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a
Shift performance,
grow sustainably
for the year ended 31 March 2013
Supplementary and Divisional Report
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
b
Contents
1
About this report 2
Structure of this report 3
About Eskom’s Group 5
Corporate structure 6
Purpose, values and strategic objectives 8
Risks that relate to material items 10
Corporate governance 18
Key performance indicators 29
Line divisions 37
Generation 38
Transmission 51
Distribution 58
Group Customer Services 64
Service functions 77
Group Capital 78
Group Technology and Commercial 84
Human Resources 94
Finance 100
Treasury 102
Eskom Shared Services 106
Strategic functions 109
Enterprise Development 110
Sustainability 121
Office of the Chief Executive 135
Subsidiary companies 139
Eskom Enterprises SOC Limited Group 140
Escap SOC Limited 143
Eskom Finance Company SOC Limited Group 144
Eskom Development Foundation NPC 145
Eskom Pension and Provident Fund 149
Appendices 151
Awards 152
Glossary 153
Abbreviations 155
Sustainability responsibilities, approval and assurance 157
Statistical tables 160
Contact details 169
1. Becoming a high-performance utility
2. Leading and partnering to keep the lights on
3. Reducing Eskom’s environmental footprint and
pursuing low-carbon growth opportunities
4. Securing future resource requirements,
5. Implementing coal haulage and the road-to-rail
migration plan
6. Pursuing private sector participation
7. Transformation
8. Ensuring Eskom’s financial sustainability
9. Reasonable assurance provided by the
independent assurance provider
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Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
2 Eskom Holdings SOC LimitedIntegrated Report 2013
2
About the report
This report acts as a supporting document for
Eskom’s year-end Integrated Report, which is
also published in book format. It is advisable to
read the Integrated Report first.
The Integrated Report provides a concise
analysis of Eskom’s technical, financial, social and
environmental performance for the year under
review. It also examines the challenges and risks
the company faces, and the steps it is taking to
mitigate and manage these. The report explores
the opportunities open to Eskom and how it
can capitalise on them to create a technically,
financially, socially and environmentally sustainable
future for the company.
This Supplementary and Divisional report
supports and expands on the information in the
Integrated Report. It offers a detailed report
about the performance of Eskom’s operating
divisions, key strategic and support functions,
and affiliated entities for the 2012/13 year. It is
only available online.
The 2012/13 annual f inancial statements are
available online.
Reporting standardsEskom applied the Global Reporting Initiative
G3 principles when compiling this report.
These principles ensure that the company
incorporates the views of its stakeholders, as
well as internal planning reporting and risk-
management processes. The Integrated Report
details how stakeholders were consulted in the
course of 2012/13, and the outcome of these
consultations.
Eskom has declared a B+ application level in terms
of the Global Reporting Initiative G3 guidelines
based on the disclosure in the suite of reporting
as noted in the GRI table which is available
online at ww.eskom.co.za/IR2013/003.html. The
assurance provider’s report (page 157) confirms
this declaration. Where reasonable assurance
has been provided, this is indicated by RA.
Eskom’s assurance provider, KPMG Services
(Pty) Ltd, has provided assurance on selected
sustainability information. Refer (page 157)
for KPMG’s assurance report. Eskom follows a
combined assurance approach. Refer page 46 of
the Integrated Report for more details.
Eskom’s reports are also prepared with due
consideration of the King Report on Corporate
Governance (King III).
Refer to www.eskom.co.za/IR2013/031.html for
Eskom’s King III checklist.
In the 2012/13 financial year, Eskom continued the transition towards more streamlined, integrated and holistic reporting of its operations.
3
Structure of this report
This repor t focuses on Eskom’s 2012/13
performance and is structured as follows:
About the Eskom Group: Outlines the
corporate structure of the company, including
its purpose, values, and strategic objectives.
The key directorships of board and Executive
Management commit tee members are
presented.
Risks that relate to material items: The matrix
details the material issues and risks facing
Eskom and links them to the performance of
Eskom’s operating divisions, and its strategic
and support functions.
Key performance indicators: These are presented
in terms of Eskom’s progress in achieving and
maintaining these targets over the past five
years, including the year under review.
Line divisions: The performance of Eskom’s line
divisions, Generation, Transmission, Distribution
and Group Customer Services, is analysed for
the 2012/13 financial year, including highlights,
challenges and future focus.
Service functions: Outlines the operational
highlights, challenges and future focus of Eskom’s
various service functions, including Human
Resources, Finance, Treasury, Group Capital
and Group Technology and Commercial.
Strategic functions: Provides an overview
of Eskom’s strategic functions: Enterprise
Development concentrates on strategy and risk
management, regulatory and legal, corporate
affairs and information management. Sustainability
focuses on sustainable development,
environmental per formance, safety, quality,
security, technical governance, international
agreements and innovative climate-friendly
solutions to power-sector challenges.
Subsidiary companies: Presents a brief overview
of the mandate and current role of Eskom’s
subsidiaries: Eskom Enterprises SOC (state-
owned company) Limited Group, Escap SOC
Limited and Eskom Finance Company SOC
Limited Group and the Eskom Development
Foundation NPC.
Appendices: Includes coverage of awards
Eskom has won, provides a glossary of terms,
assurance documentation and provides various
statistical tables. Contact details for the
company are provided.
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
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5
About the Eskom Group2
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
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About the Eskom GroupCorporate structureEskom Holdings SOC Limited consists of Eskom business and four complementary subsidiaries that
provide supporting services, offer home loan finance to its employees, manage the insurance of
business risks, and manage the company’s corporate social investment.
Eskom’s legal and operating structure
Eskom Holdings SOC Limited
Business Major subsidiaries
Generation
Transmission
Distribution
Group Customer Services
Human Resources
Technology and Commercial
Finance and Group Capital
Enterprise Development
Sustainability
Eskom Enterprises SOC Limited
Rotek Industries SOC Limited
Roshcon SOC Limited
Escap SOC Limited
Eskom Finance Company
SOC Limited
Eskom Development
Foundation NPC
Employees perform testing on equipment at the Apollo substation, a major interconnection substation in Gauteng
7
Eskom’s organisational structure comprises
line functions, which operate the business;
service functions, which service the operations;
and strategic functions, which develop the
enterprise and ensure its sustainability.
Eskom’s head office is in Johannesburg and it
has operations across South Africa. It maintains
a small office in London, primarily for quality
control of equipment being manufactured in
Europe for the capacity expansion programme.
Major subsidiariesEskom has a number of subsidiaries:
• Eskom Enterprises SOC Limited group,
through Rotek and Roshcon, provides
lifecycle support and plant maintenance,
network protection and support for Eskom’s
expansion programme in South Africa.
Eskom Enterprises has two subsidiaries
with interests in electricity operations and
maintenance concessions in Africa: one
covers Mali, Senegal and Mauritania, while
the other operates in Uganda
Eskom Business organisational structure
GenerationT Govender
TransmissionMM Ntsokolo
DistributionA Noah
Group Customer ServicesT Molefe
Human ResourcesBE Bulunga
Technology and CommercialDL Marokane
Finance and Group CapitalPS O’Flaherty
Enterprise Development
EL Johnson
SustainabilitySJ Lennon
Office of the chief executive
Assurance and Forensic (internal audit)
Line functions
Service functions
Strategic functions
Chief executiveB Dames
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
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• Eskom Finance Company SOC Limited
grants home loans to Eskom employees
• Escap SOC Limited, Eskom’s wholly owned
captive insurance company, manages and
insures Eskom’s business risk
• Eskom Development Foundation NPC is
a wholly owned non-profit company that
manages Eskom’s corporate social investment
Purpose, values and strategic objectivesIn 2010, Eskom’s management and employees
conducted an extensive business review.
This informed Eskom’s strategic direction up to
2016/17, which was approved by Eskom’s board
and Executive Management committee, and
also informs Eskom’s long-term planning.
Eskom’s strategic direction is encapsulated in
its purpose statement, strategic objectives, and
values. The strategic objectives are linked to
key performance indicators.
Eskom’s purpose, values and strategic objectives
About the Eskom Group continued
Our purpose:To provide sustainable electricity solutions to
grow the economy and improve the quality of
life of people in South Africa and the region
Leading and
partnering
to keep the
lights on
Reducing
Eskom’s
environmental
footprint and
pursuing low-
carbon growth
opportunities
Securing future
resource
requirements
Implementing
coal haulage
and the
road-to-rail
migration plan
Pursuing
private sector
participation
Foundation:Long-term nation building • Electricity for all • Triple bottom line
ZIISCE: Zero harm, Integrity, Innovation, Sinobuntu, Customer satisfaction, Excellence
Transformation
Ensuring
Eskom’s financial
sustainability
Becoming a
high-performance
utility
Accomplish Eskom’s purpose
Execute strategic pillars
Build foundation right, build capacity
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PurposeThe purpose of Eskom is to provide sustainable
electricity solutions to assist the economy
to grow and to improve the quality of life of
people in South Africa and in the region.
Strategic objectivesEskom has aligned itself around eight strategic
objectives, which emerged from the 2010
review. These objectives give Eskom direction
to deliver on its purpose, vision and values.
They are reviewed on an annual basis as part of
the annual corporate plan and will be revisited
in the light of the MYPD 3 determination.
Becoming a high-performance organisationEskom continues its transformation into a
utility focused on improved customer service;
safer, more effective and efficient operations;
better service delivery; talent and skills
development and management; transparency;
and consistency in communications.
Leading and partnering to keep the lights onEskom is committed to preventing load-
shedding by taking a leading role and actively
partnering with all key stakeholders, including
the people of South Africa, in a comprehensive
supply-and-demand management strategy.
This objective primarily focuses on ensuring
security of supply for South Africa.
Reducing Eskom’s environmental footprint and pursuing low-carbon growth opportunitiesEskom is committed to reducing its
environmental footprint through reducing
emissions, reducing water use and ensuring
full compliance with environmental legislation.
Eskom is committed to reducing its carbon
footprint and helping South Africa achieve its
targets by transitioning to a cleaner energy mix.
Securing future resource requirements, mandate and the required enabling environmentEskom must engage and collaborate with
stakeholders on a national level to ensure that it
has the resources (land, coal, water, nuclear and
so on) needed for its existing and new generating
assets to operate.
Implementing coal haulage and the road-to-rail migration planEskom will continue to reduce coal trucks on
the road through various initiatives, with the
aim of improving the cost and safety of coal
logistics and, ultimately, contributing to the
security of coal supply. This includes a strategy
to migrate the transportation of coal from road
to rail.
Pursuing private-sector participationEskom acts as a catalyst for private-sector
par ticipation in South Africa’s electricity
industry by enabling independent power
producers (IPP) to enter the supply market.
This objective focuses on ensuring security
of supply for South Africa.
TransformationEskom has initiated a transformation
programme to address national and internal
transformation challenges by leveraging the
infrastructure expansion programme and
Eskom’s organisational capacity to reduce
unemployment, improve the country’s skills
pool and increase economic and workplace
equity. This programme is informed by the
government’s New Growth Path and other
national initiatives.
Ensuring financial sustainabilityEskom will ensure its going concern status
and investment-grade status are protected.
Projects will be fully funded before
implementation, cost-ref lective tariffs will be
secured and developmental activities will be
clearly quantified.
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ValuesEskom bases the pursuit of purpose and
strategic objectives on the following values:
• Zero harm: Eskom will strive to ensure that
zero harm befalls its employees, contractors,
the public and the natural environment
• Integrity: Honesty of purpose, conduct and
discipline in actions, and respect for people
• Innovation: Value-adding creativity and
results orientated. Lead through excellence
in innovation
• Sinobuntu: Caring
• Customer satisfaction: A commitment to
meet and strive to exceed the needs of the
receivers of products and services
• Excellence: Acknowledged by all for
exceptional standards, performance and
professionalism
Risks that relate to material itemsShould any of the corporate or business risks
Eskom faces materialise and result in a significant
financial loss, lack of future funding sources,
price increases, business interruption or load-
shedding, in isolation or in aggregate, it will
have a significant negative impact on Eskom’s
shareholder and stakeholder relationships,
and its brand and reputation. All of these
may constrain Eskom’s ability to raise funding.
A strategy has been put in place to manage
these risks and to engage with stakeholders.
MYPD 3 price determinationEskom applies to NERSA, an independent
regulatory body, for the revenue it needs
to sustainably operate its business. NERSA
assesses this application in terms of the
electricity regulation Act (2006), and then
makes a determination on the electricity price
path over a number of years. MYPD 1 and 2
both spanned three years, with MYPD 2 ending
on 31 March 2013. The MYPD 3 prices are
effective from 1 April 2013 to 31 March 2018.
Eskom’s applicationOne of the goals of electricity price increases is
to move towards more cost-reflective tariffs as
defined in the Electricity Pricing Policy to enable
Eskom to keep producing electricity sustainably
while securing the financing it needs to build new
power stations and transmission lines.
Eskom submitted its revenue and tariff structure
application for MYPD 3 to NERSA in 2012.
The application was based on current regulatory
rules and policy, and Eskom’s mandate to keep
the lights on.
Eskom applied for an average annual increase
of 13% to cover its operating, capital expenditure
and debt-servicing costs over the next five years,
plus 3% a year for IPPs, for an average tariff
increase of 16% per year over the period. The
total revenue application came to R1.1 trillion.
The application assumed the following:
• Eskom’s goal would be to provide a secure
and reliable supply of electricity
• Primary energy would increase at a rate
of 8.6%, with coal increasing at 10%
• Operating costs would increase at 8%
per year
• Eskom’s application was to comply with
Electricity Pricing Policy.
• That Eskom would be allowed to claim
returns of at least 8.16%, the target
determined in NERSA’s regulation. In the
event, Eskom asked for an average of less
than 4% over the period, resulting in a pre-
tax return of 7.8% only in 2017/18
• The government would continue to
guarantee Eskom’s debt to the value of
R350 billion and Eskom would not commit
itself beyond that
• Eskom would secure financing up to the
completion of its current capacity expansion
programme
About the Eskom Group continued
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• Provision was to be made for the 3 725MW
renewable energy IPP programme and the
Department of Energy’s 1 020MW “peaker”
gas plant
• A mandatory energy conservation scheme
to prompt South Africa’s largest energy
users to curb their usage would be put in
place, but only implemented if necessary
Eskom road shows, NERSA’s public hearings and the tariff decisionEskom held roadshows across the country to
provide information on the MYPD 3 application
to stakeholders. Participants were urged to
provide input and ask questions.
In January and February 2013, NERSA held
public hearings on Eskom’s MYPD 3 application
in all nine provinces, during which stakeholders
submitted about 200 written comments and
made 162 oral representations.
On 28 February 2013, NERSA approved total
revenue of R863 billion over the next five
years, giving an average annual increase of
8% in electricity tariffs. The new tariffs took
effect for Eskom customers from 1 April 2013,
and will come into effect from 1 July 2013 for
municipal customers.
Implication of the approved 8% tariff increase NERSA’s decision will result in a revenue
shortfall of R225 billion over the next five
years. The disallowed revenue for the first
two years is a relatively smaller component,
approximately R33 billion, while the remainder
is in relation to the subsequent three years.
It is clear that the shortfall cannot be made up
through efficiencies alone. While Eskom will
strive to achieve additional efficiency, there is
a need to reshape the business and also discuss
alternative options with Eskom’s shareholder.
The following areas are being considered:
• Eskom’s mandate in terms of security
of supply
• Financial sustainability and associated impact
on Eskom’s credit profile
• Areas of major efficiencies, cost curtailments
and reductions
• Alternative funding options available to Eskom
• When cost reflectivity will be envisaged
• Policy and mandate implications to be
discussed with the Minister of Public
Enterprises. There is a need to ensure
alignment with the shareholder on issues
such as coal price regulation, the future
role of integrated demand management,
fur ther government suppor t, and Eskom’s
role in developing projects beyond Kusile
Power Station
Eskom has implemented the average 8%
increase for non-municipal customers on
1 April 2013 and will implement this average
increase for municipal customers on 1 July 2013.
A review of the impact of the NERSA decision
has been made by Eskom and is being discussed
with its shareholder. Eskom’s strategic response
will be shared once finalised.
Material items and risksThe following table details the material items
and risks facing Eskom and links them to the
performance of Eskom’s operating divisions,
and its strategic and support functions.
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
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Material items and risks
Material item and risk Key performance indicators Treatment and controls Page
Focus on safetyThere are significant health
and safety risks associated
with an electricity business
• Number of fatalities
• Lost-time incident rate
• Eskom’s “Zero Harm”
initiative, which focuses
on the following
elements:
– Leadership
– Contractor safety
– Supervisory capacity
– Training and facilities
– Human behaviour
128 – 131
Improve operationsA significant incident
relating to Eskom’s
assets and technologies
might occur, resulting in
impairment of Eskom’s
operations, financial loss
and reputational damage.
Theft of electricity and
equipment resulting in
financial loss
• UCLF
• Energy availability factor
(EAF)
• SAIDI
• SAIFI
• System minutes lost (<1)
• Number of major
incidents
• High-performance
utility strategy
• Leadership
interventions
• Appropriate insurance
portfolio
• Operation Khanyisa
• Technologies to
help reduce tower
component theft are
being pursued
38 – 64
Being customer centricReputational risk may
arise from poor service
delivery and a lack of
understanding of what is
important to customers
• Customer service index • A centre of excellence
has been established
with structured
operating units to
improve operations
and to manage
reputational risk
64 – 69
Build strong skillsThere may be inadequate
skills within the workforce
to support Eskom’s
technology-intensive
operations
• Total number of learners
in the following streams:
– Engineering
– Technician
– Artisan
– Youth programme
• Skills development
initiatives (training,
skills transfer,
engagement with
education institutions)
• Back2Basics initiative
to standardise
operations
• Localisation of skills
through the capacity
expansion programme
97 – 99
135 – 137
About the Eskom Group continued
13
Material item and risk Key performance indicators Treatment and controls Page
Keep the lights onThere is the risk of load-
shedding, which would
cause severe short- and
long-term implications for
the country and Eskom.
Eskom’s strategic resolve
to keep the lights on
may compromise long-
term plant health due
to limited maintenance
opportunities, resulting
in extended energy
constraints and loss of
confidence in Eskom
• Management of
national supply/demand
constraints
• Demand-side
management energy
efficiency
• Protection systems
and operating
standards
• Black-start readiness
• Disaster risk planning
through national
disaster management
structures
• Eskom’s “keep the
lights on” strategy
• Capacity expansion
and IPP programmes
42 – 47
52 – 56
69 – 75
117 – 120
Deliver capacity expansionLate delivery and
escalating cost of capacity-
expansion projects
would lead to a loss of
stakeholder confidence,
which would affect future
build projects. Late
delivery would also place
further pressure on the
national supply-demand
system and generation
maintenance
• Generation capacity,
transmission lines and
transmission capacity
installed
• Total capital expenditure
• Project management
and assurance
processes are in place
to control project
costs and ensure
timely delivery of
projects
78 – 84
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
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Material item and risk Key performance indicators Treatment and controls Page
Reduce environmental footprint in existing fleetIf Eskom fails to embed
climate change and
sustainable development
within its organisational
culture, its access to
natural resources may
be jeopardised to the
point that the company is
unable to reliably supply
electricity. At the same
time, Eskom’s emissions
performance would
deteriorate, possibly
resulting in costly legal
contraventions, increased
public health risks due to
growing emissions, and
reputational damage
• Specific water usage
• Relative particulate
emissions
• Environmental legal
contraventions
• Emissions treatment
plans are in place.
However, they are
not always possible
to execute due to
postponed outages
• Ongoing reviews to
ensure that water-use
licences and permit
requirements are met
• Kusile and Medupi
power plants will
be fitted with flue
gas desulphurisation
technology, which
will reduce nitrogen
oxides and particulate
emissions
• Renewable-energy
projects are underway
• Eskom supports
introducing renewable
energy IPPs to the
electricity industry
• Internal energy
efficiency
49 – 50
122 – 128
Implementing coal haulage and the road-to-rail migration planFailing to successfully
implement the road-to-
rail migration strategy
would cost Eskom lost
opportunities in terms of
cost (road repairs would
not be lowered) and
reputation. Safety benefits
would also not materialise
• Amount of coal haulage
transferred from road to
rail (million tons)
• The road-to-rail
migration strategy is
being implemented
with Transnet Freight
Rail
88 – 89
About the Eskom Group continued
15
Material item and risk Key performance indicators Treatment and controls Page
IPP-contracted energyShould IPPs only be able
to deliver intermittent
electricity, it may
compromise Eskom’s
demand-and-supply
planning, so affecting
security of supply
• Installed IPP capacity
• Gigawatt-hours (GWh)
purchased from IPPs
• By 31 March 2013,
Eskom had signed
up power purchase
agreements with IPPs
for a total capacity
of 2 664MW. Eskom
is in the process
of implementing a
contract management
strategy for
Independent Power
Producers
55 – 56
Independent System Market OperatorThe Independent
System Market
Operator regulation
may affect Eskom and its
stakeholders by affecting
its revenue stream
• Independent System
Market Operator ring-
fenced within Eskom and
a subsidiary set up
• Eskom assisted in the
preparation of a due
diligence report that
was tabled with the
Department of Energy
• The Portfolio
Commission on
Energy decided
in March 2013 to
implement the
Independent System
Market Operator Bill
as originally tabled in
Parliament
54
Credit ratingsFurther sovereign rating
downgrades, combined
with uncertainty around
Eskom’s financial
sustainability or ability
to meet loan obligations
on time, as perceived by
the rating agencies, may
result in a lower credit
rating for Eskom. This
would negatively impact
its funding and hedging
options, and increase
borrowing costs
• Free funds from
operations (FFO)/
gross debt
• Earnings before interest,
tax, depreciation and
amortisation (EBITDA)/
gross debt
• Eskom continues to
monitor the effects
of its operations and
funding initiatives on
the ratios that impact
on its credit rating
104
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Material item and risk Key performance indicators Treatment and controls Page
Maximise socio-economic contribution and procurement equityConsistently failing to meet
its targets for corporate
social investment,
universal electrification
and for ensuring that its
procurement practices
benefit local businesses –
ideally black, black women
and black youth-owned
businesses – would
mean that Eskom has
effectively not fulfilled its
mandate to contribute to
the government’s New
Growth Path and other
developmental plans
• Percentage of local
content in all new build
contracts
• Percentage of
expenditure attributable
to broad-based black
economic empowerment
companies and black
women-owned
companies
• Corporate social
investment
• Government and
Eskom electrification
connections
• Eskom promotes job
creation and local-
content procurement
in all new contracts
relating to its capacity
expansion programme
• Eskom’s procurement
policies advance
B-BBEE and black
women-owned
businesses
• Eskom provides
training through
the Academy of
Learning and learner
programmes
• The drive for access
to electricity for all,
via the electrification
programme is ongoing
60 – 61
92 – 94
94 – 99
145 – 149
Employment equityFailing to meet equity
targets for disability, race
and gender in middle
and upper managerial
and professional
positions would affect
Eskom’s reputation
and labour relations,
and could jeopardise
the developmental aspect
of its mandate
• Disability, racial and
gender equity at
senior management,
professional and middle
management levels
• Eskom has
implemented
an ambitious
employment equity
plan, supported
by a long-term,
target-setting
strategy to drive the
transformation agenda
96 – 99
About the Eskom Group continued
17
Material item and risk Key performance indicators Treatment and controls Page
Ensure financial sustainability The revenue gap between
Eskom’s MYPD 3
application and NERSA’s
tariff determinations may
compromise business
operations and delivery
on the current Corporate
mandate. Poor liquidity
and portfolio management
would lead to insufficient
funds to meet financial
obligations, or excess
funds that would result in
increased finance costs
• Financial and liquidity
ratios
• Eskom continues to
monitor its funding
and liquidity position
• Eskom’s board is
steering the review
process regarding
the implications
of the MYPD 3
determination
• Eskom is evaluating
various scenarios
and engaging various
stakeholders in
response to this
material risk
100 – 106
Tailrace concrete reinforcing is progressing at the new Ingula pumped-storage scheme
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
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Corporate governanceThe corporate governance framework for the Eskom Holdings SOC Limited Group is contained
in the integrated report. The following additional corporate governance information, not included
in the integrated report, is provided here:
• Appointment, qualification and key directorships of board and Executive Management committee
members
• Attendance at committee meetings
• Mandates of committees
• Eskom’s application of the King Code of Governance Principles for South Africa 2009 (“King III”)
About the Eskom Group continued
1. Zola Tsotsi (66)Independent non-executive directorChairman of the boardAppointed June 2011BSc Mathematics and Chemistry –
University of Botswana, Lesotho and
Swaziland (Lesotho)
BSc Hons Chemical Engineering –
University of Surrey (UK)
Director: Torre Technologies (Pty) Ltd,
Mandla Technologies (Pty) Ltd
2. Brian Dames (47)Chief executiveAppointed June 2010BSc Hons – University of the
Western Cape
MBA – Samford University, USA
Senior Management Programme –
University of Stellenbosch
Graduate Diploma in Utility Management
– Samford University School of Business,
USA
Director: Industrial Development
Corporation, Electric Power
Research Institute
3. Paul O’Flaherty (50)Finance directorAppointed January 2010BAcc – University of the Witwatersrand
BCom – University of the Witwatersrand
CA(SA)
Chairman: Accounting Practices
Committee of the South African Institute
of Chartered Accountants
Member: JSE Issuer Regulation
Advisory Committee
4. Bernie Fanaroff (65)Independent non-executive directorAppointed May 2010PhD Radio Astronomy and Astro Physics
– University of Cambridge (UK)
BSc Hons Physics – University of
Witwatersrand
Director: SKA Organisation
5. Queendy Gungubele (54)Independent non-executive directorAppointed August 2011LLM Labour Law – University of
Johannesburg
BJuris – University of Limpopo
Advanced Diploma Labour Law –
University of Johannesburg
Certificate in management in minerals
and mining policy – University of
the Witwatersrand
Board of directors
19
6. Neo Lesela (43)Independent non-executive directorAppointed June 2011BEng Hons Industrial Engineering –
University of Salford (UK)
Director: Kahina Consulting CC
7. Bajabulile Luthuli (40)Independent non-executive directorAppointed August 2011BCom Acc – University of
KwaZulu-Natal
Higher Diploma Acc – University
of KwaZulu-Natal
8. Chwayita Mabude (43)Independent non-executive directorAppointed June 2011BCompt – University of South Africa
9. Yasmin Masithela (39)Independent non-executive directorAppointed June 2011LLM Tax Law – University of the
Witwatersrand
Higher Diploma in Company Law –
University of the Witwatersrand
LLB – University of Cape Town
BA – University of Cape Town
Non-executive director: Afrocentric
Investment Corporation Ltd
10. Collin Matjila (51)Independent non-executive directorAppointed June 2011LLB – University of the Witwatersrand
BA Law – National University of Lesotho
Senior Executive Programme – Harvard
Business School
Director: Kopano Cable Trading (Pty) Ltd
11. Boni Mehlomakulu (40)Independent non-executive directorAppointed April 2010PhD Chemical Eng – University of
Cape Town
MSc Organic Chemistry – University
of Natal
BSc Chemistry and Applied Chemistry –
University of Natal
Director: South African Bureau
of Standards
12. Mafika Mkwanazi (59)Independent non-executive directorAppointed June 2011BSc Mathematics and Applied
Mathematics – University of Zululand
BSc Electrical Engineering – University
of Natal
Director: Transnet SOC Limited,
Hulamin Ltd, Stefanutti & Stocks
Holdings Ltd
13. Phenyane Sedibe (43)Independent non-executive directorAppointed June 2011MA Social Policy – University of Durban-
Westville
BA Hons Political Science/Sociology –
University of Durban-Westville
Director: TACE Development
14. Lily Zondo (44)Independent non-executive directorAppointed October 2011BSc Hons – University of South Africa
BAcc – University of the Witwatersrand
CA(SA)
Director: Humulani Investments (Pty) Ltd
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
20
About the Eskom Group continued
Zola Tsotsi (66)Independent non-executive director
Chairperson of the board
Collin Matjila (51)Independent non-executive director
Boni Mehlomakulu (40)Independent non-executive director
Yasmin Masithela (39)Independent non-executive director
Bernie Fanaroff (65)Independent non-executive director
Queendy Gungubele (54)
Independent non-executive director
Paul O’Flaherty (50)Finance director
1
3 4 5
9 10 11
Board of directors
21
Brian Dames (47)Chief executive
Mafika Mkwanazi (59) Independent non-executive director
Phenyane Sedibe (43)Independent non-executive director
Lily Zondo (44)Independent non-executive director
Neo Lesela (43)Independent non-executive director
Bajabulile Luthuli (40)Independent non-executive director
Chwayita Mabude (43)Independent non-executive director
2
6 7 8
12 13 14
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
22
Attendance at board and board committee meetings for 2012/13(excluding Executive Management committee)
Members BoardAudit and
riskInvestment and finance Tender
Social, ethics and
sustainabilityPeople and
governance
Total number of meetings 9 8 7 12 6 4
ZA Tsotsi 9 11 3 4
BA Dames3 9 7 5 4
BL Fanaroff 6 6 2
Q Gungubele 9 5 4
N Lesela 8 10 3
B Luthuli 7 7 7
C Mabude 9 7 6 12
Y Masithela 6 7 4
MC Matjila 7 6 11
B Mehlomakulu 7 9 6
ME Mkwanazi 8 6 10
PS O’Flaherty3 9 7 104
SPQ Sedibe 9 5 4
L Zondo 7 7 6
Changes in 2012/13 board compositionThere were no changes in the board’s
composition during the year under review.
Paul O’Flaherty has tendered his resignation as
finance director, with his last day being Eskom’s
AGM on 10 July 2013.
Eskom’s memorandum of incorporation
stipulates that the board, after obtaining the
approval of the shareholder, will appoint
executive directors. The shareholder is currently
in the process of selecting and appointing a new
finance director.
About the Eskom Group continued
Megawatt Park, Eskom’s head office in Johannesburg
1. Z Tsotsi attended by special invitation for this meeting. He is not a member of the Investment and Finance committee.
2. C Mabude attended by special invitation for this meeting. She is not a member of the Social, Ethics and Sustainability committee.
3. Meetings attended by the directors as officials are not included above.
4. PS O’Flaherty resigned from the Tender committee effective February 2013.
23
Board committeesAudit and Risk committeeThe Audit and Risk committee is appointed
by the shareholder in accordance with the
Companies Act (2008). It fulfils the prescribed
duties set out in the Companies Act (2008),
while also focusing on risk management.
This committee comprises five independent,
non-executive directors. Three members,
C Mabude, Y Masithela and BL Fanaroff, were
appointed in 2011 and two further members,
B Luthuli and L Zondo were appointed in
2012. Collectively, members have sufficient
qualifications and experience to fulfil their
duties, including an understanding of financial
and sustainability reporting, internal financial
controls, external audit process, internal audit
process, corporate law, risk management,
sustainability issues and IT governance.
The committee’s roles and responsibilities
include:
• Serving as the Audit and Risk committee
for the Eskom Group
• Recommending the appointment of external
auditors and overseeing the external
audit process
• Monitoring the internal control system to
protect Eskom’s interests and assets
• Reviewing the accuracy, reliability and
credibility of statutory financial reporting, the
annual financial statements and the integrated
report, as presented by management before
board approval
• Reviewing any accounting and auditing
concerns
• Ensuring that an effective internal audit
function is in place and that the roles and
functions of the external and internal audit
are clear and coordinated. The committee
assesses the internal audit function’s
performance and the adequacy of available
internal audit resources
• Considering and appropriately dealing with
complaints relating to the financial statements,
accounting practices or internal audit
• Ensuring that Eskom has an effective risk
management policy and plan to protect
the company’s ability to achieve its
strategic objectives
• Ensuring that a combined assurance model is
applied
• Obtaining assurance for IT related to the
management of IT assets, governance and
controls, risks and disaster recovery
The assurance and forensic general manager
and the external auditors have unrestricted
access to the committee and board chairperson.
See the Audit and Risk committee’s report in
the annual financial statements (page 4) for
information on how it carried out its functions.
Eight committee meetings, of which two were
special meetings, were held during 2012/13.
These meetings were also attended by the
external auditors, the finance director and
relevant company officials.
Investment and Finance committeeThe committee comprises four independent
non-executive directors and two executive
directors. The committee’s role and
responsibility includes:
• Reviewing Eskom’s investment strategy
and capital programme and making
recommendations to the board
• Evaluating and approving business cases for
new ventures or projects, investment criteria
and guidelines and investments within its
delegated authority
• Investment decisions are made within a
framework of policies approved by the board
• Monitors the performance of the major
capital projects and investments
• The committee approves policies related to
Eskom’s treasury function
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
24
• Evaluates the company borrowing
programme and financial budgets and
recommends to the full board for approval
• Monitors the performance of Eskom’s
treasury
Seven committee meetings, of which three
were special meetings, were held during
2012/13.
Tender committeeThe committee comprises five independent
non-executive directors and the finance director.
It approves tenders and contracts within its
delegated authority and approves procurement
strategies and policies. The committee
ensures that Eskom’s procurement system is
fair, equitable, transparent, competitive and
cost effective.
Twelve committee meetings, of which one was
a special meeting, were held during 2012/13.
Social, Ethics and Sustainability committeeThe committee comprises four independent
non-executive directors, as well as the board
chairperson and the chief executive. The
committee’s roles and responsibilities include:
• Dealing with the statutory functions
contemplated in the Companies Act
(2008) and integrated performance (social,
environmental, ethics and economic
sustainability) issues
• Making recommendations on policies,
strategies and guidelines, particularly related
to safety, health, good corporate citizenship,
the environment, climate change, quality and
nuclear issues
• Scrutinising nuclear safety at Eskom’s
facilities to ensure that standards exceed
all regulatory and internal requirements
and remain consistent with international
best practice
Six committee meetings, of which two were
special meetings, were held during 2012/13.
People and Governance committeeThe committee comprises four independent
non-executive directors, the board chairperson
and the chief executive. The chief executive
recuses himself when matters relating to his
remuneration and benefits are discussed.
The committee’s roles and responsibilities
include:
• Making recommendations on remuneration
and other human resource-related policies
• Making recommendations on board and
committee composition, training and
evaluation
• Making recommendations on succession
planning
• Oversight of governance matters
Four committee meetings were held during
2012/13.
Board Build Programme Review committeeThis is a committee of the board recently
established to provide a governance,
monitoring and review-oversight role for
the capital build programme. It held its f irst
meeting in April 2013.
Executive Management committee
1. Brian Dames (47)Executive director and chief executiveSee board of directors
2. Paul O’Flaherty (50)Finance director and group executive: Group CapitalSee board of directors
About the Eskom Group continued
25
3. Bhabhalazi Bulunga (57)Group executive: Human ResourcesAppointed February 2010BA Social Sciences – University of
Swaziland (Swaziland)
Director: Eskom Finance Corporation
SOC Ltd
4. Thava Govender (45)Group executive: GenerationAppointed September 2010BSc Hons Energy Studies Nuclear and
Fossil – University of Johannesburg
BSc Chemistry and Biochemistry –
University of Durban-Westville
Management Development Programme –
University of South Africa
5. Erica Johnson (44)Group executive: Enterprise DevelopmentAppointed February 2008MBA – University of the Witwatersrand
MSc Electrical Engineering – University
of Cape Town
BSc Electrical Engineering – University
of Cape Town
6. Steve Lennon (54)Group executive: SustainabilityAppointed September 2000PhD Physical Metallurgy – University
of the Witwatersrand
MSc Engineering Physical Metallurgy –
University of the Witwatersrand
BSc Chemistry, Applied Chemistry –
University of Natal
Director: National Advisory Council
on Innovation
7. Dan Marokane (41)Group executive: Technology and CommercialAppointed September 2010BSc Chemical Engineering – University
of Cape Town
MSc Engineering Petroleum – Imperial
College (UK)
MBA – University of Cape Town
Director: Eskom Enterprises (SOC) Ltd,
Roshcon (SOC) Ltd, Rotek (SOC) Ltd
External member: UK High Commission
Board of Management
8. Tsholofelo Molefe (44)Group executive: Group Customer ServicesAppointed April 2011BCompt Hons Certificate in Theory of
Accounting – University of South Africa
BA Hons Accounting and Finance –
University of East London (UK)
CA(SA)
9. Ayanda Noah (46)Group executive: DistributionAppointed April 2011BSc Electrical Engineering – University
of Cape Town
MBA – International Management Centre
Executive Development Programme –
University of the Witwatersrand
Director: Eskom Enterprises SOC
Ltd, South African National Energy
Association, Energy Access Partnership
10. Mongezi Ntsokolo (52)Group executive: TransmissionAppointed April 2011BSc Electrical Engineering – University
of the Witwatersrand
MBA – University of Stellenbosch
Chairman: Roshcon (SOC) Ltd and
Rotek (SOC) Ltd
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
26
Dan Marokane (41)Group executive:
Technology and Commercial
Brian Dames (47)Executive director and chief executive
About the Eskom Group continued
Tsholofelo Molefe (44)Group executive:
Group Customer Services
Ayanda Noah (46)Group executive: Distribution
Thava Govender (45)Group executive: Generation
Erica Johnson (44)Group executive:
Enterprise Development
Bhabhalazi Bulunga (57)Group executive: Human Resources
3 4 5
7 8 9
1Executive Management committee
27
Paul O’Flaherty (50)Finance director and group executive:
Group Capital
Executive Management committee meeting attendancefor year to 31 March 2013
Total number of meetings 16
BA Dames 13
BE Bulunga 12
T Govender 14
E Johnson 14
SJ Lennon 12
D Marokane 15
TBL Molefe 14
A Noah 16
MM Ntsokolo 10
PS O’Flaherty 15
King III and the Companies Act (2008)Eskom is guided by best practices set out in
King III, the Protocol on Corporate Governance
in the Public Sector and international guidelines.
Entities in the Eskom Group record and monitor
their application of the King III principles
through an electronic reporting and auditing
system. In keeping with the “apply or explain”
doctrine, Eskom accounts for its non-application
of a principle and declares where it has adopted
an alternative governance practice. Please
refer to www.eskom.co.za/IR2013/031.html for
more information on cases where alternative
governance practices have been implemented.
Eskom has amended its memorandum of
incorporation to align with the Companies
Act (2008), based on the guidance and
standard format provided by the Minister
of Public Enterprises. It is envisaged that
the memorandum of incorporation will be
approved in 2013.Mongezi Ntsokolo (52)Group executive: Transmission
Steve Lennon (54)Group executive: Sustainability
2
6
10
Key performance indicators 3
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
30
Eskom’s progress in achieving its strategic objectives is measured in terms of key performance
indicators. Targets have been set for 2017/18 for each of these indicators. The table which follows
indicates Eskom’s progress in achieving and maintaining these targets over the past five years,
including the period under review. Unless otherwise stated, these figures refer to the Eskom Group.
Please refer to the glossary for explanations of the abbreviations used.
