Operation Thekgo - Principals Driving Total System Reliability & Capacity AMUE Convention 16 October 2007 Greg Tosen

Operation Thekgo 2 Contents Key Demand & Supply Side Challenges facing South Africa Total System Capacity & Reliability (TSC&R) – the Thekgo Approach TSC&R Journey (last 18 months) –Emergency Preparedness –Short-term Reliability – Reliability Enhancement & Role out Conclusions

Operation Thekgo 3 South African Electricity Situation

Operation Thekgo 4 Electricity Demand and Supply – key challenges South Africa has reached the end of its surplus generation capacity 1st challenge: Avoiding mismatch between demand and supply –Excess capacity - stranded resources –Capacity shortage - constrained economic growth 2nd challenge: Correct choice of capacity to be constructed from an array of available options that differ dramatically in terms of: –Cost (construction and operating) –Lead time to construction –Environmental impact –Operating characteristics

Operation Thekgo 5 Long Term Demand forecast Eskom position based on 4% electricity growth supporting 6% economic growth

Operation Thekgo 6 Diversify Primary Energy Mix ExistingMix by 2025

Operation Thekgo 7 Total System Capacity & Reliability Action Centre Mandate The action centre will: Co-ordinate and integrate total system capacity and reliability of the business over the next 36 months –Oversight of the overall capacity and reliability targets  Develop the targets  Develop RACIs addressing Action Centre and Line –Oversight over all processes across the value chain to ensure the achievement of targeted capacity and reliability –Identify, mitigate risks and implement contingencies –Be the integration point across the value chain to ensure total systems capacity and reliability –Implement measures across all areas of the business to address the long term capacity requirements and reliability of the total system –Address all people, culture and stakeholder management issues pertaining to capacity and reliability –Ensure focus across the organisation on reliability and capacity as fundamental priorities. –Align existing initiatives and optimise resources and effort Implement a robust emergency response process

Operation Thekgo 8 Vulnerability Adaptive Capacity Reduction Readiness Response Recovery System adaptive capacity System vulnerability time KPI Shock Resilient Organisation Ability to rebound Ability to recover easily & quickly from adversity

Operation Thekgo 9 Key Initiatives and Objectives – 36 months Ensure required level of total system capacity and reliability for the next 36 months. Immediate focus on Western Cape & Eastern Implement an interim and end-state emergency response process including a command centre Enhance and Institutionalise Eskom’s current reliability management Framework. Feedback Learning from the Short Term initiatives into the existing business and long term initiatives Reliability and capacity is positioned as a top business priority Operation Thekgo is effectively positioned. Ensure consistent and proactive communication with all stakeholders regarding capacity and reliability. A robust and reliability culture supported by the correct HR processes, quality and quantity of skills. Short Term Reliability Emergency Response Command Centre Reliability Enhancement Stakeholder & Communications Culture and Change

Operation Thekgo 10 The TSC&R Journey for the next 36 months - Background and Information Establish Interim Emergency Response End State Design & Implement May 2007 and 5 yr plan

Operation Thekgo 11 Imperatives for Establishing the Emergency Response Command Centre Integrated Emergency Response Strategic Management of Stakeholders Strategic and Tactical Emergency Response Create a central co-ordination point that can respond to any event in an integrated manner Reduce duplicated effort and drive alignment Focus will mostly be on events or issues with an Eskom-wide or multiple division impact Create a central co-ordination point that can respond to any event in an integrated manner Reduce duplicated effort and drive alignment Focus will mostly be on events or issues with an Eskom-wide or multiple division impact Focus on communications between divisions and regions in an integrated manner Foster consistency in communication of messages to stakeholder groups in an emergency situation Focus on communications between divisions and regions in an integrated manner Foster consistency in communication of messages to stakeholder groups in an emergency situation Leadership driven response to emergencies Strategic responses to emergencies, aligned with divisional operational response plans Leadership driven response to emergencies Strategic responses to emergencies, aligned with divisional operational response plans Addressing the need to react differently to an emergency from an Eskom national perspective

