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Eskom Holdings Limited Annual report 2009

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Eskom Holdings Limited Annual report 2009 Powered By Docstoc
					    Eskom Holdings Limited
6   Annual repor t 2009
Eskom Holdings Limited
    Annual repor t 2009   7
Chairman and chief executive



Section contents
 8   Message from the chairman
12   Board of directors
14   Message from the chief executive
20   Executive management




    Sales decreased

     by 4,2%


    Capital expenditure

     R47 099 million


    Electrification

     112 965 connections

    Coal burned

     121 million tons

    Training

     R823 million


    Maintenance

     R5 981 million
Ingula – conserving our natural heritage

Although Eskom received government approval to build the
Ingula project, this was withdrawn shortly afterwards following
objections by governmental and non-governmental organisations.
The objections mainly centred around the proximity of the
project to sensitive wetlands located directly downstream from
the project that are the summer habitat of the highly endangered
white winged flufftail (Sarothrura Ayresi), a small bird that migrates
to South Africa from Ethiopia for the summer.

Eskom decided that to ensure its licence to operate, it had to reach a
compromise with the institutions that were critical of the project’s
development. Eskom and the institutions agreed that Eskom would offset the
impacts by purchasing land in excess of that required for the development
of the power station, and would manage this land to the benefit of the white
winged flufftail and other species of birds and mammals and vegetation
included in the area. Eskom then purchased an additional 8 000 hectares
close to the proposed pumped-storage scheme.

A team of environmental professionals was tasked with managing the site as
a conservation area. This team conducted detailed studies of the area and
found that it was not quite the “pristine environment” that had been described
in the original objections, but rather land that had been over-farmed and was
desperately in need of attention to maintain its biodiversity potential.

Major risks included erosion which was leading to the silting up of the
wetlands on the property, and the invasion of exotic vegetation which
was consuming large volumes of water. Land-use practices were also not
compatible with the goals of a conservation area, with uncontrolled hunting
and plant harvesting taking place on an ongoing basis. Communities living
on the property were struggling to maintain their livelihoods, relying on
subsistence farming and handouts.

Projects have now been initiated to address the economic development
of the area, to improve the environmental conditions and to improve the
social conditions of people living close to the project.

The purchase and appropriate management of the additional property has
led not only to the establishment of a suitable habitat for the 210 bird species
on the site, but has also added to water security for the project. The new
management practices will go a long way towards improving water supply
in both catchments on the property as their headwaters are close to the
project. The Tugela system is a major source of water for the eastern section
of South Africa, and the Wilge River is the headwaters of the Vaal system that
feeds Gauteng, the industrial and commercial centre of South Africa.
     Eskom Holdings Limited
8    Annual repor t 2009




    Message from the chairman




        Chairman: Bobby Godsell



        Dear Stakeholders
        Over this last year Eskom has been intensely focused on ensuring that
        South Africa’s lights stay on. The organisation’s effor ts to rebuild coal stock,
        intensify maintenance, increase generation and moderate demand are described
        in greater detail in the chief executive’s statement. The result has been that
        the national grid has been stable since April of last year. The reserve margin is,
        however, still very much constrained – in fact, the peak usage during the cold
        snap in June 2009 was exactly the same as the consumption last year. Power
        conservation is still absolutely crucial.
                                                                                                     Eskom Holdings Limited
                                                                                                         Annual repor t 2009   9