Key performance indicators Targets Annual actuals
Key indicator and statistics
Target 2017/183
Compacttarget
2012/13Actual
2012/13Actual
2011/12Actual
2010/11Actual
2009/10Actual
2008/09Five-year
trend
Becoming a high performance organisation
Focus on safety
Employee LTIR rate1 0.20 – 0.39RA 0.41RA 0.47RA 0.54RA 0.50RA
Fatalities (employees and
contractors), number – – 19RA 2414 RA 25RA 17RA 27RA
Improve operations
UCLF %SC,1,2 10.40 6.00 12.1215 RA 7.97RA 6.14RA 5.1RA 4.38RA
PCLF % 9.26 – 9.10 9.07 7.98 9.04 9.54
EAF %1 79.34 – 77.65RA 81.99RA 84.59RA 85.21 85.32
SAIDI hours (12MMI)SC,1,2 39.00 ≤47.0 41.89RA 45.75RA 52.61RA 54.41RA 51.51RA
SAIFI events per year
(12MMI)1 17.00 – 22.19RA 23.73RA 25.31RA 24.65RA 24.16RA
Total system minutes lost
for events <1 minutes,
minutesSC,1,2 3.40 ≤3.40 3.52RA 4.73RA 2.63RA 4.09RA 4.21RA
Major incidents number1 1 – 3RA 1RA –RA 1RA 3RA
Being customer centric
Customer service index1 89.7 – 86.8 85.6 84.4 85.1 84.7
Eskom KeyCare, index 102.0 – 105.8 105.9 101.2 98.1 101.2
Arrear debts as
percentage of revenue % 0.60 – 0.81 0.53 0.75 0.83 1.54
Customer service (large
power users), average
debtor days – – 25.2 21.8 18.9 18.9 16.4
Customer service (small
power users excluding
Soweto debt), average
debtor days – – 48.2 42.9 45.1 40.5 47.5
Customer service large
power top customers
excluding disputes,
average debtor days4 – – 12.3 14.4 15.5 15.4 16.5
Key performance indicators
31
Key performance indicators Targets Annual actuals
Key indicator and statistics
Target 2017/183
Compacttarget
2012/13Actual
2012/13Actual
2011/12Actual
2010/11Actual
2009/10Actual
2008/09Five-year
trend
Build strong skills(11)
Total engineering learners
in the system, numberSC,1,2 2 073 1 949 2 144RA 2 273RA 1 335 955 968
Total technician learners
in the system, numberSC,1,2 805 757 835RA 844RA 692 681 588
Total artisan learners in
the system, numberSC,1,2 2 705 2 543 2 847RA 2 598RA 2 213 2 144 1 979
Youth programme,
numberSC,1,2 5 000 5 000 5 701RA 5 159 – – –
Leading and partnering to keep the lights on
Keep the lights on
Management of the
national supply/demand
constraints, load-
shedding, (yes or no)SC,1,2 No No NoRA NoRA NoRA NoRA Yes
DSM energy efficiency,
GWhSC,1,2, 7 7 7325 1 827 2 244RA 1 422RA 1 339RA – –
Internal energy efficiency,
annualised GWhSC,2,8 45.05 20.0 28.9RA 45.0RA 26.2RA – –
Deliver capital expansion
Generation capacity
installed, MWSC,1,2 8 7025 260 261RA 535RA 315RA 452RA 1 770RA
Transmission lines
installed, kmSC,1,2 6 4505 900 787RA 631RA 443RA 600RA 418RA
Transmission capacity
installed, MVASC,1,2 35 0405 3 545 3 580RA 2 525RA 5 940RA 1 630RA 1 3756
Total capital expenditure
(excluding capitalised
interest), R billion1 337.155 – 60.13 58.82 47.93 48.70 43.66
Reducing Eskom’s environmental footprint and pursuing low carbon growth opportunities
Reduce environmental footprint in existing fleet
Relative particulate
emissions, kg/MWhSC,1,2 0.24 0.30 0.35RA 0.31RA 0.33RA 0.39RA 0.27RA
Specific water
consumption,
L/kWh sent outSC,1,2 1.21 1.32 1.42RA 1.34RA 1.35RA 1.34RA 1.35RA
Environmental legal
contraventions, number1 8 – 47RA 50RA 63RA 55RA 114RA
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
32
Key performance indicators Targets Annual actuals
Key indicator and statistics
Target 2017/183
Compacttarget
2012/13Actual
2012/13Actual
2011/12Actual
2010/11Actual
2009/10Actual
2008/09Five-year
trend
Transformation
Maximise socio-economic contribution
Corporate social
investment, Rm – – 194.3RA 87.9RA 62.3RA 58.7RA 79.5RA
Job creation, number142 84512 – 35 759 28 616 21 477 – –
Total number of
electrification
connections, number1 579 0005 – 144 558 155 213 149 914 149 901 112 965
Employment equity
Employment equity –
(group) disability, %1 3.0 – 2.4RA 2.4RA 2.4 2.3 3.2
Racial equity in senior
management (company),
% of black employees1 74.0 – 58.3RA 53.9RA 52.5 47.3 46.9
Racial equity in
professionals and middle
management (company),
% of black employees1 79.0 – 69.6 65.7 64.1 62.9 62.1
Gender equity in senior
management (company),
% of female employees1 38.0 – 28.2RA 24.3RA 23.5 21.6 20.7
Gender equity –
professionals and middle
management, % of female
employees1 42.0 – 34.6 32.4 31.6 30.3 29.8
Procurement equity (company)
Procurement
from B-BBEE compliant
%SC,1,2 90.0 70.0 86.3RA 73.2RA 52.3RA 28.610 63.2
Local sourcing in
procurement %SC,1,2 65.0 52.0 80.2RA 77.2 79.7 73.9 –
Procurement from black
owned, %1 50.0 – 22.1 14.6 – – –
Procurement from black
women-owned %1 35.0 – 4.7RA 3.3RA 4.3 12.19 10.09
Procurement from black
youth owned %1 30.0 – 1.0 – – – – –
Implementing coal haulage and the road-to-rail migration plan
Implement coal road to rail migration plan
Coal road-to-rail
migration, (additional
tonnage transported
on rail) MtSC,1,2 78.65 12.2 10.1RA 8.5 7.1 5.1 4.3
Key performance indicators continued
33
Key performance indicators Targets Annual actuals
Key indicator and statistics
Target 2017/183
Compacttarget
2012/13Actual
2012/13Actual
2011/12Actual
2010/11Actual
2009/10Actual
2008/09Five-year
trend
Pursuing private sector participation
Pursuing private sector participation
Independent power
producers (IPP) installed
capacity, MW 4 700 – 1 135 1 008 888 – –
Ensuring Eskom’s financial sustainability
Ensure financial sustainability (shareholder compact ratios)
Cost of electricity for
the company (excluding
depreciation, including
immediate priorities),
R/MWhSC,1,2 825.09 481.60 496.35RA 374.19RA 296.36RA 255.09RA 237.29
Interest cover ratioSC,1,2,13 3.04 0.72 0.27RA 3.27RA 1.40RA 0.77RA (4.72)
Debt/equity (including
long-term provisions),
ratioSC,1,2 1.58 2.10 1.96RA 1.69RA 1.66RA 1.68RA 1.32
Free funds from
operations as % of total
debt (Group)SC,1,2 27.3 8.00 8.04 15.15 9.51 1.92 15.89
Ensure financial sustainability
Electricity revenue
per kWh (including
environmental levy),
c/kWh 120.47 – 58.49 50.27 40.27 31.95 24.67
Electricity operating
cost per kWh (including
depreciation),
c/kWh 82.51 – 54.15 41.28 32.78 28.23 25.94
Working capital ratio,
ratio 1.43 – 0.68 0.76 0.85 0.89 0.78
Free funds from
operations for the group,
Rm 101 430 – 18 110 30 483 16 953 2 356 13 865
Gross debt/EBITDA, ratio 3.00 – 16.16 6.46 7.55 8.40 (13.00)
Debt service cover ratio 1.80 – 2.01 3.50 1.90 1.43 0.75
Key:
The key performance indicator is positive over the five years from 2008 to 2013.
The key performance indicator is negative over the five years from 2008 to 2013.
The key performance indicator has been stable over the five years from 2008 to 2013.
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
34
Notes:RA Reasonable assurance provided by the independent assurance provide (refer page 157).
SC Key indicator forms part of the Shareholder Compact for 2012/13.
1. This measure is taken into account for short-term performance measurement (in relation to executive remuneration). For further remuneration details see
www.eskom.co.za/IR2013/027.html.
2. This measure is taken into account for long-term performance measurement (in relation to executive remuneration). For further remuneration details see
www.eskom.co.za/IR2013/028.html.
3. Financial group targets for 2017/18 are not available hence the Eskom company targets for 2017/18 have been presented.
4. Top customers’ average debtors days excluding disputes for 2009/10 onwards. For 2007/08 and 2008/09 a consolidated top customers’ debtors days figure
is provided.
5. Represents a cumulative target for the five-year period: 2013/14-2017/18.
6. This includes construction by the Transmission division.
7. The basis of measurement changed during the 2010/11 year; prior to that verified savings of 372MWRA (2009/10) and 916MWRA (2008/09) were achieved.
8. Reporting basis changed during the 2010/11 year; hence no comparatives are available prior to 2010/11.
9. For 2008/09 and 2009/10, the BWO % was calculated on the attributable spend.
10. Attributable spend based on top 295 suppliers.
11. Targets are for 2016/17, the targets for 2017/18 will be developed as part of the workforce planning exercise.
12. Job creation target as for 2015/16 as there is no target available for 2017/18.
13. The interest cover ratio includes the unwinding of interest, but excludes the impact of the remeasurement of the government loan of R17.3 billion income as this
is based on the MYPD 3 determination.
14. Reclassification of the bee sting incident of 14 February 2012 as non-work related, as the cause of death was confirmed by the specialist forensic pathologist to
be natural causes.
15. The 12.12% cumulative UCLF consists of energy losses of 7.54% (excluding losses due to the Duvha Unit 4 outage, emission control and short-term outages)
plus energy losses of 1.17% for the Duvha Unit 4 outage and energy losses of 3.41% for emission control and short-term outages (Figures are only available
from April 2012).
Key performance indicators continued
35
The Kromhoek Combined School in KwaZulu-Natal is supported by the Eskom Development Foundation
Line divisions4
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
38
Eskom’s line divisions are responsible for
Eskom’s day-to-day operations. This section
contains the 2012/13 operational reports for
each of Eskom’s four line divisions:
• Generation
• Transmission
• Distribution
• Group Customer Services
GenerationGeneration’s mandate is to optimally operate
and maintain Eskom’s electricity generating
assets for the duration of its economic life.
Generation has 27 power stations with a total
nominal capacity of 41 919MW, comprising
35 650MW of coal-fired stations, 1 860MW of
nuclear, 2 409MW of gas-fired and 2 000MW
hydro and pumped storage stations.
Operating highlights• There was noRA rotational load-shedding
• 30MW of additional output capacity was
achieved on Koeberg Unit 2 after plant
enhancements were carried out
• Koeberg’s operator training programme
was re-accredited by the National Nuclear
Training Academy (USA). Eskom remains the
only non-US utility to hold this status
• All business units received ISO 14001
(environmental management) certification
and all power stations ISO 9001 (quality
management systems) certification
• The power station enhancement programme
and the energy efficiency programme rollout
continued
• 36% of Eskom’s power stations performed at
an energy availability factor (EAF) of better
than 90%. Generation achieved an internal
energy efficiency performance above target
Operating challenges• The lack of adequate space to do planned
maintenance, coupled with the demand
to keep the lights on, negatively affected
the performance of the plant, with a
deterioration in plant availability and
reliability. This poor performance was
exacerbated by the unreliability of the supply
from Hydro Cahora Bassa (HCB)
• Coal-related energy losses, mainly at Tutuka
and Arnot
• Availability of strategic spares due to long
lead times
• Emissions and water-usage performance are
not at desired levels
Future focus areasThe Eskom power stations are ageing
and need focus to maintain and improve
performance. The approach since 2010 to
shift or defer maintenance when possible
without compromising safety, to ensure we
have the capacity available to meet demand
and keep the lights on, is not sustainable.
A sustainable generation business that achieves
international best quartile performance levels
for plant availability and reliability, and does
not compromise on Eskom’s zero harm goals
for safety and environmental impact, requires
Eskom to undertake maintenance according
to the pre-planned outage schedules to meet
the plant design and statutory requirements.
Adhering to the outage schedules is also
required to provide opportunities to repair,
refurbish or retrofit plant to achieve compliance
with stricter environmental standards.
The sustainable generation business strategy
includes the following:
• A five-year maintenance strategy based on
an 80:10:10 performance level: 80% EAF, 10%
PCLF, 9% UCLF and 1% OCLF. The target for
UCLF and OCLF combined is a maximum
of 10%
• In the 2013/14 financial year a 10% PCLF
level will be targeted. 8% will be used to
create a maintenance schedule with limited
flexibility and 2% will be utilised for short
term, including weekend maintenance
Line divisions
39
• Retrofitting fabric filter plant to reduce the
level of particulate emissions - as a minimum
three units at Grootvlei and three units at
Tutuka power stations respectively up to and
including 2017
• A programme to achieve Blue Drop (water
treatment) and Green Drop (sewage works)
certification by March 2016
• A programme to achieve full compliance
to environmental requirements, including:
atmospheric emission licences, waste
management permits, water-use licences,
environmental authorisations and biodiversity-
related permits
• The continuation of the implementation of
Zero Liquid Effluent Discharge projects, as
approved by the board in 2010
It is also necessary to expedite an increase in
the generation capacity, particularly to meet the
peak demand for electricity. It is thus envisaged
to build between four and nine additional
open-cycle gas turbine units of similar design to
the existing units at Ankerlig.
BenchmarkingCoal-fired stationsGeneration benchmarks the performance
of its coal-fired power stations against those
of the members of VGB (Vereinigung der
Großkesselbesitzer e.V, an association of large-
boiler owners). VGB is a European-based
technical association for electricity and heat
generation industries. VGB’s objective is to
give support and facilitate the improvement of
operating safety, environmental compatibility,
and the availability and efficiency of power
plants for electricity and heat generation, either
in operation or under construction.
It is noted, when interpreting the results of
the benchmark, that the operating regimes
of the other utilities contributing to the
VGB database may not be identical to those
of Eskom.
The graphs on the next page illustrate the
results of the benchmarking for the 2000
to 2011 calendar years (the VGB results for
2012 are not yet available). The performance
of Eskom’s coal-fired power stations has
historically been higher (better) than the VGB
benchmark with respect to availability (energy
availability factor). The availability of the top
performing stations in the VGB benchmark has
remained consistent, while the availability of
the stations in the median and worst quartiles
has been declining. The Eskom generating
units show a deteriorating availability trend.
The benchmarking information indicates
that Eskom units are on a par with the VGB
benchmark with respect to planned maintenance.
However, the UCLF trend is not on the same
level. Although in the 2011 calendar year
Eskom’s was on a par with the VGB benchmark
on the best quartile and worst quartile, the
trend for 2012 is indicating that Eskom units
will perform worse than the benchmark – this
can only be confirmed once the VGB data for
2012 becomes available. With the very tight
demand versus supply situation and the need to
keep the lights on, Eskom has focused on risk-
based and statutory maintenance rather than
the reliability and design-based maintenance
needed to improve the UCLF performance.
With respect to the use of available plant
(energy utilisation factor), all Eskom coal-fired
units are performing at a level close to, and
in many cases above the VGB best quartile,
an indication that Eskom is running its power
station units much harder than the VGB
benchmark units.
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
40
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Benchmarking UCLF % All coal sizes 2000 – 2012108 VGB units – current year (excluding Eskom units)
20
15
10
5
0
Peak
Dem
and
Savi
ngs
(MW
)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
VGB worst quartile VGB median VGB best quartile
VGB worst quartile VGB median VGB best quartile
Benchmarking EAF % All coal sizes 2000 – 2012108 VGB units – current year (excluding Eskom units)
100
80
60
Peak
Dem
and
Savi
ngs
(MW
)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
VGB worst quartile VGB median VGB best quartile
VGB worst quartile VGB median VGB best quartile
41
Koeberg nuclear power stationEskom is affiliated to the World Association
of Nuclear Operators and the Institute of
Nuclear Power Operations, and South Africa
is a member of the International Atomic Energy
Agency. These affiliations enable Eskom to
benchmark performance, conduct periodic
safety reviews, define standards, disseminate
best practice and train personnel. The last
International Atomic Energy Agency safety
review was conducted during August 2011 with
a follow-up review scheduled for April 2013.
Refer to the 2012 Integrated Report for
details on the World Association of Nuclear
Operators peer review that was conducted in
November 2011.
Through the Institute of Nuclear Power
Operations, Eskom has obtained accreditation
from the National Nuclear Training Academy in
the United States for its systematic approach
to training of licensed and non-licensed nuclear
operators at Koeberg. Eskom is the only non-
US utility to receive such accreditation.
PerformanceFinancial performanceKey financial statistics for Generation (year ended 31 March 2013) (R million)
Actual 2012/13
Actual 2011/12
Actual 2010/11
Operating maintenance
costs1 5 945 4 936 4 254
Total property, plant and
equipment 85 169 73 728 60 060
Capital expenditure
(excluding capitalised
interest) 8 512 6 590 6 341
1. This is after the capitalisation of costs.
Benchmarking EUF % All coal sizes 2000 – 2012108 VGB units – current year (excluding Eskom units)
100
80
60
40
Peak
Dem
and
Savi
ngs
(MW
)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
VGB worst quartile VGB median VGB best quartile
VGB worst quartile VGB median VGB best quartile
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
42
There has been a constant drive to address
the backlog in maintenance; however, system
constraints have hampered the execution of
the required planned maintenance. Although
there was a significant year-on-year increase
in maintenance spend, much of the increased
maintenance spend is due to unplanned
maintenance resulting from plant failure.
Maintenance expenditure is R1.2 billion
over target.
The growth in assets value is attributable to the
return-to-service units that have come online.
The asset base will grow exponentially in the
coming years due to the capacity expansion
programme.
The increased capital expenditure is attributable
mainly to increased expenditure on the
general overhauls as a result of the increase
in maintenance. The system constraints have
delayed the execution of the technical plan, since
many of the projects are outage dependent.
Technical performanceGeneration managed to keep the lights on
in 2012/13 without rotational load-shedding.
This would not have been possible without
deferring some of the maintenance outages,
acquisition of additional capacity from
municipalities and IPPs as well as the reduction
of demand through the integrated demand
management (IDM) programmes, demand
market participation and power buyback
programmes. Moreover, for the maintenance
outages that were undertaken, there has been
an improvement in due date performance and
quality of outage execution.
The deferral of maintenance outages led to an
increase in the volatility of the performance
of the generation fleet. A significant number
of the outages that were undertaken were
forced repair outages and not planned design
maintenance. There was an increase in the
UCLF compared to the target and last year’s
performance (see table on page 43).
This volatility, together with the delay in
the commissioning of the Duvha Unit 4, the
unplanned outage of Koeberg unit one, delays
in new capacity options, and coal qualities
issues at certain sites (eg Tutuka) resulted in a
slowdown of the pace at which the maintenance
backlog could be reduced. The reduction of
imports from Hydro Cahora Bassa power
generation facility was also a major contributor
to the tightness of the system. Further details
regarding Hydro Cahora Bassa are provided in
the Southern African Energy section (page 57).
Various initiatives were developed and
implemented to improve Generation’s
technical performance, while ensuring the
availability of sufficient generating capacity
to meet the electricity demand. Examples of
initiatives are discussed below in the section on
the Generation Excellence Programme.
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Maintenance at the Palmiet pumped-storage scheme near Grabouw in the Western Cape
43
Unplanned capability loss factor (UCLF) breakdown
for 2012/13
14.0
11.2
8.4
5.6
2.8
0.0
% U
LF
March 2013 YTD UCLF % (12.12%)
Duvha unit 4 (1.17%)
Emissions and short-term outages related to UCLF (3.41%)
Partial load losses and other (7.54%)
Technical key performance indicators for GenerationThe technical key performance indicators are a reflection of this operating paradigm, where priority
has been given to balancing demand and supply.
Measure Unit
Compacttarget
2012/13Actual
2012/13Actual
2011/12Actual
2010/11
Power sent out by Eskom power stations GWh – 232 749 237 291 237 430
Energy availability factor (EAF)1 % – 77.65RA 81.99RA 84.59RA
Unplanned capability loss factor (UCLF)2 % 6.00 12.12RA.7 7.97RA 6.14RA
Planned capability loss factor (PCLF)3 % – 9.10 9.07 7.98
Unplanned automatic grid
separations/7 000 hours (UAGS/7 000)4 number – 4.09 3.19 3.62
Energy utilisation factor (EUF)5 % – 81.87 79.43 78.49
Unit capability factor (UCF)6 % – 78.78RA 82.96RA 85.87RA
The UCLF for 2012/13 has increased to
12.12%RA, which is higher than previous years
and an indication of aging plant and the current
deteriorating plant health condition. The current
high level of unplanned outages (UCLF) is a
reflection of the operating paradigm of “Keeping
the lights on” by balancing demand and supply
and trading off on plant availability by the
deferment of planned maintenance outages.
The figure alongside indicates a breakdown of
the UCLF into four major areas.
1. EAF measures plant availability including planned and unplanned unavailability and energy losses not under plant management control.
2. UCLF measures the lost energy due to unplanned energy losses resulting from equipment failures and other plant conditions.
3. PCLF is energy loss during the period because of planned shutdowns.
4. UAGS/7 000 indicates the number of unplanned unit trips per 7 000 operating hours.
5. EUF measures the degree to which energy was produced compared to the extent to which it could have been produced.
6. UCF measures plant availability including planned and unplanned outages.
7. The 12.12% cumulative UCLF: consists of energy losses of 7.54% (excluding losses due to the Duvha Unit 4 outage, emission control and short-term outages)
plus energy losses of 1.17% for the Duvha Unit 4 outage and energy losses of 3.41% for emission control and short-term outages (Figures are only available
from April 2012).
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
44
The UCLF figure is under further threat as
Generation’s normally better performing plant
is starting to show deterioration, with the likes
of Kendal, Matimba and Lethabo showing an
increase in unplanned unavailability.
The Open Cycle Gas Turbines (OCGTs) have
been utilised extensively during the year to help
keep the lights on, with a load factor of 10.4%RA
for 2012/13.
Review of the performance and impact of Hydro Cahora Bassa• Since 2010, there has been a decrease in
the EAF from Hydro Cahora Bassa due
to various problems experienced on the
generators and the high voltage direct
current transmission system (both in South
Africa and Mozambique). There was a
slight improvement in the EAF in the latter
part of 2011 and the beginning of 2012.
However, the performance is currently
at its worst. The unplanned unavailability
continues to trend in the wrong direction,
which negatively impacts the national power
system. Refer to the Transmission division
section for details (page 57)
• Longer-term events, such as the reactor
and line failures, place more pressure on
an already constrained power system and
Eskom’s ability to undertake maintenance on
its own fleet of power stations
Duvha Unit 4 return to serviceOn 9 February 2011 Duvha Unit 4 experienced
a catastrophic incident during routine statutory
turbine over-speed testing. Severe damage was
caused to the turbo generator, specifically the
high-pressure turbine, intermediate-pressure
turbine, the two low-pressure turbines,
the generator, and the exciter. The damage
extended to nearby buildings and the roof due
to flying debris.
The incident was investigated by a team of
representatives from Eskom, VGB Powertech,
who are engineering consultants to Eskom,
and two teams of investigating consultants
appointed by the insurers, TUV and Robertson
and Co SA. The investigation team conducted
exhaustive tests at the site, reconstructed
and tested equipment, interviewed staff and
examined test and other records at Duvha.
They have accepted the claim as a valid claim.
The investigators concluded that the incident
was caused by a combination of factors.
The root cause of the incident was established
to be a modification applied by Eskom in
2004 that inadvertently, when installing a new
programmable logic controller, removed a
maximum speed limit during over-speed test
conditions. The direct cause of the incident
was attributed to an operating error, in that
the operator did not follow the set procedure
while undertaking the physical over-speed test.
The operator failed to hold in the “permission”
button while raising the turbine speed. This
allowed the operator to keep raising the
originally set governor limit, which led to the
turbine speeding up and out of control.
The investigation into the incident was completed
and signed off in August 2011. The results of
the investigation were shared with all relevant
stakeholders, including Duvha employees.
All the recommendations from the investigation
have been addressed. Eskom has subsequently
implemented corrective actions and, where
appropriate, disciplinary processes have also
been followed. The modification error has since
been corrected on all the Duvha units, while
corrective actions have been applied to eliminate
contributory causes.
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45
Duvha power station Unit 4 was brought back
into service on 3 January 2013, after 23 months
of repair, executing the biggest recovery
project in the history of Eskom. The Eskom
team, supported by the original equipment
manufacturer Alstom and its sub-contractors,
achieved the recovery six months later than
originally estimated by Eskom but in less than
two years. The original estimate from the
insurer’s representatives, based on the work
done by them in assessing the loss, indicated a
recovery period of about four years.
Performance improvement initiativesTwo key initiatives were implemented to
address issues affecting plant performance,
namely, the Generation Excellence Programme
and the Maintenance Backlog strategy.
Generation Excellence ProgrammeThis programme includes the Power Station
Enhancement project and the Energy Efficiency
Improvement programme. These projects
are at various stages of rollout across the
Generation fleet.
Power Station Enhancement project
The project focuses on improving performance
of the key levers affecting EAF, namely, outage
and plant availability. One element has been to
assign more technical resources to support the
project execution. The project has improved
the UCLF performance in some of the identified
focus areas, while most of the identified long-
term actions are dependent on outages for
implementation. The following stations have
verified UCLF gains for 2012/13:
• Matla power station – 1.97% (draught group
0.71% and emissions 1.26%)
• Arnot power station – 0.44% (feedwater
0.31%, feed heating 0.03%, turbine centre-
line 0.12%)
• Lethabo power station – 0.002% (medium
voltage motors 0.002%)
The power station excellence programme
actions at all stations will continue to be
implemented, including continual review to
ensure that benefits are being realised and are
being sustained.
Energy Efficiency Improvement programme
The programme aims to improve the heat rate
of the boiler units at 13 of Eskom’s coal-fired
stations by 1% by 31 December 2015. The heat
rate measures the conversion rate of heat from
the energy source (coal, diesel) to electricity
generated. Efficiency improvements will help
reduce Eskom’s environmental footprint,
including reducing its carbon emissions.
The table below shows the average heat
rate performance across 13 coal-fired power
stations. The values are the amount of energy
needed to produce one kWh of electricity, and
illustrate the improvement in the heat rate over
the past three years.
MeasureActual
2012/13Actual
2011/12Actual
2010/11
Average Eskom
coal power station
heat rate MJ/kWh 11.25 11.46 11.04
Routine maintenance at one of the coal-fired power stations
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
46
The table below shows some of the high impact
plant areas which were targeted to achieve the
performance gains reflected in the improved
heat rate.
Performance improvement progress detail per power station
Station ActivityPerformance
gain predicted
Matla Turbine cold-end maintenance 11.0MW
Kendal Efficient lighting 0.2MW
Lethabo Reduce mill grinding media 1.2MW
Kriel Air-heater leakage defects
repaired
20.0MW
Majuba Unit 3 – air pre-heater leakage
fixed
Unit 3 – close low-pressure
bypass warming valve to 20%
Unit 3 – refurbish high-
pressure turbine
Units 1, 2 and 3 – auto shutoff
of ACC cooling fan
0.6MW
24.0MW
3.3MW
0.8MW
Maintenance backlog reduction strategyEskom’s coal-fired generating units require
routine maintenance to ensure that they meet
their technical performance requirements,
are safe to operate and do not violate
environmental laws.
Maintenance tasks that need to be performed
regularly (see the table below) can take
anywhere from a week or two for a boiler
inspection, which must be done every 12 to 18
months, to two months for a general overhaul,
which should be done every 6 to 12 years.
During this time, the generating unit being
worked on is taken out of service, which means
that the rest of the generating fleet needs to
compensate for the commensurate decrease in
generating capacity.
Maintenance schedule for a coal-fired power station
ActivityCycle time
(years)Duration
(days)
General (major)
overhaul6-12 40-60
Interim repairs 2-3 14-35
Mini general overhaul 6 28
Boiler inspection 1-1.5 7-14
Statutory inspection
and test6 35
Main steam pipe work ad hoc 120
In recent years, the margin between supply and
demand has been too narrow for Generation
to be able to take generating units offline at
the pace required to keep up with the required
maintenance schedules while also undertaking
unscheduled repairs. As a result, a maintenance
backlog has developed.
A maintenance backlog reduction strategy
was implemented to reduce this maintenance
backlog. The units that are on backlog and
pending maintenance requirements were
assessed to ensure that safety and statutory
requirements were not violated and to
determine what flexibility existed to defer
the maintenance of units. The outage risk
assessments were submitted to Eskom’s
internal governance processes for review and
approval. More focus was put on the purchasing
of modular spares, as well as increasing Rotek’s
workshop capacity, to reduce generating unit
downtime. In 2012/13 more maintenance was
carried out than in the previous two financial
years. The PCLF at the end of March 2013 was
9.1% (6.4% design-based).
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47
As at 31 March 2012, the total maintenance
backlog including additional outages was at
26 outages, of which 16 were design-based type
of maintenance and 10 were additional repair
outages. As at 31 March 2013, the total backlog
including additional outages was at 30 outages.
Of the 30 outages, 14 were design-based
type of maintenance and 16 were additional
repair outages.
Koeberg nuclear power station performanceOn 20 February 2013, Koeberg Unit 1 sustained
a reactor and turbine trip due to the de-
energisation of a 6.6kV switchboard as a result of
a busbar fault. Following repairs and during start-
up of the plant low flow was observed through a
primary circuit temperature measurement loop,
due to an isolation valve that had failed to shut.
In order to safely repair the valve, it was necessary
to completely remove all the nuclear fuel from
the reactor (and place it in interim storage in the
spent fuel pool as for a normal refuelling outage).
Return to service was achieved on 22 April 2013.
Post-Fukushima status updateThe nuclear accident at Fukushima associated
with the March 2011 tsunami off the coast
of Japan contains lessons for nuclear power
plants worldwide. Eskom, like other nuclear
utilities worldwide, undertook an assessment
of the impact of external events, including
earthquakes and tsunamis, on the safety of
Koeberg. The assessment was submitted
to and approved by the National Nuclear
Regulator who concluded that Koeberg is
adequately designed, maintained and operated
to withstand all external events considered
in the original design basis, and that there are
no findings to warrant curtailing of operations
or to question the design margins. The safety
assessment identified a number of potential
improvements to further reduce risk beyond
the design requirements. The current focus
of these improvements is on the ability of
the site to be self-sufficient for an extended
period. These are being discussed with the
National Nuclear Regulator and are being
implemented or will be installed during future
outages.
Safety performanceGeneration continually strives to reduce injuries
and harm to people and plant by focusing on
visible felt leadership in all plants and ensuring
the value of zero harm is embedded in all
aspects of the Generation business.
It is with sadness that Generation reported
an employee fatality at Kriel Power Station on
18 July 2012, as a result of an electrical contact
while working on an electrical cooling water
pump motor.
In addition to this fatality, Generation experienced
54 lost-time incidents including 46 lost time
injuries: seven noise-induced hearing losses and
one fatality during the 2012/13 financial year.
Generation’s lost-time incident rate for
employees is better than the Eskom rate
of 0.39RA.
The conveyor carries ash from Tutuka power station in Mpumalanga
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
48
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Public exposure to radiationPublic exposure to radiation arising from
Koeberg operations remains well within the
limits set by the National Nuclear Regulator.
Exposure to radiation is measured in units of
milliSievert (mSv). The limit recommended by
the International Atomic Energy Agency for
public exposure to radiation is 1mSv per year.
However, the National Nuclear Regulator has set a
stricter limit of 0.25mSv per year for South Africa.
As shown in the graph alongside, the average
public exposure to radiation arising from
Koeberg’s operations has been below 0.005mSv
in recent years – less than 2% of the limit
imposed by the National Nuclear Regulator.
Generation: Causes of employee lost time incidents (including fatalities)
20
15
10
5
0Lost
tim
e in
cide
nts
(incl
udin
g fa
talit
ies)
OtherOccupational diseasesMotor vehicle accidentInhalation of fumesHijackingGun shotForeign body
Fall on same levelFall from heightExplosion Ergonomics/material/equipment handling Electrical contact
Contact with heat/dustCaught/cut/struck byBurnBee sting/insect biteAssaultAsbestos
55 lost time incidents in 2011/12
20
15
10
5
0Lost
tim
e in
cide
nts
(incl
udin
g fa
talit
ies)
54 lost time incidents in 2012/13
Public individual radiation exposure due to effluents from Koeberg
0.008
0.007
0.006
0.005
0.004
0.003
0.002
0.001
mill
iSie
vert
2005-2013 = Financial year
2005 2006 2007 2008 2009 2010 2011 2012 2013
49
Environmental performanceRelative particulate emissionsRelative particulate emissions deteriorated from
0.31RA kilograms per megawatt hour sent out
(kg/MWhSO) in 2011/12 to 0.35RA kg/MWhSO
in 2012/13. The target of 0.30kg/MWhSO was
not achieved.
The emissions recovery team was established
in 2011 to work with power stations in reducing
par ticulate levels. The resulting focus has
reduced the increase in emissions at stations
that occurred because power stations’ pollution
abatement equipment was not able to process
the additional dust burden resulting from the
high ash content of coal. Outages for plant repair
and refurbishment are needed to maintain and
repair the pollution abatement equipment,
but this is not possible given the constrained
system. At some stations, particularly Tutuka
and Matla, particulate emissions remained high
for much of 2012/13 due to poor or variable
coal quality.
Water usageEskom’s total water usage (all power stations,
including return-to-service stations) was
334 275 megalitres (ML) (2011/12: 319 772ML).
Water consumption increased from 1.34RA
litres per kilowatt hour sent out (L/kWhSO)
in 2011/12 to 1.42RA L/kWhSO in 2012/13.
The increased water consumption was
influenced by many factors, including very low
rainfall at critical times, the high number of
start-ups, additional activities such as air heater
washing and the inability to obtain half station
shut downs to stop significant leaks at some
stations. At times of low rainfall, the station
dams are not being filled from natural rainwater
run off, requiring Eskom to procure water from
external (metered) water sources.
Generation division established water-
management task teams at the power stations
to address the reduction of water usage and
legal contraventions. Objectives of the water-
management task team include compiling
comprehensive plans to address all aspects of
water-management and water-use performance.
ISO certificationGeneration became the first Eskom division to
achieve ISO 14001 certification well ahead of
the target date of March 2014.
Legal contraventionsThe number of legal contraventions decreased
from 34 in 2011/12 to 33 in 2012/13; 18 of the
contraventions were water related (water leaks
and spills, sewerage spills and ash line leaks)
and 15 were exceeding of air quality particulate
emission limits. Generation division has
implemented a compliance programme which
will ensure continued improvement towards
zero contraventions.
Rotek Engineering, an Eskom subsidiary, performs a lot of the technical maintenance on plant components in Eskom
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
50
Environmental key performance indicators for Generation
Indicator Unit
Compacttarget
2012/13Actual
2012/13Actual
2011/12Actual
2010/11
Number of environmental legal
contraventions number – 33 34 41
Number of environmental legal
contraventions reported in terms of Eskom’s
operational health dashboard1 number – 1 1 1
Relative particulate emissions Kg/MWh sent out 0.30 0.35RA 0.31RA 0.33RA
Net raw water consumption Million litres – 334 275 319 772 327 252
Specific water use L/kWh sent out 1.32 1.42RA 1.34RA 1.35RA
Material containing polychlorinated biphenyls
thermally destructed tons – – – 3.1
Materials containing asbestos disposed
of at registered waste sites kg – – 308.3 232.4
Carbon-dioxide emissions (absolute) Mt – 227.9RA 231.9RA 230.3RA
Carbon-dioxide emissions (relative)2 kg/kWh – 0.98 0.99 0.99
Nitrogen-oxide emissions3 kt – 965RA 977RA 977RA
Sulphur-dioxide emissions kt – 1 843RA 1 849RA 1 810RA
Low-level radioactive waste generated (net) m3 – 183.1RA 184.7RA 165.3RA
Intermediate-level radioactive waste
generated (net) m3 – 34.7RA 25.4RA 39.4RA
Low-level radioactive waste disposed
of at Vaalputs m3 – 54.0RA 53.8RA 81.0RA
Intermediate-level radioactive waste disposed
of at Vaalputs4 m3 – – RA 128RA – RA
Public individual radiation exposure
due to effluents mSv – 0.0019 0.0024 0.0043
Ash produced (Mt) Mt – 35.3RA 36.21RA 36.2
Ash sold Mt – 2.4 2.3RA 2.0RA
Ash recycled % – 6.8RA 6.4RA 5.5RA
Ash disposed of on Eskom ash dumps
and dams (Mt) Mt – 32.9 33.8RA 34.16RA
1. Under certain conditions, contraventions of environmental legislation are classified in terms of the Eskom operational health dashboard index. These include
instances where censure was received from authorities, non-reporting to authorities as may be legally required, non-reporting in Eskom, a repeat legal
contravention, or when the contravention was not addressed adequately. Group or divisional executives can escalate any significant environmental legal
contravention to the operational health dashboard.
2. Factor figures are calculated based on total energy generated by Eskom (but excluding electricity used by pumped-storage scheme).
3. NOx reported, as NO
2 is calculated using station specific emission factors, which have been measured intermittently between 1982 and 2006, and tonnages
of coal.
4. The number of drums disposed of at Vaalputs in 2011/12 was restated.
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51
TransmissionTransmission’s mandate is to optimally plan,
operate and maintain the transmission
assets throughout their economic life, and to
provide an integrative function for the reliable
development, operation and risk management
of the interconnected power system. This
includes balancing supply and demand in
real time, trading energy internationally,
buying energy from IPPs, and operating the
transmission grid, comprising 154 substations
and 29 297 kilometres of transmission lines.
Operating highlights• Despite significant challenges, effective
supply and demand balancing ensured that
no national load-shedding occurred during
2012/13
• The number of transmission line faults per
100km has been reduced substantially
• Projects in the southern African region
have been identified and are being pursued
to support South Africa’s future electricity
requirements in line with the Integrated
Resource Plan (IRP) 2010
• Eskom signed IPP power purchase agreements
for the first tranche of the Department of
Energy’s renewables programme
• The 2012-2021 Transmission Development
Plan was published. It includes, among other
objectives, details of a network strengthening
plan to achieve Grid Code N-1 compliance
• Transmission’s maintenance activities were
successfully completed as per objectives
• Transmission successfully concluded
ISO 9001:2008 and ISO 14001:2004
cer tif ication audits and has been
recommended for certification by accredited
external auditors
Operating challenges• Although there were no fatalities, the
number of employee and contractor
lost-time incidents remains a concern.
Transmission had 10 lost time incidents in
2012/13, compared to 21 in 2011/12
• Three major incidents occurred:
– Abnormally high snowfall damaged
transmission towers in KwaZulu-Natal
in August 2012, temporarily constraining
power transfer capability to KwaZulu-Natal
– A failure of an isolator at the Athene
substation in October 2012 resulted in
an interruption to a large customer load
– A severe failure of a transformer
at Midas substation in March 2013
during a lightning storm resulted in
an extended interruption, primarily
affecting mining loads
• Purchases from Hydro Cahora Bassa
were lower than anticipated due to
equipment failure at the converter station
in Mozambique that reduced imports
from 1 500MW to 650MW for a period
of four months, followed by damage to one
overhead power line due to flooding that
again reduced imports to 650MW for a
period of almost three months
• Increased theft of transmission-tower steel
components caused several towers to
collapse during 2012/13
• Having effective risk management with
maintenance execution and commissioning
of network expansion projects
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
52
Future focus areas• Continue to balance supply and demand
• Connect IPPs to the grid
• Strengthen the network to achieve Grid
Code N-1 compliance, thereby improving
redundancy and reliability
• Sustain business management system
compliance (ISO 9001 and ISO 14001
certification)
• Improve the system technical performance
BenchmarkingTransmission took part in a benchmarking
exercise with 27 other transmission companies
in 2011/12. The study focused on maintenance
and plant performance and identified best
international practices for the transmission
industry. Consult the 2011/12 Divisional report
on the Eskom website for the summary of this
study. These studies have been used to identify
opportunities for continual improvement, as
well as in the Transmission Excellence Journey,
which intends to move the group towards
world-class performance for selected metrics.
PerformanceFinancial performanceKey financial statistics for transmission, as at 31 March 2013 (R million)
Actual 2012/13
Actual 2011/12
Actual 2010/11
International revenue 5 985 4 909 4 096
International energy
purchases 2 086 1 858 1 783
Maintenance and
refurbishment 634 290 98
Capital expenditure
(excluding capitalised
interest) 893 1 554 1 503
Total property, plant and
equipment 26 522 21 787 17 893
Technical performanceTransmission performance has improved
compared to 2011/12 for system minutes
(for incidents of less than one system minute),
number of interruptions, as well as line faults.
In particular, a substantial reduction was
achieved in the number of line faults per 100km
which was a key focus area during 2012/2013.
There were 33RA low frequency incidents
(<49.5Hz) during the year. Regrettably 3RA
major incidents were recorded related to
severe plant failures.
Technical key performance indicators for transmission
Measure Description of measure TargetActual
2012/13Actual
2011/12Actual
2010/11
Number of system
minutes lost
Total number of system minutes lost (for
incidents of less than one system minute)SC ≤3.40 3.52RA 4.73RA 2.63RA
Number of major
incidents
Total number of incidents with a severity
greater than one system minute – 3RA 1RA – RA
Number of
interruptions Interruptions affecting the continuity of supply – 35 48 30
Number of line faults Number of transmission line faults per 100km – 1.74 2.41 2.72
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The major incidents that occurred during
the year are highlighted under operational
challenges. The total system minutes lost
for major incidents, as well as for incidents
of less than one system minute, was 20.8RA.
The development and the implementation of
corrective action plans are continually pursued
to manage the technical risks with sustainable
solutions.
SC Shareholder’s compact.
53
Transmission: Causes of employee lost time incidents (including fatalities)
8
7
6
5
4
3
2
1
0Lost
tim
e in
cide
nts
(incl
udin
g fa
talit
ies)
12 lost time incidents in 2011/12
8
7
6
5
4
3
2
1
0Lost
tim
e in
cide
nts
(incl
udin
g fa
talit
ies)
10 lost time incidents in 2012/13
OtherOccupational diseasesMotor vehicle accidentInhalation of fumesHijackingGun shotForeign body
Fall on same levelFall from heightExplosion Ergonomics/material/equipment handling Electrical contact
Contact with heat/dustCaught/cut/struck byBurnBee sting/insect biteAssaultAsbestos
Safety performanceThere were no Transmission employee or
contractor fatalities recorded during 2012/13.
Regrettably, 10 non-fatal lost-time incidents were
recorded compared to 21 in 2011/12. Motor-
vehicle accidents have historically accounted for
many lost-time incidents and this remains a focus
area. Transmission’s lost-time incident rate is
worse than the Eskom rate of 0.39RA.
Transmission remains committed to reducing
safety incidents.
See Eskom’s overall safety strategy and initiative for more information (page 128).
Maintenance at Apollo substation, the main connection to Cahora Bassa in Mozambique
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
54
Environmental performanceTransmission’s objective is to continually improve
its environmental performance, as measured by
key environmental indicators.
Environmental key performance indicators for Transmission
Actual 2012/13
Actual 2011/12
Actual 2010/11
Number of environmental
legal contraventions 2 2 –
Number of environmental
legal contraventions
reported in terms of
Eskom’s operating health
dashboard1 – – –
Materials containing
asbestos disposed of at
registered waste sites
(tons) 38.94 35.4 10.5
Material containing
polychlorinated biphenyls
thermally destructed (tons) 1.4 2.6 400.7
1. Under certain conditions, contraventions of environmental legislation are
classified in terms of Eskom’s operating health dashboard index. These
include instances where censure was received from authorities; incidents of
non-reporting of incidents when legally required; where incidents were not
reported within Eskom; and where there was a repeat legal contravention
or where the contravention was not addressed adequately.
The environmental legal contraventions
recorded in 2012/13 included an incident
of an uncontrolled veld f ire as well as
inadequate oil containment at a substation
following heavy rainfall.
Oil-dam integrity, soil erosion, firebreaks
around substations, waste management, licence
and permit compliance remain high risk factors
for Transmission. In line with its commitment
to excellence, Transmission was recommended
for ISO 14001 certification in March 2013,
six months ahead of schedule.
