BIDDER’S CONFERENCE: Eskom Grid Connection Process and related matters Date: 16 August 2012

In support of Table of Contents 1. Introduction 2. Eskom applications for renewable energy grid connections as at 31 July Grid Connection Process for Generators including IPPs 4. Eskom Connection Agreements 5. Applications for Bid Round 3 6. Rationale for an Eskom Grid Access Unit for Generators 7. Eskom process, related to the Eskom Grid Access Unit role

In support of 1. Introduction Eskom welcomes IPPs in the electricity supply industry and is committed to facilitate efficient and non-discriminatory access to its networks. This supports the DoE endeavours to establish new (including independent) power generation, as well as renewable and co-generation capacity. Benefits that IPPs can bring include the following: Generators are distributed on the network – reduced network losses, Contribution to supply/demand balancing, reserves and ancillary services, and Additional investment into energy sector, skills and job creation. Eskom supports these initiatives and is committed to facilitate the entry of IPPs and will work in partnership with the National Energy Regulator of South Africa (NERSA) to ensure this happens.

In support of 2. Eskom applications for renewable energy grid connections as at 31 July 2012 Quotation, Contracting & Connection of generators Consultation with, and advising of IPPs Operation of IPPs and generators All current and future Eskom organisational requirements, are accommodated by the following processes Manage service relationships with IPPs Facilitate Grid Access for generators

In support of 3. Grid Connection Process for Generators including IPPs Submit Part 1 of App. Form Eskom Generators DEA Provide Cost Estimate Letter Produce prelim design and cost project Provide EIA approval Issue Budget Quote Perform /Approve Detailed Design Process Part 1 of App. Form Accept Budget Quote Perform Detailed Design (Self Build Option) Request EIA for project Accept Cost Estimate Letter & Submit Part 2 of App. Form A 8B Part 1 of Application Form contains basic generator contact details and connection requirements. Application forms are verified, captured on an Eskom Generator database and allocated to an IPP Executive. A Grid or Network Planner will assess the network requirement of the application. The IPP Executive will then compile and deliver a Cost Estimate letter to the IPP. The Cost Estimate letter will contain an estimate of costs and timelines, scope and quotation fees. On acceptance of the Cost Estimate letter and payment, Part 2 of the Application Form (Detailed generator technical information) needs to be completed and submitted to Eskom. On receipt of acceptance and payment, Eskom will initiate preliminary design and costing of the project. Bidder must have consulted and agreed on approach to secure Eskom EIAs and Servitudes. A Budget Quote is compiled based on the project cost, which is delivered to the IPP. The BQ will contain the Scope, Cost, Timeframe and T&Cs. Eskom will aim for BQ & agreements to be signed within 5 days of receipt thereof. IPP accepts terms and conditions of the Budget Quote and arranges payment. Eskom will not proceed with the connection works until payment is received. When Eskom performs the detailed design:, Eskom completes and approves the detailed project design. When Generator performs the detailed design, Eskom approves the detailed project design.

In support of 3. Grid Connection Process for Generators including IPPs (cont.) Project Close Out (incl. Cost Reconciliation) Test & Commission connection asset Perform Detailed Design Construct Connection Work (Self Build Option) Project Close out Synchronise Network Asset Eskom IPP DEA Construct Connection Works Test Generator The connection work is completed. The constructed grid connection will be tested and commissioned by Eskom. The generator is synchronised to the Eskom Grid. The constructed IPP facility test certificates are made available to Eskom who in turn issues an operational notification in writing to use the system. The project is closed out, costs reconciled and Bill produced on the billing system.

In support of 4. Eskom Connection Agreements Budget Quote: is the basis for the costs and scope of the connection works. Connection and Use of System Agreement (ie. Distribution or Transmission): Technical : Dispatch, ancillary services Financial : responsibilities, price, invoicing Operations : ownership, events Legal : Liability, confidentiality, dispute resolution, force majeure, termination. Electricity Supply Agreement (ESA): Technical : auxiliary usage, temporary construction supply. Financial : responsibilities, price, invoicing Operations : ownership, events Legal : Liability, confidentiality, dispute resolution, force majeure, termination. Reconciliation Agreement / amendment to Electricity Supply Agreement if the IPP is embedded (e.g. in a municipal network). For municipal connections the bidders need to contact and sign the required agreements with the relevant municipality. Direct Agreement Self Build Agreement PPA with SBO

In support of 5. Applications for Bid Round 3 Eskom welcomes all applications for a connection (Cost Estimate Letter required for the 3 rd bid). Eskom has discussed the timing and resource requirement constraints with the DoE. In general, Eskom requires a minimum of 90 days to process every application for a Cost Estimate Letter − this time-period is disclosed in Eskom’s standard documentation and is referred to in the RFP. Eskom considers it necessary to issue Cost Estimate Letters by no later than 14 Sept 2012 in order to enable the applicants to respond to the DoE, through submission of a bid response, by the deadline of 1 October Eskom has been inundated with requests for Cost Estimate Letters for the 3 rd bid submission phase and cannot commit to delivering the Cost Estimate Letters by 14 Sept 2012 for applications received after 15 June Eskom is committed to the DoE Renewable Energy IPP Procurement Programme and although Eskom cannot commit to completing all Cost Estimate Letters in time for the 3 rd bid submission phase, we will nonetheless endeavour to provide you with a Cost Estimate Letter as soon as reasonably possible.

In support of 6. Rationale for an Eskom Grid Access Unit for Generators Organisation and set up of a new Unit that serves as point of contact/entry for IPPs and services IPP customer needs Set up Unit with sufficient transparency to guarantee non discriminatory grid access for IPPs and generators Create transparency on pricing policy, network contracts, and operating agreements Develop optimised IPP connection process Define operations process for IPPs and generators after the IPPs have been connected Establish clear accountability for IPPs and generators within Eskom Effective organization with process excellence in IPP connection and operations processes Achieve a fundamentally improved image of the way IPPs view the South African electricity market Non-discriminatory grid access to enable IPPs >30% of overall generation capacity by 2030 Mandate of the Grid Access Unit Aspiration

In support of 7. Eskom process, related to the Eskom Grid Access Unit role Quotation, Contracting and Connection of IPPs Consultation with, and advising IPPs Operation of IPPs and generators Manage service relationships with IPPs and generators Facilitate Grid Access for generators The role of Eskom Grid Access Unit for Generators Enabling and facilitating generators (including IPPs) grid access, giving effect to commercial options requires a service relationship, interface management and communication. Managing and integrating the development of appropriate standards, processes, frameworks. Facilitating various connection, grid access and commercial options. Pricing frameworks for generators (e.g. costing of connection and “wheeling”). Developing technical capability for integration of the IPPs and renewable generators. Enabling process and system capability, and facilitation thereof, to ensure grid access. Collecting sufficient data and information, to effectively facilitate, enable, plan and support. Ensuring long-term viability of the Eskom approach.

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