In order to ensure long-term stability of supply, the            Secondly, it is not possible to fund the        rst major
Eskom new build programme, and the allied return                 expansion of our electricity grid for several decades
to operation of three mothballed power plants, has               through revenue generated from tariffs alone. The
continued apace, with 4 4 54MW of additional capacity            growth of a business is normally funded by a sensible
added since the programme started in 2005.                       balance    between    owner’s    equity,   accumulated
                                                                 reserves and debt. The R9,7 billion loss incurred
The organisation’s      nancial results, however, clearly        by Eskom this year needs to be seen in the context
indicate that nancial sustainability is now Eskom’s single,      of the R30 billion spent on the build programme,
central challenge. The scale of losses incurred is clearly       R18 billion more than in the previous year. Clearly this
unsustainable, and the board is determined to move               is not sustainable.
quickly to return the organisation to nancial health.
                                                                 The bottom-line in terms of the funding model is that
There are two major long-term causes of Eskom’s                  Eskom can only build new infrastructure if we have
 nancial woes.                                                   the money to do so. At present we have not secured all
                                                                 the funding needed for the current build projects. We
Firstly, South Africa has priced electricity below its           have taken a conscious decision that we will stop or
full cost for many decades. Whereas electricity costs            delay projects if we do not have the funding.
between 8 and 9 US cents per kilowatt-hour in the
developed economies belonging to the OECD, the                   We need to mobilise greater equity resources to
average tariff in South Africa is 3 US cents. Electricity        fund the build programme. The government has
consumers elsewhere on the African continent also pay            already provided R60 billion in a loan with equity
much higher prices.                                              characteristics. Government revenues are likely to be
                                                                 severely constrained in the near future. We need to
There is an urgent need to achieve an average tariff that         nd other sources of expansion funding, perhaps in the
recovers the full cost of producing electricity incurred         form of a development bond that will enable South
by an ef cient public utility, as well as allowing it to build   Africans to invest in the expansion of our country’s
up reserves to partly fund the capital expansion. Within         energy system.
the context of this, average tariff measures can be put
in place to ensure that electricity remains affordable for       With immediate effect the board has directed
the poorest consumer. The South African government               management to implement a cost management
subsidises the      rst 50 kilowatt-hours of monthly             programme to ensure that it breaks even at the
consumption for all consumers. Eskom operates a                  operating level.
“homelight” tariff for rural communities, but a nationally
consistent and effective “pro poor” tariff is needed.
      Eskom Holdings Limited
10    Annual repor t 2009




     Message from the chairman                                    continued




         A major source of cost in ation has been the cost of           to reduce electricity’s carbon footprint. We need also
         coal purchased. Eskom is urgently engaging the coal            to energetically explore alternative energy sources
         mining industry to better manage these costs.                  including solar, wind and biomass. If every household
                                                                        made use of solar heated geysers, almost 10% of current
         Eskom has a number of commodity-linked pricing                 coal produced energy would be replaced.
         contracts with aluminium producers, which both offer
         discounted prices, and also link the electricity prices to     The third question is how to fund both the growth
         commodity prices and exchange rates. The year-end              and the climate change modi cation of our electricity
         valuation of these contracts (embedded derivatives)            system. The nal question is how to design an electricity
         resulted in an accounting loss of R9,5 billion. They are       generation, transmission and distribution system that
         clearly not sustainable and Eskom will be engaging these       is appropriate to the circumstances of our modern
         customers with a view to achieving more equitable              world.
         pricing.
                                                                        The separation of the Energy portfolio into its own
         The capital costs of our build programme have escalated        Ministry creates a logical lead agency to ensure that
         considerably. Prior to the recent global economic crisis,      this debate not only takes place, but also results in an
         construction costs were escalating worldwide and               electricity strategy to serve this country’s future.
         across all industries. The global recession has created
         new market circumstances.                                      Acknowledgements
                                                                        I would like to make special mention of the people
         Some key longer-term questions                                 of Eskom – the women and men of Eskom – who
         Beyond these immediate concerns, our country faces             managed to turn around the electricity crisis this past
         important longer-term questions in regard to electricity.      year. I can personally bear testimony to the fact that
         The rst question is how much energy our country                37 857 people pulled together to restore the Eskom
         will need over the next 30 years. This question touches        system, while being mindful of the massive role we play
         on both the economic growth rate we achieve over               in our country.
         that period, and also on how electricity intensive that
         growth is likely to be.                                        I would also like to thank my fellow board members
                                                                        for their counsel and wish them well in providing
         A second question is what the sources of our future            guidance and assurance to this impor tant national
         electricity should be. At present we rely to a great           asset. They have spent an enormous amount of
         extent on coal for electricity generation. This poses great    additional time in special board meetings this year, to
         climate change challenges. We need to fully explore            address the various challenges and I thank them for
         the potential of nuclear and clean coal technologies           their invaluable time.
                                                                                                                           Eskom Holdings Limited
                                                                                                                               Annual repor t 2009             11