Criminal incidentsThe theft of transmission tower steel resulted
in 10 transmission towers on the Apollo-
Dinaledi 400kV line collapsing on 30 April
2012. Since then, less severe incidents have also
occurred in Gauteng.
Security patrol frequency has been increased
and aerial inspections have been conducted
in identified high-risk areas. Public awareness
campaigns and engagement with scrap-metal
dealers in affected areas were conducted.
Technologies to help reduce tower component
theft are being pursued.
Refer to page 74 for details of the management
of energy losses.
Independent System Market Operator (ISMO)The ISMO Bill of 2011 provides for a separate
state-owned entity into which certain functions
would be separated from Eskom over time.
The System and Market Operator division,
operating under the governance of the board,
was instituted in 2011 as an internally ring-
fenced division within Eskom. Its functions
include energy planning, feasibility studies, IPP
procurements and market administration.
As part of the ISMO Bill public consultation
process, the Portfolio committee on Energy
requested a due diligence to assess the impact
of creating a Transmission System Operator
comprising the ISMO Bill, plus the addition
of the transmission grid. This due diligence
was completed in November 2012. Based on
this study, the Portfolio committee on Energy
made a decision to implement the ISMO Bill
as originally tabled, without including the
transmission grid. In addition it is to address all
issues raised by Eskom and other stakeholders.
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55
Independent Power Producers (IPPs)Eskom remains committed to facilitating the
entry of IPPs into the South African electricity
market. By 31 March 2013, it had signed up
power purchase agreements for a total capacity
of 2 663.9MW with IPPs. Eskom’s board has
approved an additional 2 088.9MW, bringing
the total approved capacity up to 4 753MW.
These figures include the Department of Energy’s
renewable energy IPP procurement programme.
The amount paid for IPP and municipal
purchases for 2012/13 amounted to R2.9 billion
(2011/12: R3.3 billion).
The table below shows purchases from
operational generators with signed power
purchase agreements.
IPP and municipal purchases for 2012/2013
Actual purchases
(MW) 2012/13
Actual purchases
(GWh) 2012/13
Actual purchases
(GWh) 2011/12
Actual purchases
(GWh) 2010/11
Short- to medium-term contracts
Medium-term power purchase 288.0MW
Short-term power purchase 194.2MW 482.2 2 407.1 2 149.0
Municipal generation 585.0 1 033.1 1 958.0
WEPS 68.0 76.1 0.0
Total 1 135.2 3 516.3 4 107.0 1 833.0
Average cost per in cents/kWh 83.6 77.0
Short- to medium-term IPP programmesMedium-term power purchase programmeEskom initiated the Medium-term Power
Purchase programme (MTPPP) in 2008 to
procure base-load capacity from private
generators for the medium term until new
generation capacity, such as Medupi power
station, comes online. A price cap was
submitted to the market and all bidders capable
of meeting this within the required timeline
were accepted. A capacity of 288MWs has
been signed and is operational. Additional
capacity of 85MW was signed in February 2011,
but is not yet operational.
Short-term power purchasesEskom approved 236.4MW of short-term
power purchase agreements, of which 194.2MW
of projects were operational at the end
of March 2013. It is expected that a fur ther
35.0MW will be operational by the end of
May 2013. These contracts will expire at the
end of December 2013.
Municipal base-load purchasesEskom has been procuring energy from
City Power (Kelvin power station) and the
City of Tshwane (Rooiwal and Pretoria West
power stations) since January 2011. Eskom
has contracted a total capacity of 585MW from
these entities, although realistically the average
capacity is about 180MW. The contracted
capacity with the municipal generators was set
high in order to allow for possible additional
capacity that they could provide. These contracts
expire at the end of December 2013.
Wholesale electricity pricing system programmeEskom enters into annual contracts with
co-generators outside MTPPP and short-term
contracts. These co-generators are paid at
wholesale prices. Wholesale electricity contracts
are capped and the total collective capacity limit
is 68MW.
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
56
Long-term IPP programmesDepartment of Energy’s open-cycle gas turbine (“Peakers”) programmeEskom is awaiting the necessary National
Energy Regulator of South Africa (NERSA)
and Public Finance Management Act (1999)
approval to be the buyer for the Department
of Energy’s Open-cycle Gas Turbine IPP project
for 1 005MW of capacity, with completion
anticipated to be in the third quarter of
2015. The government support framework
agreement for this has been received.
Renewable energy IPP programmeThe Department of Energy formally launched the
renewable energy IPP procurement programme
in August 2011. The request for proposals called
for the commercial operation of 3 725MW of
renewable energy technologies between mid-
2014 and the end of 2016. Developers were
invited to submit proposals to finance, construct,
operate and maintain any suitable wind, solar
thermal, solar photovoltaic, biomass, biogas,
landfill gas or small hydro technologies.
On 5 November 2012, Eskom signed 28 power
purchase agreements with IPPs under the
first bid submission, totalling 1 441.7MW of
renewable energy capacity.
The procurement process for the second
round of submissions has been concluded and
Eskom’s board has approved the purchase of
1 043.8MW of renewable energy capacity.
Approval for this second phase per the
Public Finance Management Act (1999) is
being sought.
Small renewable energy IPP programmeThis programme, which falls under the
Department of Energy’s renewable energy IPP
programme, calls for 100MW to be generated
from small renewable energy technologies.
The Department of Energy has indicated
that it intends to release the final request for
proposals to the market for this programme
during the second quarter of 2013.
Southern African EnergyThe Southern African Development Community
region continued to experience significant
economic growth, which translated into growth
in electricity demand, during 2012/13. Eskom
predicted that its cross-border sales would,
however, decline due to energy projects
planned for the region, specifically Botswana’s
new Morupule B 600MW coal-fired station and
Namibia’s additional 90MW unit at NamPower’s
Ruacana hydro station. However, as the table
below illustrates, this did not materialise.
Cross-border purchases and sales of electricityThe table below represents cross-border sales
and purchase volumes. This differs from the
physical volume of energy flowing across South
Africa’s borders, which are termed imports and
exports.
• Wheeling of power by other countries via
the Eskom network – this power would
enter at one point and the same volume
would exit at another – resulting in imports
being higher than purchases and exports
being higher than sales
• Some power Eskom buys does not physically
flow into South Africa, but meets an existing
sales commitment, reducing the amount
physically exported from South Africa to
meet the sales commitment – this would
result in purchases being lower than imports
and sales being higher than exports
Cross-border sales and purchases
Actual2012/13
Actual2011/12
Actual2010/11
Sales1 GWh 13 699 13 108 13 216
Purchases GWh 7 698 9 939 10 190
Net sales GWh 6 002 3 169 3 025
1. Excludes sales to Lesotho by Distribution.
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57
Botswana Power Corporation’s (BPC) Morupule
B power station was due to start generating
150MW from March 2012, with three additional
150MW tranches expected during each quarter
of 2012. Unfortunately, these units were not
commissioned and only intermittent generation
has resulted. The four units are now only
expected to be in full commercial operation by
December 2014. BPC also expected continued
supply from their existing 120MW coal-fired
Morupule A, which experienced technical
problems and has been taken out of service to
undergo refurbishment. Eskom has continued
to supply Botswana in terms of the prevailing
agreement to end December 2013, and will
continue to the extent possible in terms of a new
non-firm agreement.
NamPower successfully commissioned its
additional Ruacana unit. However, due to
the lowest water levels in several years in
the Cunene River system, generation capacity
was diminished.
Regional purchases have also been disappointing.
The bulk of purchases are from the Hydro
Cahora Bassa scheme in Mozambique, which
experienced several problems in 2012 and
2013. In July 2012, a smoothing reactor at
Mozambique’s Songo converter station
failed, lowering the converter station capacity
from its full rating of 1 500MW to 650MW.
A temporary unit, relocated from South Africa,
was installed at Songo in November 2012.
This temporary unit allows 1 300MW to be
imported. A permanent replacement unit that
will allow the return to 1 500MW is due to be
commissioned in July 2013. In January 2013, one
of the high-voltage direct current lines carrying
power to South Africa was severely damaged in
floods, again reducing the scheme’s capacity to
650MW. The line was returned to full service
on 21 April 2013, returning the capacity to
1 300MW, pending the replacement of the
reactor. Full imports of 1 500MW are therefore
expected from July/August 2013.
Given the failures of the high-voltage direct
current scheme and the resultant stranding
of energy at Songo, Eskom sold a portion
of its energy from Hydro Cahora Bassa to
Zambia’s ZESCO and the Copperbelt Energy
Corporation via the Zimbabwean network.
This further increased sales. Sales to Lesotho
and Swaziland and the three end-use
customers (Motraco in Mozambique, Skorpion
Zinc in Namibia and Namdeb Diamond Mine in
Namibia) have continued along normal trends.
The Aggreko gas plant at Resanno Garcia, in
Mozambique, commissioned in the second
quarter of 2011/12, is reliably delivering
92.5MW to Eskom and 15MW to Electricidade
de Mocambique (the Mozambican national
utility) per its agreements.
Because of the increased sales and reduced
purchases, net international sales (sales minus
purchases) reached its highest level in this
financial year.
Regional supply options, as identified in the
IRP 2010, as well as a number of transmission
strengthening projects continue to be pursued.
Specifically, hydro options in Mozambique
and Zambia are being advanced, along with
transmission projects in Mozambique, Zimbabwe,
Botswana, Zambia and Namibia. These would
allow power to be securely imported into South
Africa in future. Other projects, in various stages
of development, include potential gas-supply and
hydro options as far afield as the Democratic
Republic of Congo.
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
58
DistributionDistribution’s mandate is to build, operate
and maintain Eskom’s distribution assets
to provide reliable electricity supply. It also
actively collaborates with wider industry
to resolve distribution issues and enhance
stakeholder relations.
Eskom’s distribution assets in South Africa
comprise 67 488km of distribution lines,
269 535km of reticulation power lines and
6 960km of underground cables, representing
one of the largest powerline systems on the
continent.
Since 1991, Eskom has connected over 4.3 million
electrification households to the distribution
network, of which 144 558 connections were
done in the year ending 31 March 2013.
Operating highlights• Implemented several safety initiatives,
which saw an improvement in most of the safety indicators
• Sustained improvement of the system average interruption duration index (SAIDI) and the system average interruption frequency index (SAIFI)
• Nine provincial operating unit structures are now in place, with fully functional management and governance structures and ring-fenced accountability for their performance
• Electrification connections exceeded target and also created 4 320 job opportunities
Operating challenges• Employee and, in particular, contractor safety
performance and lost-time injuries
• Employee security and network infrastructure security remains a concern in certain areas
• High levels of theft of equipment and electricity, including illegal connections, affect network and service performance, increasing Eskom’s costs
• Ageing networks, making maintenance a
challenge
• Acquiring land and servitudes for electricity
infrastructure
Future focus areas• Reinforce safety practices towards zero
harm, with special attention to contractors
• Sustain Distribution’s improving technical
performance
• Identify and implement innovation to enhance
our efficiency activities
• Actively collaborate with industry players on
electricity distribution industry issues
BenchmarkingDistribution participated in a 2012 benchmarking
study, conducted by an independent international
consulting group, with comparisons drawn with
North American utilities.
The utilities participating in the benchmark
study did not have the same measurement
and reporting methodology, network design
characteristics, planning philosophy, operating
environment or practices as each other or Eskom,
resulting in a wide range of reported network
interruption performance levels. This makes any
direct comparison of the reported performance
among the utilities difficult.
According to the 2012 study, average SAIDI
performance (including major events and planned
interruptions) was between 42.5 minutes per
year and 47.5 hours per year, with a mean
of 10.1 hours per year. Eskom’s SAIDI, as at
31 March 2013, is 41.9RA hours per year. Average
SAIFI performance (including major events and
planned interruptions) was between 0.5 and
24.3 interruptions per year, with a mean of
3.2 interruptions per year. Eskom’s SAIFI, as at
March 2013, is 22.2RA interruptions per year.
Distribution’s network interruption performance
is historically impacted by its long radial overhead
lines for rural electrification customers.
Exacerbating this is the limited redundancy
where there is little or no alternative for
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59
ring-feeds and back-feeding, in the event of
supply interruptions.
Distribution sees great value in conducting
benchmarking studies in order to identify
typical performance levels and best practices
among international utilities. Distribution has
conducted its modelling and identified capital
and maintenance interventions to improve its
long-term network performance considering
our local network characteristics.
Network performance strategic directionDistribution’s long-term objective is to move
to first quartile performance for distributors
with similar network characteristics but it
is recognised that achieving this will require
considerable resources. Distribution has the
following medium-term objectives for its
network performance:
• Reduce SAIDI to 39 hours per year by 2017/18
• Reduce SAIFI to 17 interruptions per year by
2017/18
The following four key strategic initiatives
are in place to improve the SAIDI and SAIFI
performance:
• Establishment of additional customer network
centres:
– to reduce travelling time
– to ensure that field staff are located close
to the customers and networks
Eight additional customer network centres
have been established in this financial year
• Increase live work from 50% to 70% to reduce
the outages experienced by customers (73%
of all planned work is currently executed by
live line techniques)
• Effective planning, refurbishment and
strengthening of networks:
– Revision of the planning criteria
To reduce the number of customers
affected by a fault and set the criteria for
the creation of redundancy on networks
– Focus on poor performing networks
76% of refurbishment and strengthening
projects on poor performing networks
have been completed in this financial
year. This has contributed to a 10%
improvement of the SAIDI performance
of the top 150 worse performing feeders
– Increased visibility of network
Re-closers installed in this financial year
to increase network visibility on the top
150 feeders have contributed positively
to the SAIDI performance
– Improvement of SAIDI for customers in the
top customer segment
Satisfactory performance has been
maintained for the Eskom top customer
segment
• Use of mobile computing devices to
improve work management and resource
utilisation
The Enterprise Digital Assistant installation
project is now complete. Currently 84% of
work orders are managed via these devices
PerformanceFinancial performanceKey financial statistics: Distribution, as at and for the year ended 31 March 2013 (R million)
2012/13 2011/12 2010/11
Grants received for
electrification 1 649 1 784 1 720
Maintenance and
refurbishment 4 006 3 851 2 947
Total property, plant
and equipment 54 019 47 842 43 982
Capital expenditure
(excluding capitalised
interest) 8 317 7 941 8 190
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
60
Technical performanceTechnical key performance indicators for Distribution
Measure Description of measure and unit
Compact target
2012/13 2012/13 2011/12 2010/11 2009/10
SAIFI Reliability of supply index (number per year) – 22.19RA 23.73RA 25.31RA 24.65RA
SAIDI Availability of supply index (hours per year) ≤47.0 41.89RA 45.75RA 52.61RA 54.41RA
SAIFI performance improved this year but still
did not achieve the target of interruptions per
year for 2012/13. SAIDI performance improved
and achieved the target of ≤47 hours per year
for 2012/13.
These performance improvements are
attributable to:
• Benefits from Distribution’s holistic reliability
improvement investments made over the
past few years
• Better integration in the management of
all planned and unplanned interruptions,
including project work
• Focusing on poorly performing networks
• Daily management of key events
• High leadership visibility and sharper focus in
operations
Please refer to page 74 for a discussion on the
management of Eskom’s energy losses.
ElectrificationEskom has been implementing the Department
of Energy’s integrated national electrification
programme in its licensed areas of supply since
April 2001. Eskom carries the operating costs
for this, while the programme itself funds new
connections and infrastructure development.
The average cost of infrastructure development
and the cost per connection are likely to increase
as more remote rural areas are electrified.
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The Cullinan technical services team fixes a distribution line
In addition, technical specifications for
network design have been enhanced to better
accommodate growth in electricity demand
and to improve the quality and reliability of
the electricity supply to these areas. In order
to ensure there is alignment in the delivery
of electrification projects, Eskom attends
most of the integrated development planning
sessions organised by local municipalities in
the country.
61
Electrification programme performance
Unit of measureActual
2012/13Actual
2011/12Actual
2010/11
Total connections number 144 558 155 213 149 914
Direct connections, excluding farm workers number 143 6821 154 249 149 112
Farm worker connections number 876 964 802
Total capital investment Rm 1 704 1 575 1 512
Reticulation and connections Rm 1 608 1 311 949
Sub-transmission infrastructure development Rm 92 260 559
Farm worker connection incentives paid Rm 4 4 4
1. Includes 3 801 municipality-funded connections.
Meeting universal access to electricity targets
in future depends on the availability of funding
via the integrated national electrification
programme. In order to accelerate the
Universal Access Programme, the Department
of Energy has increased the 2013/14 funding
allocation by R262 million, which will enable
Distribution to increase its programme by up
to 30 000 additional electrification connections
in the same financial year. The Department
of Energy has confirmed a significant increase
in the Medium Term Electrification Fund
for the next three years, commencing in
2013/14. Distribution is also pursuing efficiency
opportunities in order to unlock further funding
to achieve another 20 000 extra connections,
over and above the 30 000 mentioned above
for the 2013/14 financial year. This will assist in
achieving the Universal Access Programme’s
objectives earlier than 2025.
Electrification of grid schools and clinics
Unit of measure
Actual 2012/13
Actual 2011/12
Actual 2010/11
Capital investment Rm 36 2 158
Total connections number 142 19 854
In addition to the electrification above,
the electrification of schools is funded by
the Department of Basic Education through the
Accelerated Schools Infrastructure Delivery
Initiative. The Department of Basic Education
is in the process of rebuilding some schools
that currently have mud structures, to facilitate
safe electrification. The electrification of
clinics is funded by the Department of Energy,
through the National Electrification Fund. Both
programmes focus on electrifying specifically
identified schools and clinics. No clinics were
identified for electrification in the current year.
The table details progress on electrification
of schools and clinics.
2013 Africa Cup of NationsIn January and February 2013, South Africa hosted the 2013 African Cup of Nations football tournament. Eskom played a critical role in ensuring an adequate and secure electricity supply to the host cities in five provinces, namely Gauteng, Mpumalanga, North West, KwaZulu-Natal and Eastern Cape.
Eskom followed the same processes used for the 2010 FIFA World Cup by setting up provincial situational analysis centres to monitor and report on activities on match days. These centres reported to the national nerve centre to present a consolidated view
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
62
of these activities. The technical response teams were also mobilised and on stand-by during the tournament. No major electricity supply incidents were reported during the
tournament.
Safety performanceTo ensure a step change in Distribution
division’s safety performance, there has been
considerable progress made in rolling out
the prescribed measures emanating from
the Distribution Safety “Boot Camp”. These
initiatives have been grouped into six focus
areas: leadership, policy, people, physical world
of work, pre- and post-incident management
and contractor management.
There were two employee fatalities in the
2012/13 year, compared to nine employee
fatalities suffered in the previous year.
Zero fatalities were achieved in the last
quarter, largely due to the progress made
in the implementation of these initiatives.
Distribution’s lost-time incident rate is worse
than the Eskom rate of 0.39RA.
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Distribution: Causes of employee lost time incidents (including fatalities)
40
35
30
25
20
15
10
5
0Lost
tim
e in
cide
nts
(incl
udin
g fa
talit
ies) 40
35
30
25
20
15
10
5
0Lost
tim
e in
cide
nts
(incl
udin
g fa
talit
ies)
128 lost time incidents in 2011/12 107 lost time incidents in 2012/13
OtherOccupational diseasesMotor vehicle accidentInhalation of fumesHijackingGun shotForeign body
Fall on same levelFall from heightExplosion Ergonomics/material/equipment handling Electrical contact
Contact with heat/dustCaught/cut/struck byBurnBee sting/insect biteAssaultAsbestos
Contractor safety is just as important and
is given high priority in Distribution. It is a
challenging area as the dispersed nature of the
business means many contractors are operating
without constant supervision. There were seven
contractor fatalities in 2012/13 (eight in 2011/12).
Initiatives to improve Distribution’s safety
performance include each unit beginning the
day with a 15-minute safety talk and translation
of key safety messages into all applicable official
languages to ensure effective communication to
all levels of staff. Leadership continue to “walk
the talk” through regular site visits and holding
work stoppages to engage employees on daily
challenges related to safety. The zero harm
campaign was launched across all operating
units to employees and all active contractors.
Other measures taken to improve Distribution’s
safety performance include:
• Conducting induction and training before
employees or contractors are deployed
to sites
63
• Using two driving simulators for training. Additional units will be established in all operating units
• Installing enhanced vehicle-safety features, for example, park-distance control systems
• Construction and utilisation of network simulators and training centres for enhanced knowledge and practical experience
• Establishing a contractor academy, in partnership with the University of Limpopo, to develop contractors’ skills
• Identifying and assessing hazardous indoor substations and putting in place an action plan to either refurbish or replace them
• Intensifying public safety awareness
In the next financial year Distribution will focus on leadership, organisational and operational safety. The leadership will ensure strong, visible and ongoing management commitment. Zero harm is a prioritised strategic objective at organisational level, and the division will implement all appropriate elements and standards for an effective safety management system. The operating units will roll out safety initiatives including behavioural safety measures and ensure corrective and preventive actions are executed.
These measures form part of Eskom’s zero
harm campaign, which has now been rolled out
in all nine operating units. Ultimately, Eskom
would like to see a culture shift entrenching
safety behaviour into operations.
Environmental performanceDistribution had four environmental legal
contraventions where protected trees were
cut without permits. A standard application
procedure together with key principles was
successfully negotiated with the National
Department of Agriculture, Forestry and
Fisheries to ensure that permits are obtained
to eliminate this risk. Although 90% of
investigations and related corrective measures
are achieved within four months, the high
number of bird species electrocuted on
Distribution networks continues to be a risk.
Various research projects and programmes
aimed at modifying existing structures have
been implemented. For example, the Eastern
Cape operating unit modified more than 1 600
structures to reduce the electrocution risk for
vultures. Waste management practices were
also identified as an area of concern.
Environmental key performance indicators for Distribution
Actual 2012/13
Actual 2011/12
Actual2010/11
Number of environmental legal contraventions 4 5 11
Number of environmental legal contraventions reported in terms of
Eskom’s operating health dashboard1 – 2 2
Materials containing asbestos disposed of at registered waste sites (in tons)13.6 71.6 285.8
Material containing polychlorinated biphenyls thermally destructed (tons)– 11.3 18.0
Number of reported bird fatalities due to distribution infrastructure480 3752 244
1. Under certain conditions, contraventions of environmental legislation are classified in terms of Eskom’s operating health dashboard index. These include instances
where censure was received from authorities, where incidents were not reported to authorities when legally required, where incidents were not reported within
Eskom, and where there was a repeat legal contravention or where the contravention was not addressed adequately. Divisional executives can escalate any
significant environmental legal contravention to the operating health dashboard.
2. The bird fatalities for 2011/12 have been restated.
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64
All nine operating units within Distribution
have made progress towards implementing
an Environmental Management System, to
be certified by March 2014 in terms of ISO
14001. Effective monthly engagements with the
Department of Environmental Affairs resulted
in limited delays in obtaining environmental
authorisations for new projects. Compliance
with the requirements of the National
Water Act No 36 of 1998, as it pertains to
infrastructure developments within 500m
of a wetland, infrastructure that crosses
watercourses and replacement of vandalised
cables through watercourses, were identified as
challenges. Negotiations with the Department
of Water Affairs were initiated in this regard.
Raising environmental awareness remains a
key focus area and forms part of the rolling
out of the zero harm initiatives to Distribution
employees and contractors. More than
88% of Distribution contractors received
training in environmental authorisations and
environmental management plans, while
Distribution employees were exposed to nine
different environmental courses.
Group Customer ServicesGroup Customer Services’ mandate is to place
the customer at the centre of Eskom’s business
and manage customer relations. In this way, it
aims to guide the company towards achieving
satisfied customers who consistently rate
Eskom in the top quartile.
Another key responsibility is the managing of
power demand by means of IDM initiatives.
Operating highlights• Partnering with large industrial customers
to help Eskom manage the power system
during peak periods through demand-
response programmes
• Successful implementation and execution
of a comprehensive suite of IDM solutions to
exceed the NERSA and shareholder savings
targets
• Contact centre performance indicators
(Customer Care and Service Level) were
above target
• KeyCare customer satisfaction results for
large industrial customers were above target
• Various senior-level engagements with
stakeholders and customers (including
municipalities) on the status of the power
system and arrears were conducted
• The Grid Access Unit processed almost
700 applications for connection to the grid.
This included IPPs and generators that are
not part of the Department of Energy’s
bidding programme
• The Customer Service Group had no
fatalities, but extra focus is needed to
reverse the upward trend in its lost-time
incident rate
Operating challenges• Severe disruption in the platinum mining
sector, combined with reduced electricity
demand, resulted in reduced sales compared
to projections
• Municipal debt remains high despite
various interventions with municipalities
and numerous payments being made
intermittently. Legal processes with disputed
accounts are being followed
• Residential Gauteng and Soweto debt
remains high. Customer debt levels are
increasing and there is a negative trend
in debtors’ days of both large and small
power users
• The number of overdue and escalated work
items in all operating units requires attention
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65
Future focus areas• Improve safety levels and staff wellness
• Explore further options to manage power
demand, including demand response
programmes, energy efficiency and grid access
• Address regulatory constraints to sustain
the IDM programme as a key contributor to
ensuring security of supply
• Enhance debt-management strategies
• Improve customer data for segmentation
purposes and to better understand different
customer needs
• Increase employees’ technical and business-
related skills
• Better manage non-technical energy losses
• Improve meter-reading estimations and
bedrock factors (restoration time and
customer connections) so that operating
targets are met
BenchmarkingCustomer services takes part in benchmarking
studies, conducted by an independent
international consulting group to compare its
performance with similar international utilities.
Please refer to the 2012 Integrated Report for
further details of benchmarking.
PerformanceDuring the year, the numbers of Eskom
customers in the different categories changed
as shown below.
Number of Eskom customers
Customer categoryActual
2012/13Actual
2011/12Actual
2010/11
Local customers
Redistributors 795 786 784
Residential1 4 874 004 4 713 178 4 514 998
Commercial 50 399 50 270 49 090
Industrial 2 789 2 775 2 857
Mining 1 062 1 100 1 110
Agricultural 83 877 84 095 84 393
Traction 509 508 508
Total local 5 013 435 4 852 712 4 653 740
International
Utilities 7 7 7
End users across the
border4 3 3
Total international 11 10 10
Total 5 013 446 4 852 722 4 653 750
1. Prepaid customers and public lighting included under residential.
The reduction in supply points for mining and
agriculture were influenced by recent socio-
economic events. Industrial customers again
showed a growth.
Financial indicators for Group Customer Services, as at 31 March 2013Debtors’ days are being calculated and
reported on, excluding international customers
and major disputed accounts like EB Steam,
Aurora and Pamodzi Mining. All these accounts
are litigation or arbitration matters and impact
on debt out of the control of customer
service. Soweto debtors are excluded from
the calculation of debtors days, as on average
the payments received are less the 20%.
The payment levels of top customers have
once again improved year on year and although
payment terms is 15 days, exceptional payment
terms have been negotiated to ensure that
Eskom has a quick turnaround with cash
availability in this key environment.
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66
Debt in municipal entities has increased and
the negative year-on-year trend continues.
Various action plans have been put into place to
remedy the situation. The small power debt has
been under severe pressure where customers
are finding it difficult to maintain good payment
levels timeously. Debt has deteriorated in
Gauteng, Mpumalanga as well as in Limpopo
where revenue recovery projects are currently
in place.
Financial indicators for Group Customer Services, as at 31 March 2013
Actual2012/13
Actual2011/12
Actual2010/11
External (local) revenue Rm 120 678 108 260 86 454
Impairments Rm 1 020 587 669
Debtors less provisions Rm 10 173 8 835 6 955
Provision for arrear debts Rm 4 246 3 320 2 835
Integrated demand management – excluding demand market
participation and power buyback Rm 3 001 1 528 568
Power buybacks Rm 2 808 1 750 –
Demand market participation Rm 283 414 211
Total integrated demand management costs Rm 6 092 3 692 779
Large power users debtors’ days – top customers excluding
disputed days days 12.3 14.4 15.5
Large power users debtors’ days – municipalities and other days days 25.2 21.8 18.9
Small power users debtors’ days – excluding Soweto days 48.2 42.9 45.1
Technical key performance indicators for Group Customer Services
Compacttarget
2012/13Actual
2012/13Actual
2011/12Actual
2010/11
KeyCare % – 105.8 105.9 101.2
Weighted customer service index % – 86.8 85.6 84.4
Demand-side savings
Evening peak demand savings1 MW – 595RA 365RA 354RA
Energy savings1 GWh 1 827 2 244RA 1 422RA 1 339RA
Internal energy efficiency1 GWh 20.00 28.9RA 45.0RA 26.2
Energy loss %
(12-month moving average)
Total distribution loss % – 7.12RA 6.32RA 5.68RA
Total transmission loss % – 2.80RA 3.08RA 3.27RA
Total Eskom loss % – 9.08 8.65 8.25
1. Includes verified, as well as installed but not yet verified.
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67
Customer service performanceA range of statistical perception and
interaction-based customer surveys, conducted
by independent research organisations, are
used to measure customers’ satisfaction with
Eskom’s service. These include:
• KeyCare, which measures the satisfaction
of Eskom’s large industrial customers
• MaxiCare, which measures the satisfaction
of Eskom’s residential, small and medium
customers
• CustomerCare, which measures the
satisfaction of those customers who have had
recent contact with Eskom’s contact centres
Results from these surveys help Eskom identify
service aspects that require improvement.
KeyCareEskom achieved a score of 105.8% in 2013
(2012:105.9%). Performance was stable, despite
the potential negative impact on Eskom’s image
and reputation caused by the magnitude of
Eskom’s MYPD 3 tariff increase application.
Customer service index (includes CustomerCare and MaxiCare)Eskom uses a composite index to measure
its service to residential, small and medium
customers. The weighted customer service
index combines two external customer
service surveys and four internal customer
service process measures. Eskom achieved a
score of 86.8% for 2012/13 (2011/12: 85.6%).
Customer perceptions (MaxiCare) are trending
positively, but remain below target. Customer
Care scores are stable and above target,
reflecting ongoing customer satisfaction with
contact centre service.
The following measures were implemented to
improve service delivery:
• An operational improvement plan was
implemented
• Meter estimations were improved on a
national level
• Mobile service hubs were launched in the
Eastern Cape and KwaZulu-Natal to take
Eskom’s service offerings to remote areas
Restoration time performance is improving, but remains below target. Performance on minor project quotations is steady and above target, while the minor project connection performance is below target and deteriorating. This bedrock factor has a significant impact on customer perception and drives increases in customer queries. The service levels of the contact centres were above target.
Online vending systemA programme to enhance the online vending system’s resilience has been initiated and should be completed by the end of June 2013.
Arrear debtAs at 31 March 2013, the total municipal arrear debt was R1 203 million (compared to R1 157 million at 31 December 2012).
During Group Customer Services engagements with the municipalities, they cited the high turnover of key municipal staff, revenue losses, poor revenue collection, insufficient grant funding, misalignment of financial year-end, budgeting processes and reliance on government grant funding as the key factors contributing to the escalating arrear debt.
Eskom has initiated the disconnection of the electricity supply at four municipalities in line with the Promotion of Administrative Justice Act No 3 (2000).
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68
Group Customer Services continuously monitors payments made and assesses the municipality’s specific circumstances in order to enter into reasonable payment agreements. In addition, a significant effort goes into building stronger relationships with these municipalities.
Free basic electricityGovernment’s national electricity basic
services support tariff aims to bring relief to
low-income households and maximise the
benefits of electrification by supplying 50kWh
of free electricity per month to qualifying
customers. Eskom is a service agent to the
municipality by providing free electricity to its
direct indigent customers.
The terms and conditions under which the
service is provided and paid for, is set out in
a service level agreement between Eskom
and the municipality. National government
finances this programme in which an allocation
is provided to municipalities through the local
government equitable share.
Eskom thus provides free basic electricity in
its supply areas and this is recoverable from
municipalities at a standard tariff. Municipalities
continue to revise the qualifying criteria used
for the allocation of free basic electricity.
As a result, the number of customers’ meters
reconfigured to receive free basic electricity
decreased during the 2012/13 financial year.
Progress in rolling out free basic electricity
Unit of measure 2012/13 2011/12 2010/11 2009/10
Municipalities contracted to provide FBE number 243 243 243 243
Municipal contracts rolled out % 99 99 99 99
Customers approved by municipalities
for FBE number 1 142 077 1 196 117 1 132 421 1 308 357
Customers’ meters reconfigured to
receive FBE number 1 139 696 1 139 120 1 141 235 1 294 997
Reconfigured FBE customer meters in
the year average % 100 99 100 99
Amount invoiced to contracted
municipalities Rm 275 294 273 308
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Significant progress has been made by Eskom
in terms of:
• Influencing government to review the
formula and conditions of the equitable
share grant used to provide free basic
services, including free basic electricity, and
to review and audit the criteria used to
compile indigent registers (policy regarding
determination of the poor beneficiaries of
free basic electricity)
• Agreements on joint customer awareness
campaigns to increase understanding and
collection levels of free basic electricity
Grid Access UnitThe Grid Access Unit helps IPPs and other
generators connect to Eskom’s grid in a viable
manner, so promoting Eskom’s strategic goal
of enhancing private-sector participation in
the electricity sector and keeping the lights
on. In doing so, it helps close the gap between
electricity demand and supply in South Africa.
The unit also manages service relationships
with IPPs and associated industry associations.
The Grid Access Unit is developing a small
and micro-generation framework (connections
of less than 1MW) and is facilitating the grid
connection of other non-regulated projects
such as co-generation and energy wheeling.
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DoE Renewable Energy Procurement ProgrammeDoE RE IPP Bid 1Of the 28 successful bidders, 27 projects
will connect into the Eskom grid, while one
will connect into the municipality network.
All connection agreements between the
successful bidders and Eskom have been
finalised. The projects are currently at the
construction phase. 22 projects with a total
capacity of 1 088MW have a grid connection
date that falls within 2013/14. The other five
projects with a total capacity of 321MW have
a grid connection date in 2014/15.
DoE REIPP Bid 2A total of 19 projects were successful through
the bidding process and 18 of these projects,
with a total capacity of 1 322MW will be
connected into Eskom’s grid. The other project
will connect to a municipality. Eskom is currently
finalising the agreements and budget quotation
queries in line with the DoE financial close and
the signing ceremony of 9 May 2013.
DoE REIPP Bid 3DoE has postponed the 3rd Bid Submission
to 19 August 2013. To date Eskom has
processed 492 applications translating to a
performance level of 76%. Eskom is continually
driving the delivery of the outstanding cost
estimate letters in line with the DoE timeline.
Safety performanceGroup Customer Services is focused on
embedding the zero harm value in all aspects of
its business and is ensuring occupational, safety
and hygiene resources are in place to address
the identification and control of all risks.
Group Customer Services experienced 10 lost-
time incidents during the year. As Group
Customer Services is a recently established
group, comparative figures are not available for
2011/12. Group Customer Service’s lost-time
incident rate for employees is better than the
Eskom rate of 0.39RA.
Integrated Demand Management (IDM)The IDM business unit designs energy-efficient
solutions to reduce electricity demand for a
sustainable future. IDM is helping to reduce
current electricity system constraints, so
supporting security of supply and promoting
Eskom’s goal of “keeping the lights on”.
Operating highlights• Achieved a total peak demand savings of
595MWRA and annualised energy savings of
2 244GWhRA. This includes measured and
verified peak demand savings of 589MW
and annualised energy savings of 2 223GWh
for NERSA- and Department of Energy-
funded projects. The additional 6MW of
demand savings and 21GWh of annualised
energy savings have been installed, but will
only be verified and claimed in 2013/14
Group Customer Services: Causes of employee lost time incidents (including fatalities)
3
2
1
0Lost
tim
e in
cide
nts
(incl
udin
g fa
talit
ies)
10 lost-time incidents in 2012/13
OtherOccupational diseasesMotor vehicle accident
Inhalation of fumesHijackingGun shot
Foreign bodyFall on same levelFall from height
Ergonomics/material/equipment handling Electrical contact
ExplosionContact with heat/dustCaught/cut/struck by
BurnBee sting/insect biteAssaultAsbestos
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
70
• The residential mass rollout programme
continues to achieve significant savings in the
residential sector. In 2012/13, the programme
was the largest contributor to IDM savings,
achieving demand savings of 178MW and
annualised energy savings of 525GWh
• There has been significant uptake of the
funding mechanisms implemented since
the 2011/12 financial year (performance
contracting, standard product and standard
offer). Combined, these products realised
18% of total IDM savings. 4 279 projects were
registered in 2012/13, coming mainly from
commercial and light industrial customers
• New technologies such as light emitting
diodes have successfully been introduced
in the residential, commercial and industrial
sectors through the new funding mechanisms
• The compact fluorescent lamp mass rollout
programme continues to find untapped
pockets of inefficient lighting, so realising
additional savings. Together with this ongoing
sustainability programme, demand savings of
171MW and annualised energy savings of
584GWh were realised in 2012/13
• The industrial sector continues to contribute
significantly to IDM’s annual demand (19%)
and energy (24%) savings
• Power Alert continued to drive savings in
critical time periods. Research showed that
over 74% of respondents have a sound
understanding of its purpose
• The solar water heating rebate programme
continued contributing towards renewable
energy awareness and social upliftment. In the
financial year, 92 410 units were installed through
all the programmes, bringing the total installed
units since the inception of IDM to 334 032
• To date an amount of R1 011 million has
been received from the DoE to be spent on
solar water heating rebates and solar water
heating mass rollouts
Operating challenges• Reduced programme funding following the
third multi-year price decision (MYPD 3) will
affect the ability to unlock savings from all
economic sectors and technologies. Funding
is not sufficient to provide attractive financial
incentives to sustain the current market
uptake and momentum
• There is uncertainty regarding Eskom’s role in
implementing energy-efficiency and demand-
side management. Clarity is required to sustain
current momentum and ensure that a long-
term strategy is followed
• Eskom will have to ensure sustainability
of the IDM programme as a key lever to
manage security of supply
Future focus areas• Formulate a strategy to ensure the IDM
programme’s sustainability, including its role
in executing a national energy-efficiency and
demand-side management programme
• Ensure sustainability of the IDM programme
and supporting industry to maintain this as
a key lever to manage security of supply
• Continue the residential mass rollout
initiative, which involves going door-to-
door in residential areas and installing
energy-efficient technologies like compact
fluorescent lamp bulbs and geyser timers
• Drive incentive programmes further into the
market while exploring new implementation
and technology opportunities
PerformanceCustomer Services, through the IDM business
unit, play a key role in helping Eskom balance
power supply and demand during periods
of generation constraint. Since 2004, when
demand-side management projects were first
initiated and measured, the demand savings in
the evening peak period (18:00 to 20:00) have
risen in line with the growing requirement for
demand reduction.
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71
2005 2006 2007 2008* 2009 2010 2011 2012 2013
Verified accumulated demand savings against the accumulated
Eskom target per year (MW)
4000
3500
3000
2500
2000
1500
1000
500
0Pe
ak d
eman
d sa
ving
s (M
W)
Eskom target Verified demand savings (MW)
Excludes 67MW claimed in 2008 for DMP*
Technical key performance indicators for integrated demand management (annual)
Demand-side savings Unit
Actual2012/13
Actual2011/12
Actual2010/11
Evening peak
demand savings1 MW 595RA 365RA 354RA
Energy savings1 GWh 2 244RA 1 422RA 1 339RA
Internal energy
efficiency1 GWh 28.9RA 45.0RA 26.2RA
1. Includes verified as well as installed but not yet verified.
The total demand and energy savings realised
for 2012/13 were achieved through the demand
management programmes listed in the table
below.
Annual energy savings (measured and verified) achieved by IDM programme (MW)
Programme categoryActual
2012/13Actual
2011/12Actual
2010/11
Renewables 0.05 <0.01 –
Compact fluorescent
lamp rollout 313 215 199
Compressed air 46 12 42
Demand reduction 35 58 32
Heat pumps 11 1 –
Industrial process
optimisation 40 7 73
Lighting, heating,
ventilation and air
conditioning 39 14 2
Shower heads 81 14 –
Solar water heaters 24 26 6
Total 589 347 354
The accumulated verified demand savings for
the combined financial years 2005 to 2013 is
3 587MW. A single power station’s generator
unit contributes about 600MW to the national
grid and a typical power station has six units.
This means that demand-side management
has, since inception, achieved savings almost
equivalent to the capacity of a typical power
station. The savings for the current year are the
equivalent to the output of one generator unit.
Commercial and industrial sector initiativesMore flexible funding options introduced over the past 24 months – namely the Standard Offer and Standard Product programmes – have improved IDM penetration into the commercial and industrial sectors. Information on these programmes is available on the Eskom IDM website: www.eskom.co.za/idm.
Saving programmes are mostly implemented through intermediate parties or Energy Services Companies (ESCOs). As a service provider to the end-consumer the ESCO enters into a contractual agreement with Eskom, with a back-to-back agreement with the end-consumer, sharing in the benefits of the savings obtained.
Eskom registered 3 959 Standard Product projects and 177 Standard Offer projects in 2012/13. Both programmes provide favourable funding options to smaller ESCOs, enabling them to participate in IDM. Project approval turnaround times have also been significantly reduced.
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The graph below shows the improved contribution the commercial and industrial sector is now delivering, mainly through the Standard Offer and Standard Product solutions, a trend that is expected to continue.
The move into the commercial and residential sectors results in project volumes increasing significantly compared to the savings value. Automated processes are being implemented
to deal with the increased volumes.
