1 PRESENTATION TO THE PORTFOLIO COMMITTEE PROGRESS ON INFRASTRUCTURE INVESTMENTS CAPE TOWN 14 JUNE 2006

2 ASGISA INITIAL VERSUS REVISED INVESTMENT PLANS ESKOM TRANSNET KEY RISKS WAY FORWARD Overview

3 Infrastructure Investment - History After a protracted decline in investment spend, government plans to increase infrastructure investment significantly

4 Increased Investment Required In order to achieve the growth targets, gross fixed capital formation will need to comprise 25% of GDP per year by 2014 – this will require growth in investment by about 10% per year. Starting the present Transnet / Eskom investment spend at R22.8 billion (based on an average of R26.6 billion per year for five years), would need to grow to R51,4 billion by year ten if all government spending increased proportionately by 10%.

5 The CAPEX Program – Local Content 42% of the CAPEX is projected to be imported: Growth impact of local content development is extremely significant What will it take for local industry to aggressively respond to the opportunities created by the capex program ?

6 The infrastructure investment and capital expenditure program is core to the achievement of ASGISA goals: –Failure to roll out the capex program efficiently will result in failure to achieve the 5% growth target as the ASGISA growth rate assumes that the infrastructure expenditure will take place to stimulate local investment. –Failure to roll-out the capex program efficiently could result in infrastructure bottlenecks (insufficient electricity, port capacity) that will inhibit investment and thus growth. –Failure to plan infrastructure investment adequately could also result in infrastructure shortages and bottlenecks. –It is critical that infrastructure productivity (e.g. port and rail operations) is enhanced as this will decrease the costs of doing business and increase investment which will further ASGISA goals. –The building of a national infrastructure supplier industry will both catalyse greater investment within the economy (thus increasing growth) and result in the more competitive provision of infrastructure – this contributes to accelerating economic growth.

7 Initial Versus Revised Investment Plan CATEGORYINITIAL PLANREVISED PLAN DIFFERENCE ESKOMR84 billionR97 billionR13 billion TRANSNETR37 billionR65 billionR28 billion TOTALR121 billionR162 billionR41 billion

8 Initial Eskom Plan ESKOM Rmillion 2006/72007/82008/92009/102010/11TOTAL GENERATION9,8258,3239,59811,89413,44253,052 TRANSMISSION1,5662,6332,7362,7171,30610,958 DISTRIBUTION2,9353,2573,0523,0373,13115,412 CORPORATE ,589 OTHER ,0652,1163,584 TOTAL14,74914,58316,02019,00320,27084,625

9 Revised Eskom Plan ESKOM Rmillion 2006/72007/82008/92009/102010/11TOTAL GENERATION9,4748,19112,16716,70018,95665,488 TRANSMISSION1,5662,6342,7362,7171,30610,959 DISTRIBUTION2,9353,2573,0513,0373,13115,412 CORPORATE ,589 OTHER ,0652,1163,584 TOTAL14,39714,45218,58823,80925,78597,031

10 Initial Transnet Plan

11 Revised Transnet Plan

12 Build Feasibility, Business Case, Contract Concluding Pre-feasibility Research Opportunity Identification PBMR Echo 1128 Grootvlei 1520 Camden 300 Arnot P1&P2 November 600 Juliett Oscar 6000 Mike 1000 Lima India Romeo 1600 Sierra 1050 OCGT 1600 *Papa 1300 Kilo Golf Bravo 961 Komati UCG MW 7800 MW MW 1050 Quebec 800 Tango Concentrating Solar 100 Version: 26 April Coal W - Hydro - Nuclear - Gas - Coal - - Hydro - Nuclear - Gas - Coal Solar - Whiskey 500 Transmission - Songo Apollo HVDC Link Capacity Upgrade * Possible 2400MW Mid Merit Trans Kalahari Interconnector 0 0 Discard Coal 0 New Coal Supply Uniform 1200 Victor 500 Rainbow Millenium 2000 X-ray Zulu 2100 Delta Charlie Yankee Alpha Hotel Foxtrot kV Cape Strengthening MW 400kV Beta Delphi Capacity Project Funnel

