Eskom 2017 Q2 Final Draft Report To Shareholder

ESKOM HOLDINGS SOC LTD
SHAREHOLDER REPORT
FOR THE PERIOD ENDED

30 SEPTEMBER 2017
Approved on behalf of
Eskom Holdings SOC Ltd
Mr Zethembe Khoza
Interim Chairman
Date:
CONTENTS
About this report................................................................................................................. 3
Executive summary ............................................................................................................ 4
Operating performance...................................................................................................... 4
Governance and risk ....................................................................................................... 10
Compliance with equity conditions................................................................................... 11
Performance against the shareholder compact.............................................................. 12
Operating performance .................................................................................................... 15
Revenue and customer sustainability .............................................................................. 15
Operational sustainability................................................................................................. 23
Sustainable asset creation............................................................................................... 45
Environmental and climate change sustainability............................................................. 55
Safety.............................................................................................................................. 61
Building a sustainable skills base .................................................................................... 66
Transformation and social sustainability .......................................................................... 67
Strategic support functions .............................................................................................. 80
Financial review ................................................................................................................ 87
Financial results for the period ended 30 September 2017 .............................................. 87
Update on RCA and MYPD applications.......................................................................... 99
Treasury ........................................................................................................................ 101
Operating subsidiaries ................................................................................................... 113
Eskom Enterprises SOC Ltd group................................................................................ 114
Escap SOC Ltd.............................................................................................................. 118
Eskom Finance Company SOC Ltd group ..................................................................... 120
Governance and risk....................................................................................................... 121
Corporate governance................................................................................................... 121
Key focus areas and associated risks............................................................................ 124
Internal audit.................................................................................................................. 128
Appendices ..................................................................................................................... 129
Appendix 1 Abbreviations and glossary of terms

Appendix 2 Energy flow diagram
Appendix 3 Key performance indicators
Appendix 4 List of Eskom subsidiaries, associates, joint ventures and trusts
About this report
This report is prepared for the shareholder on a quarterly basis and provides an overview of
period under review. Furthermore, it examines the challenges and risks that Eskom faces as
well as the steps taken to mitigate and manage these, as well as governance matters.
Although the shareholder compact is agreed at company level, the report provides
information on the performance of the group, namely Eskom and its operating subsidiaries. It
covers the six months ended 30 September 2017 and is structured according to Eskom's
sustainability dimensions, as indicated in the diagram below:
The report should be read in conjunction with the following published documents:
March 2017 integrated report and annual financial statements, as published at
www.eskom.co.za/IR2017
September 2016 condensed group interim financial statements, as published at
www.eskom.co.za/IR2016/interim
The following items are reported only on an annual basis, in the March shareholder report:
Divisional/functional mandates
Future focus areas at a divisional/functional level
Detailed corporate governance and leadership reports
Executive summary
The executive summary provides an overview of the performance of the Eskom group for the
six months ended 30 September 2017. Items included in the executive summary are further
elaborated on in the respective sections of this report refer to the table of contents for
guidance.
Operating performance
This section should be read in conjunction with the detailed financial information at
30 September 2017 (income statement, statement of financial position, cash flow and notes)
in Appendices A to E.
Group revenue of R95 504 million is R3 747 million lower than budget. This is attributable to
lower than budgeted electricity sales volumes, which are 2 799GWh below budget, the
capitalisation of pre-commissioning revenue at Medupi and Kusile, and revenue of
R2 643 million not being recognised (against a budget of R2 100 million), due to the
application of the IAS 18 principle of not recognising revenue which is deemed not collectible
at the date of sale.
Primary energy costs are underspent by R3 874 million, with all main categories coal,
OCGTs, IPPs and international purchases being underspent. OCGTs are underspent due
to the improved availability of the coal fleet, while IPPs are underspent as a result of lower
than budgeted supply by renewable IPPs.
R25 264 million is R4 707 million below budget, as a result of underspend on employee
benefit costs and other operating expenses.
Group capital expenditure (excluding DoE funded capex, as well as private sector
participation and capex funded by the Office of the Eastern Cape Premier) amounts to
R24 185 million for the period, which is substantially lower than the budget of
R31 821 million due to underspend mainly in Group Capital mainly due to underspend at
Kusile, Medupi and Power Delivery Projects, partially due to phasing of expenditure. Much of
the shortfall is however expected to be recovered by year end, as the year end budget of
R54 883 million is forecast to be slightly exceeded by R677 million.
iquidity position (cash and cash equivalents plus investments in

securities) is R15 714 million against a budget of R25 476 million (and R32 504 million at
31 March 2017), due to debt raised being substantially lower than budget as explained
earlier, coupled with higher debt repaid, offset by higher operating cash flows generated.
However, the biggest contributor to the variance against budget is a lower opening cash
balance.
The Constitutional Court dismissed an application by Borbet SA and others for leave to
appeal the decision of the Supreme Court of Appeal which affirmed the NERSA decision to
3 methodology, on
the basis that the application bears no prospects of success.
2015/16 and 2016/17 by considering the implication of this decision and determining the way
forward.
On 25 August 2017, Eskom submitted a one-year revenue application for 2018/19 of