We bid farewell to a few of our board members who            Eskom debt:equity, including long-term provisions
have made a tangible contribution to the organisation        Ratio

                                                               1,5
in terms of strategic guidance: former chairman
Valli Moosa, Dr Brian Count, Sintu Mpambani and
Versha Mohanlal Rowjee. Sadly Errol Marshall, who had          1,0

served on the board since 2006, passed away in 2008.
His human touch will be missed. I would also like to           0,5

thank former finance director Bongani Nqwababa for
his valued service to Eskom up to the end of 2008.
                                                               0,0


                                                                     Dec 99

                                                                              Dec 00

                                                                                       Dec 01

                                                                                                Dec 02

                                                                                                         Dec 03

                                                                                                                  Mar 05

                                                                                                                           Mar 06

                                                                                                                                    Mar 07

                                                                                                                                             Mar 08

                                                                                                                                                      Mar 09
I would like to welcome our new board members –
Daniel Dube, chairman of the Self-help and Resource
Exchange, Hee-Beom Lee, chairman and CEO of
STX Energy Co, and John Mirenge, director of
Electrogaz, the power utility of Rwanda. They bring
a fresh perspective to the board and new insights
from an international perspective.


Special mention must also be made of our former
ministers, Mr Alec Erwin, Ms Brigitte Mabandla and
Ms Buyelwa Sonjica from the departments of Public
Enterprises and Minerals & Energy, respectively. I thank
them for their guidance and support over the past few
years and wish them well. I welcome our two new
ministers – Ms Barbara Hogan and Ms Dipuo Peters
– and hope that together we can put the electricity
system on a sustainable path for today and tomorrow.


Though the financial challenges facing Eskom are
formidable, this large and resilient organisation has
served our country well for more than eight decades.
I am sure that this family of 37 857 Eskom staff will rise
to the challenge, and continue to make Eskom a key part
of realising our nation’s dream of a better life for all.




Bobby Godsell
Chairman
            Eskom Holdings Limited
12          Annual repor t 2009




     Board of directors
     at 31 March 2009




                 1 R (Bobby) Michael Godsell (56)                          President: Union of the Electricity Industry (Eurelectric),
                   Chairman                                                German-Swedish Chamber of Commerce
                   BA (Natal), MA (UCT)                                    Lars was appointed in 2002
                   Chairman: Business Leadership South Africa (BLSA),
                   Freeworld Coatings, the JSE listed coatings company   5 HB (Hee-Beom) Lee (60) (Korean)
                   recently demerged from Barloworld
                                                                           Non-executive director
                   Co-chairman: Millennium Labour Council (MLC)
                                                                           BA (Electronics Engineering) (Seoul National University),
                   Bobby was appointed as chairman of the
                                                                           Graduate School of Public Administration (Seoul National
                   Eskom Holdings Limited board on 17 July 2008
                                                                           University), MBA (George Washington University), PhD in
                                                                           Business Management (Kyunghee University), Honorary
                 2 LCZ (Zee) Cele (56)                                     Doctorate Degree in Public Administration (Hoseo
                   Non-executive director                                  University)
                   BCom (Fort Hare), PostGrad Dip Tax, MAcc (Natal)        Chairman and CEO: Korea International Trade
                   Executive Leadership Development Programme              Association (up to February 2009), STX Energy Co.
                   (ADL-MEI, Cambridge, USA)                               (from March 2009)
                   Director: Hulamin Limited, Combined Motor Holdings      Non-executive director: Korean Air (from March
                   Limited, Sport for All Franchising (Pty) Limited        2009)
                   Zee was appointed in 2005                               Chairman: Haevichi Social Contribution Culture
                                                                           Foundation
                 3 SD (Daniel) Dube (59)                                   Vice-president: National Academy of Engineering of
                   Non-executive director                                  Korea
                   Diploma in Management from the University of            Hee-Beom was appointed on 17 July 2008
                   Leicester
                   Chairman: Self-help and Resource Exchange             6 WE (Wendy) Lucas-Bull (55)
                   Daniel was appointed on 17 July 2008                    Non-executive director
                                                                           BSc (Wits)
                 4 LG (Lars) Josefsson (58) (Swedish)                      Director:   Dimension      Data    Holdings    plc,
                   Non-executive director                                  Development      Bank     of    Southern    Africa,
                   MSc (Applied Physics) (Chalmers University Sweden),     Lafarge Industries South Africa (Pty) Limited,
                   Professor, Cottbus University, Germany                  Anglo Platinum Limited, Peotona Group
                   President and CEO Vattenfall AB                         Wendy was appointed in 2002