Operation Thekgo 12 Gx (where applicable) Gx (where applicable) Tx Dx KSACs Other Divisions as required Other Divisions as required ERCC Operating Model – Regional Joint Command Centres (RJCC) ERCC Megawatt Park ERCC Megawatt Park Eastern RJCC Mkondeni Eastern RJCC Mkondeni North East RJCC Witbank/ Nelspruit North East RJCC Witbank/ Nelspruit Northern RJCC Pretoria/ Polokwane Northern RJCC Pretoria/ Polokwane Central RJCC Simmerpan Central RJCC Simmerpan North West RJCC Bloemfont. North West RJCC Bloemfont. Western RJCC Bellville Western RJCC Bellville Southern RJCC East London Southern RJCC East London NATIONALCONTROLCENTRENATIONALCONTROLCENTRE NationalEmergencyCentresNationalEmergencyCentres Gx JOC Tx JOC Dx JOC KSACs Other Gx JOC Tx JOC Dx JOC KSACs Other Gx JOC Tx JOC Dx JOC KSACs Other Gx JOC Tx JOC Dx JOC KSACs Other Tx JOC Dx JOC KSACs Other Gx JOC Tx JOC Dx JOC KSACs Other Tx JOC Dx JOC KSACs Other

Operation Thekgo 13 Emergency Response Protocols

Operation Thekgo 14 The TSC&R Journey for the next 36 months Establish Interim Emergency Response End State Design & Implement May 2007 and medium-term outlook

Operation Thekgo 15 Short-term Reliability Ensure required total system capacity and reliability for next 5 yrs Ensure proper alignment and coordination of all capacity and reliability related initiatives across all functions and areas within Eskom Establish reliability assessment and reliability readiness Equip the organisation to live with an increase of power system risk

Operation Thekgo 16 Short Term Reliability – Approach Enhance the preparedness of Eskom to address total system reliability for key periods Assess Effectiveness Action Solution Identify Reliability Risk Assessments Ongoing Coordination of Reliability Initiatives Reliability Readiness Audit 18 month plan 5 yr plan Regional Reliability Teams

Operation Thekgo 17 Short Term Reliability – Approach Enhance the preparedness of Eskom to address total system reliability for key periods Assess Effectiveness Action Solution Identify Reliability Risk Assessments Ongoing Coordination of Reliability Initiatives Reliability Readiness Audit 18 month plan 5 yr plan Regional Reliability Teams Risks

Operation Thekgo 18 Key Power System Risks RiskComment Extended Outage of a large coal fired thermal unit or of a nuclear unit (600 to 900 MW) impacting on stock pile levels, creating capacity shortages (needing extended use of demand side resources) and increased vulnerability to large scale interruptions based on location of generation (as transmission corridors become heavily loaded) While there have been a number of short duration generator outages, there has been no extended outage of any of the large units Outages of one or two lines and/or transformers in major transmission corridors resulting in large scale interruptions and possible rolling load shedding if recovery times are long No major transmission risks have materialised. The risk remains unchanged Operation of special protection systems are not effective leading to cascading outages and increased vulnerability to large scale interruptions and blackout. No incidents have occurred The risk remains unchanged Dramatic reduction in coal stockpiles resulting in units having to shut down. Vulnerability has increased to this risk due to the low level of stockpiles currently. Stockpile risks The risk still remains Unavailability of liquid fuel for open cycle gas turbinesRisk remains unchanged

Operation Thekgo 19 Confidence levels ( data) 1900 MW O.R.

Operation Thekgo 20 Short Term Reliability – Approach Enhance the preparedness of Eskom to address total system reliability for key periods Assess Effectiveness Action Solution Identify Reliability Risk Assessments Ongoing Coordination of Reliability Initiatives Reliability Readiness Audit 18 month plan 5 yr plan Regional Reliability Teams Plans

Operation Thekgo Month Rolling Plan – Approach & Classification Summer ’06 Oct ’06 to Mar ‘07 Summer ’06 Oct ’06 to Mar ‘07 Winter ’07 Apr ’07 to Sep ‘07 Summer ’08 Oct ’07 to Mar ‘08 Summer ’08 Oct ’07 to Mar ‘08 18 Month Rolling Plan Updated every 6 months 6 Month Rolling Plan Bi-Monthly Approach Philosophy Assessing the vulnerability to the organisation from an integrated perspective. Plan is developed using divisional input for compiling the vulnerability, and assessing the system adaptive capacity. Assessing the vulnerability to the organisation from an integrated perspective. Plan is developed using divisional input for compiling the vulnerability, and assessing the system adaptive capacity. Green –If the Actual Supply (AS) is greater than the Required Supply (RS) and meets the 1900 MW reserve. Yellow –If the Actual Supply (AS) is greater than the Required Supply (RS) and the deficit is less than 1000MW. –Probably use of Contracted DMP resources and EL1. Orange –If Actual Supply (AS) deficit to RS is between 1000 MW and 2000 MW. –Probably use Interruptible loads. Classification System Red –If Actual Supply (AS) deficit to RS is between 2000 MW and 3000 MW. –Probably use interruptible loads and have some mandatory load shedding. Brown –If the Actual Supply (AS) deficit to RS is more than 3000MW. –Probably have rotating mandatory load shedding

