Eskom’s Capacity and New Build Context

4th SA-EU Clean Coal Working Group

Emperor’s Palace, 5 November 2012

Net Capacity Mix – 31 March 2011

2012/11/19 2

Power Station Lifetimes…

3

~ 17 120MW of new capacity

(5 222MW installed and

commissioned )

~ 4 700km of required transmission

network (3 268km installed)

Eskom’s current capacity expansion

4

Commissions of new stations

Return-to-service (RTS) New coal Peaking & renewables

Mpumalanga

refurbishment Transmission

Komati (1 000 MW)

Camden (1 520 MW)

Grootvlei (1 200 MW)

Medupi (4 764 MW)

Kusile (4 800 MW)

Ankerlig (1 338.3MW)

Gourikwa (746 MW)

Ingula (1 352 MW)

Sere (100 MW)

Arnot capacity increase

(300 MW)

Matla refurbishment

Kriel refurbishment

Duvha refurbishment

765kV projects

Central projects

Northern projects

Cape projects

3 720 MW 9 564 MW 3 536.3 MW 300 MW ~ 4 700 km

In support of

First Unit Last Unit

Medupi 2013 2016

Kusile 2014 2017

Ingula 2014 2014

5

• Internal Energy Efficiency

• Saving a billion kWh within Eskom - . equivalent to boiling 500 million typical kettles for one hour.

• Contributing to the National Energy

Efficiency Strategy (NEES) target for the power generation sector (15% reduction in parasitic electrical usage by 2015)

• Accelerated DSM

• The short term target is to save 3000 MW over the next 6 years and 8000 MW by 2025.

In the short term, the most urgent option is to practise and encourage energy efficiency…

ENERGY EFFICIENCY

2012/11/19 6

In future, the demand for electricity is forecast to increase

The Integrated Energy Plan 2010 forecast an average annual growth in

demand of 2,84% per annum, with GDP growth at 4,5% per annum

7

Acknowledgement - IRP Summary

Acknowledgement: the slides had been compiled from the Document

INTEGRATED RESOURCE PLAN FOR ELECTRICITY 2010-2030

Revision 2

FINAL REPORT

Ref: www.energy.gov.za

The IRP 2010 plan projects significant quantities of renewables

9

Total CO2 emissions remain below 275 Mt p.a. in 2030, emission intensity is reduced by ~34%

0

50

100

150

200

250

300

350

Mt CO2 p.a.

Existing coal

Committed new coal

Additional new coal

OCGT/CCGT

2030 2025 2020 2015 2010

Long-term emission target of 275 Mt p.a.

912 g/kWh 600 g/kWh 821 g/kWh

-34%

Percentage of new build – (~43GW new capacity)

2012/11/19 10 DIVERSIFICATION

11

The Eskom Factor is an assessment of the overall

footprint of Eskom in South Africa

Objectives Eskom Factor

Report geared towards a broad readership, to form a

basis for further stakeholder engagement

Triple bottom line assessment

Economic Social Environmental

Assessment of various indicators along the three dimensions...

...leads to figures that stick in readers' minds

3% impact on S.A. GDP

through initial and

direct effects

Over 516 000 people sustained

by Eskom

230 Mt of CO2 emitted in

2011

• Determining Eskom's economic, social and environmental footprint

• Transparent communication and engagement with stakeholders

• Fostering a more conscious decision-making process

• Setting the standards for economic, social and environmental footprint assessment in South Africa and the world

Source: Eskom, BCG

12

Corporate governance and administration

"Usage"

Serving South Africa

with electricity

Scope was determined firstly by grouping Eskom's

activities…

"Operate"

Generation, buy,

transmission and

distribution

"Build"

Design and construction of

new facilities

Co

re a

ctivitie

s

Su

pp

ort

activitie

s Human Resources

Investor relations, finance and taxation

Marketing and communications

Compliance and policy

Broad Based Black Economic Empowerment

Source: Eskom, WBCSD, BCG analysis

Activity map as a starting point to map Eskom’s

economic, social and environmental impact

Research and development

13

And secondly by considering impacts generated

outside Eskom’s “borders”…

Impacts directly attributable to Eskom were

considered (where data was available)

Suppliers Customers

Use of resources

Greenhouse Gas

emissions

Jobs at suppliers

Ecological impact

of mining

Providing power

at competitive

prices

14

Co

re a

ctivitie

s

Su

pp

ort

activitie

s

Economic growth engine

Impact on local

communities

Environmental

footprint

3

4

Employer, job creator and

skills developer

Enabler of S.A.

development through

electricity provision

1

Catalyst for change in South Africa

6

5

2

Eskom is pivotal in the development of South Africa

"Usage" "Operate" "Build"

Creation of jobs & skills dev.