Line divisions continued
Standard offer registrations
200
150
100
50
0
100
75
50
25
0
Num
ber
of p
roje
cts
Dem
and
savi
ngs
(MW
)
Qtr 1 Qtr 2
Year 2012/2013
Qtr 3 Qtr 4
Number of projects Demand savings (MW)
Year 2012/2013
Standard product registrations
4000
3500
3000
2500
2000
1500
1000
500
0
120
100
80
60
40
20
0
Num
ber
of p
roje
cts
Dem
and
savi
ngs
(MW
)
Qtr 1 Qtr 2 Qtr 3 Qtr 4
Number of projects Demand savings (MW)
Standard Offer and Standard Product project registrations in 2012/13
Residential sector initiativesA key focus of the IDM programme is to reduce peak demand, specifically during winter. A significant portion of peak demand is contributed by the residential sector and market research has indicated significant savings opportunities in this sector. Initiatives targeting this sector are underpinned by a strong marketing and communications campaign. One of the most visible of these is the Power Alert campaign.
The residential mass rollout programme has been the key contributor to IDM’s performance in 2012/13, delivering a total of 178MW. This programme is expected to contribute greatly to “keeping the light on” in the medium term.
The ongoing mass compact fluorescent lamps rollout programme has distributed four million
units in this financial year, realising 171MW of demand savings. Over 57 million bulbs have been installed in the residential sector to date.
Eskom contributed to the government’s residential solar water heating initiative, which aims to install a million residential solar water heaters by 2014/15, by continuing its high-pressure solar water heater rebate programme and running a contracted mass rollout programme to install low-pressure water heaters in historically disadvantaged areas. (The low-pressure solar water heater rebate programme has been terminated.)
Through these programmes, a total of 334 032 (58 316 high pressure units and 275 716 low pressure units) have been installed since inception in 2009. These have been paid for under the rebate and the contract-based mass rollout programmes.
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The project management of the National Solar Water Heating programme is being undertaken by Eskom with the funding provided by the Department of Energy (DoE). To date an amount of R1 011 million has been received from the DoE, to be spent on solar water heating rebates and solar water heating mass rollouts as per a Memorandum of Agreement between the DoE and Eskom.
Demand response“Demand response” is a collective term for initiatives that allow the System Operator to offer consumers financial incentives to reduce their immediate electricity demand for a limited time period. Its primary aim is to bring demand and supply into balance by managing demand. Demand response helps manage peak demand and creates space for critical generation plant maintenance.
Four initiatives underpin the demand response programme: demand market participation, rewards, standby generation and power buyback.
Demand market participationDemand market participation focuses on large power users and consists of a number of product offerings in both the reserve and energy markets.
By 31 March 2013, demand market participation (excluding power and energy buybacks) had achieved the following:
• Certified supplemental demand market participation at financial year end was 388MW (Maximum certified achieved during the year was 513MW)
• Certified instantaneous demand market participation at financial year end was 232MW (Maximum certified achieved during the year was 317MW)
Customers who participate in demand market participation can also participate in power buyback schemes. As the capacity used for power buybacks cannot also be used for demand market participation, the capacity available for demand market participation
was consequently lower for the year to 31 March 2013 due to active power buybacks during that time.
Demand response rewardsThe rewards programme was a pilot project that aggregated loads from a range of smaller commercial and industrial customers to provide the System Operator with loads that can be curtailed at required times. Lessons learnt from this pilot project will be used to direct future demand response programmes.
Standby generationCustomers are contracted and compensated to run their standby generators at Eskom’s request during periods of high electricity demand.
Power buybackPower buybacks for the year were 3 551GWh of which 2 248GWh relates to “tranche 2” that was executed during the last four months of the year. The cost that has been recognised in this financial year is R2.8 billion. Note that for accounting purposes the full cost is accrued when a contract is signed and therefore there can be a timing difference from when the cost is accounted for and when the GWhs are “saved”.
Internal energy efficiencyEskom aims to improve the energy efficiency of its facilities (power plants and buildings) by undertaking energy audits and implementing efficiency programmes that focus on lighting, heating, ventilation and air-conditioning. Annualised energy savings of 28.9RAGWh (year-to-date energy savings of 3.87RAGWh) with a demand saving of 2.97RAMW were achieved for 2012/13.
Energy-efficiency marketingEskom embarked on a major drive to reduce electricity consumption among all electricity users. Two major initiatives – the immediate response initiative and the 49M campaign – comprise nine programmes in total and aim to promote immediate and long-term behavioural changes.
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The immediate-response initiative aims to alleviate pressure on the grid by running televised Power Alerts between 17:00 and 21:00. The demand savings target for this initiative is between 250MW and 500MW during the evening peak period. On average, the alerts resulted in energy savings of 251MW during the weekday evening peak in 2012/13. On days when the Power Alert was set to red, indicating that the system was severely constrained, the average savings increased to 350MW. The Power Alert and 49M campaign support each other and the savings realised are dependent on customer behaviour.
The 49M campaign is a national, government and business supported long-term behavioural-change initiative that seeks to embed energy-efficiency attitudes and practices in all consumers, particularly residential users, with the ultimate goal of reducing their consumption by 10%. The IDM business unit provides advice and financial assistance to residential customers and corporations to “make the switch” and install energy-efficient technologies for a sustainable lifestyle.
Energy lossesThere are two broad categories of energy losses:
• Technical energy losses naturally occur when electrical energy is transferred from one point to another. The medium through which electrical energy is transferred imposes a resistance to the flow and some of the energy is dissipated as heat
• Non-technical energy losses can be calculated as the difference between total energy losses and technical losses. They are typically caused by theft (illegal connections, meter tampering), errors in data and billing, among others
For internal evaluation purposes the estimated technical losses range between 60% and 75% of total losses in Distribution networks, while 100% is estimated for the Transmission networks. The actual percentage in Distribution is influenced by factors such as network design, network topology, load distribution
on the network and network operations and maintenance regime.
In 2012/13, Eskom’s total energy losses were 9.08%, of which non-technical losses were estimated at 1.78% to 2.85%. This performance is above the 8.93% target allowed by the regulator. Distribution losses increased to 7.12%RA (2011/12: 6.32%RA), while Transmission losses decreased to 2.80%RA (2011/12: 3.08%RA).
During 2012/13 losses due to conductor theft (including theft of copper, cable, transformers and tower-related structures) totalled R50.5 million (2011/12: R63.3 million), and involved 5 187 incidents (2011/12: 9 584 incidents). These incidents not only result in financial loss but impact on Eskom’s ability to provide a quality service to customers.
Distribution energy losses have shown an increase in 2012/13 financial year. The current persistent economic hardships experienced in the country result in the distribution energy losses increase. There are two dominant factors contributing to the increase in the energy losses performance:
• Significant reduction in sales to high-voltage customers results in an increase in the distribution losses percentage
• Non-technical losses, particularly theft, have been increasing, which increases the energy losses volume. Theft has been increasing across all sectors of Eskom’s customer base resulting in an increase in losses
• Incidences of energy theft (illegal connections, meter tampering and illegal vending of prepaid electricity) were significantly higher than recorded in the past. The harsh economic conditions and the high electricity tariffs are exacerbating the problem. Increased community resistance to Eskom’s removal of illegal connections or tampered meters in some areas increase the risk further
The business will continue to focus on this problem of electricity theft, while ensuring that the technical losses are also kept in check.
Line divisions continued
75
These initiatives include, among others, continuing with the Energy Losses programme and Operation Khanyisa programmes, which have shown some positive impact on the losses, even in this very difficult economic climate.
The work carried out by Operation Khanyisa and the Revenue Loss Unit continues to bear fruits in the fight against ghost vending and meter tampering.
Following on the highly publicised case of the two perpetrators who were sentenced to a combined 111 years in prison and their assets forfeited, the law enforcement agencies are now showing a keen interest in dealing with electricity theft cases. To this end about 53 suspects were arrested for illegally selling prepaid electricity, while a number of electricity theft cases on business premises are also seeing their way to the courts.
On the other hand South Africans have rallied around the call for action made by Operation Khanyisa to report any form of electricity theft. From inception to date, over 6 200 tip-offs were received from concerned South Africans.
The other problem plaguing Eskom and the South African economy is the network equipment theft (generally referred to as conductor or copper theft). This involves theft of overhead lines, underground cables, airdac and bundle conductor, earthing equipment, transformers, pylon support lattices, etc. Even though this has shown signs of improvement in 2012/13, it is still a major problem which must be tackled by all involved.
Implementation of the new Second Hand Goods Act on 30 April 2012, followed by aggressive policing of the scrap industry by law enforcement agencies supported by industry role-players, had a huge impact on the trading in stolen material. This directly contributed to the decrease in incidents and losses recorded during the first nine months of the current financial year.
The joint industry working group (formed by Eskom, Transnet, Telkom, SAPS, NPA, BAC and SACCI) continues to contribute positively in the fight against this crime.
Between 5pm and 9pm, Geyser and Pool pump are not welcome Please switch them off
Between 5pm and 9pm electricity usage peaks when people return home after work. They start cooking, watching TV and bathing. All of this leads to a large demand on our limited power supply. A geyser can consume up to 39% of household power, whereas a pool pump can use up to 11%. Please help us reduce the pressure on the national grid by switching off your geyser and pool pump during peak periods. For more information please visit www.eskom.co.za/idm
Eskom runs a very comprehensive energy efficiency awareness campaign across all media
Services functions5
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
78
Services functions
Group CapitalGroup Capital’s mandate is to create a centre
of excellence in the prioritisation of capital
expenditure at group level and in the planning,
development, monitoring and execution of mega
projects and the Generation technical plan.
Since 2005, Eskom has been involved in a major
capacity expansion programme to increase the
country’s generation and transmission capacity
to meet the growing demand for energy.
The total cost of this phase of the programme
from inception to 2018/19 is estimated to be
R373 billion (excluding capitalised borrowing
costs). In addition to the capacity expansion
expenditure, Eskom incurs significant capital
expenditure to refurbish, maintain and
strengthen its current operating plant.
Operating highlightsAdded capacity• Added 200MW of generating capacity
through the commissioning of Komati
unit 1 on 1 March 2013 and unit 2 on
14 March 2013. It is a significant milestone
to have eight of the Komati units returned
successfully to service. The remaining unit
(unit 3) will be commissioned in the next
financial year
• An additional 31MW was commissioned at
Camden (6MW at unit 6, 20MW at unit 7
and 5MW at unit 8, when the capacity of the
units were re-certified)
• Commissioned 707km of the 765kV
transmission lines. 205km of the Duvha-
Leseding line (part of the Northern Grid
Projects) was commissioned in May 2012
and 268km of the Zeus-Mercury line and
234km of the Mercury-Perseus line were
commissioned in December 2012
Licences and agreements• The Department of Water Affairs issued
Eskom with a Water Use Licence for
the Hendrina-Gumeni 400kV line on
23 November 2012. This will enable
construction of 83km of line through
wetlands in the northern region
• Concluded a Joint Development Agreement
with PetroSA for the procurement of liquid
natural gas for the Gourikwa power station
(open-cycle gas turbine)
Construction• The Eskom board approved the execution
of the Sere Wind Farm project and Public
Finance Management Act (1999) approval was
received for this project from the Department
of Public Enterprises. The main wind turbine
generator contract has been awarded.
NERSA approval is pending
Safety• Employee safety continued to improve during
the year with only three lost-time incidents
reported. The number of contractor lost-time
incidents also continued to show improve
compared to 2012/13
Operating challenges• The targets for the transmission capacity
projects for 2012/13 have not been achieved
due to poor contractor performance,
extreme weather conditions, equipment
quality issues and environmental permits not
being granted
• Medupi construction challenges include
welding irregularities and post-weld heat
treatment irregularities, as well as the
control and instrumentation Factory
Acceptance Test failure. The project has
also been negatively affected by contractor
labour unrest leading to site closures. Eskom
is working with the contractors with a
particular focus on meeting the date for
synchronisation and commercial operation
79
• The development progress of the Biomass
Co-Firing project is not at a desired level due
to delays in the delivery of torrefied biomass
fuel. Activities related to raw pelletised
biomass fuel as the fuel of choice have been
suspended and the engineering work has
been stopped to focus on the evaluation of
torrefied biomass fuel
• Challenges around securing land continue to
delay the construction of critical transmission
infrastructure needed for a secure
transmission network. The Department of
Public Enterprises is regularly being engaged
for intervention. The negative impact of not
being able to secure the land is evident with
the Kappa-Omega 765KV line where the
project has been delayed from 2013 to 2015
• Contractor safety performance continues to
be a challenge. During the year there were
seven contractor fatalities. However, the
contractor lost-time incident rate continued
to show improvement
Future focus areas• Bring Medupi unit 6 online in December 2013
• Commission Komati unit 3, the last unit at
Komati power station
• Finalise the concentrating solar power plant
design, approve its procurement strategy
and obtain pre-notification, as per the Public
Finance Management Act (1999)
• The biomass co-firing concept:
– Fuel supply study and execution of
techno-economic and sustainability study,
as well as torrefied fuel pellets sourcing
and supply options
– Complete the biomass co-firing concept
design for Arnot power station
– At Kriel power station, the equipment
contract for the biomass co-firing concept
must be placed and initial studies on
fuel supply, and techno-economic and
sustainability need to be done
• Department of Energy approval awaited for
land acquisition at the Thyspunt site as part
of the nuclear programme development.
Conclude site characterisation, design
and execution preparation for Thyspunt,
Duynefontein and Bantamsklip
• Obtain approval as per the Public Finance
Management Act (1999) and initiate the
process to purchase properties to restart the
Generation environmental impact assessment
for a new coal-fired power station
• Further improve the Contractor safety
performance, especially the prevention
of fatalities
BenchmarkingPlease refer to the 2011/12 integrated report
for results of benchmarking of construction
costs conducted in that year.
An independent review of the schedules and
costs relating to Kusile and Ingula has been
performed and noted that the schedules
and costs to complete are achievable.
An independent review of Medupi’s schedule
and costs is also currently underway and will be
communicated when complete.
Construction of Unit 1 at Kusile power station in Mpumalanga is progressing well
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80
PerformanceFinancial performanceThe table below displays the capital expenditure of the group for 2012/13.
Capital expenditure (excluding capitalised borrowing costs) across the value chain (R million)
DivisionActual
2012/13Actual
2011/12Actual
2010/11
Group Capital 37 690 39 730 30 436
Generation 8 512 6 590 6 341
Transmission 893 1 554 1 503
Distribution 8 317 7 941 8 190
Subtotal 55 412 55 815 46 470
Future fuel 2 634 1 992 1 063
Eskom Enterprises 376 473 209
Other areas including service and strategic functions 1 711 535 190
Total capital expenditure 60 133 58 815 47 932
Services functions continued
Current performanceThe Group Capital division focuses on Eskom’s
large value projects, such as the capacity
expansion programme and upgrades. The budget
for the new capacity expansion programme
from its inception in 2005 until its completion in
2018/19 is approximately R340 billion.
The capacity expansion programme includes
the 4 764MW Medupi and 4 800MW Kusile
coal-fired stations and the 1 332MW Ingula
pumped-storage scheme in the Drakensberg,
which will deliver hydroelectric power during
peak demand periods. The programme
also includes expanding and strengthening
the transmission network and renewable-
energy projects, which include the 100MW
concentrating solar power plant in Upington,
currently in development and due to be
commissioned in 2017.
The table below details the progress the capacity
expansion programme made in 2012/13.
Capacity expansion programme progress in 2012/13
Compacttarget
2012/13Actual
2012/13
Actual since
inception(2005
to 2013)
Generation
capacity MW 260 261RA,1 6 017
Power lines
built km 900 787RA 4 686
Substation
capacity
installed MVA 3 545 3 580RA 23 775
1. Includes 30MW upgrade at Koeberg and 231MW constructed by
Group Capital.
81
The table below summarises construction
progress on the three key projects – Medupi,
Kusile and Ingula power stations – as at the end
of March 2013.
Construction progress on Medupi, Kusile and Ingula, as at 31 March 2013
Key projects
Target inception
to31 March
2013
Actual inception
to31 March
2013
Actual inception
to31 March
2012
Medupi 81% 65% 39%
Kusile 46% 22% 17%
Ingula 77% 68% 41%
Progress on generating projectsApart from the technical challenges facing
Medupi, construction is on track for most
projects across the capacity expansion
programme. These were some of the
achievements during the year:
• Medupi achieved a major milestone on
11 October 2012 when the first coal was
delivered to the coal stockyard from
Exxaro mine
• The Ingula project has settled all main
underground works claims up to 31 March 2012,
and the accelerated programme has been
agreed to between Eskom and the main
contractor. Ingula successfully hosted President
Jacob Zuma and members of the Cabinet
on 10 November 2012
• Grootvlei unit 5’s outage has increased due
to the planned commissioning of an additional
30MW
The following issues are being addressed
through recovery plans and mitigation
strategies, which are continually reviewed and
monitored:
• Medupi construction challenges:
– Welding irregularities and post-weld
heat treatment irregularities in respect
of high-pressure tubing in December 2012
necessitate rework
– Control and Instrumentation Factory
Acceptance Test in December 2012 failed.
Efforts are being taken to minimise the
impact of this delay
– The project schedule has been negatively
affected by labour unrest leading to site
closures over a 10-week period from
January 2013 to March 2013
– Contractors are continually engaged to
improve on the current schedule, with
particular focus on meeting the date
for synchronisation and commercial
operation
• At Kusile, several schedule-recovery
business cases to achieve unit 1’s commercial
operation date have been approved.
However, the boiler contractor’s weld-reject
rate continues to be a problem, causing
further schedule slippage. In addition, most
contractors did not work through the
builder’s festive season break as agreed
• At Komati, a high-pressure turbine incident
on unit 3 (100MW) after first synchronisation
resulted in projected delays to May 2013
Recovery plans and mitigation strategies
are in place in all of the above cases.
These are being reviewed and monitored on
a continual basis.
Eskom is currently negotiating with contractors
and labour a new partnering agreement for
Medupi and Kusile. This will replace the current
project labour agreement and is intended
to foster an improved spirit of collaboration
on site and ensure standardisation and
consistency of labour practices.
Ongoing risks to the capacity expansion
programme relate to engineering, construction,
procurement and economic fluctuations. These
are some of the challenges the programme faces:
• Keeping a sustained focus on safety
• Shortage of project staff (such as project
managers, planners, contract managers),
suppliers and contractors
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82
• Upward pressure on capital cost on the back
of high global demand for equipment
• Timely completion of environmental impact
assessments and obtaining environmental
authorisations, permits, rights and land
servitudes
• Inadequate and non-standardised processes
and tools to manage and monitor progress
• Managing the sourcing of commodities and
high-exposure items
Notwithstanding these and other challenges,
Group Capital continues to meet the
requirements of the capacity expansion
programme. Formal project assurance is used
to track project schedules, costs and safety
risks to meet the expected quality standards
and deadlines.
Power station projected completion schedule (capacity installed/first power) (MW)
Project 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Total
Grootvlei (return to service) 30 30
Komati (return to service) 100 100
Medupi (coal-fired) 794 1 588 1 588 794 4 764
Kusile (coal-fired) 800 800 800 1 600 800 4 800
Ingula (pumped-storage) 1 332 1 332
Sere wind farm (renewable) 100 100
Total (MW) 924 3 820 2 388 1 594 1 600 800 11 126
In addition, Eskom has commenced the
development of a 100MW concentrating solar
power plant in Upington that is expected to be
commissioned in 2017.
Contract placement is satisfactory across all
generation programmes. Local content from
contracts awarded in the capacity expansion
projects is indicated in the table below.
Services functions continued
Local suppliers and service providers in Eskom’s capacity-expansion programme as at 31 March 2013
Project
Original contract value
(in R billion)1
Local content committed inception to date
Actual local-content inception to date
(R billion) % (R billion) %
Medupi power station 56 455 36 205 64.1 21 365 59.0
Kusile power station 59 188 37 813 63.9 19 503 51.6
Ingula pumped-storage scheme 11 014 4 086 37.1 4 961 121.4
Power delivery projects 10 081 7 813 77.5 2 255 28.9
Total/overall average 136 738 85 917 62.8 48 084 56.0
1. Excluding CPA and modifications.
83
Safety performanceThe Group Capital safety performance had
mixed results during the year. Sadly, there were
seven contractor fatalities during the year.
Employee safety continued to show
improvement during the year with only three
lost-time incidents reported. Group Capital’s
lost-time incident rate for employees is better
than the Eskom rate of 0.39RA.
The number of contractor lost-time incidents
increased from 101 in 2011/12 to 108 in 2012/13.
The major cause of fatalities continues to be
falls from heights.
Number of employee and contractor fatalities in Group Capital
FatalitiesActual
2012/13Actual
2011/12Actual
2010/11
Employee fatalities – – –
Contractor fatalities 7 1 2
Group Capital: Causes of employee lost time incidents (including fatalities)
3
2
1
0Lost
tim
e in
cide
nts
(incl
udin
g fa
talit
ies) 3
2
1
0Lost
tim
e in
cide
nts
(incl
udin
g fa
talit
ies)
3 lost time incidents in 2011/12 7 lost time incidents in 2012/13
OtherOccupational diseasesMotor vehicle accidentInhalation of fumesHijackingGun shotForeign body
Fall on same levelFall from heightExplosion Ergonomics/material/equipment handling Electrical contact
Contact with heat/dustCaught/cut/struck byBurnBee sting/insect biteAssaultAsbestos
Measures taken to improve contractor safety
performance include:
• Leadership commitment and drive both from
the Eskom leadership as well as the senior
management of the contractor companies
that Eskom works with
• The development of health and safety
skills among Eskom staff and those of the
contractors. In addition academic institutions
have been engaged to review the programmes
to improve safety on construction projects
• A decision was made to implement
OHSAS 18001 throughout the major projects.
This will result in improved health and safety
management systems on Eskom projects
and third party auditors will review Eskom
programmes ensuring that Eskom moves
towards world-class programming
• Rollout of the zero harm programme to
employees and contractors to embed the
Eskom value among the more than 40 000
people participating in the build programme
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84
• Integration of Safety, Health and Environment
policy in the project lifecycle model and
business processes
• Safety, Health and Environment policy
integration into the commercial process
• The continued implementation of the
occupational, health and safety inspectorate
on the projects to identify and rectify gaps
For detailed information about the overall
safety strategy and initiative at an Eskom level
please refer to the page 128.
Services functions continued
Environmental performanceEnvironmental performance indicators for Group Capital
Target2012/13
Actual2012/13
Actual2011/12
Actual2010/11
Number of environmental legal contraventions (number) 8 4 8 8
Number of environmental legal contraventions reported in
terms of Eskom’s operating health dashboard (number)1 – – 2 1
Materials containing asbestos disposed of at registered
waste sites (tons) – – 32.7 76.1
Materials containing polychlorinated biphenyls thermally
destructed (tons) – – 0.4 –
1. Under certain conditions, contraventions of environmental legislation are classified in terms of the Eskom operating health dashboard index. These include instances
where censure was received from authorities, non-reporting to authorities as may be legally required, non-reporting in Eskom, a repeat legal contravention,
or when the contravention was not addressed adequately. Group or divisional executives can escalate any significant environmental legal contravention to the
operating health dashboard.
Group Capital observed a progressive decline
in the number of legal contraventions over
the period from 2009/2010 to 2012/2013.
Notably there was a decrease to four legal
contraventions from eight legal contraventions
in 2011/12. Working without authorisation and
water-related contraventions remain challenges.
The Construction Management department,
Eskom Programme Management Office and
Project Development departments of Group
Capital division are ISO 14001 certified.
The Eskom Real Estate department is on
schedule for ISO 14001 certification.
Group Technology and CommercialThe Group Technology and Commercial
division is responsible for overseeing,
monitoring and executing Eskom Group’s
engineering and procurement (including
primary energy) activities.
Group Technology and Commercial consists
of the Primary Energy, Technology and
Commercial (procurement other than primary
energy) divisions.
85
Primary EnergyPrimary Energy sources and procures the
primary energy resources (coal, water, uranium,
sorbent and biomass) that Eskom’s power
stations need to operate. These resources
must be sufficient, delivered on time and at
minimum cost, and of the required quality.
These resources must at all times be managed
in a way that strives to minimise the impact
on the environment and ensures the safety of
Eskom’s workers and the public.
Coal supply strategyDuring the past year Eskom has revised its
previous Coal Supply Strategy and developed
an implementation plan to ensure the successful
execution of the strategy. The Coal Supply
Strategy approved by the board in 2012, links
directly to Eskom’s strategic imperatives:
• Leading and partnering to keep the lights on
• Securing our future resource requirements,
mandate and the required enabling
environment
• Implementing coal haulage and the road to
rail migration plan.
Eskom faces an un-contracted demand for coal
of up to 2 100 Mt through to 2051. The Coal
Supply Strategy has been developed in the
light of, and considers the changing coal supply
landscape, the consolidation of the supplier
market into four main suppliers, the export of
Eskom grade coal to India and China, the above
inflation cost increases in the mining industry
and the lack of new coal mining projects being
developed.
Given these variables, Eskom has identified
strategies to counter potential coal supply
shortfalls and to meet Government’s and Eskom’s
transformation objectives. The approved coal
supply strategy encompasses the following five
elements:
• Progress coal supply from the Waterberg
• Drive policy changes for the dedication of
coal resources for power generation in
Mpumalanga
• Pursue new technologies for coal
beneficiation such as briquetting and
blending
• Develop black owned emerging coal
and limestone miners to secure available
resources, increase competition and
transform the supply chain
• Set up the basis of engagement for the coal
and limestone portfolio of a state owned
mining company
To this end Eskom is implementing a set of
actions to give effect to the Coal Supply
Strategy, of which the key elements are set out
on the next page:
Coal stocks at Kendal power station in Mpumalanga
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
86
• The creation of a mine development fund to
advance black emerging coal and limestone
mining projects
• Identify and contract with emerging miners
• Conclude a full scale combustion test at
Majuba power station with coal from the
Waterberg
• Conclude a contract with Transnet for
transportation of Waterberg coal to
Mpumalanga
• Conclude a water supply agreement with
the Department of Water Affairs for water
supply to the Waterberg area.
Securing coal is an increasing challenge as
Eskom’s coal-fired power stations require a
continuous supply of acceptable-quality coal
at fair prices. Eskom has to compete with
international buyers for South Africa’s coal
reserves, which has an effect on the coal price.
Increased specifications for the acceptable
quality of coal delivered to Eskom also
influence supply.
Eskom secures these resources through national
collaboration and effective engagement with
relevant stakeholders. Its performance is
assessed using the following indicators:
• Average coal stock days
• Coal delivery
• Coal quality, which is measured indirectly via a
power plant’s UCLF and EAF measurements
(see Generation on pages 42 to 47)
• Specific water consumption (see pages 49
to 50)
• Primary energy costs, including future fuel
• Volume of coal burnt
Operating highlights • Average coal stock levels improved to 46
days as at 31 March 2013 (March 2012: 39
days). This is the highest year-end stock
level to date despite experiencing a 3 week
transport strike as well as a 3 week strike at
a number of mines
• Medium-term contracts were secured to close
shortfalls in coal supply
• Safety performance on the coal heavy-haulage
road network has improved, with a 31%
decrease in year-on-year public fatalities
• The Tutuka coal terminal is now operational
and rail deliveries are ramping up
• The fleet size for coal road transport has been
optimised
• Construction of the Komati Water Scheme
Augmentation Project is on track for water
delivery by the end of May 2013
• Construction of Mokolo and Crocodile Water
Augmentation Project Phase 1 is progressing
well, with partial water delivery expected
by end May 2013 and full water delivery by
June 2014
• Eskom’s Water Conservation and Water
Demand Management Awareness campaign
launched during National Water Week
• Feasibility studies have commenced for the
Kriel-Matla mine water reclamation project
Operating challenges • Achieving contractual performance on coal-
supply agreements remains a challenge, as does
consistently supplying some power stations
with coal of acceptable quality
• Eskom needs to purchase more expensive coal
from the short-/medium-term market due to
poor volume performance from 5 of the 6 cost
plus mines
• Both Eskom and Transnet are experiencing
operational challenges regarding the rail
transport of coal
• Extended strikes in the transport and mining
industry affected the coal-supply value chain
from operational performance and safety
perspectives
• Removing coal trucks from the road has been a
difficult transition to manage
• A number of coal mines contracted to Eskom
are still awaiting approval of their integrated
water use licences from the Department of
Water Affairs
Services functions continued
87
• The target for water transfers was not
achieved due to the unavailability of
infrastructure and low plant reliability on the
water schemes
• Eskom experienced poor security of diesel
and fuel oil supply
• Managing Eskom’s contractual environmental
obligation at the Kilbarchan Colliery.
Future focus areasSecuring Eskom’s coal requirements• Implement ISO 14001 (environmental
management) and OHSAS 18001
(occupational health and safety) standards
for cer tification
• Optimise stockyard operations
• Complete testing for beneficiation
(purification), which may provide a solution
to some of the coal-quality challenges
• Ramp up existing rail operations to increase
coal deliveries by rail in 2013/14
• Co-develop an integrated rail network
in Mpumalanga to increase coal-supply
flexibility to the power stations
• Build the private Majuba heavy-haul line
between Ermelo and Majuba power station
• Build a coal terminal at Grootvlei and
commence operations in the next two years
Securing Eskom’s water requirements • Conclude the water supply agreement with
the Department of Water Affairs for the
second phase of the Mokolo and Crocodile
(West) Water Augmentation Project to
ensure water security to energy and related
developments in the Lephalale area of
Limpopo Province
• Work closely with Eskom’s bulk water
suppliers to improve the health of bulk
water-supply infrastructure to ensure annual
inter-basin and water transfers
• Roll out the water-conservation and water-
demand management programme
• Diversify Eskom’s water mix through the use
of treated effluent and waste water such as
excess mine water from coal mines
• Develop and implement Eskom’s long-term
water infrastructure and resources plan
PerformanceSecuring Eskom’s coal requirementsPrimary energy inventory (R million)
Actual 2012/13
Actual 2011/12
Actual 2010/11
Coal inventory balance 5 330 3 798 3 709
Future fuel – coal 7 098 5 020 3 703
Nuclear inventory balance 856 1 217 1 029
Future fuel – nuclear 1 023 432 386
Key performance indicators in securing Eskom’s coal reserves
Indicator and unit
Compacttarget
2012/13Actual
2012/13Actual
2011/12Actual
2010/11
Coal burnt, Mt – 122.95 125.21 124.68
Coal purchased,
Mt – 126.44 124.27 126.23
Coal transported
by rail, Mt 12.2 10.1RA 8.5 7.1
Coal stock days – 46RA 39RA 41RA
The actual quantities of coal burnt and purchased
in 2012/13 are lower than the target primarily due
to the energy sent out being below target.
The amount of coal procured from Eskom’s tied
collieries has been below committed levels. This
decline in production increases the unit cost of
coal procured, as well as results in more medium
term coal having to be procured at large cost to
address the shortfall.
Secured coal for KusileEskom is progressing on securing coal and
limestone supply agreements to Kusile power
station. There are currently two contracts in
place, and additional contracts will be secured
during the course of 2013/14.
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88
Coal securityDuring the course of 2012/13, Eskom held
discussions on coal security with several
government departments, including the
Department of Mineral Resources, Department
of Public Enterprises, Department of Energy
and the National Planning Commission. A draft
bill to amend the Mineral and Petroleum
Resource Development Act has been issued.
This bill takes some of the outcomes of the
above discussions into consideration.
Strategy for the Waterberg coalfields The largely untapped Waterberg coalfields
lie in the Limpopo province, 600km north-
west of Mpumalanga, where most of Eskom’s
coal-fired power stations are based. This area
does not have many water reserves, which are
necessary for mining coal, and the existing rail
infrastructure is not capable of meeting the
needs of Eskom or the export coal industry.
Eskom is working closely with Transnet Freight
Rail and the Department of Water Affairs to
develop funding models for the rail and water
infrastructure that is required to tap these
resources. Eskom is also in discussions with
mining suppliers for long-term coal-supply
contracts, and is considering a second phase
of the water-augmentation project to ensure
timely availability of water.
If the project proceeds as envisioned, rail
imports to Mpumalanga from the Waterberg
coalfields could begin in 2019.
Securing Eskom’s water requirements During 2012/13, Eskom contributed significantly
to the second revision of the National Water
Resources Strategy. The aim of this involvement
was to secure Eskom’s future water supplies.
Eskom has also worked closely with the
Department of Water Affairs to address the
backlog of water-use licences for its power
stations, capacity expansion programme and
coal suppliers.
Securing Eskom’s nuclear fuel requirements The current uranium and enriched uranium
contracts are sufficient to satisfy Koeberg’s
demand until 2017.
The current fuel-fabrication contracts cover
the period up to 2015/16.
Integrated logistics strategy for transportation of primary energy for Eskom’s coal-fired power stations Eskom is in the process of revising its integrated
logistics strategy. Central to the strategy is
a migration from road to rail for coal as well
as biomass and limestone transportation to
Eskom power stations. Eskom is also, at the
same time, investigating ways in which any
economic impact to road transporters as a
result of the migration from road to rail and
their employees can be mitigated (the Road
Change Over-strategy).
In 2009, the board approved the Long Term
Coal Logistics Strategy. Since then, a number
of other initiatives have gained impetus:
• A pilot project to investigate the use of
biomass as a primary energy resource for
Eskom’s power stations was initiated
• The use of sorbents in flue gas desulphurisation
(FGD) plants at Eskom power stations is being
implemented
• An emerging mining strategy is in development
• The Waterberg integrated strategy has been
approved by the board and includes approval
for the following items:
– Conclude memoranda of understanding
with coal suppliers in the Waterberg
– Engage with Transnet for the construction
of a rail line from Waterberg to
Mpumalanga
– Engage with Department of Water Affairs
for the construction of a water pipeline to
augment water supply to the area
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The current transportation situation is not
improving as coal sources in close proximity to
the power stations are either being depleted
or cannot be extracted due to difficult mining
methods or environmental constraints, hence
coal is procured from sources that are far from
the power stations and this coal is being delivered
by road. Eskom is also developing an emerging
mining strategy, which will assist the smaller
miners with opening mines and establishing a
proper transportation infrastructure.
In addition, the procurement of limestone for
the use in FGD plants, and biomass in the future;
will require more resources to be transported
to the power stations. Some of these resources
are situated across the South African border,
extending the haulage routes considerably.
To this end, Eskom is currently reviewing the long
term coal logistics strategy. The updated strategy
consists of two parts:
• Integrated logistics strategy
• Road transport change-over strategies
Eskom’s road-to-rail migration strategy is in
progress and is being implemented with the
cooperation of Transnet Freight Rail. Eskom
has already built containerised coal terminals at
Camden and Tutuka power plants.
The Majuba heavy-haul line will have enough
capacity to transport 14 million tons of coal
from Ermelo to Majuba power station each year.
Approval in terms of the PFMA to proceed with
this part of the project was granted in December
2012 and the civil construction contract was
placed during February 2013. Site establishment
commenced during March 2013.
Strikes in the road-freight and colliery industries
are already putting Eskom’s coal supplies at risk.
These issues have to be addressed sensitively, and
in good time. Eskom will continue to work with
its suppliers to ensure resilient operations during
such events as strikes.
Performance – migrating coal transport from road to rail10.1 million tons of coal was transported by
rail during 2012/13. Although rail deliveries
increased by 19% over 2011/12, Eskom failed
to meet its target of coal transported by rail
due to a delay in appointing the operator of the
Tutuka Coal Terminal and operational capacity
challenges on the side of Transnet Freight Rail.
Group TechnologyGroup Technology’s mandate is to optimise
plant asset performance and support the
capacity expansion programme through the
Outage Management, Engineering and Asset
Management departments. The division has
been set up to ensure that Eskom engineering
capability is maintained at a high standard in
terms of design, operations, maintenance,
project engineering services and solutions.
Outage managementOperating highlights• An upward trajectory in key indicators including
due date performance (measurement of
on-time return of outages) rising to 70.4%
from 55% in 2011/12
• Establishment of the Outage Performance
Improvement Centre at Megawatt Park
in February 2012 to provide a platform
for performance improvement, with a
mandate to:
– Be the nucleus of all outage activities,
providing transparency on outages across
the fleet
– Assist current outages in resolving issues
through agreed escalation processes and
deployment of expert resources
– Improve outage performance by accounting
for the central, day-to-day management
of outages
– Build visibility and transparency of the
outage planning and execution value chain
– Be the central point to drive standardisation
across outages
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• Design and implementation of a number
of key interventions that have transformed
performance:
– Capacitation of outage teams with additional
technical and project management support
from external providers
– Deployment of a SWAT team of technical
experts (engineering experts, procurement,
quality and safety representatives) to provide
on-the-ground support to outage teams
– Implementation of the process control
manuals, focusing on process standardisation
across the fleet and ensuring power station
units have the required levels of outage
readiness
– Development of best practice manuals
and boot camps defining the outage
team’s performance expectations for
successful outages
– Facilitation of technical forums to improve
collaboration and transparency as well
as develop practical solutions to specific
outage issues and challenges
Operating challengesOutage management faces signif icant
operational challenges that continue to place
a tremendous strain on the system. Historical
challenges include low levels of transparency
on outage status, execution quality issues, lack
of full process standardisation and insufficient
central support and control. Key operational
challenges include:
• Deterioration of power station units due to
maintenance backlog
• High number of unplanned and forced
outages at power stations
• High number of outages that need to be
undertaken
• Stretched resources required to work on
multiple units on outage simultaneously
Future focus areas• Safety: Implement fully the outage safety
strategy and recommendations from root
trend analyses and greater support and
coordination of site safety officers and
safety watchers
• Technical: Increase capacitation of site
teams and improved planning and the
implementation of best practice outages
• Human resources: Fill staff vacancies
(especially for key skill areas), renew focus on
increasing gender equity at professional and
management levels and great resourcing for
the 80:10:10 Generation Sustainability project
EngineeringOperating highlights• Completion of an Engineering Management
Framework, enabling the effective management
of engineering requirements within a centre-
led operating model. The framework includes
engineering processes, systems, tools, technical
governance, engineering accountability and
design base management
• Development of a comprehensive set of new
engineering processes has been completed,
including the supporting training material for
young engineers
The Engineering Management Framework
will enable a standardised work approach
throughout Eskom that will provide assurance
through a strong technical governance capability.
Operating challenges• Continued operational demand from the
aging coal plant fleet increases the need for
innovative engineering solutions
Future focus areas• Deliver innovative engineering solutions to
maintain current assets and meet the needs
of the new build design and construction
• Enrol more supplier panels to provide
expertise in support of the local engineering
industry
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Asset managementOperating highlights• Development of maintenance and outage
management process control manuals
• Development of process control manuals
training material
• Training of 73% of target audience with
balance set for the new financial year
Operating challenges• A loss of skills within the Protection,
Telecoms and Measurement department.
A retention strategy has been developed
Future focus areas• Establish the Maintenance and Operating
Centres of Excellence
• Developing asset performance tools to
provide assurance that maintenance plans
are in line with maintenance strategy
Development projectTo meet future power demand, Eskom has
embarked on a large capacity expansion
programme. The huge capital outlay associated
with this expansion drive represents a unique
opportunity for South Africa to develop a
service industry around the power plant industry.
However, the current engineering offering in
South African universities, although broad and
diversified, does not fully meet the specialised
needs of the power industry. South Africa also
faces a shortage of qualified engineers, which
could jeopardise Eskom’s delivery on capacity
expansion and retrofit programmes within
planned schedules and costs.
To catalyse the development of a local,
specialised knowledge base and generate
a pipeline of qualified engineers, Eskom
established a Power Plant Engineering Institute
in collaboration with six leading universities.
Eskom has identified broad specialisation areas
and awarded eight chairs to these universities
in the fields of emissions control technologies,
combustion engineering, energy efficiency,
plant asset management, renewable energy
technology, materials science, high-voltage
engineering alternating current and high-
voltage engineering direct current.
The Power Plant Engineering Institute launched
on 12 January 2012 with a total of 42 BSc
Engineering candidates selected from Group
Technology.
Eskom aims to be a Top 5 global utility and
to achieve this must continue to develop its
most valuable asset – people. Their increased
capabilities are essential to achieving Eskom’s goal
and ensuring long-term sustainability of initiatives.
Eskom launched a number of exciting people-
based programmes to catalyse internal leadership,
including the Top Engineers programme, driven
by Group Technology in collaboration with
partners, McKinsey & Company.
This programme will develop future engineering
leaders with a broader skill set including core
problemsolving skills. McKinsey, who support
Eskom as part of their supplier development
and localisation commitment, designed the
programme and will provide training material
and trainers. In addition, they will include the
engineers within the McKinsey teams that
currently support Eskom projects, providing
them with real-world opportunities to solve
complex problems while enjoying significant
exposure and support. Young engineers with
a maximum of five years’ experience were
selected. This full-time, one-year programme will
be based on the field (on-the-job training with
McKinsey teams) and forum (formal classroom
learning) principle. After the programme,
participants will be “change agents” who help
design and drive change to take Eskom to the
next level. In addition, there will be potential
opportunities to retain some of these engineers
in a central team, possibly within the office of
the chief executive or as a separate unit with
Group Technology. This will be reviewed and
developed after further consultation.
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Engineering Management Development programmeGroup Technology Engineering Management
team has approved the 2013 launch of
an Engineering Management Development
programme to develop and retain engineers
to fulfil the upcoming portfolio of work.
This programme seeks to complement Eskom’s
existing human resources and developmental
initiatives, and will be targeted towards the
top 5% highest potential engineers.
The programme will employ world-class
development techniques, over an 18-month
period, to expose candidates to industry best
practices through rigorous training. It will
require participants to commit at least 50% of
their time to the programme, which has been
structured to follow a modular approach over
three semesters. This will enable candidates
to balance work requirements, albeit at a
reduced level, to allow them time off to attend
the programme.
