2. 2015/16 Annual Report Presentation to the Portfolio Committee on Energy 12 October 2016

3. Performance Highlights for 2015-16 Financial Year
PRESENTATION OUTLINE
Introduction
Performance Highlights for Financial Year
Responses to the Committee’s Concerns
Conclusion

4. In the year under review:
INTRODUCTION
In the year under review:
We have managed to overcome energy challenge of inadequate electricity
The stable oil price cushioned the economy and motorists from high fuel prices
The renewable energy IPP programme moved towards maturity and was further entrenched as part of our energy mix
Preparation for the Nuclear Build Program continued
Electrification of households ensured that more people have access to modern forms of energy
The African continent continued its march towards being the main source of crude oil imports to our country

5. ANNUAL FINANCIAL STATEMENTS
2015/16 FINANCIAL YEAR
ANNUAL FINANCIAL STATEMENTS 5

6. Introductory Remarks AFS Preparation
The financial statements has been prepared on the modified cash basis as required in terms of the Departmental Financial Reporting Framework Guide issued by National Treasury.
Challenges
Key vacancies during year end audit period
NECSA Liability
Verification of projects activities
Slow moving projects
Payment of suppliers within 30 days
Targets not being achieved 6

7. Financial PERFORMANCE
Statement of Financial Performance as at 31 March 2016
2015/16
2014/15
Note
R'000
REVENUE
Annual Appropriation
Departmental Revenue
Aid Assistance
TOTAL EXPENDITURE
Current expenditure
Transfers and subsidies
Expenditure for capital assets
Payments for financial assets
SURPLUS FOR THE YEAR
Voted Funds
Departmental revenue
Aid assistance
5 277
4 424 5
3 763 33
4 299 7

8. FINANCIAL PERFORMANCE FOR 2015/16 Expenditure as a % of final approp.
Note: Major spending areas
DETAILS
Final Appropr.
Actual Expenditure
Variance
Expenditure as a % of final approp.
Rand’s Thousand
R'000
R'000  %
Compensation of Employees
296,219
296,009
210
99.93
Goods and Services
215,588
213,299
2,289
98.94
Transfers and subsidies
6,751,374
6,628,379
122,995
98.18
Payments for capital assets
4,432
4,424 8
99.83
Payments for financial assets 6 5 1
83.33
Totals : Major spending areas
7,267,619
7,142,117
125,502
98.27

9. FINANCIAL PERFORMANCE FOR 2015/16 (Cont.)
Analysis of financial performance:
By 31 March 2016, the Department had utilized R7.14 billion or 98.27% of its 2015/16 adjusted budget.
A budget balance of R million or 1.73% of the adjusted allocation.
The composition of the budget balance of R million is as follows:
Compensation of Employees :R 210 thousand
Goods & Services :R 2.29 million
Transfer Payments :R 123 million
Capital Assets :R 8 thousand
Financial Assets :R 1 thousand

10. FINANCIAL PERFORMANCE FOR 2015/16 (Cont.)
Note: Aid Assistance Received
Aid assistance received
Revenue
Expenditure
Surrendered to RDP
Rand thousand
R’000
Swiss Agency for Development
2 865
Kingdom of Denmark
12 047
EU Commission (GBS Funding)
31 079
93 639
Total 10

11. FINANCIAL PERFORMANCE FOR 2015/16 (Cont.)
Note: Transfers and Subsidies
Transfers and Subsidies
Final Appropr.
Actual
Variance
Rand thousand
R’000
SANEDI
64 861
Membership Fees
29 621
29 563 58
National SWHSP
EEDSM - Munic
NECSA
NNR
21 487
INEP - Eskom
INEP - Munic
INEP - Non-grid
10 413
Households
3 659
3 656 3
SETAs
792
Total Transfer Payments
6,751,374
*6,628,379
122,995
* Actual transfer on the statement of financial performance includes aid assistance of R 11

12. Financial PERFORMANCE
Statement of Financial Position as at 31 March 2016
2015/16
2014/15
Note
R'000
ASSETS
Current assets
Unauthorised expenditure
14 860
Cash and cash equivalents
Prepayments and advances
1 023
1 686
Receivables (Inc. fruitless & wasteful expenditure)
430
311
Non- Currents Assets
2 205
Investments
Total Assets
LIABILITIES
Current Liabilities
Voted funds to be surrendered to the Revenue Fund
Dept. Revenue and NRF Receipts to be surrendered to the Revenue Fund
360
1 666
Payables
536
464 12

