1. 1 27 March 2013 MYPD3 Briefing Session – Portfolio Committee on Energy

2. 2 ESKOM MYPD3 Application in Summary

3. 3 MYPD3 Decision in Summary

4. 4 Approved Regulatory Asset Base Adjustments to align with the MYPD2 phasing in of the RAB Assets commissioning dates adjusted to cater for the delays Depreciation rate not adjusted (Depreciation amount will change due to changes in asset base costs)

5. Actual Return Approved 5 The allowed returns were calculated to allow Eskom to meet its debt obligation – see next slide These returns were also considered to allow for affordable and gradually increasing pricings and to avoid price spikes

6. 6 Primary Energy (R’m) including Environmental Levy MYPD 3 Total Applied for418 940 Adjustment s(60 441) Allowed 358 399 Primary Energy Coal Prices escalated at 10% over the MYPD3 period Base price for 2013/14 adjusted to reflect actual history IPP Commissioning dates and associated costs re-adjusted to reflect delays Efficiencies on the burn rate and load factors Renewable IPP adjusted to reflect revised dates Electricity purchases & SBP procurement costs disallowed

7. 7 Depreciation

8. Integrated Demand Management (IDM) 8 IDM R'mIDMDMPBuy Back Applied for13 0902 5438 513 Adjusted(7 906)(688)(8 513) Approved5 1841 8550 Operational DMP maintained Supplemental limited to 800 MW Power Buy Back allocation not approved SWH & Heat pumps not approved Compressed air, process optimisation removed or limited

9. 9 OPEX R'MMYPD3 TOTAL APPLIED 310 595 ADJUSTED (45 258) APPROVED 265 337 Operating expenditure (excl Primary Energy)  Manpower costs were adjusted in line with inflation plus a salary negotiating margin (1.4%) Additional staff compliment for new power plants included (Benchmarked @ 1.24/MW)  Debt arrears reduced from 0.6% from 0.5%  “Other costs” limited to increase by inflation  Double counted items removed

10. 10 Capex (R'm)MYPD3 Capex Applied336 370 Adjusted(106 357) Capex Approved230 012 Capital Expenditure Transmission adjustment based on detailed scope assessment and benchmarked costs/km or MVA. Distribution capex was adjusted from Eskom unit cost of R2.18/km to R1.74/km over the MYPD3 period – projects not altered Generation adjusted to remove excessive contingency fees and Owners Development Costs,

11. Weighted Average Cost of Capital 12 Months Average25 Years Average CAPM Real risk free rate2.29%4.51% Real cost of equity6.75%8.96% Real cost of debt2.86%5.07% Pre-tax real WACC5.14%7.65% Post-tax real WACC3.70%5.51% 11 The current methodology prescribes the use of 25 years average to calculate the real risk free rate The 12 months average reflect the current market conditions

12. Eskom’s Financial sustainability Goals 2 12 Source: NERSA Rfd

13. Eskom’s Financial Sustainability: Cash Flow 13 Source: NERSA Rfd

14. The Tariffs – issues considered and approved Increase to Homelight 20A customers consuming up to 350 kWh/month limited to inflationary increase of 5.6 %. Above this consumption level customers will see an increase of 7.6 % All residential customers will see an increase of 8 % p.a. Eskom to ensure: –T-O-U off-peak to peak demand adjusted from a ration of 1:9 to 1:8 –Tariff cross-subsidies to be shown transparently –The use-of-system charges to be based on cost per voltage level for all large power customers –The reliability and service charge to be unbundled from the energy charge –The environmental levy to be included in the energy charge and not shown separately Eskom to ensure alternate tariff options are made available to municipalities with a predominantly residential load mix 14

15. THANK YOU 15