Eskom technology expertise or know-howTransmission lines are devices that transmit
power over very long distances. In order
to optimise line design to the load transfer
requirements, Eskom has developed an
optimisation process that matches the lifecycle
cost, initial cost, losses and line capability to the
requirements of the customer. This process,
which includes simple indicators to objectively
determine the best line design to use, is unique.
Eskom has, as a result, been requested to head
up a working group of Cigre (SC B2-WG51 under
R. Stephen) to document and publish this process
as a worldwide best practice.
Commercial (procurement other than primary energy)Group Commercial’s mandate is to optimally manage external spending and ensure efficient procurement, inventory management, and warehousing and logistics. It is also responsible for supplier management and development, and contract negotiations and establishment.
Group Commercial’s activities are undertaken within the ambit of a sound risk management framework that encompasses good governance, and legislative and regulatory compliance. It includes a centralised project sourcing function that executes all project-related capital procurement to ensure consistent practice, align procurement practices and obtain good value for Eskom.
Supplier development and localisation supports the government’s socio-economic development objectives, including broad-based black economic empowerment (B-BBEE) by maximising local supplier development in a manner that supports Eskom’s business plan.
Operating highlights• In 2012/13, cumulative local content actual
expenditure is R48 billion, which is 56% of
the total local content committed in the new
build projects since inception
• A total of 473 contracts were awarded in the
new build programme in 2012/13, amounting
to R4.3 billion. Of this, local content accounts
for R3.4 billion, or 80.2%RA, which is 28%
higher than the target of 52% set in the
shareholder’s compact
• Product lines for grinding media and elements
that traditionally have been imported were
opened up. A medium-voltage motor
contract has been placed solely with local
manufacturers
• Implementing a spend shift strategy has
increased average expenditure on black-
owned suppliers by about 30%
• Better supply-chain planning has resulted
in higher stock levels of fuel oil at coal
power stations and increased reliability
from upstream diesel suppliers to the
open-cycle gas turbine stations at Ankerlig
and Gourikwa
• Procurement from non-compliant suppliers
is declining due to updating the B-BBEE
certificates. The B-BBEE attributable
expenditure exceeded the 70% annual target
by 16% (R19.5 billion)
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Operating challenges• There are significant risks in the security
of supply of diesel and fuel oil, as demand
is unpredictable
• Expenditure on black women-owned
business is 5% below the annual target
• Expenditure on black-owned business is 3%
below the annual target
• Expenditure on black youth-owned business
is 4% below the annual target
• Qualifying small enterprises/exempted
micro-enterprise attributable spend is 4%
below the annual target
Future focus areas• Curb inventory growth, without
compromising on the availability of spares,
through improved collective planning and
integrated replenishment
• Implement the shipping and haulage strategy
to consolidate all shipping and haulage
activities within Eskom
• Develop and implement appropriate
contracting strategies, through targeted
supplier sourcing and development initiatives,
to improve procurement expenditure on
black-owned businesses with particular
focus on black women, youth and disabled
ownership
• Design and develop the supplier development
and localisation data management system
Operating performanceThere is a need for project sourcing excellence in support of the capacity expansion programme and schedule. The impetus is to drive down operating unit costs, allowing cash to be freed up to drive other initiatives.
Group Commercial is developing a local supplier base to support long-term requirements in areas such as nuclear equipment supply and renewable technology. The focus is on skills alignment and competency development for improved performance.
National expenditure on capacity expansion programmeEskom’s capacity expansion programme continues to support B-BBEE and industrialisation within South Africa. The annual target is 52% local content in annually placed contracts. For 2012/13, committed local content spend in capacity expansion projects was R3.4 billion, equivalent to 80.2RA% of the R4.3 billion total contracted value.
IndustrialisationEskom’s spending programmes support the government’s economic objectives, including local development, job creation and encouraging small business growth. During 2012/13, total investment expenditure on plant by suppliers was R823 million (2011/12: R646 million).
TrainingSince the inception of the new build projects, a total of 8 624 (2011/12: 7 226) people have been identified for skills development. Of these, 2 763 (2011/12: 2 342) are currently undergoing training. To date, 6 851 (2011/12: 5 915) people have completed their training at various training sites across the country.
Job creationSince the inception of capacity expansion
contracts to the end of March 2013, some
35 759 (2011/12: 28 616) jobs were created as
a direct result of the build projects. A total of
16 100 (2011/12: 13 954) people – about 45%
of the total jobs created – were employed
from districts surrounding project sites: the
Waterberg around Lephalale, from Inkangala
around Delmas, from Uthukela around
Ladysmith, and various power delivery projects.
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Eskom B-BBEE attributable spend performance
Eskom companyTarget
2013/14Actual
2012/13Actual
2011/12Actual
2010/11
Measured procurement spend (R billion) – 119.9 98.5 79.9
B-BBEE attributable spend (R billion) – 103.4RA 72.1RA 41.9RA
B-BBEE attributable spend (%)SC 70.0 86.3RA 73.2RA 52.3RA
Attributable spend on black women-owned businesses
(R billion) – 5.7RA 3.3RA 3.4RA
Black women-owned businesses as % of measured
procurement spend – 4.7RA 3.3RA 4.3
Targets are set for the company only. In the previous year, only the company B-BBEE was reported.
SC Shareholder’s compact.
Services functions continued
B-BBEE attributable spend performanceThe table below sets out Eskom’s B-BBEE
attributable spend performance for 2012/13.
The attributable spend targets are in line
with the Codes of Good Practice, which
prescribe a minimum of 50% for the first five
years that the codes are in effect. With 80.9%
B-BBEE attributable spend, the Eskom
company exceeded its B-BBEE target for the
year. The Eskom Group achieved 82.1%RA
(R95.97RA billion). Going forward, strategies will
be put in place to improve the performance of
black women-owned businesses in particular,
which make up 5.1%RA (R5.99RA billion) of
the group measured procurement spend
of R116.9 billion.
In the final quarter of the financial year, an
overall steady improvement in key performance
areas for transformative procurement was
observed, with Eskom reaching R26 billion of
the R119.9 billion procurement on 50 + 1%
black-owned companies.
Human ResourcesBeing the custodian of people management
within Eskom, human resources is mandated
to partner and empower the line divisions to
recruit, develop, and retain skilled, committed,
engaged and accountable employees across the
company. Human resources is committed to
building skills not only internally but also in the
communities in which Eskom operates. This is
done in support of Eskom’s aspiration and duty
to grow the economy and improve the quality
of life of people in South Africa and the region.
In response to Eskom’s strategies, human
resources has defined its enabling strategy
to create a high-performance culture. The
foundation of the strategy is that people
management begins with the alignment
of human resource objectives to business
objectives.
In creating the step change required to enable
a high-performance culture, the strategy is built around the following six core themes that work together to support the execution of the overall business strategy:
• Health and safety at work
• Recruiting, retention and transformation
• Learning and development
• Performance management and culture
• Employee engagement and industrial relations
• Workforce planning and organisation design
Operating highlights• Developed the transformation framework
and five-year delivery plan focusing on creating a balanced workforce in line with the economically active population of the country and developing a skilled and competent workforce
95
• Developed 341 training courses, delivered 25 909 events and recorded 200 642 learners during the financial year, exceeding the target in all three areas
• Engaged extensively with stakeholders,
locally at Medupi with the municipality
and traditional leaders, and nationally
with the offices of the National Union of
Metalworkers of South Africa, Solidarity,
National Union of Mineworkers and the
Department of Public Enterprises
• Established the Medupi Leadership Initiative,
in conjunction with Group Capital to mitigate
the impact of demobilisation on completion
of the construction
• Kusile’s Project Labour Agreement was
selected by the independent panel of
judges for the Centre for Effective Dispute
Resolution Awards 2012 as finalist in the
Excellence in Alternative Dispute Resolution
and Conflict category in London
• Established a governance framework and
model established under the Strategic
Integrated Project 1 to provide a sustainable
programme
Operating challenges• Relationship with organised labour
• Limited availability of women for technical
and leadership roles
Future focus areas• Improve relationships with employees and
organised labour to move to a partnership of
collaborative relationships
• Win the hearts and minds of employees
through effective and innovative employee
engagement
• Shift from reactive to proactive approach
regarding skills and resource planning and
development to ensure that Eskom has the
right mix of skills, in the right quantities, at
the right time and in the right place•
Build strong skills through an integrated
capacity-building approach
• Close the competency gap through Eskom
Academy of Learning and its partners
• Promote collaborative methods of work to
enable a high-performance organisation,
accompanied by appropriate rewards and
recognition system
• Move from uniform benefits to differentiated
benefits for variable pay
• Move from differentiated pay to fixed-point
scale for base pay
• Enable a transformed workplace with values-
based, effective and accountable leaders
driving transformation beyond compliance
• Enable “smell of the place” through human
rights culture and equal access to career and
development opportunities, with targeted
development where required
BenchmarkingTraining and development costs as a percentage of the wage billEskom’s R1 933 million 2012/13 (2011/12:
R1 361 million) investment in training and
development is 7.2% of the wage bill (including
1% of the wage bill that is paid as a skills levy).
This puts Eskom well within the 75th percentile
of United States utility companies (which
average 3.3%) and United Kingdom/European
utility companies (which average 3.5%)
according to a 2010 PricewaterhouseCoopers
report. The guideline for South African
companies is to spend 5% of the wage bill on
training and development.
Employer of choiceYoung engineering professionals rated Eskom
the employer of choice out of 60 engineering
and technology companies in South Africa for
five years running (Ideal Employer Ranking,
Magnet Survey, 2012).
Overall staff turnoverEskom’s overall staff turnover was 3.6% for the
period 2012/13. This places Eskom favourably
below the 25th percentile of South African
companies (9.5%). This is beneficial to Eskom,
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as the average cost of separation and replacing
scarce and critical skills ranges from 30% to
100% of an incumbent’s annual salary.
Turnover due to retirementTurnover due to retirement is 1.2%. This places
Eskom below the 75th percentile (1.2%) of
South African companies. Employees that are
50 years and older make up 26.2% of Eskom
staff and could be considered a retirement risk
within the next decade.
PerformanceEmployment equityEskom implemented an employment-equity
plan supported by a long-term, target-
setting strategy (Equity 2020) to drive its
transformational agenda for the three financial
years leading up to 2012/13. The employment-
equity plan seeks to create a workplace and
workforce profile that is diverse and inclusive,
and to ensure that diversity becomes the
“Eskom way”.
Eskom company employees profile for the top
four occupational levels (task grades nine and
above). There are no specific targets set for
each group.
The following table details the employee profile
in terms of gender and race for Eskom’s senior
management of the Eskom company workforce
at March 2013.
Eskom company employee profile for the top two occupational levels:
Employee profilesActual
2012/13Actual
2011/12Actual
2010/11
Racial equity in senior management, % of black employees 58.32RA 53.90RA 52.52
Racial equity in professionals and middle management, % of black
employees 69.57 65.69 64.05
Gender equity in senior management, % of female employees 28.21RA 24.31RA 23.51
Gender equity in professionals and middle management, % of female
employees 34.60 32.43 31.56
People with disabilitiesAs per the Employment Equity Act (1998),
Eskom continues to strive for fair representation
of people with disabilities. The Eskom group
currently has 1 137RA (2012: 1 032RA [company
currently has 1 126RA (2012: 1 022RA)] employees
with recognised disabilities. The table
below details Eskom’s disability profile at all
occupational levels.
Percentage of Eskom employees with disabilities
Actual2012/13
Actual2011/12
Actual2010/11
Group (%) 2.43RA 2.36RA 2.36
Company (%) 2.59RA 2.49RA 2.53
Although the actual disability figures are below
the target of 3% of the workforce, they are well
above the national norm of 0.7% (Employment
Equity Commission’s report, 2009) and
the government’s 2% expectation for the
public service.
Health and wellnessEskom’s integrated health and wellness
programme promotes a safe and healthy
working environment to ensure its employees
are healthy, productive, resilient and engaged
throughout their time at Eskom.
The “Road to a Safe and Healthy Lifestyle”
campaign is part of expanding the scope
from HIV/Aids to other diseases affecting the
business. The campaign is a move from the
traditional workplace programmes focused
on raising awareness and prevention of HIV
infection and promoting access to treatment
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care and support. The focus is now on
addressing other diseases, as well as workplace-
related factors that put employees at risk of
ill health.
Eskom, as a company, is committed to forging
strategic partnerships aimed at enhancing
effectiveness in the handling of community
issues. It is in this respect that Eskom pledged
to support government to achieve its HIV
Counselling and Testing campaign objective
of testing 15 million South Africans.
Eskom’s “HIV counselling and testing”
campaign was nominated as a finalist in GBC
Health’s Business Action on Health Awards,
held in New York in May 2012.
Employee relationsEskom’s employee engagement model builds employee participation involving employees and executives in conversations about strategy, performance and people. Eskom has also built more productive and sustainable relationships with organised labour and continues to do so through a partnering model to guide these interactions. In addition, Eskom has embarked on a process to further strengthen the relationships with the trade unions, utilising the services of an external facilitator. To date, preliminary engagements between the facilitator and Exco, as well as between the facilitator and two of the trade unions, have taken place.
Eskom maintains direct lines of communication
with recognised trade unions. Eskom and the
trade unions engaged in salary and conditions
of service negotiations during 2011. The parties
could not reach an agreement and a dispute
was referred to arbitration. The arbitrator
handed down a two-year award that was still in
force during the reported financial year.
Demobilisation at MedupiThe Medupi Leadership Initiative, led by Group
Capital, was established to mitigate the impact
of demobilisation at the end of the construction
phase. Six feasible solutions are being debated
with contractors, labour and community leaders
for execution: four job-creation opportunities
and two skills development initiatives.
A governance framework and model under
government’s Strategic Integrated Project was
established to provide a sustainable programme.
The demobilisation of workers at Medupi
slowed down and was then delayed in the latter
part of 2012 and early 2013. The outcome is
that 3 000 workers will be demobilised in the
next 12 months.
Human resources sustainabilityHuman resources is responsible for measuring
and monitoring critical factors relating to the
sustainability of Eskom’s human resources.
A human resources sustainability index is
used to measure the following key aspects:
employee satisfaction, employee competence,
and employee health and wellness. The
measurements and criteria are reviewed
annually to make sure they remain applicable.
Human resources’ sustainability index has
reflected positively in terms of overall
performance, achieving a year-to-date score of
87.9% (2010/11: 82.4%). The index weighting of
work-related fatalities was increased from 4.5%
in 2012 to 9.0% in 2013.
Training and skills developmentEskom learner pipelineAll targets have been exceeded for the learner
pipeline and Engineering, Technician and Artisan
learners and for the Youth programme, which
reached an intake of 5 701RA for 2012/13 against
a target of 5 000, as tabulated below.
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Learners in Eskom’s learnership pipeline
Skills developmentCompact
targetActual
2012/13Actual
2011/12Actual
2010/11
Total learners/bursars (excluding youth programme) – 6 987RA 6 794RA 5 283RA
Engineering learners 1 949 2 144RA 2 273RA 1 335RA
Technician learners 757 835RA 844RA 692RA
Artisan learners 2 543 2 847RA 2 598RA 2 213RA
Youth programme (learners being trained to contribute
to socio-economic development) 5 000 5 701RA 5 159 N/A
Cumulative projected core, critical and scarce skills to replace
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Artisans and trade workers 12 210 11 693 11 198 10 694 10 201 9 732
Engineers and technologists 3 101 2 942 2 792 2 648 2 504 2 376
Operators and controllers 2 562 2 496 2 419 2 342 2 263 2 196
Technicians 4 151 3 975 3 817 3 660 3 507 3 364
Total core, critical and scarce skills 22 024 21 106 20 226 19 344 18 475 17 668
• 2012/13 column represents the actual
grouping of the skills as it was at
31 March 2013 for the Eskom Group
• 2013/14 to 2017/18 represents the forecasted
supply/availability of the skills after applying
the attrition rate
• The core, critical and scarce skills to replace
represents a cumulative effect of attrition on
the selected skills over the period
Eskom’s Academy of LearningThe mandate of Eskom’s Academy of Learning is
to close Eskom’s competency gap by addressing,
coordinating and integrating all learning needs
of employees, as well as enhancing performance
throughout Eskom, by focusing on business
needs, and catering for all facets of the learning
value chain and learning operations.
During 2012/2013 the Academy devoted a
large proportion of its energy to ongoing
support for the SAP reimplementation project
with the rollout of classroom-based training
and e-learning courses for the Back2Basics
processes and systems. The year-to-date
figures show the commitment in supporting
business with the rollout of Back2Basics
with 27 390 Eskom employees and a total of
58 250 course attendees undergoing training.
More than 1 200 employees were trained as
Back2Basics facilitators.
The Academy did not allow the focus on
Back2Basics to divert it from addressing normal
training demands of the business. The total
learner attendance now exceeds the year-end
target, with a figure of 200 642. The number
of learning events delivered now exceeds
the year-end target with a figure of 25 909.
Number of courses developed to date is 341.
In March 2012 the Academy, in partnership
with Group Technology, launched the Eskom
Welding School of Excellence. A total of
150 welding apprentices are in the learner
pipeline and the first group of 50 will qualify
in 2014. This initiative will help with the national
shortage of welding skills. The early success of
this initiative is evident, with positive feedback
from potential employers and continuous
improvement of learner capabilities.
Services functions continued
99
The Engineering Centre of Excellence
commissioned a state-of-the-art training
facility that includes a power plant steam
turbine simulator to train power plant
engineers. A new government Certificate of
Competency programme was implemented
to prepare candidates to become certified
engineers. In addition, the Engineering Centre
of Excellence implemented the Distribution
Clerk of Works training curriculum to improve
the quality of workmanship on the construction
of overhead lines.
An ETAPro training programme continues
to train power station engineers to optimise
power station performance.
Eskom’s Power Plant Engineering Institute was
launched in partnership with South African
universities to:
• Increase the number of powerplant MSc and
PhD graduates
• Ensure South African universities participate
fully in the localisation of new technologies
currently being offered to Eskom by original
equipment manufacturers
• Ensure South African universities play an
active role in transferring and establishing
these new technologies in the country
• Ensure South African universities are
actively involved in solving Eskom’s specific
engineering problems
• Leverage the expertise and experience of
international universities and utilitiesSo far
there have been two intakes of masters
and doctoral students, totalling 65 Eskom
engineers doing full-time postgraduate
studies. Good progress has been made
with engineering research on topics directly
relevant to Eskom. Universities have made
good progress with appointing academic staff
in the institute’s Centres of Specialisation.
They have also made good progress in
contracting developing universities to do
related research.
The Project Management Training Centre of
Excellence, launched in October 2012, built up
relationships with academic institutions for the
development and improved professionalism of
project management staff throughout Eskom.
A Project and Construction Management
School was launched during the year to ensure
an adequate pipeline of skills is available for the
continued Eskom built environment.
Group Customer Services in partnership with
Eskom’s Academy of Learning established
a School of Customer Services within the
Professional Services Centre of Excellence on
28 June 2012 and had trained 2 313 frontline
staff by March 2013.
Total training investment per year
Training expenditure 2012/13 2011/12 2010/11 2009/10
Rm 1 933 1 361 998 758
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
100
FinanceFinance’s mandate is to provide financial strategy,
policies, assurance and strategic financial services
(including treasury, corporate and regulatory
reporting, taxation, financial evaluation and
advisory services) to the Eskom Group.
Operating highlights• Securing 82.9% of the R300 billion funding
plan and drawing down R40.5 billion during
2012/13
• The successful introduction of inflation-
linked bonds that have met with significant
support from the investor base
• Eskom Treasury Economics Team placed
second in the Thompson Reuters ranking
• Group Finance has been ISO 9001 certified
Operating challenges• The rating agencies downgraded Eskom’s
credit rating on 17 October 2012 (Standard
& Poor’s), 1 December 2012 (Moody’s) and
11 January 2013 (Fitch). The outlook for
Standard & Poor’s and Moody’s was changed
to negative, whilst the outlook for Fitch
moved from negative to stable
• The impact of NERSA’s 8% tariff award in
terms of MYPD 3
Future focus areas• Realigning the budget and funding to the
MYPD 3 determination
• Maintain funding momentum for the build
programme
• Use alternative funding solutions for future
Eskom initiatives
• Continue renegotiation of remaining special
price agreement
Operations financial resultsEskom has achieved a group net profit of
R5.2 billion (2011/12: R13.3 billion) for the year
to 31 March 2013. Operating profit before fair
value gains and losses on embedded derivatives
and net finance costs was R9.9 billion (2011/12:
R22.0 billion). Compared to the previous year,
the 16% tariff increase resulted in a 16.4%
average increase in electricity revenue per kWh.
This increase was offset by a 31.2% increase in
operating costs compared to the previous year.
Sales and revenueGroup revenue for the year under review was
R128.9 billion (2011/12: R114.8 billion). Electricity
sales totalled 216 561GWh, a decrease of 3.7%
from the previous year (2011/12: 224 785GWh).
The decrease is mainly attributed to power
buybacks, industrial action at large customers
in the mining sector, poor market conditions
and major customer breakdowns. These were
offset by higher-than-anticipated sales to
international customers.
Primary energy costsThe primary energy costs for the year amounted
to R60.7 billion (2011/12: R46.3 billion). The cost
of primary energy for the year increased
by 36.1%, from 20.6c/kWh to 28.1ckWh.
The 7.5c/kWh increase was mainly due to:
• Coal usage costs going up by 3.9c/kWh
(52.7% of the increase)
• Cost of using open-cycle gas turbines of
1.6c/kWh (21.6% of the increase)
• The environmental levy increasing by
1c/kWh to 3.5c/kWh from 1 July 2012 (12.2%
of the increase)
• Demand-market participation, power
buyback and co-generation costs increasing
by 0.5c/kWh (6.8% of the increase)
• Other expenditure, including coal handling,
gas-fired startups, water usages and
international purchases, made up the
remaining 6.7% of the increase
As at 31 March 2013, coal stock stood at 46RA
days, up from 39RA days as at 31 March 2012.
Operating costsGroup employee numbers increased by
2 793 from 43 473 to 46 266 during the
year. Group gross employee costs (before
capitalisation) for the year amounted to
R28.7 billion (2011/12: R24.4 billion).
Services functions continued
101
Group arrear bad debt was 0.81% of external
revenue for the year (2011/12: 0.53%).
The amount owing from electricity debtors
(before impairment provision) increased from
R14.6 billion at 31 March 2012 to R16.7 billion at
31 March 2013. The allowance for impairment
for trade and other receivables increased from
R3.3 billion to R4.3 billion between March 2012
and March 2013.
Group other operating expenses for the
year was R23.1 billion (2011/12: R15.3 billion),
consisting primarily of IDM costs, and repairs
and maintenance. IDM cost Eskom R3.0 billion
in 2012/13 (2011/12: R1.5 billion), while gross
repairs and maintenance cost R18.4 billion
(2011/12: R12.0 billion).
Fair value gains and lossesThe net fair value loss on financial instruments,
excluding embedded derivatives, was R1.7 billion
for the year (2011/12: R2.4 billion). These gains
and losses are primarily attributable to the costs
of rolling over forward exchange contracts.
View the rand exchange rates applicable to
major currencies at 31 March 2013 in the annual
financial statements.
The net impact of changes in the fair value of
the embedded derivatives (relating to the special
pricing agreements) on the income statement
was a fair value loss of R5.9 billion for the year
(2011/12: R0.3 billion gain). Embedded derivative
liabilities amounted to R11.5 billion (2011/12:
R5.5 billion). Eskom applied to NERSA to review
the last remaining special pricing agreement
that Eskom has with BHP Billiton relating to
aluminium smelters in KwaZulu-Natal.
Finance chargesAfter capitalising borrowing costs and including
the unwinding of interest on provisions, the net
finance income for the group was R3.0 billion
for the year (2011/12: R4.0 billion cost). Gross
finance income was R2.8 billion (2011/12:
R3.5 billion), while the gross finance cost was
R1.1 billion (2011/12: R10.5 billion). The finance
costs include the impact of remeasuring the
government loan, amounting to an income of
R17.3 billion. The remeasurement is based on
the new MYPD 3 price path.
The borrowing costs capitalised for the year
was R3.7 billion (2011/12: R5.0 billion), while the
unwinding of interest amounted to R2.4 billion
(2011/12: R2.0 billion).
The effective tax rate for the year was 26.4%,
which is in line with the current statutory tax
rate of 28%.
Liquidity The cash and cash equivalents decreased from
R19.4 billion at 31 March 2012 to R10.6 billion
at 31 March 2013. Cash and cash equivalents,
together with investment in securities,
amounted to R28.0 billion at 31 March 2013
(2011/12: R40.5 billion).
The group’s net cash inflow from operating
activities for the year was R27.7 billion (2011/12:
R38.5 billion). The group’s working-capital ratio
was 0.68, compared to 0.76 as at 31 March 2012.
Cash flows used for investing were R58.4 billion
for the year (2011/12: R60.0 billion). The capital-
expenditure cash flows included in this line
item, excluding capitalised interest, amounted
to R57.9 billion (2011/12: R59.5 billion).
The net cash inflows from financing activities
for the year was R21.8 billion (2011/12:
R28.7 billion). The raising of borrowings and
the issuing of securities have been managed to
match reduced capital expenditure. The debt-
to-equity ratio for the group (including long-
term provisions) was 1.84 as at 31 March 2013
(2011/12: 1.57). The free funds from operations,
as a percentage of gross debt, was 8.04%
for the group as at 31 March 2013 (2011/12:
15.15%) while the gross debt as a percentage of
earnings before interest, tax, depreciation and
amortisation was 16.16% (2011/12: 6.46%).
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
102
Services functions continued
TreasuryEskom remains in a solid position from a
funding viewpoint, although its credit-rating
downgrades and the lower-than-requested
MYPD 3 tariff award may have a negative
impact on its ability to secure future funding.
Currently it has adequate short-term liquidity
reserves. At the beginning of the financial
year under review it had already pre-funded a
portion of the year.
Eskom’s Treasury has adapted its funding
to market conditions by balancing local and
international funding, and capital-market
and money-market funding. Funds for the
next 12 to 18 months will be from a number
of sources including the issuing of domestic
and international bonds, through export-credit
backed financing, and from development-
finance institutions. These are largely based on
draw-downs of loan facilities that have already
been signed with lenders. New facilities to be
contracted in the new financial year are limited
to Italian export credit agency-backed financing
and clean technology funds from development
finance institutions.
The state of the global economy and new
global banking regulations (Basel III) have
not yet materially affected Eskom’s ability to
access funding, although funding is becoming
increasingly expensive. The effect these new
requirements will have on corporate clients is
difficult to determine on a product-by-product
basis, but the overall impact will undoubtedly
be more expensive funding and difficulty
extending tenor. Eskom’s Treasury continues
to monitor the global economy and the ways it
might influence the company’s funding abilities
in coming years. Opportunities exist for
corporate entities to fund in the international
bond market at favourable yields.
The major rating agencies downgraded the
sovereign credit rating on 12 October 2012
(Standard & Poor’s), 27 November 2012
(Moody’s) and 10 January 2013 (Fitch). As a
consequence Eskom’s credit rating was also
downgraded. While this has not yet affected
Eskom directly, global issues have affected the
rand, which in turn has influenced the mark-to-
market of Eskom’s hedging activities.
Eskom continues to follow the funding plan for
the capacity expansion programme (up to the
completion of Kusile). It has largely identified
funding sources and continues to make
progress in securing the funding and drawing
down on facilities. Eskom is conscious of the
need to balance its reliance on the government
guarantee facility against the need to build its
own balance sheet, with the ultimate goal of
achieving a standalone investment-grade rating.
The reduced tariff increase for the MYPD 3
period will extend Eskom’s reliance on state
support by a number of years.
Government’s electricity pricing policy had
aimed to achieve tariffs that would reflect the
full cost of supplying electricity to customers by
the end of MYPD 2. NERSA’s MYPD 3 tariff
determination, handed down in February 2013,
granted an average 8% increase per year for
the five years of the determination period –
significantly less than the increase applied for.
Eskom is generating scenarios to determine
the likely effects of a longer phase-in to a cost-
reflective tariff. At minimum, it will have to
reduce its capital and operating expenses, and
raise significant additional funding, particularly
in the latter years of the MYPD 3 period.
Eskom continues to plan its funding around
the targets set in the Department of Energy’s
IRP 2010, the 20-year energy strategy for
the country. This will require a funding
approach that supports Eskom’s goal to
develop a standalone investment grade credit
rating and reduce reliance on state support.
This potentially includes technology or equity
partners for new projects.
103
Spread of Eskom bonds over relevant government bonds
ES33/R209 ES26/R186 ES18/R204
80
70
60
50
40
30
20
Basi
s po
ints
31 Dec 2011 31 Jan 2012 29 Feb 2012 31 Mar 2012 30 Jun 2012 30 Sep 2012 31 Dec 2012 28 Mar 2013
Comparison of international Eskom, government and benchmark bond spreads
Eskom US 10 YR Eskom US 10YR to Govi US 10YR Eskom US 10YR to US 10YRGovi US 10 YR US 10 YR
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
Yie
ld
Mar
201
1
Apr
201
1
May
201
1
Jun
2011
Jul 2
011
Aug
201
1
Sep
2011
Oct
201
1
Nov
201
1
Dec
201
1
Jan
2012
Feb
2012
Mar
201
2
Apr
201
2
May
201
2
Jun
2012
Jul 2
012
Aug
201
2
Sep
2012
Oct
201
2
Nov
201
2
Dec
201
2
Jan
2013
Feb
2013
Mar
201
3
30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30 10 20 30
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
104
FundingEskom Treasury’s priority is to secure liquidity
while managing financial risks (including interest-
rate, currency, credit and refinancing risks).
The 2012/13 financial year continued to be
dominated by the global economic crisis and
the resulting low economic growth, particularly
in the Euro zone and the United States (US),
resulting in volatile interest and currency rates
and, most importantly, uncertainty on access
and depth of the markets.
Eskom continued its small-sized regular bond
auctions in the domestic market in 2012/13.
These have been fully subscribed each time.
It also started issuing inflation-linked bonds,
which have enjoyed significant investor support
in the market. Domestic bond performance
remained stable, while the Euro bond, which
matured in March 2013, was volatile, as is to
be expected with bonds during the 12 months
before reaching maturity. The US dollar bond
was under pressure due to the large demand
for infrastructure development funds and
the volatile credit climate.The focus of Eskom
Treasury’s activities during 2012/13 remained
funding the balance of the required fund for the
committed build programme (to end of Kusile)
plus a liquidity buffer of R20 billion. Its new
funding focus remains primarily on initiatives
relating to renewable energy projects. Eskom’s
Treasury also finalised secured export credit-
backed funding.
Standalone investment-grade ratingEskom aspires to achieve cost reflective
tariffs, which in turn will lead to a standalone
investment-grade rating. Eskom’s ability to raise
debt funds on a standalone basis is a function of
its credit rating, as assigned by rating agencies.
Eskom’s credit ratings, following the sovereign
actions by the rating agencies in late 2012 and
early 2013, are “BBB” (Standard & Poor’s) and
“Baa3” (Moody’s) from a foreign currency point
of view. These ratings also imply a “negative
outlook”, reflecting that of South Africa’s rating.
Any further downgrades on the sovereign
could reduce Eskom’s credit rating to below
investment grade.
Rating agencies have raised concerns about
Eskom’s ability to finance the current capacity
expansion programme and the requirements
of the IRP 2010 without a cost-reflective tariff
adjustment. These have so far been mitigated by
government’s strong support as the shareholder.
The reduced MYPD 3 tariff award will delay
Eskom achieving a cost-reflective tariff. Eskom
will require clarity on funding for any additional
capacity that it may be tasked to build.
Services functions continued
Summary of Eskom’s standalone credit rating as at 31 March 2013
Rating Standard & Poor’s Moody’s
Fitch
Local currency National scale
Foreign currency BBB Baa3 – AA+
Local currency BBB Baa3 BBB+ F1+
Standalone B Ba3 None None
Outlook Negative Negative Stable Stable
Action date 17 October 2012 1 December 2012 11 January 2013 16 January 2013
105
Financial sustainabilityEskom continues to make steady progress
in finalising funding for the capital-expansion
programme and remains in a strong short- to
medium-term funding and liquidity position.
The latest projections indicate that Eskom has
sufficient cash from cash on hand, investments,
net operating cash flows and current secured
facilities available to fund the business through
to the beginning of the 2014 calendar year.
Funds sourced in terms of Eskom’s R300 billion funding plan from 1 April 2010 to 31 March 2017 (R billion)
Sources
Funding sources
Apr 2010 – Mar 2013
Secured to date
Draw-downsApr 2010 –
Mar 2012
Draw-downsApr 2012 –
Mar 2013Draw-downs
to date
Amount of secured
supported by government
Bonds 90.0 44.8 32.8 11.9 44.8 32.3
Commercial paper 70.0 70.0 20.0 10.0 30.0 –
ECAs 32.9 32.9 15.5 4.0 19.5 –
World Bank 27.8 27.8 5.5 3.1 8.6 27.8
AfDB 20.9 20.9 5.9 7.5 13.3 20.9
DBSA 15.0 15.0 3.0 4.0 7.0 –
Shareholder loan 20.0 20.0 20.0 – 20.0 20.0
Other/new sources 23.4 17.4 0.9 – 0.9 4.9
Totals (R billion) 300.0 248.8 103.6 40.5 144.1 105.9
Percentages 82.9%1 – – 57.9%2 42.6%3
(% of
R300 billion)(% of secured) (% of secured)
1. As a percentage of the total R300 billion sourced.
2. As a percentage of the secured total of R248.8 billion as at 31 March 2013.
3. As a percentage of the secured total of R248.8 billion as at 31 March 2013.
By the end of the financial year, Eskom had
secured 82.9% of the funding required for the
capital expansion programme.
Of the R23.4 billion from “other sources”
required by the funding plan, Eskom Treasury
has secured about R17.4 billion. These funds
are to be applied to projects that are signed
off, particularly the renewable-energy projects.
The remaining R6 billion will come from facilities
that have been identified and are currently
being negotiated, and facilities that have been
identified but not yet negotiated. The balance
of the funding required for “other” continues
to be explored. The sources considered
include Islamic-type funding, and hybrid and
preference share instruments. The use of these
instruments will require regulatory approvals
and policy amendments.
Bond issuanceEskom’s target for 2012/13 was to raise
R9 billion with issuance of domestic debt off the
listed domestic medium-term note programme;
however, the market conditions and investor
appetite were favourable and Eskom actually
raised R11.9 billion.
At the beginning of the financial year, it became
evident that investor interest in nominal bonds
was limited. Investors preferred inflation-
linked bonds. Although this debt profile is not
favoured by Eskom given the uncertainty of
managing the refinancing risk at redemption,
it is a critical source of liquidity that needs
to be accessed. To further diversify Eskom’s
domestic funding instruments, Eskom created
two new inflation-linked bonds: the EL28 and
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
106
the EL29, each with an issue size of R3 billion.
The f inal maturity value, based on an average
inf lation of 6% over the period, will result in
a projected capital redemption amount of
about R8 billion each.
These bond listings proved very successful,
with issue spreads remaining fairly constant
at approximately 26 basis points over the
government benchmark bonds during
the auction period. This contrasts with spreads
on vanilla bonds of up to 60 basis points.
Eskom continues to favour domestic market
borrowing, which offers lower costs and
longer tenors relative to foreign debt. To allow
Eskom to continue sourcing funding from the
domestic market and offer investors choice,
its Treasury added fixed coupon interest
bonds to its existing list. These will mature
during the financial years ending March 2037,
2043 and 2048. The actual issuance of these
bonds depends on Eskom receiving sufficient
investor demand.
Current indications are that demand in the
inflation-linked bond market will continue to
support Eskom’s funding activities, underscored
by the recent increase in demand for longer-
dated vanilla debt, which seems to have some
momentum and could also help Eskom’s funding
activities over the next few months.
The allocated bond auction dates, per the
National Treasury auction schedule, are
used to raise funding in the bond markets.
Bond auctions accounted for the majority of
the funding from this market, with the balance
coming from reverse enquiries from investors
and bonds being sold outside the auctioning
process via Eskom’s market-making facility.
Eskom Shared ServicesShared Services was given a mandate to
integrate all activities that have a high level of
repetitive transactions and are dependent on
cycle-time efficiencies into a single unit. This is
a newly formed unit in Eskom, it is multi-
disciplined and located in seven hubs across
South Africa. Shared Services also runs a multi-
discipline contact centre supporting Eskom
employees and Eskom suppliers for the services
rendered by the Shared Services unit.
Included disciplines are:
Fleet management: Fleet was historically
managed individually by different divisions and
has now been consolidated into one service
provider with a total fleet of more than 12 000
vehicles.
Revenue management: This area provides a
billing and related services function to Eskom,
including bill determination, processing and
management of cash inflow from electricity
purchases by Eskom customers (small power
users, large power users and key customers).
Finance: The finance area is responsible for
the payment of supplier invoices, payment of
Eskom employees, international travel and
management of bank accounts.
Human resources: Shared Services manages
the recruitment process, appointments,
resignations and any other internal movement
of employees. Benefit administration and
organisational structure maintenance is also
handled in this area.
Master data management: This area focuses
on enabling Eskom to become a world-class
master data organisation with “one version of
the truth” for better decision making. This is
achieved through providing the necessary tools,
techniques, framework, methodologies and
coordination for master data management.
Setting up a master data organisation has
ensured clear visibility and accountability for
the quality of master data.
Operating highlights• Achieved ISO 9001:2008 certification
• Asset management and management of vehicle operating cost improved significantly with the consolidation of fleet ownership
Services functions continued
107
into one single entity
• The implementation of a new vehicle on board computer, enabling the management of vehicles and drivers through exception reporting, including vehicle availability reports identifying vehicle usage and service downtime
• Expediting the replacement of vehicles not equipped with advanced safety features by acquiring some 319 additional vehicles for replacement
• The accuracy of billing index for key customers and large power users is at 99.19% and 98.39% respectively for the year, which is an exceptional performance. Accuracy of billing index for small power users is 90%, mainly because of Soweto challenges
• Implementation of Eskom Enterprise Structure in the system, ie the linking of employees to new personnel areas and sub-areas and ensuring that physical location of staff is loaded in the system for payroll distribution, access control, risk assessment and for real estate purposes
• Data quality for 16 data domains is monitored and reported monthly to the Master Data committee with results of 94% completeness and 95% correctness of master data. 369 different tests are executed monthly to arrive at these results. This is a tremendous improvement showing one version of the truth that did not exist previously
• Master Data now has its own process control manuals for both the governance and maintenance processes. The Master Data governance policy was also approved by Exco during the financial year
• A team has been set up within the Finance Shared Services to expedite payments to suppliers working with business through the performance of 80% of supplier reconciliations in a standardised manner across Eskom and following up on outstanding issues
• Payslips have been simplified, standardised and aligned to a system copy for ease of use by employees and the distribution of payslips has improved
Operating challenges • Shared Services is by nature at the end of
the value chain and therefore requires the whole process in the value chain to function and support the activities of Shared Services. The challenges experienced include:
– Payment to suppliers delayed in relation to payment terms due to issues ranging from receipting of goods and services in the system not done timeously to disputes between project managers and suppliers.
– Billing accuracy, specifically for Small Power Users (SPU) not at aspired levels due to metering data not accurate and timeous.
– The cycle time to fill vacancies of 60 days was not achieved due to various impacts in the value chain.
– Alignment of payment to due date by municipalities impacted the cash inflow forecasting.
• The vehicle maintenance is managed through a virtual shared service and this has resulted in challenges to the telephony system and human resource efficiency
• Fleet data accuracy and completeness is an area of focus and system improvements are planned for SAP release 2 to deal with this challenge.
Although the data base of suppliers has been cleaned up from a total of 81 000 (mostly duplicated and inactive) suppliers to 15 475 active suppliers, it is still a challenge to keep the data base up to date due to poor response from suppliers on expiry of documents like tax and B-BBEE certificates which are required to be updated yearly.
6Strategic functions
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
110
Enterprise DevelopmentThe Enterprise Development group comprises
four key strategic functions as divisions with
specialised capabilities to guide, position,
protect and enable the Eskom Group. They are:
Strategy and Risk Management; Regulation and
Legal; Corporate Affairs; and Group IT.
Each division serves specific needs and
requirements of the organisation, but the
overarching role of Enterprise Development
is to group these key strategic functions to
identify and develop integrated strategies and
step-change programmes to deal with change,
taking into account forces in the operating
environment that include market dynamics,
such as accelerating innovation cycles,
disruptive technologies, emerging markets,
value chain complexity, and regulatory and
voluntary standards; sustainability dynamics,
such as climate change, demographic shifts,
and resource constraints; and stakeholder
dynamics, including the growing engagement of
consumers, NGOs and regulators.
These integrated strategies and step-change
programmes are to be introduced into the
organisation at business unit, divisional, group
and cross-functional levels to develop Eskom
as an enterprise, enhance its organisational
efficiency and effectiveness, and enable its
intent to be a Top 5 performing utility.
Enterprise Development was established just
over a year ago and the last year has seen
each of its divisions under pressure to deliver
in terms of their own portfolios. Enterprise
Development has made great progress in
embedding quality management systems that
will form strong foundations for leading change
in this complex organisation. Focus has been
on the Group’s purpose of providing strategic
services to the organisation informed by an
integrating role, bringing together the strategic
insights of the four divisions. Currently the
Group is developing approaches for “creative
collaboration” to effectively engage the rest
of the organisation, play the required strategic
role and influence outcomes.
Strategy and Risk ManagementMandateStrategy and Risk Management’s mandate is to
lead an integrated approach to organisational
strategy, risk management and corporate
planning to ensure sustainability and resilience.
