Eskom Generation way forward

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Eskom Generation way forward
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Three drivers of change impacting our business
Market Restructuring
Continue preparation for deregulation (also
requires a degree of divisional independence)

• Need for a more
• integrated approach
• in growing
• capacity

Limited resource availability
Declining surplus capacity
Need to maximise synergies operational
excellence
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Eskoms strategic positioning

• Our core business is electricity
• Generation
• Transporting
• Trading (among producers, wholesalers, and bulk
  users)
• Retail (to end users)
• Our target market
• South Africa
• SADC and the rest of Africa connected to the SA
  grid
• Rest of Africa

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Electricity demand and supply key challenges

• South Africa is approaching the end of its
  surplus generation capacity
• 1st challenge Avoiding mismatch between demand
  and supply
• Excess capacity - stranded resources
• Capacity shortage - constrained economic growth
• 2nd challenge Correct choice of capacity to be
  constructed from an array of available options
  that differ dramatically in terms of
• Cost (construction and operating)
• Lead time to construction
• Environmental impact
• Operating characteristics

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Eskom's Installed Generating CapacityRed Solid
Line until end 2004 Actual peak demand PLUS
10 RESERVE MARGIN, thereafter _at_ 2.5 growth in
peak demand PLUS 10 RESERVE MARGIN.Fifty year
assumed plant life. Demand Side Management
initiatives NOT included
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5 Year Capital Expansion Plan

• In October 2004, Cabinet approved the following
• Eskom to lead this current phase of creating new
  electricity generation capacity
• Earlier Cabinet decision to exclude Eskom from
  future build programme was reversed
• Decisions on any future (beyond the current 5
  year programme) build programme will be on a case
  by case basis
• 5-year infrastructure investment plan in South
  Africa's electricity infrastructure amounting to
  R95 billion (DPE tabling of vote to parliament)

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Capacity Outlook - 2003 to 2022

• 6 year-on-year demand increase
• Major risks of insufficient supply options
• Ageing infrastructure
• Shortages if new build not initiated

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Planning Process Flow
Increasing Certainty
Investment Decision
Concept Screening
Complete business case
PHASE 1 PRE-FEASIBILITY
PHASE 2 FEASIBILITY
BUILD
NEW CONCEPTS
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Eskoms Return To Service (RTS) project

• 3 stations with a combined nominal capacity of
  3800MW
• built in the 1960s, and were mothballed due to
  high excess capacity in the late 1980s and
  1990s
• An investment expenditure totalling R12 billion
  (nominal rand) on the return to service of the 3
  stations over the next 5 years

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Budget Vote

• Alongside this process, using Eskoms
  purchasing power, we would introduce the first
  significant Independent Power Producers (IPP).
  This allowed for the initial indicative 5-year
  investment figures to be provided with some
  degree of certainty.
• Minister Erwins Budget Vote Speech, 15 April
  2005

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SA enjoys globally competitive prices
29 gap
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Eskom remains committed to keep the lights burning
Day Month Year