Presented by: Commercial Finance Date: Monday 29 June 2015 Financial Requirements The refurbishment of generator stators, units 1;2 and 3 at Drakensberg Pumped Storage Scheme PS(DPS)2015/DJ/01

2 Financial Returnables 1. Pricing Schedule (Excel File) Consists of following worksheets: 1.Cover 2.Instructions 3.Summary 4.PS5 Schedule 5.Unit 1 6.Unit 2 7.Unit 3 8.Option X 3: Foreign Currency 9.Option X 1: Contract Price Adjustment 10.Prescribed indices Input is required in all cells shaded light green 2. CPA requirements for Local (South African) Goods/Services 3. CPA (IG) Form – indicate Foreign payment method

Cover sheet Tenderers to Enter all relevant details on the cover page 3

4 Summary Sheet Tenderers to Enter: 1.Supplier’s Name This information pulls through into remainder of spreadsheet

5 Activity Schedules- Unit 1-3 COLUMN: EFGHI Tenderers to Enter: 1.PS 5 Allocation into column F: use drop down list This is required for PS5 schedule summary 2. Supplier details:- 2.1Name of supplier into column H 2.2 Factory of Origin into column I Note: some rows and columns that appear in the Excel file are hidden in the above extract

6 Activity Schedules- Unit 1-3 Tenderers to Enter: 1. Unit Price in relevant currency into column J excl VAT 2. Currency type (eg ZAR or USD or EUR) into column M Conversion to ZAR takes place based on your input into sheet “Option X 3” Note: some rows and columns that appear in the Excel file are hidden in the above extract COLUMN: FJKLMN

7 Activity Schedules – “Other” Items Tenderers to Enter: 1.PS 5 Allocation into column F: use drop down list 2.Activity description into column G 3.Supplier details in columns H & I Total 4.Pricing (rate) in column J 5.Currency into column M Note: some rows and columns that appear in the Excel file are hidden in the above extract COLUMN: EFGHIJ

Activity Schedules (Unit 1-3) – FRI 8 Colu mn: V WXYZA ABAB ACAC ADAD AEAE AFAGAG AHAH AIAJAKAK ALAL AMAM ANAN AOAO APAP AQAQ Tenderers to enter: 1.Forecast rate of invoicing over the contract period (column X – BG) 2.Check for no variances in column V Note: some rows and columns that appear in the Excel file are hidden in the above extract

9 Summaries: PS 5 Schedule Tenderers to Enter: 1.Vat into row 48 (automated) Rest of the information pulls through from activity schedules Note: some rows and columns that appear in the Excel file are hidden in the above extract

10 Summary: rows 3 – 10 Note: some rows and columns that appear in the Excel file are hidden in the above extract COL DEFHIJK

Summary: rows 14 – Note: some rows and columns that appear in the Excel file are hidden in the above extract COLUMN:GHIJKLM

12 Activity Schedules (Unit 1-3): CPA Tenderers to Enter CPA per line item: 1.Use drop-down list to select applicable CPA formula per line item into column P 2.Default is “Fixed’ - if left unchanged, offer is Fixed and Firm CPA Formulae are updated in sheet “Option X 1” Note: some rows and columns that appear in the Excel file are hidden in the above extract COL: EFJKMPQ

13 Contract Price Adjustment (CPA) What is CPA? CPA is a mechanism used to track the movement of a contractor’s costs over the Contract period to provide reasonable reimbursement for price fluctuations. CPA determinations are calculated using a pre-determined formula based on the assumed cost drivers of a particular product or service and a recognised index-based system which tracks those cost movements over a period of time. Prices will be fixed for first year and thereafter CPA will apply from anniversary of contract onwards. Separate CPA invoices are submitted for each base invoice once CPA applies ie CPA is not a price increase updated on the contract but rather a price adjustment based on the movement in the applicable index vs the base index

14 Contract Price Adjustment (CPA) ……………contd 15% Fixed Portion minimum (ie can be more eg 35% Fixed) Balance (e.g. 85%) makes use of relevant indices Sum of indices adds up to 100% No in-house indices allowed Proposed indices must be reflective of cost structure Final applicable CPA formulae may be negotiated with successful tenderers