13 Timing of decisions

14 Projects in Development Project NameStageLocationCapacityPossible Commercial date Project Echo (coal)Pre-feasibilityMozambique – linked to NMPD initiative 1500MW2012 Project Delta (coal)Pre-feasibilityBotswana3600MW2011 Project Kilo (hydro)Business caseMozambique – linked to NMPD initiative 1300MW2011 Project Romeo (gas)FeasibilityNamibia800MW2010 Project Papa (gas)FeasibilityRSA Coastal1600MW2011 Project X – RayPre-FeasibilityConventional Nuclear16000MW2014 Project Quebec (gas)Pre-feasibilityDME initiative; Eskom monitoring1050MW2009

15 Current Generation Build Programme

16 RTS Current Status Camden Unit 6: Commercial. Unit 7: Commercial Unit 8 : Expected commercial date end June 2006 Scope of Work (SOW) greater than expected. Staffing >80%. Grootvlei Partnership delivering. Catching up. Centre line & Boiler started. Challenges: staffing, planning, purchasing and partnerships. First unit expected before March 2007 Komati 15 Months into project. Asbestos removal complete. Centre line work started. Major contracts in adjudication Staffing, SOW, engineering specifications, strategy on time. First unit expected before September 2007

17 Milestones 2006/7 SiteM WDate RTS: Camden - Unit June ’06 RTS: Camden – Unit Sep ’06 RTS: Grootvlei – Unit Mar ‘07 OCGT – Atlantis14731 Jan ‘07 OCGT – Mossel Bay14615 Feb ‘07 RTS: Camden – unit Feb ‘07 OCGT – Atlantis14728 Feb ‘07 OCGT – Mossel Bay14615 Mar ‘07 Total: 1390 MW Quarter 1: 200 MW Quarter 2: 200 MW Quarter 3: 0 MW Quarter 4: 990 MW

18 Next Projects’ Status Project Alpha (Base load) –Approved for R26 000M on 1 Dec 2005 –PFMA approval in place –Contracting strategy completed 2006 –EIA and RoD in progress –Coal agreement negotiations in progress –Licenses outstanding (water, NERSA) –Contract placement before end 2006 –CO dates 1 st Unit 3 rd quarter rd Unit 2 nd quarter 2012 Project Hotel Pumped Storage (Peaking- 333MW x 4 : 1332 MW) – Work on schedule, process world class – Approved for R 8 900M, including contracting strategy –PFMA approval in process – Contract placement December 2006 – CO dates 1 st unit 2 nd quarter th unit 4 th quarter 2012

19 Current Transmission Schemes Under Construction Cape Strengthening (Phase 1) Bacchus and Proteus Series Capacitors commissioned (studies being conducted on extra MW). Palmiet - Stikland line still at risk because the National roads department has not approved Eskom using their servitude. Platinum Basin Apollo-Dinaledi line still at risk due to servitude issues Substation works on target. Significant Savings on these projects

20 Transmission Project Status Beta - Delphi Construction has commenced on the longest 400Kv line in the country R460m project Schedule completion by end May % of foundations completed Challenges Weather impact Supplier capability 765 kV “Super Grid” R6.3bn investment Scheduled completion by 2009 Challenge servitude and ROD approval

21 Reflection on Transmission BLOEMFONTEIN DE AAR KOMATIPOORT RICHARD'S BAY WITBANK Namibia Botswana Mozambique Swaziland CAPE TOWN DURBAN EAST LONDON PORT ELIZABETH PRETORIA DE AAR Mercury Perseus Hydra Gamma Omega Kudu kV 400 kV Matimba 2009/10 for integration of project Alpha Marang Dinaledi Grassridge Eros Delphi Neptune BEAUFORT WEST Juno Bloemfontein 2009 To Option A4 Major transmission needs have been identified and will need to be implemented regardless Further major decisions include HV/DC link and further major improvements to comply with higher reliability criteria. Interrelationship with future long term generation options is key

22 1.Accelerate Kudu Power First Kudu Power CCGT unit (400 MW) April 2010 and the second 400 MW unit is July On critical path: finalisation of the gas supply agreements and construction of the upstream component. Proposal due by end January 2006, still not received. Critical. 2.Accelerating Coega as a mid merit option - feasibility Accelerating Coega as a mid merit option, it is possible, subject to favourable Record of Decision to run 400MW earliest winter 2009 onwards using liquid fuel. 3.New Nuclear in the Cape – feasibility A concept study has been launched for conventional nuclear including a review of Eskom sites. Timeframes are still being developed Options for greater reliability and capacity