The power utility landscape within the broader
energy environment is changing with diverse
stakeholder requirements. The environment
is continually faced with key requirements of
doing business in a sustainable manner, adapting
to changes in technology, policy, market
structure and global trends.
This environment requires Eskom to
continuously look, not only at the short term,
but the long-term strategic business positioning
to meet such requirements. Strategy and Risk
Management focus primarily on ensuring that
Eskom continually adapts to the changing
landscape and responds appropriately to risks.
To this end, Strategy and Risk Management focus
on strategy development and scenario planning
that continuously shapes Eskom’s direction,
corporate planning that provides depth and
reflects what Eskom is doing operationally and
strategically, and risk and resilience management
to ensure that it is continually managing current
and emerging risks that emanate from such a
dynamic business environment.
The division was established by integrating
strategy, corporate planning, risk and resilience
functions, that were traditionally positioned
within the business. This approach enables
Eskom to develop corporate and functional
strategy, the corporate plan and shareholder
compact, and manage risk in an integrated
manner, while continually identifying and
establishing response capabilities.
Strategic functions
111
Operating highlights• Eskom’s strategy to shift performance and
grow sustainably has been accentuated by
specific strategic pathways of “lock-in”, these
are initiatives that protect the core business
“agility and growth”: initiatives that ensure
the business is responsive while developing
at the same time
• The 2013/14 to 2017/18 corporate plan
was drafted and shareholder compact was
finalised; this supports the alignment of the
organisation and its shareholder
• Scenario-based strategy development was
operationalised to support the development
of robust strategies
• A strategy review was undertaken to
update the corporate strategy taking into
consideration changes in the policy, business
and technology environment. This will also
form the basis of the next corporate plan
• The Integrated Risk and Resilience
Framework was developed and will allow
the organisational risks to be managed in
an integrated manner; including business
continuity management
• Eskom has conceptualised and incorporated
into the corporate plan the strategy to
address transformation in a holistic manner
Operating challenges• The Strategic Energy Planning Directives
at a national level need to be reviewed
and updated to give guidance to the
organisational plans
• The industry structure is under discussion
and plays an important part in the Eskom
planning process
• The changes associated with climate change
will potentially shift the risk profile of the
organisation
Future focus areasIn striving to shift performance and grow
sustainably, Strategy and Risk Management will:
• Research and formulate options for Eskom’s
alignment to a changing business landscape
• Review the Eskom business model taking
into account key business and technology
drivers
• Update the corporate plan following
the NERSA tariff determination and
align the shareholder compact to enable
organisational alignment with the
shareholder for 2013/14
• Focus risk management on Eskom’s
Integrated Development plan and strategic
imperatives while strengthening the business
continuity management capacity in the
organisation
• Perform a comprehensive review process on
strategy and longer-term plans in line with
the expected available funding
• Develop an organisation-wide implementation
plan to embed Eskom’s transformational
aspiration
• Deepen risk understanding and treatment
plans throughout the organisation
• Strengthen emergency and disaster
management structures
Regulation and LegalMandateRegulation and Legal’s mandate is to ensure that
Eskom conducts its business within its “licence
to operate” by ensuring good governance and
compliance with current policy, regulatory
and legal frameworks influencing the policy,
regulatory and legal frameworks required for
achieving Eskom’s strategic objectives.
In essence the division ensures good governance,
assists in managing legal, regulatory and
compliance risks while also looking ahead to
assist in creating an enabling legal and regulatory
environment to support Eskom’s objectives.
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The division is primarily responsible for the
following activities/roles:
• Positively influencing the regulatory and policy
environment within which Eskom operates
• Providing strategic and objective legal advice
and effective business solutions
• Ensuring the necessary compliance as
required in terms of legislation and policies
applicable to Eskom
• Influencing and ensuring effective governance
and secretariat best practices to enable
Eskom to be a well-governed, ethical and
trusted company
The operating model of the division includes
a shaping, servicing and safeguarding role
and relies on strong partnerships with the
business and integration within the Enterprises
Development group. It consists of the
regulation, legal and compliance, governance
and company secretary departments.
The division reviews its strategy regularly
and has, during 2012/13 refined its mandate,
strategic objectives and priorities to align with
the Enterprises Development group objectives
and Eskom’s purpose, vision elements, values
and strategic objectives. In addition, the
division has also refined its strategic direction
to achieve effective, efficient and sustainable
transformation over the next five years in a
manner that will change the way it interacts
with the rest of the business.
This will be achieved through a transformation
plan (five-year Journey Map of “Excellence”)
that will focus on addressing inconsistent
performance by embedding quality and
developing skills, as part of its quest to transform
the division into a benchmark leader and create
measurable and sustainable value. A hallmark
of this transformation is the expressed desire
“to become the benchmark strategic function
in terms of trust, credibility and value add by
FY2017”. This aspiration, albeit bold, is a fitting
destination for Regulation and Legal.
The journey framework depicts a multiphase
transformation that is marked by five distinct
phases, each phase will be diligently monitored
and measured to improve its effectiveness,
efficiency and performance. The goal of
planning and managing each specific phase is
to yield measurable and recognisable benefits
along the way.
The first phase, FY2013, commenced with an
appraisal of the division’s current performance
and gaps (“understanding its role and mandate”)
and the final phase, FY2017, will culminate in
the division achieving its aspiration to “become
the benchmark function whose services are
credible, trusted and value adding”.
Priorities for 2012/13• For the period under review the focus in the
compliance area moved towards achieving
a greater level of proactively orientated
maturity across the various corporate and
operational groups/divisions. During this
period, the focus shifted towards:
– Development of group/divisional compliance
capacity
– Integration at a combined assurance level
– Expansion of the compliance universe
and associated guidelines
– Process and governance refinement
– Enhancement of integrated and coordinated
compliance reporting
Operating highlights• The MYPD 3 process was a comprehensive
one that included extensive stakeholder
engagement. Eskom communicated with
numerous stakeholders and engaged
with stakeholders at all the public hearings
• The revised Eskom delegation of authority
framework has been approved by the
board and executive management and
implemented with effect from 1 April 2013.
Training is to be provided and standard
delegations have been developed for groups/
divisions
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• The performance of the secretariat to
support the board and governance processes
has stabilised but there is room for further
improvement in this regard
• The procurement strategy for the appointment
of a new panel of attorneys was approved by
the board Tender committee on 6 February
2013 and the tender was subsequently issued
in line with the approved strategy
• As at the end of this financial year, the
Group Compliance Office prepared a more
comprehensive year-end Compliance Status
report. This report reflects the progress
made over the last 18 months in the
development of compliance
Operating challenges/risks• Due to the constrained system more
compliance breaches have been identified
especially regards environmental performance.
In addition, there has also been some non-
compliance with the Preferential Procurement
Policy Framework Act (2000) after the
exemption expired. Further, the resources
available to implement compliance effectively
in the business have been limited
• The risk that Eskom would have a shortfall
in terms of revenue materialised with the
MYPD 3 decision and is being addressed
• A high demand for legal support has
stretched the capacity and resources of the
department and in certain instances affected
turnaround times
• The management of information needs
improvement and processes put in place
in this financial year will hopefully see
improved performance in this regard next
year. The role of deputy information officer,
as required by the Promotion of Access to
Information Act (2000), has been delegated
to the divisional executive and resources
are managed in the legal and compliance
department. Fortunately, the management of
requests in terms of the Act has been good,
but there is a need for additional capacity in
terms of deputy information officers within
the groups/divisions across Eskom
Future focus areasOne of the key future focus areas will be to
support the business in terms of responding
effectively to the MYPD 3 determination. This
will include dealing with NERSA, communicating
with stakeholders and reshaping the business to
the extent necessary.
The following additional focus areas will be
prioritised:
• Support specific areas in respect of evolving
legal requirements and risks, for example, IT,
Procurement and Construction
• Ensure that the compliance framework
is implemented and is effective, including
divisional compliance processes, capability
and monitoring
• Strengthen regulatory coordination, with
a focus on NERSA and the National
Nuclear Regulator
• Ensure compliance with legislation and
licence requirements to support the
“partnering and leading to keep the lights
on” goal and general licence obligations
• Create a step change in regulation management
and strategy by focusing on the key enablers
required to achieve Eskom’s objectives
• Implement the delegation of authority,
including training
• Implement the Governance Framework
through, among other initiatives, the alignment
of governance policies to the Memorandum of
Incorporation
• Continue to focus on improving governance
and secretariat performance and support to
executive management and the board
• Embed quality and reporting processes
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Corporate AffairsMandateCorporate Affairs’ mandate is to make Eskom
a top global power company that is resilient,
reputable, trusted and highly regarded by its
stakeholders and peer group of companies
in South Africa and elsewhere in the world.
By basing Eskom’s stakeholder engagement
on international best-practice principles and
focusing on the strategic use of traditional
and new communication channels and media,
Corporate Affairs positions Eskom as a top
global power company.
Eskom recognises that it operates in an
environment where the management of a
company’s reputation is an integral part of the
company’s business chemistry. Consequently,
during the 2012 company strategic review, the
areas of reputation management, stakeholder
management, brand management and
communication were identified as step changers
to build trust and to improve Eskom’s reputation.
While Eskom’s reputation score improved
from 36.31 in the previous year to 42.6 during
the year under review, this score is still in the
weak-to-vulnerable range. According to the
Reputation Institute, “this indicates that in 2013
the general public has a stronger emotional
bond to the company than in 2012, however the
company’s reputation score is still considered
to be poor but has returned to the reputation
levels seen in 2010”.
Operating highlightsStakeholder managementEskom regards openness, transparency and
effective stakeholder engagement as key to
building the support, confidence and trust
necessary for Eskom to deliver on its mission.
Accordingly Eskom’s stakeholder engagement
was based on the AA1000 Stakeholder
Engagement Standard, an international
standard prescribing best-practice principles
and guidelines. During the period under
review stakeholder management was carried
out nationally, with tailored engagement
programmes to enable the effective execution
of specific operating units and projects based
on their stakeholder networks and geographic
locations.
• This period saw a marked increase in
engagements with national government
departments and parliamentary committees
on issues ranging from the build programme,
MYPD 3, the ISMO Bill, electrification,
transformation, public safety and job creation
• Hosting the South African President, Eskom’s
shareholder, and other stakeholders at
Medupi and Ingula power station construction
sites, created a positive profiling opportunity
for Eskom’s strategic imperative to keep the
lights on and to demonstrate the company’s
contribution to the growth and development
of South Africa
• During this year stakeholders were also
engaged on supplier development and
localisation, new build programme challenges,
land and servitude acquisition, electrification,
renewables, support to municipalities
and municipal debt. Furthermore, various
international delegations were hosted to
explore opportunities of doing business
with Eskom
Strategic Marketing• The Marketing team supports and runs
campaigns across Eskom. A new brand
campaign was launched internally and
externally in 2013, the aim being to
explain the whole electricity value chain to
customers and stakeholders. Eskom received
a Craft Certificate in Cinematography at
the prestigious Loerie Award Show on
23 September 2012 for its new corporate
television advertisement
• Other major campaigns are Operation
Khanyisa that combats electricity theft and
promotes payment for services, as well
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as the IDM and Power Alert campaigns.
Last year Power Alert was flighted on
10 DSTV stations for the first time
• The 49M campaign continued to encourage
energy efficiency and spread the company’s
strategic imperative to keep the lights
on. A total of 86 organisations have since
partnered with 49M. Research conducted
on the campaign indicates that 73% of the
respondents aware of the campaign thought
it was important to save electricity and 83%
of the respondents aware of the campaign
indicated that the campaign inspired them to
change their behaviour. Of the 73% more than
half had top of mind awareness, in other words
unprompted recollection. These people are
more likely to buy into the brand message
• 49M also bounced into the Guinness Book
of World Records as 4 000 participants
transformed kinetic energy into electric
energy by jumping on kinetic plates as part
of an Earth Hour initiative
• Continued success with Eskom flagship
sponsorships saw the Eskom Expo for Young
Scientists continue to yield a positive return in
maths and science education among the youth.
Nine learners proudly represented South
Africa at the international science fair, Intel ISEF,
in Pittsburgh, Pennsylvania, in May 2012
Internal and External Communication• Facilitated chairman and chief executive
employee engagements focused on creating
awareness of the company’s history and
achievements leading up to Eskom’s 90th
anniversary, celebrated on 1 March 2013
• An integrated internal zero harm campaign
was designed and successfully rolled out
to all regions. This included 17 national
launches, site safety, health and environment
days, facilitated team engagement sessions
and a range of collateral to support the
campaign. Further to this, two national
vehicle safety campaigns were rolled out
across the organisation
• Celebrated a significant milestone in Eskom’s
history as the company turned 90 on 1 March
2013. The anniversary provided a platform to
showcase the company’s legacy in South Africa
and pay homage to employees and pensioners
for their significant contribution to Eskom
• While Eskom did not achieve the 16%
tariff increase required, the company
demonstrated its commitment to open and
transparent communication by engaging
robustly with stakeholders during the
MYPD 3 process. In so doing, the risk of
stakeholder activism was minimised as
stakeholders engaged through the formal
Celebrating the Guinness World record achieved by the 49M campaign are Minister of Public Enterprises Mr Malusi Gigaba, Miss Earth Tamerin Jardine, Guinness World Records Official Pravin Patel, and Eskom Holdings chief executive Brian Dames
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process. Employees received daily updates
from the public hearings and all potential
issues and risks were managed through a
dedicated nerve centre
• Embraced social media by increasing Eskom’s
share of voice to 85 million people on the
digital platform, particularly on web, Twitter,
YouTube, Facebook and Mobile (MiXiT).
Eskom, the media desk and associated brands
such as the eta Awards and the Eskom Expo
for Young Scientists increased the number of
followers on these platforms
• Corporate Affairs division monitors all digital
and social media conversations online, and
identifies anything that is deemed relevant to
the organisation. Each of these conversations
is verified and tagged with a sentiment score,
algorithm, language, location, category and
author credibility
• A heightened sensitivity to risk and daily
monitoring and management of key issues have
minimised the impact of potential challenges.
Using this approach, for instance, the lights were
kept on during the African Cup of Nations
• Eskom continued to keep South Africans
informed about the state of the electricity
system through quarterly media briefings
and twice-a-week bulletins. The latter
saw an increased uptake in the media and
created an understanding of the security
of supply status
• The issue of security of supply saw
more consistent coverage in 2012, while
tonality saw an upward trend regarding
general perceptions. Eskom’s Solar Rebate
programme and energy-efficiency efforts
are some of the Eskom stories that emerged
with a more positive profile in the media in
2012 compared to 2010/11
Operating challenges• While Eskom’s RepTrakTM score improved
from 36.31 in the previous year to 42.6
during the year under review, this score is
still in the weak-to-vulnerable range
• Eskom’s share of voice in the media, even
though it improved by 4%, remained below the
recommended 35% due to a series of negative
coverage of key issues in the media space. This
negative coverage was sustained in social media
• Centralising the communication, stakeholder
and marketing functions has created short-term
performance challenges on a provincial basis
Future focus areas• Engage with stakeholders on the impact and
consequences of the MYPD 3 determination
made by NERSA
• Pilot the segmented approach to reputation
management and develop a reputation
management dashboard
• In order to keep the lights on it is imperative
that South Africans understand and reduce
electricity consumption during peak
load from 17:00 to 21:00 in winter. An
integrated communication and stakeholder
communication strategy will be implemented
during the winter period to achieve this
business priority
• Increase the company’s share of voice in the
media space and maintain it at a minimum
of 35%
• Increase and accelerate rapid adoption of 49M;
develop a long-term strategy based on 49M
research; standardise marketing programme
management in Eskom; build marketing skills
and knowledge within the organisation; and
align all programme communication strategies
with the brand strategy
• Segment and matrix stakeholders from
various stakeholder groups and pilot a
stakeholder relationship assessment and
reporting tool
• Standardise marketing management in Eskom
• Build marketing skills and knowledge within
the organisation
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Group Information Technology (IT)Key performance indicators for Group Information Technology
Key performance indicatorsActual
2012/13Actual
2011/12
Number of major incidents 8 104
Audit findings 1 remaining from previous year and 6 new (all minor) 184
Annual learner intake 188 95
ISO 9001 compliance Yes No
Successful delivery of major IT projects to scope, budget,
and time 65% 50%
Maturity level (CMMI) of IT processes, people,
and technology 2.5 to 3.0 across most areas 1.8
Information security – number of incidents
(eg virus outbreak; illegal connections) – –
Average end user satisfaction survey 93.7% 85.9%
MandateGroup IT’s mandate is ensuring effective
delivery and operations of IT systems,
IT communications, IT asset management,
data custodianship, and business processes
automation to support Eskom’s business
objectives. From the safety of Eskom’s people,
the experience of its customers, the efficiency
of its power stations, to the new power build
programme, Group IT plays a vital role in day-
to-day operations and assisting Eskom achieving
its aspiration of becoming a high-performance
organisation.
Group IT supports some of the most complex
IT business processes, managing large complex
data, integration of all IT components and IT
security operations, while facilitating large
volume of transactions and services in Africa
and meeting the IT needs of more than 50 000
users across 505 locations nationally and
internationally. The group utilises peta bytes of
storage with 11 million emails and 200 million
business transactions per month.
Information technology forms the backbone for most of the more than 6 900 processes in the Eskom business
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The diagram below shows the full set of comprehensive services provided by Group IT to the Eskom Group.
Strategic functions continued
Operating highlights• Significantly stabilised the IT operations
and has not experienced major incidents or
any data losses, compared to the previous
financial year
• Improved on all previous critical key
performance indicators
• Achieved ISO 9001:2008 certification
• Increased intake to the graduate skill
developmental programme to 188 IT learners
• Stabilised the online vending system
by removing all single points of failure.
Eskom had experienced 180 days of 100%
availability before a network failure occurred
in December when a tree took down a line.
Since that incident Eskom has continued with
100% availability and offering customers sub-
second response time
• Implemented a standardised system disaster
recovery method and systems to dramatically
improve restoration times
• Delivered a customer network link upgrade
so that Eskom can improve customer data,
improve response times for customer work
requests, and ensure accurate dispatching of
field engineers
Manage incident
and problem
Manage demand Manage change Manage release Manage testing
Manage continuity Manage security Training Business enablement Project and programme
management
Media services
Data management infrastructure
Hardware and software
Electronic mailing
Content management
Business PCM development
Network management
IM business engagement
Mobile solutions Web services
Knowledge management
Business process optimisation
Infrastructure management
Architecture and strategy
Printing services Telephony Business intelligence
Access management
Application portfolio
End user computing
Communication services
Connectivity Information, knowledge and management
Business process management
Business support services
Service management
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• Mobile hubs assisted Group Customer
Services with the successful design and
delivery of mobile hubs through using VSAT
technology to deliver services directly to
the customer within rural villages. Currently
in pilot phase in KwaZulu-Natal and
Eastern Cape
• Implemented a number of smart grid
demonstration and pilot projects including
improved condition monitoring of generation,
transmission, and distribution assets
Operating challenges• One of the primary operational challenges
relates to the availability of critical and core
Information Technology skills, particularly
in SAP; Smart Plant; Microsoft; Geospatial;
Security; and Infrastructure (network;
voice; storage; server virtualisation). This
remains a key concern for many South
African companies. Core and critical skills
have been identified with the placement and
recruitment for the positions being initiated.
• SAP performance and functionality, particularly
on Supplier Relationship Management
and Performance Management, remains a
business concern and Eskom hopes that the
implementation of the new F5 Load Balancers
with significantly more capacity will alleviate
the problems. Users are still encountering
workflow issues that are related to the data
on the system. HR and Finance are embarking
on an exercise to cleanse the data.
• The Megawatt Park data centre remains a
major risk and concern, and the recent issue
of damaged power cables under the floor
has led to a request for overhead busbar
power cables. Cooling is also a major issue,
particularly towards the back of the data
centre, and options are being sought to
improve the cooling to enable the installation
of additional servers and storage.
Progress on major IT and business projects• Broader and deeper SAP Enterprise
Resource Planning – IT are in the process
of deepening and broadening SAP usage to
make full use of the functionality provided
across all areas of the business; areas
include Primary Energy, Real Estate, Human
Resources, and Commercial
• Back2Basics Engineering Tools – This
programme ensures that Eskom’s engineers
have the right tools to enable delivery of
world-class power infrastructure. As part
of the programme Eskom is digitising critical
design data of the legacy fleet (design base
back fit) on a single platform accessible
across the organisation. Group IT has also
delivered an engineering portal that allows
engineers across Eskom to collaborate,
share documents, and govern the technical
standards bodies
• The migration to Windows 7 and Windows 8
– A project that is providing Eskom employees
with the tools to effectively carry out their
responsibilities (eg enhanced collaboration
tools such as community portals), as well
as evolving end-user computing to aid
productivity improvements
• Unified Communications – The integrated
set of unified communication tools will
support collaboration while reducing
costs and improving the safety of Eskom
employees by reducing travel
• Green Data Centre – The next generation
data centre will help ensure Eskom
always keeps the lights on by providing
reliable infrastructure for Eskom’s critical
applications, processes, and data. IT has
completed the conceptual phase of this
project, and has started the design work to
deliver two Tier IV facilities
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Group IT will include the following projects,
initiatives and innovation as part of its
future focus:
• Mobility – IT is leveraging the power of mobile
to ensure Eskom employees have the most
relevant information in the palms of their
hands. For example, by supporting a range
of applications for field engineers on mobile
phones and tablets, from collaboration
applications to tools for identifying faults
• Cloud computing – To support the business
with the most efficient technologies available,
IT is piloting a range of Cloud initiatives in
areas such as the testing environment and
email archives.
• Protection of Personal Information Act
(2009) – Eskom is proactively evaluating
and modifying the systems and processes to
ensure that Eskom achieves full compliance to
the Act to ensure that customers, employees
and supplier data are responsibly protected.
Data leakage prevention, network security,
laptop encryption, and USB disabling are
some of the initiatives being piloted and
considered
• Integration platform replacement and
migration
• Smart strategy – Developing a strategy
for harnessing smart-grid and smart-utility
capabilities to improve Eskom’s efficiencies,
improve asset management and utilisation,
better manage demand-response, reduce the
carbon footprint, improve customer services
and power quality, improve grid resilience,
incorporate renewables and contribute to
the National Development Plan
• Server room upgrade nationally – Eskom will
refurbish approximately 105 server rooms
across all Eskom key sites. This initiative
will significantly improve systems and
infrastructure availability, assure national
key point security levels, both physical and
logical, as well as achieve a lower total cost
ownership through standardisation and
inherent, modern facilities with remote
monitoring capabilities
• Wide area network upgrade and resilience
– Eskom has implemented a core network
backbone that straddles the country, based
on the modern MPLS architecture, installed
WAAS compression technology to improve
network performance, removed legacy
daisy chains, implemented a new local area
network (DC LAN) with redundancy in
the two main data centres, and migrated
1 327 servers from the old LAN to the new
DC LAN, upgraded network bandwidth
for 205 sites in preparation for B2B and
centralisation of its key systems
• Voice – IT has completed installing the back-
end infrastructure to migrate the wireless
network from old equipment to the modern
technology, and is now ready to roll out
wireless access points across the organisation.
In this financial year Eskom will also be rolling
out seamless virtual private networks that
will enable all Eskom employees to make
free voice over IP (VOIP) calls from mobile
to mobile, as well as mobile to office landline
phones, resulting in cost savings for Eskom
• Load balancers – Group IT has removed a
major single point of failure for all critical
systems by procuring backend infrastructure
for the load balancers that will further
improve performance of the end user and
South African consumer-facing systems
and further improve the end-user computing
experience
• Security programme – Eskom has initiated
a major Information Security programme
to ensure that it secures and protects
Eskom’s information assets. One of the
project streams is to achieve certification to
the international standard for information
security ISO 27001/2
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SustainabilityThe Sustainability division’s mandate is to
deliver effective and innovative solutions
and decision support to enable sustainable
business performance and greater stakeholder
confidence, which will contribute to the
transformation of Eskom and South Africa.
The division’s functions include ensuring a safe
workplace for staff, and conducting research
and testing to support cost-effective, climate-
friendly and innovative approaches to energy
provision, espousing the value of sustainable
development, while being responsive to
global pressures.
The division also facilitates the deployment and
upscaling of renewable-energy technologies in
Eskom as a way to protect the environment and
reduce Eskom’s carbon footprint.
Other responsibilities include implementing
the quality value chain and maintaining Eskom’s
international profile, relationships and interfaces.
Operating highlights• Launch of the zero harm campaign
throughout the business was well received
and reinforced by management
• Approval of Eskom’s climate change
adaptation strategy as well as supporting
government to further the outcomes of
COP 17 and the National Climate Change
Response policy
• Good progress with the placing of contracts
for the Sere wind farm and the appointment
of an owner’s engineer for the concentrating
solar power plant
• Progress made with the internal energy-
efficiency programme
• The commissioning of the photovoltaic
plant at Kendal and Lethabo power stations,
Megawatt Park parking rooftop and
concentrated photovoltaic at the entrance
to Megawatt Park. These projects will save
Eskom an estimated 2 845 tons of carbon
emissions per annum
• Development of partnerships,such as the
Integrated Energy Centre’s clean coal centre
• Participation in international platforms/
initiatives like the UN Global Compact
LEAD initiatives and the Rio+20 Sustainable
Energy for All
• Improved environmental compliance (reduced
number of legal contraventions)
• Recommendation for certification to
ISO 9001 for the whole of Eskom
• Establishment of the technical governance
process, with a specific focus on plant safety
as well as establishing the base for smart
metering
• Sighting of the critically endangered white-
winged fluff tail at Ingula
• Instituted the security recovery plan, with
specific reference to national key points
Operational challenges• Eskom’s environmental performance has
deteriorated within the last reporting year.
This can be largely attributed to the tightness
of the system and the inability to obtain an
outage to conduct maintenance, with specific
reference to manage particulate emissions
and water usage
• Delay in the implementation of the
underground coal gasification project due to
environmental compliance issues
• Vulture fatalities associated with distribution
infrastructure
• Quality issues at Medupi
Future focus areasThe impact (time frames and priorities) of the
recent price increase on these future focus
areas is still being investigated.
• Continue to focus on leadership in safety and
the safety boot camps, as well as placing a
particular emphasis on contractor safety
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• Continue to participate on international
and national climate change and sustainable
development platforms (eg Caring for Climate,
National Climate Change Committee, technical
working groups for the implementation of the
National Climate Change Response policy)
• Implement the adaptation strategy and
integrating this into Eskom’s business
• Finalise the Socioeconomic Development
policy and strategy for Eskom
• Finalise Eskom’s Green Financing strategy
and exploring alternative revenue sources
• Environmental recovery (water and air
quality) to ensure compliance as a minimum
standard
• Establish Eskom’s safety, hygiene,
environmental and security inspectorate,
which is aimed at proactive assurance of safety,
hygiene, environmental and security aspects
• Construct of Sere wind farm and Megawatt
Park rooftop photovoltaics
• Conclude the commercial process for
concentrated solar power
• Commence development of photovoltaic
installations at Eskom’s other power stations
and commercial buildings
• Initiate the Eskom Factor II report as a
follow-on to the first Eskom factor project
to consider more detailed impacts within
Eskom’s supply chain, with a specific focus
on key strategic and operational issues, such
as water
• Establish a portfolio of high-impact flagship
research projects that need to be implemented
(including smart grids)
• Continue the implementation of the total
quality value chain – ISO 9001, 14001 and
OHSAS 18001 (environmental, safety),
with a view to obtain certification to
ISO 9001, 14001, OHSAS 18001, other
applicable specialist ISO standards and the
implementation of Business Excellence
during the course of next year
• Implement lifecycle quality processes in the
project and capital expansion programme to
ensure product and service quality
• Implement security recovery throughout
the business
Environmental performanceImproving environmental performance remains
a focus area for Eskom. Advances continued
to be made in areas such as biodiversity,
environmental management systems, waste
management and skills development. However,
the constrained nature of the electricity system
has hampered Eskom’s ability to do critical
maintenance and rollout projects aimed at
improving particulate emissions and water
usage performance at power stations. This has
negatively affected 2012/13’s environmental
performance indicators, with emissions, water
and legal contravention indicators all above
desired targets.
Eskom’s strategic objectives regards
environmental management as listed in the
Eskom corporate plan are:
• Avoid harming the natural environment and
so minimise financial and legal liabilities
• Reduce the carbon footprint through efficient
energy production and by diversifying the
energy mix
• Reduce particulate and gaseous emissions to
minimise the impact on human health and
comply with regulated emission standards
• Reduce fresh-water usage by using mining
water and by eliminating liquid effluent
discharge to avoid damaging water resources
• Enhance waste management by reducing,
reusing and recycling of waste
• Comply with environmental legislation as a
minimum requirement in all activities
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• Minimise the impact of Eskom’s activities on
ecosystems and enhance ecosystem services
such as functioning wetlands, improved
biodiversity, avoiding erosion by responsible
land-management practices
PerformanceEnvironmental expenditureIn 2012/13, R1.7 billion was allocated to
environmental capital projects (2011/12:
R0.6 billion) and R1.3 billion to environmental
operating projects (2011/12: R0.9 billion).
Most of the capital expenditure was on air
quality-related projects and projects related
to the capacity expansion programme.
Operating expenditure was primarily on
the capacity expansion programme and
projects relating to air quality improvement,
water management and treatment, and the
rehabilitation of coalmines.
Bird diverters are strung on high-voltage power lines by helicopter
Eskom’s environmental indicatorsEskom’s environmental indicators are displayed in the table below.
Compact target
2012/13
Actual 2012/13
Actual 2011/12
Actual 2010/11
Relative particulate emissions (in kg/MWhSO) <0.30 0.35RA 0.31RA 0.33RA
Specific water usage (in l/kWhSO) <1.32 1.42RA 1.34RA 1.35RA
Carbon-dioxide emissions (relative)(kg/kWh)2 – 0.98 0.99 0.99
Carbon-dioxide emissions (in Mt) – 227.9RA 231.9RA 230.3RA
Nitrogen-oxide emissions (in kt)3 – 964.8RA 977.0RA 977.0RA
Sulphur-dioxide emissions (in kt)1 – 1 843RA 1 849RA 1 810RA
Nitrous-oxide emissions (in t) – 2 980 2 967 2 906
Environmental legal contraventions (number)1 – 47RA 50RA 63RA
1. Under certain conditions, contraventions of environmental legislation are classified in terms of the Eskom operational health dashboard index. These
include instances where censure was received from authorities, non-reporting to authorities as may be legally required, non-reporting in Eskom, a repeat
legal contravention, or when the contravention was not addressed adequately. Group or divisional executives can escalate any significant environmental legal
contravention to the operational health dashboard.
2. Factor figures are calculated based on total energy generated by Eskom (but excluding electricity used by pumped-storage scheme).
3. NOx reported, as NO
2 is calculated using station specific emission factors, which have been measured intermittently between 1982 and 2006, and tonnages of coal.
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Compliance – legal contraventionsThe number of legal contraventions has
decreased from 50RA in 2011/12 to 47RA in
2012/13. Of the contraventions, 20 were water
related (water leaks and spills, sewerage spills
and ash line leaks) and 15 were for exceeding
of particulate emission limits at power stations,
the remaining contraventions were related to
vegetation management, environmental EIA
non-compliance and oil spills.
Eskom was served with three pre-compliance
notices in terms of the National Environmental
Management Act (1998) during 2012/13.
The notices relate to inspections undertaken
in 2009 and 2010 at Lethabo, Camden and
Matimba power stations. Most of the issues
raised in the notices have been addressed.
Outstanding issues are progressing but are of a
more long-term nature, requiring authorisations
or modifications to plant.
Eskom aims to comply with all legal requirements
and has initiated several activities over the
past three years to address shortcomings.
These include internal peer reviews, training
and development and the implementation of
ISO 14001 certification. Some improvements
have been achieved.
WaterRefer to Generation at page 49 – 50 for
commentary on the deteriorating water usage
performance.
Eskom aims to reduce fresh-water usage and
eliminate liquid effluent discharge. This is
achieved through effective water-management
processes, water conservation and water-
demand practices. Eskom approved a water
management policy during the financial year.
The policy focuses on four key areas, namely:
Stakeholder Management; Corporate Water
Stewardship; Assurance and Compliance; and
Training and Development and work on these
key areas will continue over the coming years.
Eskom has established water-management
task teams to work with power stations to
address the reduction of water usage and
legal contraventions. Objectives of the water
management task team include compiling
comprehensive plans to address all aspects of
water management and water use performance.
The United Nations Global Compact’s CEO
Water Mandate is a unique public-private
initiative designed to help companies develop,
implement and disclose water-sustainability
policies and practices. As a signatory to the
compact, Eskom is committed to the CEO
Water Mandate principles and reports annually
on its progress.
Air qualityEskom aims to reduce particulate and gaseous
emissions to minimise its impact on human
health and comply with regulated emission
standards. There has been progress in
implementing the long-term air-quality strategy
during 2012/13.
All power stations are equipped with
emission-abatement technologies such as
electrostatic precipitators or fabric filter plants
to reduce particulate emissions from the flue
gas. Particulates and gaseous emissions are
monitored and reported on a regular basis.
All coal-fired power stations have fugitive
emission-management plans in place to prevent
dust dispersion from the ash-disposal sites, coal
stockyards and unpaved roads. The plan requires
stations to have dust-bucket monitoring at the
coal stockyard and ash-disposal sites to quantify
fugitive emissions. Dust-bucket monitoring has
been implemented at Lethabo, Camden and
Tutuka power stations, the remaining stations
will implement during the next financial year.
See Generation’s environmental performance
indicators for additional information on Eskom’s
power station emissions on page 49 – 50.
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Ambient air-quality monitoringMonitoring is currently undertaken at 15
ambient air-quality monitoring sites that
measure a range of pollutants including sulphur
dioxide, nitrogen dioxide, fine particulate
matter and ozone. Meteorological parameters
like wind direction, wind speed, wind velocity
and temperature are also monitored. Although
these sites measure pollutants from many
sources, they are strategically located close
to power stations and at ground level to pick
up the kind of pollutants most likely to come
from these power stations. Some monitors are
in residential areas and some in remote areas
(to measure regional air quality). Monitoring
equipment is calibrated against National
Meteorological Laboratory standards in a
laboratory accredited by the South African
National Accreditation System.
Ambient air quality is impacted by emissions
from a number of sources, including Eskom, and
the combined results from all these sources are
reflected in the concentrations measured by
the network.
Generally, there is compliance with ambient air
quality standards at the monitoring stations.
The annual ambient PM10 limit of 50μg/m3 was
exceeded at Kendal, Komati and Marapong, and
there was non-compliance with the daily PM10
limit at four sites. The recorded exceedances
could be attributed to many sources relative
to each station; increased construction activity,
proximity to power station, mining activity and
low level sources like domestic combustion. It
should be noted that power stations make only
a very minor to contribution to ambient PM10
levels because of the abatement equipment
installed at the power stations.
BiodiversityEskom aims to comply with environmental
legislation and is constantly striving to put in
place mitigation measures to ensure that its
activities do not negatively affect biodiversity.
Eskom has a number of complementary
strategic partnerships with wildlife organisations
in place. The long-standing Eskom Endangered
Wildlife Trust partnership focuses on managing
and monitoring wildlife interactions.
The Ingula Partnership (with conservation-
orientated non-governmental organisations
(NGO) BirdLife South Africa and Middelpunt
Wetlands Trust) has contributed towards
conserving a very important environmental
biome, so helping to protect a range of critically
endangered species.
The electrocution of Cape Griffon Vultures on
Distribution power lines in the Eastern Cape
Operating Unit was identified as a contributing
factor to the local extinction of the species.
The electrocutions are due to old networks
which were built in the late 1970s with bird-
unfriendly designs. The Operating Unit has
embarked on a project to retrofit the existing
designs with bird-friendly designs over the next
three years. More than 900 structures out of
a total of approximately 4 300 structures have
been completed.
Eskom have formally endorsed the ‘Best
practice guidelines for avian monitoring and
impact mitigation at proposed wind energy
development sites in southern Africa’, a guideline
aimed at assisting developers in the sustainable
development of renewable projects. As a
member of the Bird and Wind Energy Specialist
Group Eskom have committed to ensuring best
business practice by supporting a sustainable
development approach to renewable projects
in the SADC region.
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Eskom responded to a request for a partnership
in greening the Mpumalanga province, in which
the province identified areas for greening.
Through this proposal, a total of 5 270 trees,
half of which are edible and half indigenous, have
been planted by the Wildlife and Environment
Society of South Africa.
ISO 14001 environmental management system standard certificationIn 2012/13, the Generation division, Group
Capital construction management, the
telecommunications depar tment, Rotek
SOC Ltd, Roshcon SOC Ltd, Eskom Aviation
and the Sustainability Systems departments
obtained ISO 14001 certification. Progress
continues to be made towards achieving
ISO 14001 environmental management system
standard certification by March 2014.
Waste managementIn accordance with part 7 of the National
Environmental Management: Waste Act,
Eskom have commenced with the voluntary
implementation of Industrial Waste
Management Plans which focus on the efficient
recycling, reuse and recovery of all Eskom waste
streams. The Industry Waste Management
Plans will be completed for Generation first
before being consolidated across all Eskom
business Units.
Commercialisation of Ash: Eskom continues to
work with the industry and the South African
Coal Ash Association to pursue commercial
opportunities associated with the utilisation
of ash aimed at increasing the quantities of
ash which is diverted from landfill, this not
only reduces the environmental impact but
also provides opportunities for business
development.
Climate change and renewable energySouth Africa’s response to climate change
is guided by the National Climate Change
Response policy, which was approved by
Cabinet in November 2011. The policy is
founded on the principles of sustainable
growth and development of the country. Policy
process will also guide South Africa’s input to
the international negotiations in terms of what
the country can and cannot do with regards
to mitigation. This policy process has been
driven by an intergovernmental committee
led by the Department of Environmental
Affairs in partnership with all stakeholders,
including Eskom.
Eskom has been focusing on reviewing its
Climate Change strategy in line with the
government’s policy implementation process
and international discussions. Eskom aspires to
a more diverse energy mix, with the objective
of reducing relative emissions until 2025 and
subsequently reducing absolute emissions.
Eskom has also prioritised adaptation to the
impacts of climate change as this has major
implications for the security of supply.
Eskom has a comprehensive climate change
strategy based on six pillars:
Diversification of the generation mix to lower
carbon-emitting technologies
Energy efficiency measures to reduce demand
for electricity and improve the technical
efficiency of plant, thereby reducing greenhouse
gas and other emissions
Adaptation to the negative impacts of climate
change
Innovation through research, demonstration
and development
Investment through carbon market mechanisms
Progression through advocacy, partnerships
and collaboration
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Eskom continually models electricity options
that will balance the conflicting goals of
affordability, economic growth, social inclusion
and environmental protection in an optimal
manner. There is currently no single technology
option that will solve all of these challenges at
the same time, so Eskom is assessing all options,
including the trade-offs and the impacts thereof.
PartnershipsEskom has established an Eskom-NGO forum
with the intention of creating a platform for
dialogue between Eskom and members of
the environmental NGO community. In the
reporting year three engagements were held
and there was good progress on the sharing of
information, specifically on water-related issues.
However, due to the recent spying allegations
made against Eskom by members of the forum,
Eskom has postponed these activities until such
time that the investigation is concluded. These
allegations have unfortunately compromised
the relationship with certain members of the
forum. Eskom has committed to transparently
share specific outcomes of the investigation
report with NGOs concerned.
Renewable energy projectsRenewable energy plays an important role in
meeting Eskom’s diversification aspirations
and the renewable unit focuses on large
power-generation technologies, namely wind,
photovoltaic and concentrating solar power.
These will play an extremely important role
in improving relative (emissions intensity) and
reducing absolute emissions reduction.
Eskom has partnerships with a diverse set of
funding institutions that are contributing to its
two flagship renewable-energy projects, the
Sere wind farm and the Upington concentrating
solar power plant. These projects form part
of South Africa’s Renewable Energy Country
plan, which was developed in conjunction
with the Department of Public Enterprises,
the Department of Environmental Affairs, the
Department of Energy and the National Treasury.
Sere wind farmThe project development phase of the Sere
wind farm was successfully concluded in 2012/13
with the appointment of the engineering,
procurement and construction contractor for
the project’s main package. The 100MW wind
farm is Eskom’s first utility-scale renewable
energy project outside its hydro-generation
projects.
The project comprises 46 turbines to be
erected in the Matzikama district close to the
community of Koekenaap. The plant is scheduled
to be commissioned in December 2014 and will,
based on plant availability, save and estimated
230 000 tons of carbon emissions per annum.
Concentrating solar power demonstration plantSignificant progress was made towards
developing Eskom’s concentrating solar
thermal power plant in the Northern Cape,
near Upington, with commercial operation
envisaged for 2017. The project is expected
to save an estimated 450 000 tons of carbon
emissions per year.
Energy storage is a key component of the project
and it will provide for plant dispatch ability to
meet peak demand. An owner’s engineer has
been appointed for technical oversight, and a
process to conclude the procurement strategy
is underway.
Photovoltaic technologyIn 2012/13, Eskom installed photovoltaic
technology at two of its power stations, Kendal
and Lethabo, and at Megawatt Park head office
and is developing a photovoltaic programme
for the rest of its assets.
It is envisaged that an estimated 150MW
of capacity will be installed on the rooftops
of Eskom’s power stations, offices and
transmission substations for Eskom’s
internal use.
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The potential for solar boosting (the use of
solar power as an additional heating medium) is
being investigated at Eskom’s coal-fired power
stations as a supplement to coal.
BiomassBiomass is a renewable-energy source derived
from biological material of living or recently
living organisms. The plant-based material is
used directly or converted into other energy
products such as torrefied (moisture removed)
pellets or biofuel.