       01                                                      02                                    03




                                       04                       05                                           06
                                                                                                       Eskom Holdings Limited
                                                                                                           Annual repor t 2009   13




      7 PM (Mpho) Makwana (38)                                     Trustee: Nelson Mandela Children’s Fund
        Non-executive director                                     Jacob was appointed in 2002
        BAdmin (Zululand), BAdmin (Hons) (Pretoria), EDP
        (North Western)                                         11 AJ (Allen) Morgan (61)
        Chairman: Epitome Investments                              Non-executive director
        Director: Monitor Group                                    BSc, BEng (Electrical) (Stellenbosch)
        Trustee: Lovelife Trust                                    Chairman: Bio Therm Energy (Pty) Limited
        Mpho was appointed in 2002                                 Director: Kumba Iron Ore
                                                                   Allen was appointed in 2002
      8 PJ (Jacob) Maroga (49)
        Chief executive                                         12 U (Uhuru) Nene (49)
        BSc (Electrical Eng) (Wits), AMP (Harvard)                 Non-executive director
        Jacob was appointed in 2007 as chief executive             MSc (Structural Eng) (Patrice Lumumba, Moscow)
                                                                   Uhuru was appointed in 2005
      9 J (John) Mirenge (43) (Rwandan)
        Non-executive director                                     Retirements and other changes:
        Bachelor of Law (LLB) (Makerere University),               • MV Moosa retired as chairman on 17 July 2008
        Kampala, Postgraduate Diploma in Legal Practice
        (Law Development Centre, Kampala)                          • M Bello retired on 17 July 2008
        Chairman: MTN Rwanda, Rwandair Express                     • BM Count retired on 17 July 2008
        Director: Electrogaz (Power Utility of Rwanda), The        • V Mohanlal Rowjee retired on 17 July 2008
        Rwanda Investment Promotion Agency                         • SA Mpambani retired on 17 July 2008
        John was appointed on 17 July 2008                         • B Nqwababa resigned as finance director on
                                                                     31 December 2008
     10 JRD (Jacob) Modise (42)                                    • ID du Plessis was asked to act as chief finance
                                                                     officer from 1 January 2009. He is not a director
        Non-executive director
                                                                   • E Marshall passed away during the year
        BCom, BAcc, CA(SA), MBA (Wits), AMP (Harvard), AMP
        (Samford)
        Director: Batsomi Group, Altron, Blue IQ Investments,      Only major directorships included
        IRBA, EDI Holdings, Road Accident Fund

                                                           08                                  09
07




       10                                            11                                        12
      Eskom Holdings Limited
14    Annual repor t 2009




     Message from the chief executive




         Chief executive: Jacob Maroga



         Dear Stakeholders
         The Western Cape power disruptions of 2006 marked the end of an era – a long
         period of reliable and abundant power supply with excess capacity that was built in
         the 80s in anticipation of an economic boom. On 18 January 2008, what was only
         a Western Cape issue spread to the rest of the country with the first incident of
         rotational blackouts (load shedding) at a national scale.
                                                                                                   Eskom Holdings Limited
                                                                                                       Annual repor t 2009   15