13. FINANCIAL PERFORMANCE FOR 2015/16 (Cont.)
Note: Unauthorised Expenditure
The unauthorized expenditure of R14.86 million is due to an Infrastructure Grant transfer payments paid to the Mthonjaneni Municipality in May 2010.
The transfer was appropriated in the 2009/10 financial year, however the payment to the municipality was processed in March 2010, but only transferred in May 2010 due to the system rejection of the banking details.
A request for condonation has been submitted to National Treasury for consideration. Condonation was approved without funding.
The Department presented the matter to SCOPA on 12 November 2014 and is awaiting the committee’s decision.
No unauthorised expenditure was incurred in the 2015/16 financial year. 13

14. FINANCIAL PERFORMANCE FOR 2015/16 (Cont.)
Note: Cash and cash equivalents
2015/16
2014/15
Rand thousand
R’000
Cash and cash equivalents
Total
The total amount of R million consists of :
- Cash receipts R million.
- Cash on hand R46 thousand.
- Cash with commercial banks (local) R42 thousand 14

15. FINANCIAL PERFORMANCE FOR 2015/16 (Cont.)
Note: Fruitless and wasteful expenditure (Included in receivables)
2015/16
2014/15
Rand thousand
R’000
Department of Energy 12 15
Total
During 2015/16 Fruitless expenditure to the value of R12 thousand was identified. This amount was due to interest paid for a late payment of contributions to the Government Employees Pension Fund.
The matter was referred to labour relations for investigation as per the Departmental policy.
During 2014/15 Fruitless and wasteful expenditure amounting to R15 thousand was identified. The payment made was in respect of interest on international membership fees. 15

16. FINANCIAL PERFORMANCE FOR 2015/16 (Cont.)
Note: Investments
2015/16
2014/15
Shares and other equity
R’000
Nuclear Energy Corporation of South Africa
2 205
Total
The Department is a 100% shareholder in The South African Nuclear Corporation Limited (NECSA) and own shares of R1 each. 16

17. FINANCIAL PERFORMANCE FOR 2015/16 (Cont.)
Disclosure Notes
Note : Irregular expenditure
2015/16
2014/15
Rand thousand
R’000
Department of Energy
678 55
Total
During 2015/16 financial year irregular expenditure to the value of R678 thousand was identified. This amount was due to the non-compliance of the procurement process.
The matter was referred to labour relations for investigation as per the Departmental policy.
During 2014/15 irregular expenditure to the amount of R55 thousand was identified. This amount was due to non-compliance to procurement process 17

18. FINANCIAL PERFORMANCE FOR 2015/16 (Cont.)
Note: Provision for disused past strategic nuclear facilities
2015/16
2014/15
Rand thousand
R’000
Provision for disused past strategic nuclear facilities
Change in provision
Transfer to NECSA
( )
Total
(0)
The Department had a potential liability arising from the decontamination and decommissioning of past strategic nuclear facilities as per section 1 (xii) (a) of the Nuclear Energy Act, Act No. 46 of 1999.
NECSA then submitted to Cabinet, in 2004, through the former DME, a Nuclear Liabilities Management Plan of the total nuclear liability for the nuclear facilities on NECSA site at Phelindaba. This Plan was divided into three major stages as follows: 18

19. FINANCIAL PERFORMANCE FOR 2015/16 (Cont.)
Provision for disused past strategic nuclear facilities
Stage 1 -Decontamination and Decommission (D&D) and waste management of all disused strategic nuclear facilities
Stage 2 -D&D and waste management of all remaining (currently operating) nuclear facilities i.e. operational past nuclear facilities
Stage 3 - Disposal of long-lived and high level waste (including SAFARI-1 Spent Fuel) when an appropriate disposal facility for such waste becomes available.
The department carried the liability of the Stage 1 of the D& D liability for the strategic past disused – 2014/15 valued at R3.6 Billion.
There were on going disputes regarding the legal liability of the costs of decontamination and decommissioning of past strategic nuclear facilities.
To assist with concluding this long outstanding matter and to assist NECSA with the process of tabling their outstanding Annual Report, the department sought a legal opinion in this regard.
The legal opinion was sought to determine the legal liability and the funding responsibility thereof.
After a lengthy process with Senior Counsel, it was concluded that the legal liability should be carried by NECSA and the funding responsibility resides with the state. 19