15 Option X1: CPA Formulae Per Formula (A to J) Submitted, the Tenderers must Enter: 1.Description of CPA Formula 2.For the balance of indices (e.g. 85%) making up each formula: % Weights (add up to 100% including minimum 15% Fixed portion) Description Definition from publisher Base month and Index plus Historical data See notes: Instructions) Note: some rows and columns that appear in the Excel file are hidden in the above extract FORMULA No: A ???? The proportions used to calculate the Price Adjustment Factor are: IndexProportionDescriptionBase DateSource (indices prepared by) Historical Data - Index 115%Fixed yy/mm/dd %Total Kindly check input - must add to 100%

16 Option X3: Forex

17 Activity Schedules Exchange rates in sheet Option X1: 1.Accessed from SARB website 7 calendar days before tender closes Select Research, then Rates, then “Select historical exchange rates and other interest rates geAndInterestRates.aspx COLUMN: FJKLMN

18 Forex Payment Methods Payment method 1: Where the contract with a supplier is in a foreign currency and the payment will be effected in a foreign currency………: (1a) into the foreign bank account of the beneficiary (1b) into an SARB-approved CFC account in South Africa Payment method 2: In South African Rand at the selling spot rate of exchange obtained by Eskom’s Treasury on the date that the forward cover is cancelled. Eskom will notify the supplier of the date that the forward cover is cancelled as well as the intended payment date, which will be as per the agreed payment terms. Any exchange rate adjustment after Eskom has notified the supplier of the date and the rate which the forward cover is cancelled, will be for the account of the supplier. Fixed Rand: Provided that the tenderer nominates either Payment Method 1 or 2 as the main tender offer, an alternative payment method offering a fixed price not subject to exchange variation may be offered for Eskom's consideration

19 Forex: Key Concepts 1.Foreign amount being claimed must be proven: commercial invoice for the same amount 2.Any markup to be charged on top must therefore be in ZAR and not Forex 3.Goods imported into the country for stock are treated as ZAR based 4.Tenderer must be importing the goods directly from overseas and not buying from a local distributor, otherwise treated as ZAR based 5.Where tenderer proposes a ZAR-based contract (alternative offer), even then the spot and forward rates must be confirmed with and approved by Treasury If approved, then Eskom is not responsible for any exchange fluctuations 6. CFC account approval is granted for 1 year at a time; supplier must renew validity with SARB timeously Other hedges:  Commodities are hedged too. We will request full information (volumes and prices)  CPA. We will request FRI

20 Preference Points- note for JVs BBBEE certificate submitted for preference points must be for the JV and not for individual entities who are party to the JV

21 Other matters Printing settings for all documents are to be adjusted according to Tenderer’s printer Tenderers to please complete the Excel Pricing Schedule, included on the tender bulletin. Apart from the 2 identical hard copies (original and copy), the pricing schedule must also be submitted in electronic format (CD) in Excel format. The hard copies must be submitted and signed by the authorised signatory. The pricing schedule makes extensive use of drop-down lists; if any are not functioning please contact Mr Dhiren Jingoo

22 Other matters: Financial Analysis Companies Signed Independent Auditor’s Report / Reviews Report Directors’ Report Statement of Financial Position (comparative figures) Statement of Comprehensive Income (comparative figures) Statement of Changes in Equity (comparative figures) Statement of Cash Flows (comparative figures) Notes to the Financial statements Close Corporations Signed Accounting Officers Report Members’ Report Statement of Financial Position (comparative figures) Statement of Comprehensive Income (comparative figures) Statement of Changes in Equity (comparative figures) Statement of Cash Flows (comparative figures) Notes to the Financial statements

23 Other matters: Financial Analysis……….contd. Applicable to companies and close corporations A Signed Guarantee Letter:- If a subsidiary which is tendering does not have its own set of financial statements or its financials are consolidated into that of the Holding company the Holding company must provide a guarantee letter which will allow Eskom to utilise its financial information for the purposes of their subsidiary and to further guarantee any liability which may arise as a result of a subsidiary failing to perform in terms of the contract

24 Questions

Thank you