Waste and emissions

Use of resources

Intruding local communities

Waste and emissions

Use of resources

Creation of jobs & skills dev.

Electrification

Contribution to GDP Contribution to GDP Availability and reliability

Corporate governance and administration

Human Resources

Compliance and policy

Marketing and communications

B-BBEE policy

Investor relations, finance and taxation

Price and competitiveness

Energy Efficiency

Intruding local communities

Research and development

Corruption control

Transparency and disclosure

Labour standards

Labour relations

Equity requirements

Internal & external comm.

Impact on public

accounts

Econ. contr. through

financing act.

Legal Policy Tax

Pilots and Demonstratio

ns

B-BBEE seven pillars

Negative

Both impacts

Positive Economic

Social

Environm.

Source: Eskom, BCG analysis

15

Employer, job

creator and

skills developer

Impact on local communities

Environmental footprint

Enabler of S.A. development

through electricity provision

Catalyst for change in South Africa

Economic growth engine

Over 129 000 people

employed in Eskom cloud

and about 516000

supported by Eskom

About 16 000

potential job losses out of 8.5m employed due to

forecast price increases

298000

training days, equivalent to

7 days training per

employee

Over 4 million homes

electrified since the start of

the electrification

programme in 1991

1 810 kt of SOx and 977 kt

of NOx emitted

230 Mt

of CO2 emitted – future

reduction of relative CO2

emissions

54%

of staff employed at new

builds sites are from the

local districts

40 families

in total to be relocated to

new homes, specifically

from Ingula and Kusile

sites

R110m

invested in road repairs in

2011 of R950m allocated to

2013

R45m

invested in the 49M energy

efficiency campaign

3%

Initial & direct contribution

to S.A. GDP

Around 47bn

capital expenditure

52%

of expenditures on

B-BBEE compliant

companies

Around 80%

local content committed in

capacity expansion

contracts concluded

Over 60 000 jobs

in non-mining related

industries suppliers

327bn litres

of water consumed

2.4 GW

of low CO2 emission

nuclear and hydro capacity

Key figures and analysis from the report

… and there are key figures to support this

Source: Eskom; BCG; Note: Figures partly rounded and relate to the financial year 2011

6TWh

forecasted energy gap in

2011, managed through

tight operational controls

Level 2

contributor on B-BBEE

compliance

300 000

beneficiaries from 254

projects assisted by the

Eskom Foundation

R500m

spent on R&D and Demos to

improve operations and

secure future energy options

Negative Both impacts Positive

Ranked 2nd

lowest cost country on

electricity supply pricing out

of 16 countries surveyed

2011

67

employee, contractor and

public fatalities (and the

affect on their families)

5 IPPs

signed power purchase

agreements (totaling

373MW)

16

Economic Growth Engine

On-going

contribution to Gross

Domestic Product

(GDP)

Direct impact on GDP

through initial and direct

effects of the local

portion of the capital

investments, primary

energy, wages and other

Opex. Eskom is the

largest coal and logistics

buyer in SA

Economic

stimulus through

new build projects

Capital expansion

programme to 2018

amounts to R340bn, is

one of South Africa's

largest economic stimuli.

This includes two of the

world’s largest dry

cooled, coal-fired power

plants

Development

of new industries

in South Africa

Promoting shared

growth

Direct GDP impact of

about 3 % of S.A. GDP

R47bn Capital

Investment in 2011

80%

contracted local

content in 2011

52% of

expenditures on

B-BBEE compliant

companies in 2011

Money strategically

spent to nurture

sustainable development

of new industries in S.A.

Eskom contracted, on

average, 60% local

content for the mega

new build project spend

during their construction

Support for principles of

New Growth Path.

Surpassed B-BBEE target

for the first time in 2011.

Active role beyond South

African borders in

particular in the SADC

region

Note: Figures relate to financial year 2011

17

Employer, job creator and skills development

Employer and job

creator

Providing numerous

jobs both internally and

at suppliers. By applying

family multiplier, more

than 516 000 people

sustained by Eskom

More than 129 000

people employed in

Eskom cloud within

South Africa

Over 60 000 jobs

in non-mining related

industries’ suppliers

South Africa's

largest training

ground

Extensive training

programme for Eskom

employees. Eskom

suppliers required to

train their workers,

leaving behind an up-

skilled workforce

Contribution to job

diversification

New build programme

allows for the creation of

jobs on manufacturing,

construction, business

services, amongst other

industries

Note: Figures relate to financial year 2011

Around 298 000

employee training

days achieved,

equivalent to 7days

training per employee

According to a recent

macro-economic study an

estimated 16000 jobs

could potentially be lost

due to price increases.