Operation Thekgo 22 Capacity Adequacy – Winter 2007 DateWeekForecastAvailable CapacityLess OR and UASurplus / Deficit 04-Jun Jun Jun Jun Jul Jul Jul Jul Jul Aug Aug Aug Aug Sep Sep Sep Sep Ver 5

Operation Thekgo 23 Short Term Reliability – Approach Enhance the preparedness of Eskom to address total system reliability for key periods Assess Effectiveness Action Solution Identify Reliability Risk Assessments Ongoing Coordination of Reliability Initiatives Reliability Readiness Audit 18 month plan 5 yr plan Regional Reliability Teams Teams

Operation Thekgo 24 Reliability Risk Team Structure (R.A.C.I.) Integrated Reliability Risk Forum Exco SoS Exco Thekgo Action Centre CTAD Regional Reliability Teams Implementation of Reliability Risk Mitigations and Actions (Accountable) Custodians of Reliability Risk (Responsible) Guidance re Mitigation & Implementation Support (Inform) Auditing of Action Implementation & Mitigation Effectiveness (Consult) Custodian of Overall Reliability Risk Process (Responsible)

Operation Thekgo 25 Approach to Addressing the Reliability Situation in the Regions Network Strengthening Load Reduction Initiatives Load Reduction Initiatives Integrated Customer Mgt Integrated Customer Mgt Stakeholder Management Integrated Reliability Risk Mgt Integrated Reliability Risk Mgt Emergency Preparedness Emergency Preparedness Skills & Resources Operation Thekgo Reliability Team PMO Assessing overall reliability risks in an integrated approach for the region Managing and controlling the activities of the resilience team Risk, issue and deliverable management

Operation Thekgo 26 Approach to Addressing the Reliability Situation in the Regions Network Strengthening Load Reduction Initiatives Load Reduction Initiatives Integrated Customer Mgt Integrated Customer Mgt Stakeholder Management Integrated Reliability Risk Mgt Integrated Reliability Risk Mgt Emergency Preparedness Emergency Preparedness Skills & Resources Operation Thekgo Reliability Team PMO Assessing overall reliability risks in an integrated approach for the region Managing and controlling the activities of the resilience team Risk, issue and deliverable management

Operation Thekgo 27 Region Risks Unifirm SubstationsSingle Contingency lines R Load is shed after the loss of a single transformer. O Momentary load shedding is required after the loss of a transformer but all load is restored after remedial actions have been implemented. G No load shedding is required after the loss of a single transformer.

Operation Thekgo 28 Approach to Addressing the Reliability Situation in the Regions Network Strengthening Load Reduction Initiatives Load Reduction Initiatives Integrated Customer Mgt Integrated Customer Mgt Stakeholder Management Integrated Reliability Risk Mgt Integrated Reliability Risk Mgt Emergency Preparedness Emergency Preparedness Skills & Resources Operation Thekgo Reliability Team PMO Assessing overall reliability risks in an integrated approach for the region Managing and controlling the activities of the resilience team Risk, issue and deliverable management

Operation Thekgo 29 DSM Role out ESSENTIAL SUPPORT FUNCTIONS TO ALL OF THE ABOVE Comprehensive National Demand Management Programme Virtual Power Station Increased Demand Side Management target of 3000MW by 2012

Operation Thekgo 30 Conclusions The system remains extremely tight from a capacity point of view for the months and years ahead –Probability of load shedding is relatively high largely due to unexpected performance changes in generation or transmission plant. –Relief only when several new coal fired units are built and reserve margin goes over 15% (2011 to 2013) Focus is required on current system, as well as new build programs –Integration of new projects is going to put the network under stress and close cooperation required between all divisions.

Operation Thekgo 31 Integration between these elements is key for Eskom to handle their current and future challenges. Planning Security of Supply Risk Management Emergency Response Daily plan Weekly Plan Monthly Plan 18 Month Plan 5 Year Plan 15 Year Plan Life of Plant Supply Demand Risk / Shortfall Probability of Risk Thekgo value

Thank You