20. FINANCIAL PERFORMANCE FOR 2015/16 (Cont.)
Provision for disused past strategic nuclear facilities- (Cont.)
The legal opinion was shared with NECSA and AGSA – the information was used in concluding the 2014/15 and 2015/16 Annual Financial Statements of NECSA.
The legal opinion also gave clarity to the Decontamination and Decommissioning liability disclosed by DoE in their Annual Financial Statements.
This resulted in the liability being transferred from DoE Annual Financial Statements and disclosed by NECSA.
Extract - Legal Opinion Advocate MM Oosthuizen SC
“ In conclusion my opinion is therefor that NECSA carries the legal liability for the costs of the decontamination and decommissioning of certain so called ‘past strategic nuclear facilities’ licensed to and still in operation by NECSA - but that, subject to proper compliance with policy and procedure , the State and/or the Minister of Energy has a funding responsibility in this regard”. 20

21. SUMMARY OF KEY AUDIT FINDINGS FOR 2015/16
1. Oversight
Non-compliance with SOC oversight framework
2. AOPO (Audit of Predetermined Objectives)
Fourth quarter report of 2015/16 relating to IPPP was excluded from the of AoPO draft
3. Commitments
Understatements of commitments
4. Transfer payments
Non-compliance with DoRA: Quarterly reports not submitted within the required 45 days
5. Procurement
Deviations not reported to National Treasury and AGSA within the required timelines
6. Information Technology
Evidence for approval of the initial ICT plan for 2011/12 – 2015/16 could not be provided.
The engine monitoring report was not updated to show the current status. 21

22. Audit outcomes AND FINDINGS for the last 5 years
Financial Years
2011/12
2012/13
2013/14
2014/15
2015/16
Audit Opinion
Unqualified
(Clean Audit)
Corporate Services 5 1 2
Information Technology 6 3
Financial Management Services 14
Governance and Compliance
Line Function 7 8
* The Department received an unqualified audit opinion for the year under review

23. Interventions In Response to Concerns Raised by the Committee
30 August 2016

24. Issue
Response
Why most performance targets were not met and what would be consequence management for un-achieved targets.
Target setting will be reviewed to align with the “SMART” Principle. Going forward, our strategy planning sessions will review the number of our targets and reprioritised them in line with the budget and human resources.
Update on the Nuclear New Build programme
A detailed report was tabled to this Committee on the 11th of October 2016.
Why is there little done, if any on demystification of nuclear. What are the communication and awareness campaigns?
 A Communication strategy has been developed and is still undergoing internal review and approval process.

25. Issue
Response
Explanation of underperformance within Clean Energy, where 39 RE:IPPs were behind schedule - since 5% completion has been reached in Window 3
There are six key stages in the procurement of IPPs. These are:
Request for Proposals,
Evaluation of proposals,
Announcement of preferred bidders,
Financial close by bidders,
Construction and
Commercial operation / Commissioning.
Procured IPPs are at different stages and they take the risk of construction schedule. Effectively it means that government has contracted the IPPs such that we do not manage their schedule, but they are penalised if they do not meet their contracted operations date. To date none of the projects have failed to meet their operations date.
Explanation on under spending in the 4th quarter of 2015/16 financial year and related going roll-overs.
An early warning system has been developed to track and monitor slow moving projects to ensure that reprioritisation of budget on a quarterly basis.

26. DoE’s response on Eskom and National Treasury media statement on IPPs
Issue
Response
Progress update on the Energy Masterplan, IRP, IEP and other legislation
The IRP and the IEP have been updated taking into account inputs received during the stakeholder consultation process and would be presented to Cabinet within October 2016.
DoE’s response on Eskom and National Treasury media statement on IPPs
The matter has been resolved. Various engagements at the highest level of Eskom, National Treasury, NERSA and DPE were held to address Eskom’s concerns on this matter.

27. Issue
Response
The DG’s Office had only one target, why did it fail to achieve this target
The Department submits outcomes report on a quarterly basis to the Cabinet Secretariat on each of the outcomes. In Even though incomplete reports were submitted on the due date, the remainder of the reports were all submitted few days after the deadline.
The delays were caused by the collation, analysis and verification of information and consultation process with relevant stakeholders as some outcomes are cross-cutting in nature.
A review in our administration, systems, and processes has been done to improve our compliance requirement in this aspect.

28. Thank you