6/8/12 PPC-Energy: Update on Window 1 RE-IPP Procurement Programme. 07 June

6/8/12 Presentation Content  Introduction.  RE-IPP Procurement Process Background.  Overview of Evaluation Process (bid window 1).  Sequence of event.  Evaluation Composition.  Preferred Bidder Results and MW allocation.  Financial Evaluation.  Bid Window 2 progress. 22

6/8/12 Introduction The procurement documents were released on the 03 of August 2011 and compulsory bidders conference for the first and second window on the 14 of September The document provides for procurement of 3725MW in five different rounds subject to the availability of the MW The Department, under bid window one: – Received 53 Bids by the 4th of November – Announced 28 preferred bidders in December 2011 With regards to bid window two: – Received 79 bids on the 5th of March 2012 – These bids amount to 3255MW whilst the cap was 1275MW 33

Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level Ninth Outline LevelClick to edit Master text styles – Second level Third level – Fourth level » Fifth level Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level Ninth Outline LevelClick to edit Master text styles Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level Ninth Outline LevelClick to edit Master text styles – Second level Third level – Fourth level » Fifth level 6/8/12 Procurement documents: Request for Proposals Part A: General Requirements and RulesPart B: Qualification Criteria Power Purchase Agreement Wind PPASolar PPA Implementation Agreement Contract between the IPP and the DepartmentObligation for IPP to deliver on economic development Part C: Economic Development CSP PPA…….etc In buyer default – Department to pay the IPP Small hydro PPA Procurement Process Background 44

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6/8/12 Part c evaluation 77 Price 70 % 30 % Economic Dev Job creation Socio -Economic Local content Preferential Procurement Project cost Rand/MW

6/8/12 Overview of evaluation process (Bid Window 1) 88

6/8/12 99 EventDate Ministerial determination (in consultation with National Energy Regulator of South Africa) 3, 725 MW of new generation capacity required by 2016 Q2 of 2011 Programme launch DoE issued a Request for Proposals 31 July 2011 Procurement uploaded on DoE website Interested Bidders requested to register on a dedicated programme site: 03 August 2011 Compulsory Bidders’ Conference Interested Bidders taken through the bidding process Drew interest from across the globe 14 September 2011 Close of 1st Bidding Window Evaluations ensued from 04 to 28 November 2011 Conducted by international and local financial, technical and legal experts 04 November 2011 Announcement of Preferred Bidders 28 preferred out of 53 Projects need to reach financial close by June December 2011 Sequence of Events: Bid Window 1

Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level Ninth Outline LevelClick to edit Master text styles – Second level Third level – Fourth level » Fifth level Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level Ninth Outline LevelClick to edit Master text styles Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level Ninth Outline LevelClick to edit Master text styles – Second level Third level – Fourth level » Fifth level 6/8/12 Evaluation team: International reviewers Legal review – Linklaters (UK) Technical review – Blueprint consult Financial review – cross- moderation between the two Financial Advisory firms Governance review – Ernst & Young Legal evaluation team Bowman Gilfillan Edward Nathan Sonneberg Ledwaba Mazwai Webber Wentzel BKS Technical evaluation team Mott Macdonald Financial evaluation team Ernst & Young PWC Evaluation Streams: Legal Environment Environmental Authorization Legal Land Land right Notarial lease registration Proof of land use application Legal Commercial Acceptance of the PPA Project structure Economic Development Contributor status level 5 Compliance with threshold Financial Full and partial price indexation Technical Eligibility Energy resource Evaluation Composition 1010

6/8/12 Renewable Energy IPP’s: Window 1 Preferred Bidder 1111 Allocation to Preferred Bidders: Window 1 Allocation per Determination Still Available MW allocation per Determination MWPercentageMWPercentage Solar PV % % Solar CSP % % Wind % % Biomass % %12.50 Biogas % %12.50 Landfill gas % %25.00 Small Hydro % %75.00 Total MW % % Total Capacity - Bids Received Percentage Preferred Bidders66.5% Number of Passing Bids28

6/8/12 Contracted Number of Jobs: Window 1 & Window 2 Compared Jobs during constructionJobs during operations First Round Second Round

6/8/12 Financial Evaluation (Bid Window 1) 1313

6/8/12 Introduction Majority of bids to a generally high standard; No bidder submitted a fully compliant Part B submission; Significant number of “failures” related to non-material omissions and inconsistencies perhaps reflecting tight timeframe for bid preparation; 1414

6/8/12 Financial Evaluation Key areas of shortcoming included: Letters of support not provided by parent company &/or funders; Rationale and quantum of success fees not fully described; Limited information on hedging strategies; Incomplete financial accounts for equity participants Calculation of partial/fully indexed tariffs not done comprehensively. 1515

6/8/12 Financial evaluation results Results post-clarification: Solar PVWindCSPHydroTotal Pass (MW) No. Projects Fail (MW) No. Projects

6/8/12 Financial Analysis – Tariffs Majority of bidders have priced at or just below the applicable technology price cap; Similarly most bidders have shown a strong preference for a fully indexed tariff; This may reflect bidder expectation that Round 1 would be undersubscribed. 1717

6/8/12 Bidding Price Differential: Window 1 & Window 2 Compared Technology 2nd Round Average 1st Round AverageDifferencePrice Cap Solar PhotovoltaicR R %R Onshore WindR R %R Small HydroR %R Concentrated Solar Power R R %R Landfill GasR

6/8/12 Overview of evaluation process (Bid window 2) 1919

6/8/ Financial Investment: Bid Window 2 Number of Projects Net Capacity (MW) Total Project Cost (R' ) Concentrated Solar Power Northern Cape150R Landfill Gas Gauteng114R 237 KwaZulu Natal13R 52 Onshore Wind Eastern Cape10619R Northern Cape2238R Western Cape10599R Solar Photovoltaic Eastern Cape6190R Free State4145R Gauteng3136R Limpopo4127R Mpumalanga19R 248 North West367R Northern Cape23799R Western Cape7221R Small Hydro Free State28R 202 Northern Cape110R 498 Grand Total R

6/8/12 Preferred Bidders Geographic Distribution 2121

Click to edit Master subtitle style 6/8/12 Thank You 2222