As par t of Eskom’s biomass research
programme, a System Johannsen Gasifier was
constructed and installed at a rural sawmill in
Melalani in the Eastern Cape in collaboration
with the University of Fort Hare. It uses wood
and other biomass as a fuel source to produce
a virtually tar-free gas, which powers an
electricity generator.
Eskom is also evaluating other biomass options,
such as the use of municipal solid waste as a
feedstock for power generation. Municipal solid
waste not only represents a continuous source
of energy that can be harnessed for generation,
but its use will also significantly decrease the
burden on landfill sites and processing facilities.
To reduce greenhouse-gas emissions from its
coal-fired power stations, Eskom is exploring
co-firing of biomass fuel. Should the business
case prove feasible, Eskom aims to co-fire
biomass to replace 10% of coal usage by
weight in coal-fired power stations by 2026.
To achieve this goal, Eskom is looking to
source suitable biomass within South Africa
and sub-Saharan Africa.
The project is divided into phases:
• Co-firing technology selection – Test
burns will be conducted at Arnot and
Kriel power stations to determine the
most suitable technology and biomass fuel,
selecting between the separate milling and
co-milling of biomass with coal, and between
co-firing white biomass pellets and torrefied
biomass pellets (also known as black pellets).
An order has been placed for 2 000 tons
of torrefied biomass pellets
• Biomass fuel sourcing – sourcing biomass
fuel for sustainable application. A contract
has been placed with the Council for
Scientific and Industrial Research to conduct
a biomass fuel supply study. The study
addresses the availability of biomass fuel in
South Africa and neighbouring countries,
including transport, beneficiation, quality,
environmental, market conditions, fuel cost
and legal/regulatory issues
Ocean energyA 2002 Eskom study concluded that South
Africa had a sufficient ocean resource to
explore the option of ocean energy. A techno-
economic study and technology evaluation
are being performed to assess ocean energy
conversion technologies and determine which
technology should be researched further for
possible application in South Africa.
Occupational hygiene and safetyEskom conducts its business with an
underpinning safety principle that no operating
condition, or urgency of service, justifies
exposing anyone to negative risks arising out
of Eskom’s business or cause them injury or
damage to the environment.
Safety improvement is a key concern for the
organisation, particularly in light of the number
of recent fatalities and serious injuries of both
employees and contractors. To this end, a
number of safety improvement initiatives are
being implemented, with a view to decrease the
number of fatalities and injuries for contractors
and employees to zero.
Zero harm was introduced as an Eskom
value to further entrench and emphasise
the importance of the safety of employees,
contractors and members of the public.
Eskom’s leadership genuinely believes that all
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incidents are preventable, and has ensured
that policies, procedures, processes, tools, and
behavioural expectations are in place to assist
their employees and contractors to achieve the
zero harm goal. Eskom’s Chief Executive sets
the direction and empowers all employees to
do what is necessary to achieve this goal.
Operating highlights• The Eskom Occupational Health and Safety
(OHS) strategy was reviewed during the year, with the development of key strategic initiatives for implementation within the organisation. These strategic elements were developed after assessing the root causes of incidents. The primary elements identified include:
– Leadership: Visible, committed and effective leadership at all levels driving, implementing, monitoring and continuously reviewing OHS management and performance
– Contractor safety: To ensure that contractors demonstrate safety excellence and care for their employees as incorporated in the value chain for suppliers
– Supervisory capacity: Hands-on site supervision and all supervisory training to include a module on OHS management
– Training and facilities: Implement simulator and practical training including training sites developed closer to business units. Training requirements will be informed by findings from incidents
– Human behaviour: Human behaviour to be a key consideration in managing OHS, monitored through culture and perception surveys, ensuring understanding of “right to refuse”, monitoring health-related issues, and embedding the zero harm philosophy
• The Health and Safety Agreement between
Eskom and the trade unions was concluded
providing for the health and safety of persons
at work
• The Blue Flag campaign, which is designed to take participating suppliers and operations to the achievement of world-class performance in safety, health and environment was rolled out during the year
• Zero harm campaigns were launched at many sites with a total of 7 500 employees attending 17 launches and 11 702 attending 64 site-safety days. This initiative supported the launch of the zero harm value and the entrenchment of this value amongst employees and contractors
• In a drive to improve the safety management systems the following business units were OHSAS 18001 certified: Matimba power station, Hendrina power station, Komati power station, the Peaking power station, Rotek, Roshcon, Eskom Telecommunications and Eskom Aviation
• In support of the global campaign “Decade of Action for Road Safety 2011-2020”, vehicle safety campaigns were rolled out across the organisation during April and December 2012 and March 2013. These campaigns focused on driver fatigue, vehicle fitness, tyre safety, knowledge of the rules of the road, roadworthiness of vehicles that transport employees, passenger safety, road conditions, defensive driving and driver alertness
• Eskom contractor OHS improvement plan provides Eskom staff with a practical, consistent system for overseeing contractors’ work and integrates safety requirements into contractor management. It also ensures compliance with legal and Eskom’s internal procedural requirements
• Eskom’s vendor management system in 2012/13 conducted safety, health and environment evaluations on new suppliers. Of these 576 suppliers were approved and 638 rejected
• Distribution division’s safety “Boot Camp” initiative has made considerable progress in rolling out the prescribed solutions that will assist in improving the division’s safety performance
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• Several safety interventions to educate the
public about the dangers of the unsafe use
of electricity were organised across the
country. These included 7 206 school visits,
5 022 community campaigns, 375 farmer
forums and 4 453 other interventions
(including house visits, radio interviews,
community leader interactions and illegal
connections removals). Eskom’s public safety
message has reached about 28.3 million
listeners via nine regional and 26 community
radio stations
• Eskom hosted Electricity Safety Week in
August 2012, during which five identified
safety hot-spots across the country were
visited. The interventions included school
and community visits, with industrial theatre
performances, live outside broadcasts and
promotional material. Eskom reached about
3 585 school learners and 1 730 community
members through these five visits
Operating challenges• Despite significant efforts, some of which
are mentioned above, occupational health
and safety performance, although improving,
remains poor. Accidents still occur that
not only affect our employees, but also
contractors and members of the public
• Not all employees and contractors have
yet embedded the principles of zero harm
in the way they work. This results in people
not following work procedures and method
statements, endangering their own lives or
those of their colleagues
• Lessons learnt, incident feedback reports
and case studies are not always shared
and implemented within the organisation
and among contractors, resulting in repeat
incidents. An additional challenge is the
lack of competence, among Eskom and
contractor supervisory staff, to identify risk
exposure or enforce compliance to safety
procedures. This is being addressed through
a robust training programme for supervisors
Future focus areasIn addition to the divisional specific improvement
initiatives, Eskom will:
• Continue the programme to entrench the
zero harm value
• Enhance the safety management system
through the implementation of OHSAS 18001
• Uplift the training programmes in terms of
electrical and vehicle safety, competence
of supervisors and capacity development
of contractors through the Supplier
Development and Localisation initiatives
• Strengthen the behaviour-based safety
programme
Safety performanceEskom’s safety performance remains poor:
in 2012/13 there were 3RA Eskom employee
fatalities (2011/12: 13RA) and 16RA contractor
employee fatalities (2011/12: 11RA).
The Eskom employee fatalities were due to
electrical contacts. Of the 16RA contractor
employees who lost their lives, four fatalities
were due to motor vehicle accidents, two due
to electrical contact, two were security guards
who died from asphyxiation from a heating
fire, two were due to assault, four were due to
falls, one was struck by an object and another
was caught between objects.
Vehicle accidents and electrical contacts
remain the major causes of public fatalities.
The 29 reported public fatalities indicate a
positive trend compared to the 34 fatalities
of 2011/12. Eskom continues to run its intense
public-safety campaign.
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Safety performance, 2009/10 to 2012/13
Unit measureActual
2012/13Actual
2011/12Actual
2010/11
Employee safety
Total fatalities number 3RA 13RA 7RA
Electrical contact fatalities number 3 4 3
Vehicle accident fatalities number – 4 –
Other fatalities4 number – 5 4
Lost-time incident rate, including occupational diseases1 index 0.39RA 0.41RA 0.47RA
Contractor safety
Total contractor fatalities number 16RA 11RA,2 18RA
Electrical contact fatalities number 2 1 1
Vehicle accident fatalities number 4 5 10
Other fatalities4 number 10 52 7
Public safety
Total public fatalities number 29 343 43
Electrical contact fatalities number 23 283 22
Fatalities from other causes number 6 6 21
1. The progressive lost-time incident rate is a proportional representation of the occurrence of lost-time injuries over 12 months per 200 000 working hours.
2. A fatality recorded in 2011/12 thought to have been from bee stings, was found by a pathologist to have been from natural causes. The fatality has been
re-classified as non-work related.
3. There was an electrical contact in February that was reported late.
4. Refer to page 56 of the Integrated Report for the breakdown of other fatalities.
Eskom achieved an actual lost-time incident
rate performance of 0.39RA per 200 000 person-
hours worked for 2013. Only the Distribution
and Transmission divisions had lost-time
incident rates greater than the Eskom rate.
In risk-specific terms, the leading causes of
injuries were motor vehicle accidents, electrical
contacts, falls, and being caught between and
struck by objects.
In memoriamThoughts and prayers go to the families,
friends and colleagues of the employees and
contractors who passed away in the line of duty
this past year:
Eskom employees Contractor employees
Elvis Maseko
Othusitse Jacob Mmitsi
Malungisa Patrick Shongwe
Akeem Adegbite
Derick Thulani Dlungwane
Lebohang Malangabi
Joseph Mashaba
Nditsheni Mashau
Sandile Matsebula
Malibongwe Mhambi
Khayelihle Mkhwanazi
Andries Saziso Ntobela
Olawale Olaniyan
Sydney Happy Segonyane
Albert Sikhozile Soyekwa
Refus Charles Tlaka
Sipho Gift Tseisi
Bunruang Yorkun
Bonginkosi Andries Zitha
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Security management in EskomThe Group Security department is required
to provide Exco and the board with assurance
that Eskom Holdings SOC’s security risks are
optimally managed in a changing business and
risk environment by developing and maintaining
effective security strategies, policies and
frameworks that support the organisation by
providing advice and guidance.
The primary goal of Security is to effectively
and economically safeguard Eskom’s business
by protecting its people, assets, information,
processes, products and reputation by
preventing harm (unauthorised denial, disclosure,
modification or destruction) due to irregular
or illegal behaviour, either of employees or the
general public.
Operating highlights• Regulatory compliance
• Integration with the law enforcement
agencies and intelligence community
• Successfully supported the AFCON Cup of
Nations and the BRICS Summit
• Effectively reduced conductor theft crime
and energy losses in collaboration with
Business Against Crime
• The Security Recovery programme was
established to deal with the changing security
environment and new threats
Future focus areas• Continue to provide the necessary security
capability and capacity in alignment with
Eskom’s strategic business objectives, as well
as support Eskom’s drive to be a world-class
electricity utility
• The Security Recovery programme was
established to enhance security while
entrenching a security culture that will drive
zero harm and a safer environment, creating
in the long-term a proactive security culture
within the organisation
Quality managementEskom has undertaken to develop and
implement management systems that
are ISO 9001:2008 compliant to achieve
sustainable performance improvement with
zero deviation from requirements. The first
phase of this performance improvement
journey was the establishment of the ISO 9001
Quality Management Systems as the foundation
for good business management. This has paved
the way for the second phase, to position the
organisation for sustained success through
the implementation of business excellence to
become a high-performance organisation and
top global utility.
Operating highlights• The Finance, Primary Energy and all but two
of the Generation division power stations
received certifications for ISO 9001:2008.
The Quality Management department within
the Sustainability division has also been
certified. All the other divisions and Eskom
have been recommended for ISO 9001
Certification. This milestone has been
achieved in record time
• ISO 9001 awareness training target
exceeded. A total of 16 738 staff members
completed awareness training
Future focus areas
• Maintain and continually improve the
consolidated ISO 9001 certified, e-enabled
Quality Management System and any
other certifiable ISO standards to ensure
sustainable performance
• Entrenchment of the ISO 9001 principles
into the business processes, operations and
the quality culture
• Implement a Business Excellence programme
to support the organisation’s objective of
becoming a high-performance utility among
the “top tier global power utilities”
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133
• Roll out and standardise the life-cycle
quality processes in the project and
capital expansion programme to ensure
and improve product and service quality.
This will ensure Eskom’s active involvement
in the quality of its projects through effective
control of suppliers in terms of quality
assurance and control on all project sites and
manufacturing facilities globally
Research and testingEskom’s Research, Testing and Development
department has focused on enhancing its
strengths through the establishment and
promotion of Centres of Expertise in those
areas of research that support Eskom’s
priorities. This has ensured that it maintains a
focus on the organisation’s operational needs
and the strategic challenges it is currently
facing. Eskom aims to become a highly
innovative company recognised for its research
and innovation. Focusing the research and
development on product delivery is designed
to achieve this aim.
Financial performanceThe research investment of R195.3 million was
4% higher than the previous year. A breakdown
of this expenditure is shown below.
Research investment areas
The figure above indicates that research funding
follows a similar pattern to the previous year.
An increase in memberships was implemented
to support and increase research to support
the operational needs of the business and
to enhance the focus on environmental
performance of plant. The research into
primary energy was increased to support the
need to optimise use.
Expenditure per research focus area (R million)
Power system technologies
Renewables and the environment
Research memberships
Energy policy, economics and statistics
Primary energy
Improving generation performance
Energy efficiency
Innovation and future technologies
Asset management
Health, safety and human factors
R33.01
R30.18
R40.48
R14.56
R13.10
R3.61R12.26
R16.57
R18.35
R13.21
Eskom’s extensive research portfolio varies from laboratory work to building of massive demonstration plants
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
134
Strategic partnershipsEskom has maintained memberships,
collaboration and partnerships with national
and international research organisations to
ensure that it remains up-to-date with the latest
global technologies and trends. The continuing
international collaboration includes organisations
such as the Electric Power Research Institute,
Doble, the International Energy Agency Clean
Coal Centre and SolarPACES, and The Welding
Institute. A new membership with the Source
Testing Association was identified as being
important in supplementing environmental
research. The agreement with the European
Commission FP7 project “OCTAVIUS”,
focused on carbon capture and storage, has
made good progress and resulted in a meeting
and conference in South Africa. Collaboration
with national universities has received special
attention, with a review of their interest and
capabilities followed by the placement of new
agreements. A bilateral agreement has been set
up with the Council for Scientific and Industrial
Research to carry out collaborative research in
areas of mutual interest and first projects in the
programme have been agreed.
TestingThe application of the specialised skills and
facilities developed primarily through the
research programme is carried out through
a testing programme and the provision of
specialised services. This is seen as an effective
way of delivering a number of the research
outputs to the organisation while ensuring
optimal use of the developed skills. Ongoing
research is often used to continuously
enhance and update the services while
further developing the skills. Specialist services
are provided in oil analysis (lubricating and
insulating), welding, non-destructive testing,
coal quality, material fatigue and corrosion.
Air-quality monitoring is centralised through
these services and reported nationally. Power
station performance testing for efficiency
improvements has been established.
Demonstration and pilot projectsThe capital expenditure for the pilot and
demonstration projects is R150.4 million,
the majority of which was invested in the
underground coal gasification pilot project.
The concentrating solar power project no longer
forms part of the pilot portfolio and has been
moved to the Renewables department. The pilot
and demonstration programme provides for the
production of scale assets that are used to assess
technologies identified through the research
process for their commercial potential for Eskom.
The primary aim is to develop a business case for
the commercial use of the applicable technology
and to ensure that key technologies that can
improve performance and fundamentally change
Eskom’s current and future technology path are
effectively appraised and the risks understood.
Eskom is currently engaged in the following
demonstration and pilot projects:
High-voltage direct currentThe purchase of a 1 000 volt high-voltage direct
current generator has been approved. This will
allow Eskom to test high-voltage, direct current
line designs at altitude and enable future
network expansion using this technology.
Municipal solid waste to energyWork is progressing with local municipalities to
bring biogas online and convert waste to energy
through thermal conversion in the short term.
Refer to the biomass project in the Climate
Change and Renewables section (page 128).
IP/MPLS telecommunicationsThis new technology is being researched to
evaluate its suitability for all systems, especially
operating security and reliability.
Low-loss distribution transformersResearch into innovative transformer core
material and construction techniques that
minimise losses and help Eskom achieve internal
energy-efficiency targets.
Strategic functions continued
135
Plant monitorAn integrated system that allows for the
comprehensive monitoring, storage and analysis
of equipment operating parameters and
conditions.
Friction stir taper stud welding platformA tool used for extracting metallurgical samples
from materials used in pressurised steam-
bearing structures and then plugging the holes.
The samples are then analysed.
Underground coal gasificationEskom’s research into underground coal
gasification technology has successfully proven
that the technology works under very challenging
geological conditions, and the research objective
has therefore shifted to proving the viability of
producing electricity with this technology.
As a first step to achieving this objective, Eskom
completed a detailed design study for a 100-
140MW open-cycle gas turbine demonstration
plant. The study concluded that while the
technology is technically viable, it has limitations
due to the specific geological conditions at the
chosen site.
Further research is therefore being initiated to
improve and prove the quality of underground
coal gasification gas at the site.
Technical governanceA technical governance framework has
been established to manage governance and
compliance related to the integrity and risks
of technical work undertaken throughout the
asset lifecycle. This includes the establishment
of a Technical Governance committee, technical
governance codes and Technical Steering
committees, which are required to ensure the
effective and efficient management of technical
work throughout Eskom.
Office of the chief executiveDelivery UnitThe Delivery Unit coordinates and drives
Eskom’s performance-management programmes
by tracking, monitoring and reporting on the
implementation of the entire portfolio of
strategic transformation initiatives. The initiatives
can broadly be defined with these three
objectives:
• Value-creating: strategic or enterprise projects
• Operating: projects that enable Eskom to
become more efficient and effective
• Compliance: “must-do” projects required
to maintain regulatory compliance
Performance of the 48 strategic initiatives is
measured against the following focus areas:
• Movement and progress of the portfolio per
the standard Eskom project lifecycle model.
Currently 25% of strategic initiatives are in
the planning phase, 54% are in the execution
phase, and 21% in finalisation phase. Some
benefits have been realised but effective
identification and monitoring of these benefits
will be conducted in the next stage
• Financial management, where declared savings
are allocated to strategic initiatives. Allocation
of funding for initiatives remains problematic,
hampering the execution of initiatives
• Benefits management framework. No real
benefits tracking has been initiated as the
framework is still in its proof-of-concept
phase. The Back2Basics SAP Release 2
programme has been identified as a pilot for
this framework
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
136
The following top six strategic initiatives
received specific focus:
• The “keep the lights on” imperative
• Back2Basics
• Leadership
• Distribution operating excellence
• Generation operating excellence
• Customer centricity
Operating highlights“Keep the lights on” programmeIncreased expenditure on the power buyback
initiative and making more use of the open-
cycle gas turbine have created a small margin
for maintenance. However, there is still much to
be done and the system remains constrained.
Refer to Generation and Transmission for more
details of this initiative.
Back2Basics programmeThis is a coordinating programme for initiatives
aimed at the standardisation, simplification and
optimisation of processes and systems in support
of Eskom’s vision of being in the Top 5 global
utilities. Overall the programme is progressing
well; however, some delays are being experienced
with the execution release approval for the
Service Tools programme release 2. There is
confidence that the Back2Basics initiatives will
meet these objectives:
• Standardise work processes to eliminate
waste
• Simplify supporting and enabling enterprise-
wide software systems architecture
• Build competencies in operating, maintenance
and outages
• Establish a platform and culture for continuous
improvement
• Optimise capital and human productivity
Leadership programmeImplementation of the leadership strategy
is on track. The Eskom Leadership Institute
has completed the full Experiential Learning
Academy initiative for the organisation’s
top 100 leaders. It has also completed four
business-driven action learning “waves”,
focusing on developing leadership capacity
and technical solutions to support Generation
operating excellence. Training and development
programmes were redesigned for supervisors,
middle management and senior managers.
These are now in the implementation phase.
To date 1 500 supervisors have attended the
programme, 302 middle managers and 276
senior managers. All three programmes run
over the 2012/13 financial year and are to be
completed only in 2013/14.
Future focus will be on developing an integrated
leadership scorecard to measure the impact
of the leadership programmes and other
interventions.
Distribution Operating Excellence programmeRefer to the Distribution division for details
of the programme (page 59).
Generation Operating Excellence programmeRefer to the Generation division for details
of the programme (page 45).
Customer Centricity programmeThe Customer Centricity programme is
required to ensure that the Group Customer
Services division’s mandate of putting the
customer at the centre of the business is
achieved and guides Eskom towards the overall
objective of achieving fully satisfied and serviced
customers who consistently rate Eskom in
the top quartile while promoting Eskom as a
company. The entire programme is on track
and progressing well, with four initiatives having
moved to the execution phase and three
initiatives completed.
Strategic functions continued
137
Operating challenges• Re-engineering the business to adapt to the
limits imposed by the 8% annual average
tariff increase that the NERSA granted for
the next five years
• All projects, including strategic initiatives,
must be loaded on the SAP system to enable
proper management, reporting and tracking
of costs. The transition is moving slower
than expected, primarily due to the system
training of project managers and reporting
system developments that affect the
robustness and accuracy of project reporting
Future focus areas• Implement the benefits management
framework for the strategic initiatives. This
will include reviewing benefits claimed
initially, establishing performance baselines
and monitoring performance going forward
• Continue the transition to SAP project and
portfolio management. This will automate
the tracking and monitoring of the strategic
initiatives’ portfolio and financial performance,
and improve data integrity
• Roll out SAP release two and the Back2Basics
programme in Engineering, Outages,
Maintenance, Operations and Projects
departments
• Continue rolling out the operating excellence
programmes for Distribution and Generation,
as well as the customer-centricity and
leadership programmes
• The entire portfolio of strategic initiatives
managed by the Office of the Chief Executive
is currently under review to ensure effective
alignment with the new Eskom key focus areas
Live line maintenance is a key component of keeping the lights on every day
Leadership overviewSubsidiary companies 7
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
140
Subsidiary companies
Eskom Holdings SOC Limited has the following
direct subsidiaries:
• Eskom Enterprises SOC Limited
• Escap SOC Limited
• Eskom Finance Company SOC Limited
• Eskom Development Foundation NPC
Although not a subsidiary, a summary of the
Eskom Pension and Provident Fund is included.
Eskom Enterprises SOC Limited GroupEskom Enterprises provides lifecycle support,
plant maintenance, network protection and
support for the capital expansion programme
for all Eskom Holdings divisions. This is done
primarily through Eskom Enterprises’ operating
divisions and its two main subsidiaries,
Rotek Industries SOC Limited and Roshcon
SOC Limited.
Operating highlights• Good safety performance in Eskom
Enterprises, with the Telecommunications
division achieving more than two million
incident-free hours
• Implemented a new enterprising resource
planning system in Rotek and consolidated
and implemented a new payroll system
for Rotek and Roshcon to enable better
alignment with Eskom and facilitate improved
reporting
• Improved alignment ensuring that the
subsidiaries support Eskom’s main operating
businesses and its strategic intent
• Continued to support Eskom divisions
aligned to the mandate
Operating challenges• Poor safety performance in Rotek and
Roshcon
• Managing a volatile outage programme and
ensuring more optimal utilisation of assets
and resources
Future focus areas• Safety improvement initiatives in Rotek and
Roshcon
• Reposition Eskom Enterprises’ divisional assets
into Eskom Holdings (awaiting authorisation
per the Public Finance Management Act 1999)
• Integrate Rotek Industries and Roshcon
into a single company producing high-quality
products and focused on meeting Eskom’s
needs cost effectively (awaiting authorisation
per the Public Finance Management Act 1999)
• The group will continue to embed the
Back2Basics programme as part of
the continuous improvement drive
• Manage the extended interim operating and
maintenance contract for the Eskom Energie
Manantali concession while the 10-year
agreement for the continued investment is
being finalised
• Restructure South Dunes Coal Terminal and
Golang to simplify the group structure
• Finalise the long-term strategy for investments
in TAP (Pty) Limited and Eskom Uganda
Limited to align with Eskom’s Africa strategy
PerformanceThere were varying degrees of performance by
each of the operating entities. Eskom Enterprises
has performed well in terms of operating, safety
and technical performance. While Rotek and
Roshcon’s safety performance has declined in
this financial year, the technical performance
was also not in all cases aligned to the targets.
The Rotek profit was significantly higher than
target mainly due to the high workloads to meet
the outage demand. The operating concessions
have been fairly stable and remain profitable for
the period under review, bearing in mind that
these entities have a December year end.
141
Due to the nature and seasonality of the work
being done in Rotek Industries and Roshcon
there has been a need to utilise labour-broking
employees. Rotek Industries and Roshcon
have reviewed the current labour staffing
practice and are going through a governance
process to start a process of creating internal
capacity and reduce reliance on externally
sourced personnel over the next few years.
This strategy is intended to be implemented
from the 2014/15 financial year.
Eskom Enterprises SOC Limited shareholder compact
Measure UnitTarget
2012/13
Target achievedYes/No
Actual2012/13
Actual 2011/12
Safety
Fatalities Number Nil Yes Nil Nil
Fatalities – contractors Number Nil Yes Nil Nil
Lost-time incident rate – employees Rate 0.2 Yes Nil 0.17
Lost-time incident rate – contractors Rate Nil Yes Nil Nil
Technical
Eskom Telecommunications backbone
network availability
% 99.7 Yes 99.8 99.8
Use of rotary wing fleet hours 3 000 Yes 4 442 4 709
B-BBEE accreditation Certificate Maintain Yes Maintained Maintained
Financial
Operating income R million 53 Yes 197 91
EBITDA R million 119 Yes 282 108
Net profit before tax R million 119 Yes 264 163
Debtors’ days
(12 month moving average)
Days 40 No 78 79
Debtors outstanding > 90 days R million Nil No 54 50
Human resources
Racial equity % 68.00 No 50.58 67.13
Gender equity % 25.00 No 15.12 24.06
Eskom Enterprises has separate shareholder
compacts with its main operating subsidiaries.
Eskom Enterprises has a compact with Eskom
Holdings. Eskom employees are employees
seconded from Eskom to manage the assets
of Eskom Enterprises. The racial and gender
targets were before the restructuring and not
changed accordingly when all support functions
were centralised. Debtors’ days is being
proactively managed to ensure compliance to
target going forward.
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
142
SafetyCauses of employee lost time injuries (including fatalities)
For detailed information about Eskom’s overall safety strategy and initiative please refer to page 128.
Subsidiary companies continued
Eskom Enterprises subsidiariesEskom Enterprises has the following additional
subsidiaries:
• Eskom Uganda Limited
• Eskom Energie Manantali s.a.
• Pebble Bed Modular Reactor SOC Limited
• South Dunes Coal Terminal Company
SOC Limited
• Golang Coal SOC Limited
• Technology Services International SOC
Limited – dormant (Eskom has applied
for approval as per the Public Finance
Management Act (1999) to de-register this
subsidiary)
• Rosherville Properties SOC Limited –
dormant
Performance summaries of the main subsidiaries
are set out below.
Eskom Uganda LimitedEskom Uganda is an operations and maintenance
concession with an electricity utility in Uganda.
The concession tenure spans over 20 years and
Eskom Uganda is currently in the 10th year of
the concession.
Financial and safety performance has been good,
while risk and environmental management was
fair. Challenges requiring management attention
are: asset management, operational excellence,
stakeholder and reputational management, as
well as people and talent management. Though
the plant is old, this is being managed by plant
lifecycle management and equipment upgrades.
Eskom Enterprises SOC Limited: Causes of employee lost time incidents (including fatalities)
15
12
9
6
3
0Lost
tim
e in
cide
nts
(incl
udin
g fa
talit
ies)
30 lost time incidents in 2011/12
15
12
9
6
3
0Lost
tim
e in
cide
nts
(incl
udin
g fa
talit
ies)
58 lost time incidents in 2012/13
Human/operating error Industrial/political unrest Motor vehicle accident Occupational disease
Fall on same level (slip, fall and trip over)Ergonomics, handling (lifting, pushing, pulling) Fall from elevation to lower level
Electrical contact/flashContact with fumesCaught by/between/underBurn
143
Eskom Energie Manantali s.aEskom Energie Manantali s.a (EEM) is an
operating and maintenance concession with
SOGEM, an energy-management company
based in Mali, to operate and maintain SOGEM’s
electricity utility, which supplies energy to Mali,
Senegal and Mauritania.
EEM and SOGEM signed a mutual discharge
to bring to an end the initial operating and
maintenance contract. An extension of
the interim contract was approved until
30 June 2013, limited to operating and routine
maintenance. The interim contract has
addressed the exposure to onerous provisions
of the initial contract. The progress on
negotiating the details of the new concession
has slowed down but the teams continue to
work toward finalising a new 10-year contract.
The political instability and unrest in Mali
remains a concern.
Pebble Bed Modular Reactor SOC LimitedThe Pebble Bed company remains in care and
maintenance within the Eskom Enterprises
Group until direction on the future of the
company is given by government.
South Dune Coal Terminal SOC Limited and Golang SOC LimitedDue to its investments in these two companies,
Eskom is entitled to export three million tons
of coal through the Richards Bay Coal Terminal.
These export rights are being leased by Eskom
to other exporters, while Eskom determines
the long-term strategy for these investments.
Escap SOC LimitedEscap SOC Limited (Escap) is a captive short-
term insurance company, meaning it can only
insure risks of its parent company, Eskom, and
its subsidiaries. Established in 1993, this fully
owned Eskom subsidiary is licensed to offer
short-term insurance products. It provides
specialised insurance directly for all Eskom
Group’s insurable risks except for nuclear and
aviation liability. It does so by retaining risk
and transferring catastrophic risk to external
insurance, mutual or reinsurance markets.
Operating highlights• Escap’s net recognised assets exceed its risk-
based solvency capital requirements in terms
of solvency assessment and management
interim measures by R1 379 million (shareholder
compact target: R323 million)
• Net operating expenses as a percentage of
net earned premiums are 5.6% (shareholder
compact target: <10%)
• Money market investment performance is
5.8% measured in comparison to the short-
term fixed-interest composite index at 5.4%
• Return on equity is 7.3% (shareholder
compact target: greater than Eskom’s real
weighted average cost of capital, which is
currently 6.4%)
Operating challenges• Net claim expenses as a percentage of net
earned premiums are 100.1% (shareholder
compact target: <90%). This results from
increasing losses, predominantly in respect
of the Generation fleet that is being
worked extremely hard in order to keep the
lights on
• Listed share investment performance is 4.5%
measured in comparison to the shareholder
weighted index of the Johannesburg Stock
Exchange at 18.1%
Future focus areasEscap would like to see itself as a benchmark for
all captive insurance companies in the country,
the region and internationally. Therefore, it has
put together building blocks that will propel it
to achieve this goal:
• The first building block is meeting,
understanding and leveraging the implications
of the compliance requirements of Solvency
Assessment and Management (SAM), known
as Solvency 11 in the European context.
Escap is not treating this risk-based insurance
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
144
management regime as a tickbox exercise
but as an indepth overhaul of its processes,
procedures, systems and resources to ensure
that they are world class
• A world-class entity should be involved
in landscaping the regulatory framework
within which it is to operate. Therefore,
the second building block for Escap is
consistent participation in Quantitative
Impact Studies (QIS) and pioneering captive
insurer perspectives and interests. For South
Africa to conclude SAM legislation in January
2016 as envisaged, more of these studies
need to be carried out to ensure the new
regime meets the objectives of industry
transformation
• The third building block will involve
enhancing and improving insurance process
control manuals. Escap plans to have these
manuals reviewed by independent parties
to ensure excellent, effective and efficient
processes are implemented. Escap’s internal
control processes will need to be extended
and new processes developed and improved
• The fourth building block was insurance-
specific ISO 18001 certification. Escap
attained ISO 9001 certification in
October 2012
• The fifth building block is the compliance
universe for Escap as an insurance company.
An in-depth analysis of regulation and
legislation that Escap needs to comply with
is underway
• The sixth building block involves optimal
capital utilisation. Following analysis of
detailed stress testing models, Escap is
looking to utilise its capital to best effect
going forward for the benefit of Eskom
Subsidiary companies continued
Shareholder compact with Eskom
Key performance areasTarget
2012/13Target
achievedActual
2012/13Actual
2011/12
Equity portfolio return (1 year) > shareholder weighted
index (SWIX) (%) > 18.1 No 4.5 2.4
Money market portfolio return (1 year), > short-term
fixed-interest composite index (STEFI)(%) > 5.4 Yes 5.8 5.8
Expense ratio (%) < 10.0 Yes 5.6 6.5
Incurred loss/claim ratio (%) < 90.0 No 100.1 89.0
Growth assets > Solvency capital requirements (Rm) 323.3 Yes 1 379.6 1 193.0
Return on equity > Eskom’s weighted average cost
of capital (%) > 6.4 Yes 7.3 11.0
Eskom Finance Company SOC Limited GroupEskom established the Eskom Finance Company
(EFC) in 1990 primarily to give its employees
access to home-loan finance, while optimising
home-ownership costs for both Eskom and its
employees. The company is mandated to:
• Finance employees’ home loans at
competitive rates
• Educate its employees on responsible home
ownership and financing
• Administer interest rate and rental subsidies
on behalf of Eskom
• Assist Eskom in developing and implementing
its housing policy
• Provide ancillary products to satisfy Eskom
employee needs
Operating highlights• Improved operational efficiency resulting
in the cost-to-income ratio of 32.2%
• Successful implementation and rollout of
the collection’s module on the company’s
145
Phoenix banking system. This has improved
the collection of delinquent loans
Operating challenges• Averting early amortisation of the Nqaba
securitisation structure due to the recent
Fitch downgrading of Eskom’s credit rating
from AAA to AA+
• Controlling reputational and financial risks
in light of the liquidity challenges
Future focus areas• Ongoing investigation into the optimal
vehicle for home loan financing for Eskom
employees
• Closely monitor operations and maintain
high quality and integrity of the company
assets during this time of uncertainty
Shareholder compact with Eskom
Key performance areasTarget
2012/13
Target achievedYes/No
Actual2012/13
Actual 2011/12
Maximise shareholder value:
Optimise home ownership cost to Eskom and its
employees in the form of economic value added R181.6 million Yes R199.4 million R166.2 million
Achieve company operational efficiency:
Cost-to-income ratio 35.4% Yes 32.3% 38.1%
Asset growth: Net loan book growth1 17.1% No 15.5% 27.2%
Maintain good customer satisfaction:
Customer satisfaction rating 97.2% Yes 97.3% 97.2%
Maintain good macro customer relationship:
Macro customer rating 3.0% Yes 4.3% 4.3%
Socioeconomic contribution, support of black economic empowerment (BEE)
Work allocated to B-BBEE attorneys2 90.0% Yes 95.0% 91.7%
Controllable expenses to B-BBEE companies2 65.0% Yes 82.9% 78.0%
Employment equity
Racial equity, managerial and supervisory staff (%) 50.0% Yes 60.0% 47.8%
Enable Eskom employees to own a home:
% Eskom employees home loans financed3 42.1% No 37.7% 37.9%
1. Limits to funding resulted in reduced product offerings, which had a negative impact on loan growth.
2. EFC endeavours to maximise the use of B-BBEE suppliers.
3. Limited product offering and marketing negatively impacted mortgage loan penetration in Eskom.
Eskom Development Foundation NPCEskom Development Foundation NPC is a
not-for-profit company that was incorporated
in December 1998. The Foundation, which
is solely funded by Eskom, is responsible for
Eskom’s corporate social investment initiatives.
The Foundation focuses on initiatives to develop
small and medium enterprises, education,
health, food security, communities, energy
and the environment. In the past year funding
was increased to ensure the sustainability
and continuity of the projects. Spending was
also increased on mobile paediatric units
for communities and further education and
training institutions.
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
146
Support to small and medium businesses is
provided through:
• An annual business opportunities and
Franchise Expo
• A business investment competition
• Incubator support
• The contractor academy programme
Education programmes include:
• Upgrading rural schools
• Early childhood development programmes
• Maths, science and computer-lab support
programmes
• A tertiary education support programme
• A further education and training support
programme
• An energy and sustainability programme
Health support programmes include:
• Upgrading existing infrastructure
• Providing medical equipment
• Providing mobile primary health-care
facilities to rural communities
Community development and welfare
programmes include:
• Funding specific needs related to training,
equipment or materials for hospices, old-age
homes, orphanages, the disabled, disaster
relief and so on
• Funding localised community needs through
philanthropic and strategic funds
• Supporting the employee volunteer initiative
• An annual “joy and jewels” charity fundraiser
The Foundation supports food security
by developing sustainable livelihoods in
rural communities through funding skills
development, agricultural equipment and
materials for agricultural projects.
Energy and environmental management
programmes include the Eskom energy and
sustainability programme, undertaken in
schools across South Africa in partnership
with the Wildlife and Environment Society
of South Africa.
Operating highlightsIn 2012/13, the Foundation approved funding
for initiatives to the value of R194.3RA million.
• Held the 14th annual business opportunities
and franchise expo in September 2012.
The expo provides a platform for small
and medium enterprises to showcase
their businesses and network with peers,
investors, suppliers and customers
• Ran the fifth annual business investment
competition where the Foundation identifies,
showcases and rewards small and medium
enterprises that are successful and show
potential for growth. Winning enterprises in
the agriculture, services and manufacturing
sectors receive a cash investment into their
business, energy efficient products and exhibit
at the Expo. The 2012 winner in the Trading
sector category was Archworxs. The winner
in the Agricultural sector was Tlamelo Fresh
Produce. The winner in the Manufacturing
sector was Elegant Line Chemicals. This also
has a schools category, Simamaranta, to
encourage schools that excel in practical
entrepreneurship education. The 2012 winner
was Sakhelwe High School in KwaZulu-Natal
• Obtained approval to conduct a technical
investigation into upgrading rural schools,
including additional classrooms, administration
blocks and ablution facilities
• Funding for equipment for engineering
workshops at 10 further education and
training colleges across the country has also
been approved
• Funding for paediatric mobile clinics was
approved and will deliver eye care, dental
hygiene and general health check-up services
to children in the rural schools surrounding
Kusile power station and Majuba rail area
as from 2013
Subsidiary companies continued
147
• Approved funding towards the Soshanguve
manufacturing technology demonstration
centre in Soweto, Johannesburg and
Atlantis, Western Cape, which will focus on
manufacturing LED products
• Approved funding for the Eskom Contractor
Academy programme that aims to empower
and develop contractors and suppliers, as
well as equipping them with sustainable
business and technical competencies to
compete in the industry
• Approved funding for the construction of a
community centre in Wisani, Bushbridge
• Approved funding to assist with disaster relief
efforts in Port Alfred, Umlazi W-section,
Dassenhoek, Ntuzuma, Mnambithi, Ethekwini,
Amaoti and Kwanyuswa, Maphephetheni and
KwaMkhizwana areas
• Adopted the annual Eskom Expo for Young
Scientists and approved funding for 2012/13
and 2013/14
Shareholder compactIn line with the Foundation’s small and medium
enterprises strategy, a shareholder compact
was signed with Eskom. The compact includes
performance targets against which the
Foundation will be measured at the end of each
financial year. The shareholder compact has been
executed with Eskom, the Shareholder, in line
with the authority granted to Eskom, in its own
shareholder compact executed with the minister
of the Department of Public Enterprises.
Key performance areaKey performance indicator Measure
Target (2012/13)
Target met (Yes/No)
Actual(2012/13)
Actual(2011/12)
Ensuring financial
sustainability
% of CSI budget
committed on
projects
(%), annual
financial
statements 90% Yes 97% 97%
Reduced operating
expenditure against
budget
(%), annual
financial
statements 5% Yes 17% 8%
Contribute to job
creation, poverty
alleviation, education
and skills development
Number of
beneficiaries Plan 600 000 Yes 652 347RA 531 762
Number of small and
medium enterprises
assisted Plan 300 Yes 572 255
Number of Further
Education and Training
colleges assisted Plan 10 Yes 10 4
Number of rural
development projects
completed Plan 6 Yes 6 5
Focus on corporate
social investment in
strategic sites
Number of projects
approved in strategic
sites Plan 15 Yes 30 14
Enhancing Eskom’s
reputation
Citizenship dimension
of South African
Global RepTrack Pulse
score Survey 45.0 Yes 46.7 n/a
1. Excluding CSI spend.
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
148
• Percentage of CSI budget committed on projects:
The target was exceeded as a result of more
projects with both higher value and impact
being committed to in line with the new
approved CSI strategy
• Reduction of operating expenditure against
budget:
This target was exceeded due to a specific
focus to achieve a reduction on operational
costs (excluding CSI)
• Contribute to job creation, poverty alleviation,
education and skills development, number of
beneficiaries:
The target was exceeded due to an increased
number of high impact projects in the health
care and education focus areas.
• Contribute to job creation, poverty alleviation,
education and skills development, number
of SMEs assisted:
The target was exceeded due to the increased
number of SMEs assisted through the
business incubator and contractor academy
programs funded in this financial year
• Contribute to job creation, poverty alleviation,
education and skills development, number of
projects approved in strategic sites:
The target was exceeded due to an increased
number of high impact projects in geographic
areas that are deemed of strategic nature
such as Eskom new build sites
• Restoring confidence in the Eskom Brand –
Positioning of Eskom, perception of Eskom as a
responsible citizen:
The perception of Eskom as a good
corporate citizen has improved as per the
RepTrack study
PerformanceDuring the year, the Foundation approved
funding for 343 projects to the value of
R194.3RA million with 652 347RA beneficiaries
(2011/12: 264 projects for R87.9RA million and
531 762RA beneficiaries). Of the committed
R194.3RA million, R126.5RA million was spent
in the financial year.
