1. CENTLEC (SOC) LTD (Addressing EDI Service Delivery Challenges) Centlec Delegation (SOC) LTD Parliament Committee on Energy 21 February 2012

2. Who are We and What's Our Story ? 2

3. Background Centlec (SOC) Ltd was established in April 2004 as a municipal entity wholly owned by the Mangaung Local Municipality. It provides an electricity distribution service in the Free State to 5 local municipalities (Mangaung, Kopanong, Naledi, Mantsopa and Mohokare) Other value added services provided by Centlec include:  Training and Development  Support to struggling municipal electricity distributors in the Free State  Embedded generation (Soon to be re-commissioned) Centlec has always been the greatest supporter of EDI restructuring objectives 3

4. Cabinet Decision and its Implications On the 8th of December 2010, cabinet took a decision to immediately stop the restructuring of the EDI industry. IMPLICATIONS New industry leaders needed to address EDI challenges A new strategy and approach needed A new willingness and commitment by stakeholders to address EDI challenges is needed 4

5. EDI Objectives 5 To provide low cost electricity to all consumers, with equitable tariffs for each customer segment; To provide a reliable and high quality supply and service to all customers, in support of The government’s economic and social development plans; To meet the country’s electrification targets in the most cost-effective manner, and so ensure that electrification is contributing to social and economic development; To meet the legitimate employment, economic and social interests of all employees in the sector, and ensure their safety; and To operate in a financially sound and efficient manner, in order to provide a reliable and sustainable future for both consumers and employees. Even though the restructuring process by EDI Holdings has been stopped, the objectives that it was meant to address remain valid and urgent. These are:

6. The Case for a Provincial Footprint 6

7. OUR APPROACH SUPPORTS THE ECONOMIC DEVELOPMENT INITIATIVES Airport Redevelopment** Flight Training Industrial Settlement Human Settlement Maintenance Chemical Cluster Mining & Beneficiation Communica- tions Hub Development Triangle Logistics Hub** Agro-Processing Tourism, etc. N8 Development Corridor Bfn – Maseru Rail** Nodal Development** Transport Light Industrial Institutional Commercial Aircraft Maintenance Tourism, etc. Xhariep Tourism Energy, etc. Transport possibilities: National & Provincial Roads as catalysts for development Rail as an alternative means of transporting passengers and goods Free State can play significant role in overall aviation in the country – aircraft maintenance, repairs, new development and building airframes, etc. 7

8. Centlec Viability  Economies of scale will improve profitability (surplus)  Provincial growth plans and socio-economic needs will form part of Centlec planning and design requirements  Costs will drop significantly as this will be a shared service  Centlec will be in a better position to raise funds to address the current capital backlog * Source: EDI Holdings information 8

9. In What Form? 9

10. The (SDA Route) 10

11. Down To Earth Mode of Operation Service Authority CENTLEC Service Provider Tariffs Electrification Maintenance & Refurbishment IDP Compliance Service Delivery Agreement (SDA) Service Provision Delivery Kopanong Naledi Mohokare Mantsopa LETSEMENG 11

12. Centlec With a Provincial Footprint: 5 Focus Areas Reliable Supply Eradication of Electrification Backlogs DSM Skills Development (Increase Artisan Output) Profitability Compete with Consultants (Electrification) Centralized Services (e.g. Vending, SCADA) and Specialized Technical Services (Network Protection, Design, Training, Tariff Design etc.) 12

13. Municipalities Under Centlec 5 municipalities indicated in orange already under Centlec control. And 3 where loss making initially FS173 Mantsopa FS172 Mangaung FS162 Kopanong FS163 Mahokare FS171 Naledi 13

14. Electrification Backlog 14

15. Refurbishment Backlog (2007)* 15 * Source: EDI Holdings

16. 16 The Era of “Modimo-Nthuse” Network Infrastructure Requirements Build Capability PROBLEM

17. What's Our Value Preposition ? 17

18. FS Enablers 18

19. FS Enablers  Constitution Constitution  Ordinance 8 of 1962  Provincial Lekgotla Resolution  Section 76 MSA 19

20. LOCAL GOVERNMENT ORDINANCE 8 OF 1962 [NB. The administration of the whole of this Ordinance has under Proclamation 113 of 1994, published in Government Gazette 15813 of 17 June 1994, been assigned to Free State Province with effect from 17 June 1994.] ORDINANCE as amended by Local Government Laws Amendment Act 51 of 2002 PN 4 [sic] of 2004 (PG 45 of 28 May 2004) (145A) Council may co-operate with other local authorities and persons. (1) A council may,... by agreement, co- operate with any other local authority or person for the better or more economical carrying out, either jointly or by any of the contracting parties, of any matter within the power of the council. 20

21.  The Constitution does not say that a municipality itself must provide services; it gives municipalities the right to administer the matters assigned to them and then compels municipalities to ensure the provision of sustainable services. In other words, the municipality must take responsibility for the provision of services whether those services are provided by itself or on its behalf by another service provider.  MSA: S ection 76 provides municipal services through either an internal or an external mechanism and also municipal entities operating under the sole or shared control of a municipality. If the service is to be provided through an external mechanism, including provision of the service must be in accordance with a service delivery agreement concluded between the municipality and the external mechanism. CONSTITUTION AND MSA 21

22. “… Centlec to have a provincial footprint …” 2009 FS-Provincial Lekgotla Resolution 22

23. Down To Earth Mode of Operation Service Authority CENTLEC Service Provider Tariffs Electrification Maintenance & Refurbishment IDP Compliance Service Delivery Agreement (SDA) Service Provision Delivery Kopanong Naledi Mohokare Mantsopa LETSEMENG 23

24. What's the Essence of Our Advocacy ? 24

25. Accelerate Service Delivery Present Alternative Futures Scenario 1 Scenario 2 Driving Forces Uncertainty Security of Supply Issues Technology Revenue Management Efficiencies Stay AS Is ME with Provincial Footprint 25

26. Maturity Centlec Growth Shape PioneersEmerging rapid growthReaching maturity Market value creation Provincial Call Center Governance/Expert Services/Skills Center of Excellence Services Customer interaction & support e.g., Transformers, Switch gears, Line Work e.g., Training & Development, Switching, Network Design, etc. e.g., Political Buy-in, Separation, Tariff Design, Operation Management, Protection etc. ICT Adoption Provincial Vending Center, Telecoms Network Maintenance and Refurbishment Backlogs 26

27. 27

28. In the Absence of an Alternative We Volunteer Centlec for Adoption by DoE As A Pilot Project 28

29. Pula !!! 29