1. PRE-BID MEETING CONSTRUCTION OF THE MEDUPI-BORUTHO TRANSMISSION LINE PRE-BID MEETING Finance (Foreign Exchange) Clarification Presented by: Charlene Strydom Date 13 January 2015

2. 13 January 20152 Medupi-Borutho Section A & B 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.

3. Medupi-Borutho Section A & B 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) 13 January 2015 3

4. Medupi-Borutho Section A & B 2. 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) 13 January 2015 4

5. Medupi-Borutho Section A & B 3. 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. 13 January 20155

6. Medupi-Borutho Section A & B 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. 13 January 20156

7. Medupi-Borutho Section A & B Any questions ? 13 January 2015 7

8. Thank you