Subsidiary companies continued
The Eskom Contractor Academy provides technical and business training to suppliers
149
Eskom Development Foundation investments
Eskom Pension and Provident Fund1
Eskom intends to convert the current Eskom
Pension and Provident Fund from a defined
benefit fund to a defined contribution fund.
The Board of Trustees approved the
implementation of the project on 25 May 2012
and their decision was supported by Exco on
27 July 2012 and the Eskom Investment and
Finance committee on 7 August 2012.
The market value of the assets of the Eskom
Pension and Provident Fund at 31 March 2013
was R90.6 billion (2012: R75.5 billion) and
the calculated liabilities were R82.5 billion
(2012: R63.5 billion), resulting in a surplus of
R8.1 billion (2012: R12.0 billion).
Programme
2012/13 2011/12 2010/11
No of projects
Approved Rm
Benefi-ciaries
No of projects
Approved Rm
Benefi-ciaries
No of projects
Approved R’m
Benefi-ciaries
Contractor academy1 9 19.1 225 – – – – – –
Business incubators 7 29.1 3 188 5 3.4 229 – – –
Enterprise
development– – – 3 1.1 26 4 2.0 1 241
Business investment
competition1 6.0 26 1 6.0 195 1 4.2 190
Business opportunities
and franchise expo1 6.0 36 1 5.6 56 1 4.1 51
Energy and
sustainability
programme
1 4.9 227 154 1 4.6 125 894 1 3.7 154 141
Rural infrastructure
development6 11.3 4 507 8 17.2 12 271 4 6.8 831
Health 2 16.8 28 080 – – – – – –
Education2 14 38.7 15 024 4 18.5 1 935 13 16.8 4 486
Further education and
training colleges10 17.2 6 986 4 6.2 2 918 5 5.0 4 228
Food security 2 0.3 – 4 4.7 480
Philanthropy and
welfare290 44.9 367 121 233 20.6 387 758 225 19.7 138 815
Total 343 194.3RA 652 347RA 264 87.9RA 531 762RA 254 62.3RA 303 983RA
1 Contractor Academies were executed by the Eskom Foundation but were funded by Eskom Distribution Group in the previous financial year.
2 Education projects managed by Eskom Human Resources division included.
1 Although not a subsidiary, a summary of the Eskom Pension and Provident
Fund is included.
Appendices 8
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
152
Appendices
AwardsNkonki SOC Integrated Reporting awardsIn June 2012, Eskom emerged as the overall
winner of the Nkonki SOC Integrated Report
Awards 2012. Eskom also scooped several other
awards in the categories of ethical leadership
and corporate citizenship as well as compliance
with laws, codes, rules and standards.
Investment Analysts Society of Southern Africa awardAt the 27th annual Investment Analyst’s Society
awards held in June 2012, Eskom emerged as
the winner in the category: basic materials
and resources. Eskom was the first non-listed
company to receive such an award.
Ernst & Young Excellence in Integrated Reporting awardsEskom was adjudged an “Excellent Integrated
Reporter” at the Ernst & Young inaugural
Excellence in Integrated Reporting Awards in
September 2012.
Institute of Risk Management in South AfricaAt the Annual Awards Ceremony of the
Institute of Risk Management in South Africa
(IRMSA) in October 2012, Eskom received
an award (runner-up in the public sector
category) for the concept and implementation
of Provincial Resilience Teams.
Loerie awardEskom received a Craft Cer tif icate in
Cinematography at the prestigious Loerie
Award Show in September 2012.
SAP implementation awardEskom, as part of the Back-to-Basics (B2B)
Programme, implemented a major SAP Solution
in October 2011. At the end of October 2012,
at the SAP Africa user conference, known as
Saphila, Eskom won the silver prize in the large
implementation category.
Mail & Guardian Greening the Future awardsEskom Ingula project received the runner-up
award for conservation in the Mail & Guardian
annual “Greening the Future” awards for its
work in biodiversity conservation at the Ingula
pumped storage scheme. The Greening the
Future awards are held every year to showcase
national projects that make a difference to the
broader environmental field.
A Malachite Kingfisher at the Bedford dam in the Ingula pumped-storage scheme conservancy
153
GlossaryBase-load plant Largely coal-fired and nuclear power stations, designed to operate continuously
Biomass co-firingCo-firing is defined as the burning of more than one fuel simultaneously within a furnace.
Biomass co-firing refers to the addition of a carbon based biological material which is derived
from living and/or recently living organisms as a supplementary fuel.
Combined cycle Technology for producing electricity from otherwise lost waste heat as it exits from one or
more gas (combustion) turbines
Demand-side management (DSM)
Planning, implementing and monitoring activities to encourage consumers to use electricity
more efficiently, including both the timing and level of demand
Free basic electricity Amount of electricity deemed sufficient to provide basic electricity services to a poor
household (50kWh/month)
Free funds from operations Cash generated from operations adjusted for working capital (excluding provisions) and net
interest paid/received and non-current assets held for risk management
Free funds from operations as a percentage of gross debt
Free funds from operations/gross debt multiplied by 100
Gigawatt One thousand megawatts
Gross debt Debt securities issued, borrowings, finance lease liabilities and financial trading liabilities plus
the after tax effect of: retirement benefit obligations and provisions for power station-related
environmental restoration and mine-related closures
Gross debt/EBITDA Gross debt/earnings before interest, tax, depreciation and amortisation
Independent non-executive director
• Not a full-time salaried employee of the company or its subsidiary
• Not a shareholder representative
• Has not been employed by the company and is not a member of the immediate family of
an individual who is, or has been in any of the past three financial years, employed by the
company in any executive capacity
• Not a professional advisor to the company
• Not a significant supplier or customer
International financial reporting standards
Global accounting standards issued by the International Accounting Standards Board that
require transparent and comparable information
Independent power producer (IPP)
Any entity other than Eskom that owns or operates, in whole or in part, one or more
independent power-production facilities
Interest cover Operating profit before net finance cost/(net finance cost but before unwinding of discount
on provisions, change in discount rate and borrowing cost capitalised)
ISO 14001 Environmental management systems certification by an accredited external organisation.
It includes an assessment of the core and support business processes. Certification is based on
prevention of pollution, compliance with legislation and continual improvement of the system
ISO 9001 Quality management systems certification by an accredited external organisation. Certification
is based on principles around customer centricity, leadership, employee involvement, process
approaches, systematic management approaches, factual approach to decision making,
mutually beneficial supplier relations, and continuous improvement. This standard forms the
foundation for other standards such as ISO 14001, OHSAS 18001, etc
Kg/MWhSO kilograms per megawatt hour sent out
Kilowatt-hour (kWh) Basic unit of electric energy equal to one kilowatt of power supplied to or taken from an
electric circuit steadily for one hour (one kilowatt-hour is 1 000 watt hours)
Load Amount of electric power delivered or required at any specific point on a system
Load-shedding Scheduled and controlled power cuts that rotate available capacity between all customers
when demand is greater than supply to avoid blackouts
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
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Lost-time incident rate Proportional representation of the occurrence of lost-time injuries over 12 months per
200 000 working hours
Megawatt One million watts
Megawatt-hour (MWh) One thousand kilowatt-hours or one million watt-hours
OHSAS 18001 Occupational health and safety certification by an accredited external organisation.
This certification is designed specifically to integrate with ISO 9001 and 14001 and assesses
policy based on hazard identification, risk assessment, risk control, legal compliance and
commitment to performance improvement
Outage Period in which a generating unit, transmission line, or other facility is out of service
Off-peak Period of relatively low system demand
Peak demand Maximum power used in a given period, traditionally between 07:00 and 10:00 and 18:00
and 21:00
Power pool Two or more interconnected electricity supply systems that agree to coordinate operations
and seek improved reliability and efficiencies
Primary energy Energy in natural resources (eg coal, liquid fuels, sunlight, wind, uranium)
Pumped-storage scheme A lower and an upper reservoir with a power station/pumping plant between the two.
During off-peak periods the reversible pump/turbines use electricity to pump water from the
lower to the upper reservoir. During peak demand, water runs back into the lower reservoir
through the turbines, generating electricity
System average interruption duration index (SAIDI)
This index is used as a reliability indicator and is defined as the average outage duration for
each customer served and is commonly measured in units of time over the course of a year
System average interruption frequency index (SAIFI)
This index is used as a reliability indicator and is defined as the average number of interruptions
that a customer experiences, commonly measured over the course of a year
System minutes Global benchmark for measuring the severity of interruptions to customers. One system
minute is equivalent to the loss of the entire system for one minute at annual peak. A major
incident is an interruption with a severity ≥1 system minute
Technical losses Naturally occurring losses that depend on the power systems used
Torrefied fuel A fuel source which has been pre-treated (by means of low temperature pyrolysis) to reduce
the moisture content and enhance the fuel quality for combustion purposes.
Unplanned automatic grid separations
Measure of the reliability of the service provided to the electrical grid that logs the number
of interruptions per operating period
Unit capability factor (UCF) Measure of power-station availability indicating how well plant is operated and maintained
Unplanned capability loss factor (UCLF)
All occasions when a power station unit has to be taken out of service. Energy losses due to
outages are considered unplanned if they are not scheduled at least four weeks in advance
Watt The watt is the International System of Units’ (SI) standard unit of power. It specifies the rate
at which electrical energy is dissipated – energy per unit time
Appendices continued
155
AbbreviationsB-BBEE Broad-based black economic empowerment
EBITDA Earnings before interest, taxes, depreciation and amortisation
ESCO Energy Services Company
FFO Free funds from operations
GWh Gigawatt-hour (1 000MWh)
IDM Integrated demand management
IRP2010 Integrated Resource Plan 2010
IPP Independent power producer
ISMO Independent System Market Operator
ISO International Organisation for Standardisation
Kg Kilogram
Kt Kiloton (1 000 tons)
kWh Kilowatt-hour
kWhSO Kilowatt-hour sent out
L Litre
LA Limited assurance
LTIR Lost-time incident rate
MW Megawatt
MWh Megawatt-hour (1 000kWh)
ML Megalitre (1 000 000 litres)
mSv MilliSievert
Mt Megaton
MTPPP Medium-term Power Purchase Programme
MVA Mega volt ampere
MYPD Multi-year price determination
NERSA National Energy Regulator of South Africa
NGO Non-governmental organisation
OCLF Other capability loss factor
OHS Occupational Health and Safety
OHSAS Occupational Health and Safety Assessment Series
PCLF Planned capability loss factor (see glossary)
PFMA Public Finance Management Act (1999)
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R South African rand
RA Reasonable assurance
SAIDI System average interruption duration index (see glossary)
SAIFI System average interruption frequency index (see glossary)
SOC State-owned company
UCF Unit capability factor (see glossary)
UCLF Unplanned capability loss factor (see glossary)
US United States
WEPS Wholesale electricity pricing scheme
Appendices continued
157
Sustainability responsibilities, approval and assuranceSustainability key indicators report performance
on issues material to Eskom’s stakeholders.
These key indicators have been prepared
in accordance with the GRI G3 guidelines,
supported by Eskom’s internal reporting
guidelines. View Eskom’s declaration on its GRI
B+ Application Level.
The King Code advocates that sustainability
reporting and disclosure should be
independently assured. KPMG Services (Pty)
Limited provided reasonable assurance on
selected sustainability key indicators marked
with an “RA” in this report and limited
assurance on Eskom’s self-declaration of a
GRI B+ application level. KPMG’s assurance
report is presented below.
Independent assurance report on selected sustainability informationTo the Directors of Eskom Holdings SOC LimitedWe have undertaken an assurance engagement
on selected sustainability information as
described below and presented in the online
2013 Supplementary and Divisional Report
(the Report) of Eskom Holdings SOC Limited
(Eskom) for the year ended 31 March 2013.
Independence and expertiseWe have complied with the International
Federation of Accountants (IFAC) Code of
Ethics for Professional Accountants, which
includes comprehensive independence and
other requirements founded on fundamental
principles of integrity, objectivity, professional
competence and due care, confidentiality
and professional behaviour. Our engagement
was conducted by a multi-disciplinary team
of health, safety, social, environmental and
assurance specialists with extensive experience
in sustainability reporting.
Subject matter and related assuranceWe are required to provide assurance as follows:
1. Reasonable assurance on the following
key performance indicators prepared in
accordance with the Global Reporting
Initiative (GRI) G3 Guidelines, marked with
a ‘RA’ on the relevant pages of the Report:
• Technical performance parameters –
unplanned capability loss factor, unit
capability factor, energy availability factor,
system minutes lost, total system minutes
lost (<1 minute), major incidents, system
average interruption frequency index
(SAIFI), system average interruption
duration index (SAIDI), management of
the national supply/demand constraints,
OCGT load factor trend, number of low
frequency events (<49.5 Hz), and energy
losses (transmission and distribution)
• Environmental performance parameters –
coal purchased, stock days, coal road to
rail migration, specific water consumption,
liquid fuel usage (diesel and kerosene),
demand-side management (megawatts
and gigawatt-hours), internal energy
efficiency (megawatts and gigawatt-
hours), particulate emissions (total
tonnages) relative particulate emissions,
carbon dioxide emissions, sulphur
dioxide emissions, nitrogen oxide
emissions, low level radioactive waste
generated and disposed, intermediate
level radioactive waste generated and
disposed, ash (produced and recycled)
and environmental legal contraventions
• Social performance parameters – total
learner pipeline, engineers, artisans,
technicians, youth programme, disabilities
– company and group (number and
percentage), racial equity in senior
management – company (percentage of
black employees), gender equity in senior
management – company (percentage
female employees), corporate social
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
158
investment (committed rand value, spend
rand value and number of beneficiaries),
total employee and contractor work related
fatalities, employee work related fatalities,
contractor work related fatalities, employee
lost time incident rate (LTIR), broad-based
black economic empowerment (B-BBEE)
expenditure – company and group
(attributable spend and percentage), black
women owned (BWO) expenditure –
company and group (attributable spend and
percentage)
• Economic parameters – generation capacity
installed and commissioned, transmission
lines installed, transmission capacity installed
and commissioned (MVA), percentage of
local content in new-build contracts, cost of
electricity, debt: equity ratio (company) and
interest cover (company)
2. Limited assurance on Eskom’s self-declaration
of the GRI B+ Application Level (page 2).
Directors responsibilitiesThe Directors are responsible for the
selection, preparation and presentation of the
sustainability information, the identification of
stakeholders and stakeholder requirements
and material issues, for commitments with
respect to sustainability performance, and
establishing and maintaining appropriate
performance management and internal control
systems from which the reported information
is derived, and for such internal control as the
Directors determine is necessary to enable
the preparation of the Report that is free from
material misstatement, whether due to fraud
or error.
The Directors are also responsible for the
selection and application of the criteria
detailed below:
• The GRI G3 Guidelines applied to the
selected key performance indicators; and
• The GRI G3 Guidelines on Eskom’s self–
declaration of the GRI B+ Application Level
Our responsibilityOur responsibility is to express assurance
conclusions on the selected sustainability
information based on our work performed. We
have conducted our engagement in accordance
with the International Standard on Assurance
Engagements (ISAE 3000), Assurance
Engagements Other than the Audits or Reviews
of Historical Financial Information, issued by the
International Auditing and Assurance Standards
Board. That Standard requires that we plan and
perform our engagement to obtain assurance
about whether the selected sustainability
information is free from material misstatement.
Our procedures and the extent of our
procedures depend on our judgement, including
the risks of material misstatement of the
selected sustainability information. In making
our risk assessments, we considered internal
control relevant to Eskom’s preparation of the
Report. In a limited assurance engagement,
the evidence gathering procedures are less
than where reasonable assurance is expressed.
We believe the evidence we have obtained is
sufficient and appropriate to provide a basis for
our conclusions.
Summary of work performedOur work included the following evidence-
gathering procedures:
• Interviewing management and senior
executives to evaluate the application of
the GRI G3 Guidelines and to obtain an
understanding of the control environment
relative to the reported sustainability
information
• Inspecting documentation to corroborate
the statements of management and senior
executives in our interviews
• Testing the processes and systems to generate,
collate, aggregate, monitor and report the
selected sustainability information
• Inspecting supporting documentation and
performing analytical procedures
Appendices continued
159
• Performing site work at the nuclear power
station (Koeberg), coal power stations (Arnot,
Tutuka, Lethabo, Kriel, Matla, Hendrina,
Duvha, Camden and Majuba), Transmission
divisions (North East and North West),
Distribution divisions (North West and
Mpumalanga), Roshcon and Rotek
• Conducting an Application Level check on
the Report to evaluate whether all disclosure
requirements of the GRI B+ Application Level
have been adhered to
• Evaluating whether the information presented
in the report is consistent with our findings,
overall knowledge and experience of
sustainability management and performance
at Eskom
Conclusions1. On the selected key performance indicators on
which we are required to express reasonable
assurance
In our opinion, the selected key performance
indicators for the year ended 31 March 2013
are fairly stated, in all material respects, in
accordance with the GRI G3 Guidelines.
2. On Eskom’s self-declaration on the GRI G3 B+
Application Level on which we are required to
express limited assurance
Based on our work performed, nothing
has come to our attention that causes us
to believe that Eskom’s self-declaration of a
B+ Application Level is not fairly stated, in
all material respects, in accordance with the
GRI G3 Guidelines.
ComparabilityThe report includes the provision of reasonable
assurance on OCGT load factor trend, total
system minutes lost, number of low frequency
events (< 49.5Hz), coal road-to-rail migration,
youth programme, corporate social investment
(number of beneficiaries) and broad-based
black economic empowerment (B-BBEE)
expenditure – group (attributable spend and
percentage) and black women owned – group
(attributable spend and percentage). We were
previously not required to provide assurance
on these key performance indicators.
Other matterThe maintenance and integrity of the Eskom’s
website is the responsibility of Eskom’s
management. Our procedures did not involve
consideration of these matters and, accordingly,
we accept no responsibility for any changes to
either the information in the Report or our
independent assurance report that may have
occurred since the initial date of presentation
on the Eskom website.
Limitation of liabilityOur work has been undertaken to enable us
to express the conclusions on the selected
sustainability information to the Directors of
Eskom in accordance with the terms of our
engagement, and for no other purpose. We do
not accept or assume liability to any party other
than Eskom, for our work, for this report, or for
the conclusions we have reached.
KPMG Services (Pty) Limited
Per PD Naidoo A JafferDirector Director
Johannesburg Johannesburg
30 May 2013
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
160
Appendices continued
Statistical tablesTable 1. Ten-year statistical overview
2012/13 2011/12 2010/11 2009/10
Sales
Total sold, GWh1,2 216 561 224 785 224 446 218 591
Growth/(reduction) in GWh sales, % (3.7) 0.2 2.7 1.7
Electricity output
Power sent out by Eskom stations, GWh (net) 232 749 237 289 237 430 232 812
Coal-fired stations, GWh (net) 214 807 218 210 220 219 215 940
Hydroelectric stations, GWh (net) 1 077 1 904 1 960 1 274
Pumped storage stations, GWh (net) 3 006 2 962 2 953 2 742
Gas turbine stations, GWh (net) 1 904 709 197 49
Wind energy, GWh (net) 1 2 2 1
Nuclear power station, GWh (net) 11 954 13 502 12 099 12 806
Purchased from IPPs GWh 3 516 4 107 1 833 –
Wheeling, GWh4 2 948 3 099 3 423 3 175
Total imported for Eskom system, GWh4 7 698 9 939 10 190 10 579
Total electricity for Eskom system (Eskom stations and
purchased), GWh5 246 911 254 434 252 876 246 566
Total consumed by Eskom, GWh6 4 037 3 982 3 962 3 695
Total available for distribution, GWh2 242 874 250 452 248 914 242 871
Plant performance indicators
Total power station installed capacity, MW7 44 206 44 115 44 145 44 175
Total power station nominal capacity, MW7 41 919 41 647 41 194 40 870
Peak demand on integrated Eskom system, MW 35 525 36 212 36 664 35 850
Peak demand on integrated Eskom system, including load
reductions and non-Eskom generation, MW
36 345 37 065 36 970 35 912
Reserve margin (including imports, load reductions and
non-Eskom generation), % 20.0 16.9 14.9 16.4
Average energy availability – EAF (UCF), %8 77.7RA (78.8)RA 82.0RA (83.0)RA 84.6RA (85.9)RA 85.2(85.9)
Generation load factor, %10 63.6 65.1 66.4 66.2
Integrated Eskom system load factor (EUF), % 81.9 79.4 78.5 77.7
Environmental indicators
Specific water consumption, L/kWh sent out11 1.42RA 1.34RA 1.35RA 1.34RA
Environmental legal contraventions 47RA 50RA 63RA 55RA
Significant legal contraventions reported, number12 1 5 4 0
Customer satisfaction (Enhanced PreCare/MaxiCare),
ratio13
99.63 96.17 95.99 98.18
Net raw water consumption, ML 334 275 319 772 327 252 316 202
Liquid fuels (diesel and kerosene), ML 609.7RA 225.5RA 63.6RA 16.1RA
Coal burnt, Mt 123.0 125.2 124.7 122.7
Average calorific value, MJ/kg 19.76 19.61 19.45 19.22
Average ash content, % 28.69 28.88 29.03 29.56
Average sulphur content, % 0.88 0.79 0.78 0.81
161
2008/09 2007/08 2006/07 2005/062004/05
(15 months)2004
(12 months)2003
(12 months)
214 850 224 366 218 120 207 921 256 453 206 799 196 980
(4.2) 2.9 4.9 (18.9)3 30.5 5.0 4.8
228 944 239 109 232 445 221 988 273 404 220 152 210 218
211 941 222 908 215 211 206 606 251 914 202 171 194 046
1 082 751 2 443 1 141 903 720 777
2 772 2 979 2 947 2 867 3 675 2 981 2 732
143 1 153 62 78 – – –
2 1 2 3 – – –
13 004 11 317 11 780 11 293 16 912 14 280 12 663
– – – – – – –
– – – – – – –
12 189 11 510 11 483 10 310 12 197 9 818 8 194
241 133 250 619 243 928 232 298 285 601 229 970 218 412
3 816 4 136 3 937 3 814 5 043 4 040 3 664
237 317 246 483 239 991 228 484 280 558 225 930 214 748
44 193 43 037 42 618 42 011 42 011 42 011 42 011
40 506 38 747 37 764 36 398 36 208 36 208 36 208
35 959 36 513 34 807 33 461 34 195 34 195 31 928
36 227 37 158 35 441 33 461 34 195 34 195 31 928
10.6 5.6 7.8 12.7 – – –
85.3(86.1) 84.8(86.2) 87.5(88.6) 87.4(88.7) 89.5(89.9)9 89.5(90.0) 87.5(88.7)
67.0 72.3 72.4 69.7 69.0 69.2 66.3
78.6 85.2 82.7 79.8 78.0 77.4 76.8
1.35RA 1.32RA 1.35LA 1.32 1.279 1.26 1.29
114RA 46RA 50RA 55 57 44 36
12 6 0 1 39 2 2
99.84 97.21 100.80 101.06 93.10 8.31 8.47
323 190 322 666 313 064 291 516 347 135 277 557 271 940
28.9LA 345.9 11.3 – – – –
121.2 125.3 119.1 112.1 136.4 109.6 104.4
19.10 18.51 19.06 19.58 19.36 19.42 19.41
29.70 29.09 29.70 29.10 29.60 29.60 28.90
0.83 0.87 0.86 0.88 0.87 0.87 0.92
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
162
2012/13 2011/12 2010/11 2009/10
Overall thermal efficiency, % 32.0 31.4 32.6 33.1
Line losses, % 9.1 8.7 8.3 8.5
Nitrous oxide (N2O), t14 2 980 2 967 2 906 2 825
Carbon dioxide (CO2), Mt14,21 227.9RA 231.9RA 230.3RA 224.7RA
Sulphur dioxide (SO2), kt14 1 843RA 1 849RA 1 810RA 1 856RA
Nitrogen oxide (NOx) as NO
2, kt15 965RA 977RA 977RA 959RA
Relative particulate emissions, kg/MWh sent out14 0.35RA 0.31RA 0.33RA 0.39RA
Particulate emissions, kt 80.68RA 72.42RA 75.84RA 88.27RA
Ash produced, Mt 35.30RA 36.21RA 36.22RA 36.01RA
Ash sold, Mt 2.4RA 2.3RA 2.0RA 2.0RA
Asbestos disposed, tons 374.6 448.1RA 611.5RA 321.4RA
PCB thermally destructed, tons 1 408.0 14.3RA 422.9RA 19.1RA
Public individual radiation exposure due to effluents, mSv16 0.0019 0.0024 0.0043 0.0040
Low-level radioactive waste generated, cubic metres17 183.1RA 184.7RA 165.3RA 137.8
Intermediate-level radioactive waste generated,
cubic metres17
34.7RA 25.4RA 39.4RA 47.1
Low-level radioactive waste disposed of, cubic metres17 54.0RA 53.8RA 81.0RA 216.0RA
Intermediate-level radioactive waste disposed of,
cubic metres17,18
0.0RA 128.0RA 0.0RA 266.0RA
Low-level nuclear waste - fuel racks, cubic metres19
(cumulative figure)
0 (697) 0 (697) 0 (697) 0 (697)
Used nuclear fuel, number of elements discharged20
(cumulative figure)
56 (2 013) 60 (1 957) 112 (1897) 56 (1 785)
1. Sales prior to 2005 include internal sales.
2. Difference between electricity available for distribution and electricity sold is due to transmission and other losses.
3. Actual sales growth was 0.8% when compared to the 12 months 1 April 2004 to 31 March 2005.
4. Prior to 2009/10, wheeling was combined with the total imported for the Eskom system.
5. Includes Eskom electricity produced and delivered to neighbouring countries.
6. Used by Eskom for pumped storage facilities and synchronous condenser mode of operation.
7. Wording changed from nominal to installed capacity in line with VGB international and Eskom’s plant reporting standard STD 36_48.
8. Capacity hours available, times 100, divided by total capacity hours in a year.
9. Represents the 12-month moving average for 1 April 2004 to 31 March 2005.
10. kWh produced, times 100, divided by average net maximum capacity times hours in a year.
11. Volume of water consumed per unit of generated power from coal fired power stations sent out, excluding Komati power station.
12. 2002 reported in terms of the revised definition of the operational health dashboard. From 2008, repeat legal contraventions are included in the criteria.
13. Reflects the environmental element of Enhanced MaxiCare. A new calculation implemented this year includes weightings per the size of the different
customer segments. The figures for 2009/10, 2010/11, and 2011/12 have been restated. The Enhanced MaxiCare replaced the PreCare/MaxiCare from
January 2005.
14. Calculated figures based on coal characteristics and the power station design parameters. Sulphur-dioxide and carbon-dioxide emissions are based on coal
analysis and using coal burnt tonnages. Figures include coal-fired and gas turbine power stations, as well as oil consumed during power station start-ups and,
for carbon-dioxide emissions, the underground coal gasification pilot.
15. NOx reported as NO
2 is calculated using average station specific emission factors, which have been measured intermittently between 1982 and 2006, and
tonnages of coal burnt.
16. The limit set by the National Nuclear Regulator is ≤ 0.25mSv.
17. These are the net volumes produced in a 12-month moving window.
18. The number of drums disposed at Vaalputs in 2011/12 was restated.
19. Waste as a result of re-racking of spent fuel pools at Koeberg power station.
20. The gross mass of a nuclear fuel element is approximately 670kg, with UO2 mass typically between 462 and 464kg.
21. See www.eskom.co.za/IR2012/035.html for the climate change fact sheet, giving details of the relative CO2 emission factor.
RA Reasonable Assurance provided by the independent assurance provider (refer page 157).
LA Limited Assurance provided by the independent assurance provider in previous years.
Appendices continued
163
2008/09 2007/08 2006/07 2005/062004/05
(15 months)2004
(12 months)2003
(12 months)
33.4 33.4 33.9 33.8 34.0 34.0 34.2
7.9 8.0 8.4 8.2 8.29 7.8 8.3
2 801 2 872 2 730 3 134 3 552 2 924 2 580
221.7RA 223.6LA 208.9 203.7 247.0 197.7 190.1
1 874RA 1 950LA 1 876 1 763 2 236 1 779 1 728
957LA 984 930 877 994 797 760
0.27RA 0.21LA 0.20 0.21 0.269 0.27 0.28
55.64RA 50.84 46.08 45.76 72.83 59.17 58.65
36.66LA 36.04 34.16 33.40 40.80 33.10 29.80
2.1 2.4 2.2 1.8 2.0 1.6 1.2
3 590.8LA 321.0 6 060.0 – – – –
505.6LA 17.0 10.0 – – – –
0.0045 0.0047 0.0034 0.0049 0.00799 0.0087 0.0123
140.8 180.3 94.5 90.2 80.3 81.4 100.5
23.9 16.5 49.8 52.7 47.2 36.8 30.1
189.0 270.0 135.0 91.0 – – –
473.6 418.0 436.0 52.0 – – –
0 (697) 0 (697) 0 (697) 0 (697) 0 (697) 697 –
56 (1 729) 112 (1 673) 56 (1 561) 52 (1 505) 104 (1 453) 56 (1 405) 104 (1 349)
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
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Table 2. Power station commercial capacities at 31 March 2013
Name of station Location
Number and installed
capacity of generator
setsMW
Total capacity1
MW
Total nominal
capacity1
Generators in reserve storage Other
generation: installed capacity
MW2NumberCapacity
MW
Coal-fired stations (13) 37 776 35 650 1 100 –
Arnot3,9 Middelburg,
Mpumalanga
1x370; 1x390;
2x396;
2x400;
2 352 2 232 – – –
Camden4,10 Ermelo 3x200; 1x196;
2x195; 1x190;
1x185
1 561 1 481 – – –
Duvha3 Witbank 6 x 600 3 600 3 450 – – –
Grootvlei4 Balfour 4x200; 1x190;
1x160
1 150 1 090 – – –
Hendrina3,10 Mpumalanga 8x200; 1x195;
1x170
1 965 1 865 – – –
Kendal3,5 Witbank 6 x 686 4 116 3 840 – – –
Komati4,10 Middelburg,
Mpumalanga
5x100; 3x125;
1x95
970 791 1 100 –
Kriel3 Bethal 6x500 3 000 2 850 – – –
Lethabo3 Viljoensdrift 6x618 3 708 3 558 – – –
Majuba3,5 Volksrust 3x657; 3x713 4 110 3 843 – – –
Matimba3,5 Lephalale 6x665 3 990 3 690 – – –
Matla3 Bethal 6x600 3 600 3 450 – – –
Tutuka3 Standerton 6x609 3 654 3 510 – – –
Gas/liquid fuel turbine stations6(4)
2 426 2 409 – – –
Acacia Cape Town 3x57 171 171 – – –
Ankerlig Atlantis 4x149.2;
5x 48.3
1 338 1 327 – – –
Gourikwa Mossel Bay 5x149.2 746 740 – – –
Port Rex East London 3x57 171 171 – – –
Hydroelectric stations (6) 661 600 – – 61
Colley Wobbles2 Mbashe River 3x14 42 – – – 42
First Falls2 Umtata River 2x3 6 – – – 6
Gariep7 Norvalspont 4x90 360 360 – – –
Ncora2 Ncora River 2x0.4; 1x1.3 2 – – – 2
Second Falls2 Umtata River 2x5.5 11 – – – 11
Vanderkloof 7 Petrusville 2x120 240 240 – – –
Appendices continued
165
Name of station Location
Number and installed
capacity of generator
setsMW
Total capacity1
MW
Total nominal
capacity1
Generators in reserve storage Other
generation: installed capacity
MW2NumberCapacity
MW
Pumped storage schemes8(2) 1 400 1 400 – –
Drakensberg Bergville 4 x 250 1 000 1 000 – – –
Palmiet Grabouw 2 x 200 400 400 – – –
Wind Energy (1)
Klipheuwel2 Klipheuwel 1x1.75;
1x0.66;
1x0.75
3 – – – 3
Nuclear power station (1)
Koeberg3,11 Cape Town 2x970 1 940 1 860 – – –
Total power station capacities (27) 44 206 41 919 1 100 64
1. Wording changed from nominal to installed capacity in line with VGB international and Eskom’s plant reporting standard STD 36_48. The difference between
installed and nominal capacity reflects auxiliary power consumption and reduced capacity caused by age of plant and/or low coal quality.
2. Operational but not included for capacity management purposes.
3. Base-load station.
4. Return to service station
5. Dry-cooled unit specifications are based on design back-pressure and ambient air temperature.
6. Stations used for peaking or emergency supplies.
7. Use restricted to peaking, emergencies and availability of water in Gariep and Vanderkloof dams.
8. Pumped storage facilities are net users of electricity. Water is pumped during off-peak periods so that electricity can be generated during peak periods.
9. At Arnot two units were fully uprated and four partially uprated in the Capacity Increase Project.
10. Due to technical constraints, some units at these stations have been de-rated.
11. At Koeberg, 30MW of additional output capacity was achieved on Unit 2 after plant enhancements were carried out.
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
166
Table 3. Environmental implications of using or saving electricity1
Factor 1 (total energy
sold)2
Factor 2 (total energy
generated)3 If electricity consumption is measured in:
kWh MWh GWh TWh
Coal use 0.57 0.54 kilogram ton thousand tons (kT) million tons
Water use4 1.54 1.46 litre kilolitre megalitre thousand megalitres
Ash produced 163 154 gram kilogram ton thousand tons (kT)
Particulate
emissions 0.37 0.35 gram kilogram ton thousand tons (kT)
CO2 emissions5 1.05 1.00 kilogram ton thousand tons (kT) million tons
SOx emissions5 8.51 8.06 gram kilogram ton thousand tons (kT)
NOx emissions6 4.46 4.22 gram kilogram ton thousand tons (kT)
Use of table: Multiply electricity consumption or saving by the relevant factor to determine the
environmental implication.
Example 1 (using factor 1): Example 3 (using factor 2):
Used 90 MWh of electricity Used 90 MWh of electricity
Water consumption: 90x1.54 = 138.6 Water consumption: 90x1.46 = 131.4
Therefore 138.6 kilolitres of water used Therefore 131.4 kilolitres of water used
Example 2 (using factor 1): Example 4 (using factor 2):
Used 90 MWh of electricity Used 90 MWh of electricity
CO2 emissions 90x1.05 = 94.5 CO
2 emissions 90x1.00 = 90.0
Therefore 94.5 tons emitted Therefore 90.0 tons emitted
1. Figures represent the 12-month period from 1 April 2012 to 31 March 2013.
2. Factor 1 figures are calculated based on total electricity sold by Eskom (based on total available to Eskom to distribute – including what Eskom purchases – less
technical electricity losses due to transmission and distribution of electricity across the country; less electricity theft; less our own internal use; and less wheeling).
That is for CO2: 227.9 Mt/216 561 GWh) = 1.05 tons per MWh.
3. Factor 2 figures are calculated based on total electricity generated by Eskom (coal, nuclear, pumped storage, wind, hydro and gas turbines), but excluding
electricity used for pumping water for the Pumped Storage schemes. That is for CO2: 227.9 Mt/(232 749 GWh-4037 GWh) = 1.00 tons per MWh
4. Volume of water used at all Eskom power stations
5. Calculated figures based on coal characteristics and the power station design parameters. Sulphur-dioxide and carbon-dioxide emissions are based on coal
analysis and using coal burnt tonnages. Figures include coal-fired and gas turbine power stations, as well as oil consumed during power station start-ups and,
for carbon-dioxide emissions, the underground coal gasification pilot.
6. NOx reported as NO
2 is calculated using average station specific emission factors, which have been measured intermittently between 1982 and 2006, and
tonnages of coal burnt.
7. Further information can also be obtained through the Eskom environmental helpline. Contact details are available on page 169.
8. For CDM related Eskom Grid Emission Factor information please go to the following link: http://www.eskom.co.za/c/article/236/cdm-calculations
or via the Eskom website>Our Company>Sustainable Development>CDM Calculations.
Appendices continued
167
Table 4. Transmission and distribution equipment in service at 31 March 2013
2012/13 2011/12 2010/11
Power lines
Transmission power lines, km1 29 297 28 995 28 790
765 kV 1 667 1 153 1 153
533 kV DC (monopolar) 1 035 1 035 1 035
400 kV2 16 899 17 118 16 913
275 kV 7 360 7 361 7 476
220 kV 1 217 1 217 1 217
132 kV 1 119 1 111 996
Distribution power lines, km 67 488 66 9414 66 2474
132 kV and higher 44 595 44 326 43 765
88-33 kV 22 893 22 615 22 482
Reticulation power lines, km
22 kV and lower 269 535 267 0114 263 2634
Underground cables, km 6 960 6 6574 6 3264
132 kV and higher 58 49 49
33 – 88 kV 212 212 179
22 kV and lower 6 690 6 396 6 098
Total all power lines, km 373 280 369 604 364 626
Total transformer capacity, MVA 241 594 237 140 232 058
Transmission, MVA3 135 840 132 955 130 005
Distribution and reticulation, MVA 105 754 104 185 102 053
Total transformers, number 361 367 356 511 351 297
Transmission, number 412 408 405
Distribution and reticulation, number 360 955 356 103 350 892
1. Transmission power line lengths as per Geographic Information System (GIS) distances.
2. The Majuba Umfolozi No 1 (765kV Line), even though constructed at 765kV, is currently still being operated at 400kV and thus, for now, is counted under the
400kV total.
3. Base of definition: transformers rated ≥ 30 MVA and primary voltage ≥ 132 kV.
4. Distribution powerlines restated.
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
168
Table 5. Sale of electricity and revenue per category of customer
Customers
Category2012/13
Number2011/12
Number2010/11
Number
Local 5 013 435 4 852 712 4 653 740
Redistributors 795 786 784
Residential1 4 874 004 4 713 178 4 514 998
Commercial 50 399 50 270 49 090
Industrial 2 789 2 775 2 857
Mining 1 062 1 100 1 110
Agricultural 83 877 84 095 84 393
Traction 509 508 508
International 11 10 10
Utilities 7 7 7
End users across
the border 4 3 3
5 013 446 4 852 722 4 653 750
Sold
Category2012/13
GWh2011/12
GWh2010/11
GWh
Local 202 770 211 590 211 150
Redistributors 91 386 92 140 91 564
Residential1 10 390 10 522 10 539
Commercial 9 519 9 270 9 020
Industrial 51 675 58 632 59 611
Mining 31 611 32 617 32 630
Agricultural 5 193 5 139 4 919
Traction 2 996 3 270 2 867
International 13 791 13 195 13 296
Utilities 4 659 3 607 3 974
End users across
the border 9 132 9 588 9 322
216 561 224 785 224 446
Sales to countries in southern Africa, GWh
Sold
Category2012/13
GWh2011/12
GWh2010/11
GWh
13 791 13 195 13 296
Botswana 2 574 2 498 2 377
Mozambique 8 284 8 265 8 523
Namibia 1 822 1 507 1 559
Zimbabwe 3 7 –
Lesotho 255 184 247
Swaziland 598 596 564
Zambia 253 134 23
Short-term energy
market2
2 4 3
Revenue
Category2012/13
Rm2011/12
Rm2010/11
Rm
Local 114 307 103 863 82 119
Redistributors 49 891 44 251 34 408
Residential1 9 044 8 155 6 808
Commercial 6 972 5 925 4 563
Industrial 23 543 23 522 19 199
Mining 17 620 15 689 12 325
Agricultural 5 180 4 482 3 480
Traction 2 057 1 839 1 336
International 5 892 4 846 4 031
Utilities 3 149 2 404 1 927
End users across the border 2 743 2 442 2 104
Gross electricity revenue 120 199 108 709 86 150
The environmental levy4 included in revenue 6 464 4 290 4 335
Less: revenue capitalised3 – – (110)
Electricity revenue per note 34 in the annual financial statements 126 663 112 999 90 375
Appendices continued
1. Pre-payments and public lighting are included under residential.
2. The short-term energy market consists of all the utilities in the southern African countries that form part of the Southern African Power Pool. Energy is traded
on a daily, weekly and monthly basis as there is no long-term bilateral contract.
3. Revenue from the sale of production while testing Generation plant not yet commissioned, capitalised to plant.
4. The Environmental levy of 2c/kWh tax, was effective from 1 July 2009 to 31 March 2011.
On 1 April 2011 the levy was raised to 2.5c/kWh. On 1 July 2012 the levy was raised to 3.5c/kWh.
The levy is payable for electricity produced from non-renewable sources (coal, nuclear and petroleum).
The levy is raised on the total electricity production volumes and is recovered through sales.
Contact details
Telephone Websites and email
Eskom head office +27 11 800 8111 Eskom website www.eskom.co.za
Eskom Group communications
+27 11 800 2323 Eskom integrated report www.eskom.co.za/IR2012/
Eskom media desk +27 11 800 3304
+27 11 800 3309
+27 82 805 7278
Eskom media desk [email protected]
Eskom Development Foundation NPC Ltd
+27 11 800 5279 Eskom Development Foundation NPC Ltd
www.eskom.co.za/csi
Investor relations +27 11 800 2775 Investor relations [email protected]
Ethics office advisory service +27 11 800 3700
+27 11 800 4816
+27 11 800 3189
Ethics office advisory service
Confidential fax line +2786 568 2969 Eskom environmental [email protected]
National sharecall number 08600 ESKOM
(08600 37566)
Promotion of Access to Information Act
Physical address Postal address
Eskom
Megawatt Park
2 Maxwell Drive
Sunninghill
Sandton
2157
Eskom
PO Box 1091
Johannesburg
2000
Eskom Holdings Secretariat
Bongiwe Mbomvu (Company secretary)
PO Box 1091
Johannesburg
2000
Eskom Holdings SOC Limited
Company registration number:
2002/015527/06
Back cover image: Commissioner Street, Johannesburg, 1920s
Eskom Holdings SOC LimitedSupplementary and Divisional Report 2013
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