development.Support for NEPAD

Expenditure of Eskom Development Foundation (ESDEF)

Budget (R’m) 42

Expenditure on projects to encourage electricity development in Africa (Westcor)

Approved USD100 000

Eskom financial contribution to AIDS vaccine development research.

Budget R15 million

Eskom contribution to advanced AIDS training for medical practitioners.

Budget R2 million

Employees enrolled in E-vision management development program

Employees Targeted

2000

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REVISED BUSINESS MODEL

OBJECTIVES INDICATORS MEASURES TARGET 2004

(Demonstrating progress towards achieving Eskom's intended business model)Diversification and growth of markets, products and services.Restructuring Eskom to support the strategic intent and align with Government policy.

Expenditure on diversification and market growth.Market related, risk adjusted return on new investment as approved per investmentImplementation of Government’s ESI/EDI restructuring policies and plans within Eskom’s control executedImplementation of internal restructuring milestones and plans towards Eskom’s strategic intent-Generation cluster subsidiaries-Generation BEE sale-SAPEX-EDI preparation-Repositioning of Eskom Enterprises

Budget (R’m)Investment return require-ment matrixGovernment policies & plansKey milestones & target dates

20Individual projects within agreed limitsAchievementAchievement of dates

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CONCLUSIONSDuring the first decade of democracy, Eskom has:

Delivered on its developmental mandate Sustained financial performance Delivered world class technical performance Practiced sound corporate governance Become a global player of note

There are significant key challenges ahead. Eskom is ready for the

challenge and the next decade of delivery!

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ESKOESKOMM

Holdings LtdHoldings Ltd

The EndThe End