The impact of the power disruptions was profound. It         the provision of a cheap and abundant supply of
touched the lives of every South African in some way         electricity wherever required, without profit or loss.
or another, and had an impact on confidence in the
country and its image abroad.                                Eskom, since its inception, was run on strictly business
                                                             lines, but its objective was largely the provision of
The fact is that electricity supply has always been in the   service for public benefit, and not for profit. Dr van
background as the silent giant powering the country          der Bijl established the industrial base of this country
without much attention being paid to it, because it          as chairman of numerous activities such as the South
worked. The recent events highlighted the fact that          African Iron and Steel Industrial Corporation (ISCOR),
Eskom indeed plays a critical role in the economic           African Metals Corporation Ltd, the Van der Bijl
development of South Africa.                                 Engineering Corporation and many others.


This major shift in focus has brought about some             The role of Eskom in our country
serious introspection by myself and my management            The role of Eskom today must be in the context of
team. Over the past few months we have been engaged          the aspirations of the new democratic South Africa.
in reframing the role of Eskom. This work is driven by       The provision of reliable, abundant and affordable
our desire to ensure that the role of Eskom is visibly       electricity is not only a commercial under taking,
and vividly embedded in the aspirations of the country.      but is critical to the dreams and hopes of the new
                                                             democratic order.
Our history and our legacy
We are steering a company that was formed in                 In 1948, Dr Hendrik van der Bijl wrote the following
1923 and that was instrumental in the industrialisation      words in a foreword of a book celebrating the first
of the country and all aspects of the economy – Eskom        25 years of Eskom:
has been part of the fabric of this country over the past
86 years.                                                    “There lies before the Electricity Supply Commission a
                                                             great task and great opportunity. It will be our endeavour
I follow in the footsteps of great men. The development      to play our part not as those who follow, where others
of Eskom since 1923 owes its success to these men and        lead, but as pioneers, to foresee the needs of a country
one of whom had the vision, passion and leadership as a      fast developing, and by wise anticipation be ever ready to
truly remarkable South African: Dr Hendrik van der Bijl.     provide power wherever it may be required”.
He was the founder chairman of Eskom, from 1923 to
1948, and was instrumental in shaping the industrial         The link between the aspiration of the country and
development of South Africa.                                 the provision of power is as relevant today as it was in
                                                             1948. The great task and great opportunity that lies
He was intimately involved in the framing of the             before Eskom today is to foresee the needs of a country
Electricity Act, No 42 of 1922, which aimed to stimulate     that must improve the lives of all its citizens.
      Eskom Holdings Limited
16    Annual repor t 2009




     Message from the chief executive                                      continued




         On 20 April 1964, Nelson Mandela concluded his Rivonia         5. Enhancing the potential of each citizen
         Trial statement from the dock with the following:              6. Leveraging the role of state-owned enterprises for
         “During my lifetime I have dedicated myself to the                the economic development of the country.
         struggle of the African people. I have fought against white
         domination, and I have fought against black domination. I      Eskom value proposition
         have cherished the ideal of a democratic and free society      First and foremost we provide power to all of South
         in which all persons live together in harmony and with         Africa. This is our fundamental role, given that electricity
         equal opportunities. It is an ideal which I hope to live for   is the “oxygen” of the economy.
         and achieve. But if needs be, it is an ideal for which I am
         prepared to die.”                                              Few people realise that Eskom has a substantial macro-
                                                                        economic footprint, over and above the provision of
         In this statement, Nelson Mandela articulated a vision         electricity. We support other industries, such as the
         that inspired the people of South Africa to strive for a       coal industry that employs some 25 000 people. Our
         society that is reflected in our Constitution, adopted         new build programme is also creating new business
         in 1996.                                                       opportunities in terms of local manufacture of power
                                                                        station components.
         It is the preamble of our Constitution that ties the
         contributions of outstanding South Africans such as            Our capital expansion programme constitutes a major
         Hendrik van der Bijl with the vision of our icon, Nelson       economic stimulus. Consider that the Medupi project
         Mandela. The preamble is a unifying symbol of the hope         alone is four times bigger than the Gautrain project and
         and aspirations of our nation.                                 even bigger than the five-year capital spend on all rail,
                                                                        port and pipeline upgrades in South Africa.
         From the Preamble of the Constitution and other
         sources, we as Eskom have developed the following              The Medupi project in Lephalale is set to create
         six universal principles which we believe represent the        8 000 jobs directly at the peak of construction and up
         hopes and aspiration of the country and will guide all         to 1 000 jobs in ultimately running the station. Over
         our thoughts and actions.                                      and above this, the town of Lephalale is already growing
                                                                        exponentially in terms of housing (1 850 needed),
         1. A united, democratic and prosperous South Africa            infrastructure (services and education), commerce
         2. Eradication of poverty and unemployment                     (increase in guest houses and hotels, catering for
         3. A thriving economy, connected to the world and              workforce), and much more.
           integrated with the broader African continent
         4. A sustainable economy, not harmful to the                   Our build programme has also provided a major
           environment and committed to climate change                  opportunity for Eskom to enhance its corporate social
                                                                                                Eskom Holdings Limited
                                                                                                    Annual repor t 2009   17




