CORP 3141 Finance (Foreign Exchange) Clarification Date 15 May 2015

15 May CORP 3141 Eskom, in the normal running of its business, has exposure to foreign currency exchange rate movements and in being one of the larger corporates, has direct access to the foreign currency trading markets. In order to eliminate any exposure to the volatility of the currency exchange rate markets, Eskom has taken a decision to manage any of these risks.

CORP 3141 The management of the risk entailed Eskom developing payment options involving foreign currency exchange rate risk. Namely : 1. Payment Method 1A - payment in foreign currency directly overseas to a nominated foreign beneficiary. N.B Proof of importation is required for payment to be effected. (Tenderer must be direct importer) 15 May

CORP Payment Method 1 B - Payment in foreign currency into a duly authorized CFC ( Customer Foreign Currency) Account. However The responsibility rests with the tenderer to provide evidence that they have a duly authorized CFC account and that they have the South African Reserve Bank’s approval to invoice Eskom (another locally registered entity) in foreign currency and to receive these foreign currency proceeds into their CFC a/c Eskom. Will require proof of these approvals (Copy of bankers application to SARB and copy of the official response) NB: Proof of importation will be required. Tenderer must be direct importer) 15 May

CORP Payment Method 2 – Payment in Rand, where the Rand payment is linked to Rate of Exchange. Eskom has special dispensation from SARB to hedge these exposures, and payment will be made at the spot rate of exchange obtained in cancelling the hedge (forward cover). Tenderers will have to provide a letter of indemnity advising that they(or their sub-contractors) will not be availing of forward cover. N.B Proof of importation is required N.B Tenderer must be the direct importer N.B Only payment of goods can make use of this payment method once Risk and Governance and the Eskom Treasury Department approve this method of payment. 15 May 20155

CORP 3141 Should a tenderer propose a fixed Rand price for the imported content (i.e. assume the exchange rate risk), Eskom will consider this proposal) However : Eskom reserves the right to check the market-relatedness of the cost to be passed on to Eskom. This price comparison must be done simultaneously The tenderer will be required to match or better the Eskom quote or Eskom will hedge the risk and payment will be in accordance with Payment Method 1A. If the Tenderer assumes the risk, Eskom will not be liable for any exchange rate movement for the duration of the contract. 15 May 20156

CORP 3141 Kindly take note of the following: During contract execution, and Eskom has hedged the exchange rate risk, should a supplier indicate a change in currency of payment or payment method, any associated costs will be borne by the supplier. During contract execution, and Eskom has hedged the exchange rate risk, should there be any delays by the supplier which result in the forward cover in place having to be modified to accommodate these changes, the additional forward covers costs incurred by Eskom will be recovered from the supplier. 15 May 20157

CORP 3141 Any questions ? 15 May 20158

Thank you