1. ­ PLASTICS CONVERTORS ASSOCIATION Presentation to NERSA ESKOM REVENUE APPLICATION: MULTI YEAR PRICE DETERMINATION. Polokwane 12 th Jan 2010 Thanks very much Nonhlanhla, I have attached to this mail my presentation and a copy of the letter sent in advance. To make arrangements please contact Ms Edith Mkhabela on 012 401 4756. Kind regards, Mike

2. ­ Presenter CV.  Mike Bullock  Part time employee PCA 2009- now.  National Diploma Plastics Technology University of East London UK 1974.  Technical, sales and production positions  Manufacturing, training and trading experience.  MD Metal Box CA Plastics Div 1976-82.  MD Aries Plastics 1982-86.  CEO Plastics Industry Training Board 1990-2000  CEO Plastics Convertors Association 2000- 2009 ESKOM REVENUE APPLICATION: MULTI YEAR PRICE DETERMINATION.Polokwane 12 th Jan 2010

3. ­ The Plastics Sector. Contribution to national economy per year = R32 billion. Share of National GDP =5-6% Users of electrical energy = 2 nd (after Aluminium) Annual conversion of raw materials =1.2 m tons. Number of employees = 40 000 Packaging sector = 50% of sales ESKOM REVENUE APPLICATION: MULTI YEAR PRICE DETERMINATION.Polokwane 12 th Jan 2010

4. ­ The Plastics Industry Expects  An uninterrupted supply of  Good quality electricity  At a competitive price ESKOM REVENUE APPLICATION: MULTI YEAR PRICE DETERMINATION.Polokwane 12 th Jan 2010

5. ­ Pressures on the Plastics Industry.  Raw material price increases based on world oil prices.  Wage increase demands for labour above inflation rate.  World recession.  Limited benefit from FIFA World Cup and Gautrain. ESKOM REVENUE APPLICATION:MULTI YEAR PRICE DETERMINATION.Polokwane 12 th Jan 2010

6. ­ Pressures on the Plastics Industry (cont)  Plastics becoming uncompetitive compared with metal and board.  Industry already at high levels of efficiency so little opportunity to improve.  Packaging sector customers unable to accept above inflation price increases.  Eskom price increases. ESKOM REVENUE APPLICATION:MULTI YEAR PRICE DETERMINATION.Polokwane 12 th Jan 2010

7. ­ Actions taken by the plastics Industry.  Raw materials. Reduction of import duties from 10% to 0% over 3 years.  Cost of labour. Negotiating within the MEIBC for a Special Plastics Wage Table @ 65%.  Cost of Energy Challenging Eskom’s price increases. ESKOM REVENUE APPLICATION:MULTI YEAR PRICE DETERMINATION.Polokwane 12 th Jan 2010

8. ­ Eskom Challenge.  Impact of proposed increases. Industry average as %age of sales =3% YearIncrease Rev ave %age Adjust for Inflation 8%Recovery from margin Year 135%4%3.24%0.76% Year 235%5.5%3.5%2.0% Year 335%7.4%3.8%3.6% Industry average as %age of sales =3% ESKOM REVENUE APPLICATION:MULTI YEAR PRICE DETERMINATION.Polokwane 12 th Jan 2010

9. ­ Industry average as %age of sales =3% ESKOM REVENUE APPLICATION:MULTI YEAR PRICE DETERMINATION.Polokwane 12 th Jan 2010 The Plastics Recycling Sector.  The industry recycles about 175 000 tons per year of plastics.(14.5%)  It uses about 3 times the amount of energy for transportation, washing, drying and processing when compared with normal plastics processing.  Run by entrepreneurs with no subsidies.  Creates over 3000 fulltime and about 15 000 informal jobs.

10. ­ Eskom Challenge.  Impact of proposed increases on the Plastics Recycling sector.. Industry average as %age of sales =11% YearIncrease Rev ave %age Adjust for Inflation 8%Recovery from margin Year 135%15%12%3% Year 235%20%13%7% Year 335%27%14%13% Industry average as %age of sales =3% ESKOM REVENUE APPLICATION:MULTI YEAR PRICE DETERMINATION.Polokwane 12 th Jan 2010

11. ­ Eskom Challenge. Consequences of proposed increases on the Plastics Recycling sector.  Energy to the sector would have to be subsidised.  Companies would close down.  Serious environmental impact  Increase pressure on landfill. Industry average as %age of sales =3% ESKOM REVENUE APPLICATION:MULTI YEAR PRICE DETERMINATION.Polokwane 12 th Jan 2010

12. ­ Eskom Challenge (cont)  Supply policy ought to be reviewed, direct or through Municipality.  Introduce a competitive environment because now we are being asked to fund inefficiencies.  Generating capacity on mines must be more competitive than shipping in coal. ESKOM REVENUE APPLICATION:MULTI YEAR PRICE DETERMINATION.Polokwane 12 th Jan 2010

13. ­ Conclusion  Plastics will not be able to absorb the proposed increases without serious loss of markets and jobs.  The National economy cannot afford bleeding in a sector contributing 6% to the GDP.  Eskom must shoulder its responsibilities in a responsible manner. ESKOM REVENUE APPLICATION:MULTI YEAR PRICE DETERMINATION.Polokwane 12 th Jan 2010

14. ­ 35% Hertz !! Thank you ESKOM REVENUE APPLICATION:MULTI YEAR PRICE DETERMINATION.Polokwane 12 th Jan 2010