investment initiatives in the communities around the      There has been a significant improvement in technical
projects. Examples are the building of classrooms for     performance since January 2008. As intended at the
rural schools, the creation of a contractor training      time of the introduction of the recovery programme,
academy, educator training, science and mathematics       plant performance was stabilised by the winter of 2008
equipment and resources, to name a few.                   and the required level of plant availability and reliability
                                                          has been achieved. Most of the pressing needs relating
As a signatory to the world’s largest corporate           to maintenance and refurbishment were met during
responsibility initiative – the United Nations Global     the year. Our focus now moves to achieving sustainable
Compact – we will continue to demonstrate leadership      performance levels within an environment of severe
in the 10 principles relating to labour standards, the    financial constraints.
environment and anti-corruption.
                                                          The full cost of the power system recovery dominates
I firmly believe that Eskom is a true citizen of this     Eskom’s results. The operating loss for the year for
country – a productive citizen that spreads its hard      the Eskom group, before the impact of embedded
work across many spheres of our society.                  derivatives and net finance cost, is R3 195 million
                                                          (2008: profit of R3 215 million). The sales of electricity
Reviewing the past year                                   decreased by 4,2% (2008: increase of 2,9%). Eskom saw
The year under review has been primarily about            a 2% drop in the demand from the start of 2008 until
keeping the lights burning and recovering the power       September 2008. This was mainly in response to the
system. This has to a great extent been at the cost of    call made to industry and residential users to reduce
our bottom-line, in return for a strong South African     their energy consumption. Later, as a result of the
bottom-line.                                              international economic downturn, the steel industry
                                                          and the ferro-alloys sector reduced production mainly
The load-shedding activities of the 2007/8 financial      as a consequence of a reduction in global demand.
year underlined the inherent risk of managing a power
system with inadequate spare capacity. For the first      The year under review has also been dominated
part of the year under review, Eskom had to undertake     by the accelerated implementation of Eskom’s
extraordinary measures to recover the power system.       build programme. A total of R30 460 million
The recovery programme started soon after the             (2007/8: R12 783 million) was spent on the build
events of 24 January 2008 and was largely concluded       programme. Since inception of the programme in
in October 2008.                                          2005, capital expenditure has amounted to a total of
                                                          R54 304 million.
The recovery programme with the associated costs has
secured South Africa a much healthier power system        As at 30 April 2009, 4 454MW was commissioned
and a resilient Eskom, evidenced by the fact that there   since 2005. A further 6 184MW will come on stream
has been no load shedding since May 2008.                 within the next five years. All eight units of Camden
      Eskom Holdings Limited
18    Annual repor t 2009




     Message from the chief executive                                 continued




         power station are now fully operational – a major           R25 351 million in 2009. This increase is mainly due
         achievement given the old technology that had to be         to the use of short-term coal contracts and the
         recommissioned.                                             significant escalation in the unit cost of coal.