23 Eskom Standard Project Schedules Overall Project Timescales to first unit: –OCGT4 Years –LNG 5 ½ Years –CCGT6 Years –COAL9 Years –HYDRO10 ½ Years –NUCLEAR11 ½ Years

24 TRANSNET: Aligning Strategic Focus with the Economy PE East London Maputo Richards Bay Durban Cape Town Coega Heavy Manufacturing zones Mining zones Micro-economic strategy: Support SA’s export-led growth strategy Reduce the cost of doing business SA’s economy: 1.Mining (6%) 49% 2.Manuf. (20%) 45% 3.Agriculture (4%) 6% Why Strategic corridors? Majority of export/ import traffic (excl. containers) is typically bulk and heavy manufacturing on rail Majority of road haulage is for domestic distribution To support the export strategy and economic growth for current key sectors, connectivity between inland transportation systems and ports are critical Create efficient export systems for growing sectors Freight Typology: Up to 70% of economy is bulk, heavy-haul, long distance and low to medium value traffic Production location of key sectors Transnet Strategic Direction Focus on Rail and Ports (Operations & Infrastructure) Focus on improving key corridors/ clusters Transnet Focus

25 Port Elizabeth East London Maputo Gauteng Mega Industrial Zone Sishen Beit Bridge Richards Bay Durban Saldanha Volumes and Investment per Corridor – 5 year budget Cape Town

26 Port Elizabeth East London Maputo Gauteng Mega Industrial Zone Sishen Beit Bridge Richards Bay Durban Saldanha Major Projects – Five Year Capital Budget Cape Town

27 Directing Capital Expenditure

28 Directing Capital Expenditure

29 CAPEX 5YEAR PLAN (CORE) RAIL (R31.5bn) Replacement: Ore Line sustain (R460m) Coal Line sustain (R6192m) Capitalization of Maintenance (R8124m) General Freight (R10827m) Other smaller replacement projects (R1475m) Expansion: Ore Line expansion (R2283m) Coal Line expansion (R1765m) Other smaller projects (R345m) Ports (R18.6bn) Replacement: Pier 1 resurfacing (R659m) Reconstruct Island View Berths (R134m) Remodel Maydon Wharf (R1249m) Remodel South Arm (R633m) Other smaller replacement projects (R836m) Expansion: Construction of the Port of Ngqura (R2493m) Container Terminal Expansion- Salisbury and Bayhead (R3837m) Cape Town Capacity expansion (R1838m) Other smaller expansion projects (R6888m) 5 Year Capex Spend R 64bn Amounts against projects are 5 year spending (not estimated total cost)

30 CAPEX 5YEAR PLAN (CORE) Port Operations (R6.3bn) Replacement: Durban Container Terminal (R274m) MPT West (R614m) Refurbish 8 Noell cranes(R240m) 14 Gantry cranes & 78 Straddle carriers (R1167m) Other smaller replacement projects (R75m) Expansion: Coega Container Terminal (R1254m) Saldanha Phase 1 & phase 1B expansion (R689m) Other smaller expansion projects (R1950m) 5 Year Capex Spend R 64bn (continued) Pipeline (R4.9bn) Replacement: Upgrade of Gas Line - Lilly (R396m) Expansion: New Multi-product pipeline (R2905m )  Gauteng to Maputo line (R620m)  Terminalling and logistics (R499m) Other smaller expansion projects (R1627m) Amounts against projects are 5 year spending (not estimated total cost)

31 CAPEX 5YEAR PLAN (CORE) Transwerk (R2.5bn) Replacement: Equipment replacement (R1743m) Upgrade of facilities (R562m) Other smaller replacement projects (R2305m) 5 Year Capex Spend R 64bn (continued) Amounts against projects are 5 year spending (not estimated total cost)

32 Key Risks Scarce Skills (Project Management, Engineering, Commercial and Finance), high demand for resources worldwide Capability of suppliers - SA not be highest priority Steel – demand, availability and price Commercial complexities associated with Primary Energy Sources Water constraints increasingly becoming a constraint to station positioning Environmental Processes – increasingly complex and difficult Timescales tight Project execution strategy Delays due to approval processes outside of Eskom Planning for 6% GDP (4.4% electricity growth): –11 New Build Projects should be in process –9 are in process –4 are on time –5 are in funnel, but late

33 THANKING YOU