Incline Block Tariff is

designed to protect low

income / low energy users

16 000 potential job

losses out of

8.5m

employed due to

forecast price

increases

Potential job

losses

18

Substantial impact on local communities

Creator of local

employment

Significant

infrastructure

investments

Careful

management of

relocations

New build projects

provide employment

opportunities to locals;

with further efforts

through contractor

academy programme

About 54% of

employees at new

builds sites originate

from the local

districts

Negative impact on road

infrastructure mitigated by

significant investments in

road improvements. Eskom

investing in sewage,

telecom and other

infrastructure to the benefit

of the communities

R110m

invested in road

repairs in 2011

Negative impact on local

people due a need to

relocate for infrastructure

development. Relocations

are managed carefully to

ensure that the standard of

living of the relocated

families is maintained or

improved.

40 families in total to

be relocated to new

homes specifically at

Kusile and Ingula

Health and

Safety

Commitment towards "zero

harm" Eskom value

through the pursue of

elimination of fatalities,

peer reviews of risk control

interventions and sharing

learnings

67 employee,

contractor and public

fatalities in 2011 Note: Figures relate to financial year 2011

19

Around 2.4 GW of low

CO2 emission nuclear

capacity

Negative environmental footprint

CO2 & climate

change

Significant CO2 emissions

driven by high reliance on

coal

CO2 emissions per kWh to

be reduced through new

technologies and climate

change strategy

230 Mt of CO2 emitted in

2011 – future reduction of

relative CO2 emissions

Use of resources

Water and coal most

prevalent used resources.

Roll-out of dry cooling and

alternative technologies ,

expected to bring water

consumption down by 60bn

liters until 2030

327bn litres

of water consumed

SOs, NOX and

particulates

Implementing filtering

technologies will bring

down SO2 and NOx

emissions responsible for

local air pollution

significantly

1 810 kt of SO2 and 977

kt of NOX emitted in 2011

Nuclear &

Domestic Hydro

Low carbon nuclear power

generation second largest

portion in our generation

mix

Note: Figures relate to financial year 2011

20

Enabler of South African development

Advancing

electrification

Closing

the supply gap

Price and

competitiveness

Energy Efficiency

initiatives

Supporting the

government's objective of

advancing electrification

and could reach universal

access by 2020.

Universal access could be

achieved earlier with

targeted funding

4 million homes

electrified since

beginning electrification

programme in 1991

Current new build

programme, along with

investments in

transmission and

distribution will significantly

enhance availability and

reliability

6 TWh forecasted energy

gap in 2011, managed

through tight operational

controls

A 2011 NUS study of 16

countries found South

African electricity prices to

be competitive, ranked the

second cheapest in the

world , with Canada first

Despite recent price

increases, SA electricity

prices remain competitive

Major nationwide "49m"

campaign launched recently

Substantial efforts to raise

awareness of efficient use of

electricity both for

households and businesses

R45m invested on 49m

energy efficiency

campaign in 2011

Note: Figures relate to financial year 2011

2

1

21

Catalyst for change

Corporate

governance

Adhering to three standards

of accountability,

transparency and

responsibility in daily

business

Contributing to SA

leading position on

anti-corruption

performance

Regulation and

government

policies

Full support of regulatory

bodies and active

contribution to the

realization of national and

international development

goals

Engagement in IRP,

COP, NCCC etc.

Innovation through

Research & Development

Significant R&D investment with

focus on new technologies

development and demonstration

Projected 20.5% p.a. growth of

research budget over next five

years

R500m invested in R&D in

2011 to improve current

operations and investigate

future energy options

Note: Figures relate to financial year 2011 Source: Eskom, BCG analysis

Seven pillars

of B-BBEE

Solid compliance with B-

BBEE policies

Level 2 contributor on B-

BBEE compliance

Annual investment of 62

million rand in CSI, mainly

related to education and

training

More than 300 000

beneficiaries (from 254

projects) supported by

Eskom Foundation

Thank you

Presented by Gina Downes Climate Change & Sustainability Department Strategy & Risk Management Division Eskom gina.downes@eskom.co.za