         Two units of Grootvlei and one unit of Komati             • Higher manpower cost: During the year under review
         have been successfully synchronised to the national         Eskom had to grow its employee complement not
         electricity grid. Two more open-cycle gas turbine units     only to build new generation and network capacity
         were commissioned at Gourikwa power station. Some           but also to operate and maintain both existing and
         1 962km of high-voltage transmission lines have been        new plants. Eskom recruited 4 261 employees in
         built in the past four years, as well as numerous new       2008/9. Eskom has been losing critical and scarce
         transmission substations and transmission networks.         skills to a highly competitive labour market. In the
         The construction of the 765kV line to Cape Town is          prevailing skills climate in 2008, Eskom was forced
         progressing well, with 430km already strung. The Apollo     to review its remuneration strategy in order to
         substation refurbishment was completed in May 2008,         attract and retain staff, particularly those with scarce
         increasing the availability and maintainability of the      or critical skills. Consequently, group employee
         interconnection between Cahora Bassa in Mozambique          costs increased from R11 353 million in 2008
         and Apollo substation in Gauteng.                           to R15 166 million in 2009. We have also spent
                                                                     R823 million on training for staff and instituted an
         Operating costs                                             academy of learning with six faculties: engineering,
         The full recovery cost to Eskom, and in particular some     apprenticeship,    services,    project    management,
         of the extraordinary measures taken last year, has          leadership and finance.
         dominated the results we are submitting.
                                                                      I
                                                                   •   ncreased maintenance cost: During the year under
            I
         •   ncreased primary energy cost: At the end of March       review, significant progress was made in catching up
           2008, the coal stock levels were at 13 days – well        with maintenance which could not be undertaken
           below the required minimum of 20 days. While the          because our plant was run at full capacity during
           total coal burned for the year under review was           the latter half of 2007/8. During the year,
           121 million tons (2008: 125 million tons), Eskom          maintenance costs increased to R5 891 million
           purchased 133 million tons (2008: 120 million tons).      (2008: R4 526 million).
           Given that the long-term contracted coal suppliers
           could not respond to the short-term increase in our     Acknowledgements
           coal requirements, the additional coal was purchased    The recovery of the power system is the result of hard
           mainly under the more expensive short-term coal         work and dedication. Our 37 857 employees and a
           contracts, which included coal transportation cost.     multitude of contractors worked tirelessly to ensure a
                                                                   healthier electricity supply system. I also need to make
         • The amount spent on primary energy (mainly              special mention of our suppliers, in particular the coal
           coal) increased from R18 314 million in 2008 to         industry, who partnered with us to solve the coal issues
                                                                                                                      Eskom Holdings Limited
                                                                                                                          Annual repor t 2009      19




at our power stations. I also salute all our stakeholders    Generation plant capacity and maximum demand
who came to me with offers of assistance and advice –        MW thousands

your contributions were invaluable and continue to be         45
                                                              45
                                                              40
                                                              40
appreciated.                                                  35
                                                              35
                                                              30
                                                              30
                                                              25
                                                              25
No words can describe the tragic loss of life of staff,       20
                                                              20
contractors and members of the public – I would like to       15
                                                              15
                                                              10
                                                              10
acknowledge those people who died in the line of duty,
                                                                5
                                                                5
and my thoughts go out to all their friends and families.       0
                                                                0




                                                                    1999

                                                                            2000

                                                                                   2001

                                                                                          2002

                                                                                                 2003

                                                                                                        2004

                                                                                                               2005

                                                                                                                       2006

                                                                                                                              2007

                                                                                                                                     2008

                                                                                                                                            2009
In order to prevent these unacceptable consequences,
                                                              n Capacity in reserve storage
we have made the decision to reinforce and roll out five      n Net maximum capacity
                                                              — Maximum demand
Eskom cardinal rules that apply to Eskom employees
and other persons performing work for Eskom. We are
also working with suppliers, customers and contractors
to integrate safety, health and environmental issues into
all their operations.


Last year we called on the nation to seriously look for
ways to reduce electricity consumption in an attempt to
reduce the strain on the system. Many of our customers
heeded the call and I thank them.The national electricity
supply system remains under pressure, and the solution
is not merely to start saving energy when the pressure
is on.


We need to start a national debate about how we
consume energy. Every time we flick a switch there is
a power station at the end of the line. It consumes raw
materials, it costs money and it has certain impacts on
the environment. I invite every person in South Africa
to start thinking about energy – how we generate it,
what we pay for it and how sustainable it is. Collectively
we can make national decisions to ensure a sustainable
electricity system for the next 86 years to come.




Jacob Maroga
Chief Executive
        Eskom Holdings Limited
20      Annual repor t 2009




     Executive management committee
     at 31 March 2009




              1 PJ (Jacob) Maroga (49)
                 Chief executive and director
                 BSc (Electrical Eng) (Wits), AMP (Harvard)


              2 ID (Izak) du Plessis (54)
                 Acting chief finance officer
                 BCom (Hons) (Accounting, Taxation and Auditing) (Free
                 State), MCom (Financial Management) (Pretoria), AMP
                 (Harvard), Advanced Certificate Taxation (UNISA),
                 CA(SA)                                                       5 E (Erica) Johnson (40)
                 Providing financial and procurement strategy, policies,        Chief officer – Customer Network business
                 assurance and strategic services to the Eskom group
                                                                                BSc (Electrical Eng) (UCT), MSc (Electrical Eng) (UCT),
                                                                                MBA (Wits)
              3 BA (Brian) Dames (43)                                           Director: PBMR
                 Chief officer – Generation business                            Accountable for the Network and Customer Services
                 BSc (Hons) (Western Cape) MBA and Graduate Diploma             business in Eskom. Entails the planning, operations
                 in Utility Management (Samford, USA)                           and maintenance of the transmission and distribution
                                                                                network, the management of the customer base and
                 Chairman: Rotek Industries, Roshcon
                                                                                the revenue stream
                 Chief executive officer: Eskom Enterprises
                 Operating and maintenance of generation assets
                 throughout the plant life-cycle, nuclear operations and      6 EM (Elsie) Pule (41)
                 strategic primary energy sourcing                              Acting managing director – Human Resources
                 Designing, building and refurbishing electricity assets,       division
                 leading project development for the Eskom group,               BA (Social Work) (University of the North), BA (Hons
                 being the custodian of the non-regulated businesses            Psychology) (Pretoria), MSc (Business Engineering)
                 and offering strategic and commercial life-cycle services      (Warwick University)
                 to the divisions
                                                                                Providing human resources strategy, direction, policies
                                                                                and assurance, strategic services including health and
              4 Dr SJ (Steve) Lennon (50)                                       wellness, industrial relations, learning, organisational
                 Managing director – Corporate Services division                effectiveness and remuneration and benefits. Driving
                                                                                culture change through effective change management
                 MSc (Phys Metallurgy), PhD (Wits), Professional scientist      and implementation and development of appropriate
                 (Pr.Sci.Nat), Fellow of the Academy of Engineering, Fellow     programmes
                 of the Royal Society
                 Chairman: Board of trustees Fossil Fuel Foundation,
                 National Advisory Council on Innovation                        Retirements and other changes
                 Director: Electric Power Research Institute, Eskom             Bongani Nqwababa and Mpho Letlape left Eskom’s
                 Enterprises                                                    service on 31 December 2008
                 Supporting growth, innovation and sustainability of
                 Eskom group by influencing strategic direction and             Only major directorships listed
                 risk management, ensuring safety, assurance, strategy
                 execution, an optimal portfolio of assets, regulatory
                 compliance, and effective group-wide governance, and
                 providing strategic services in the area of information
                 management, environment, security, insurance and
                 research, demonstration and development to the
                 benefit of the business as a whole
          Eskom Holdings Limited
              Annual repor t 2009   21




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