R219 514 million to NERSA (and agreed to by NERSA), which equates to a standard tariff
price increase of 19.9%.
For the six months to 30 September 2017, savings of R9 077 million were achieved against
a target of R9 244 million. The underperformance was primarily due to lower savings in
manpower and revenue (particularly energy losses). Inception-to-date savings amount to
R57 729 million against a target of R52 214 million, an overall stretch of R5 515 million.
Savings projected at year end amount to R18 693 million against a target of R18 929 million.
At 30 September 2017, Eskom Treasury has secured 56% of the reduced funding
requirement of R54.2 billion (originally R71.7 billion) for t
reserves at 30 September 2017 amounted to R9.1 billion.
The World Bank and AfDB send a mission from 17 to 25 July 2017 during which they
reviewed implementation progress on projects funded. Meetings were held with officials from
DPE, National Treasury (NT), DEA, DWS together with Eskom. The lenders held a separate
meeting with NERSA. The mission noted several operational issues:
Potential delay in commencing implementation of flue gas desulphurisation (FGD)
Delay in implementation of MCWAP phase 2A water augmentation scheme
Sulphur dioxide (SO2) emission spikes from the Medupi power plant above the
3500mg/Nm3 limit in current regulations
Three fatalities were suffered over a period of months, with two fatalities on transmission
lines and one in the Medupi power plant
Lack of progress on the renewable energy concentrated solar plant (CSP) component
(co-financed by IBRD, CTF, KfW, AfDB, EIB, and AFD)
The World Bank also discussed these action items with the Minister of Finance. Eskom is
finalising a letter with feedback regarding the above concerns to the Ministers of Finance
and Public Enterprises.
All customer service indicators improved for the six months ended 30 September 2017
compared year end and are above target.
NERSA approved the silicon smelters application for a two-year negotiated pricing
agreement on 24 August 2017. Furthermore, 13 customers have signed up to participate in
the incentive scheme which encourages electric arc furnace customers to consume more
energy during standard and off-peak hours. Approximately 270GWh of additional sales were
achieved for the winter pilot, with estimated net revenue of R162.5 million.
A total of 57 active payment agreements are in place with defaulting municipalities, including
14 of the top 20 defaulters. However, of the 57 agreements, only 16 are being honoured. Of
the top 20 defaulters only one is fully honouring their agreement. None of the Free State
municipalities is honouring their payment arrangement.
During the past quarter, numerous customers concluded agreements with Eskom or made
suitable arrangements supported by their Provincial Treasury. The interventions from the
Northern Cape Province were not complied with in some of the municipalities, resulting in
supply interruptions. Various other supply interruptions will continue unless agreement can
be reached.
Soweto outstanding debt (excluding interest) increased from R5 426 million at 30 June 2017
to R5 668 million at 30 September 2017. For the six months ended 30 September 2017, a
total of 16 465 split and/or smart meters were installed in Soweto, Sandton and Midrand,
while 7 185 meters were converted to prepaid.
Coal stock stood at 74 days, with normalised coal stock days at 37 (excluding Medupi,
Kusile and excess stock at Lethabo), meeting the overall target of 37 days. The road-to-rail
performance of 6.5Mt year-to-date fell slightly short of the target of 6.7Mt mainly due to the
locomotives.
UCLF has improved from 9.82% for the six months to September 2016 to 7.80% for the six
months to 30 September 2017. PCLF has decreased to 8.42% over the past six months
compared to 11.23% for the same period last year, due to outages that did not start as
planned.
Transmission improvement initiatives introduced in 2016/17 are being sustained and have
contributed to the excellent Transmission system minutes lost <1 performance attained for
the period to September 2017. This includes the focus on improving restoration response
time, risk management and plant availability. No major incidents have occurred and good
line fault performance is being sustained.
Distribution network interruption performance in terms of interruption frequency is better than

target, although the average duration of interruptions is slightly worse than target.
The improved performance in the Generation plant in terms of energy availability has
resulted in a reduction in OCGT usage and costs compared to the prior year. Both Eskom
and IPP-owned OCGTs were only operated to meet minimum operating requirements.
Eskom purchased 4 070GWh from IPPs at a cost of R9 376 million during the six months, at
an average cost of 230c/kWh. Renewable IPPs delivered energy at an average load factor of
30.5% at an average cost of 203c/kWh. At 30 September 2017, total available IPP capacity
of 4 267MW included renewable IPPs of 3 262MW and IPP peakers of 1 005MW. The
previous short-term IPP contracts of 912MW were not renewed for the current year.
Cross-border sales for the six months were slightly lower than budget due to increased
rainfall in the region, which resulted in improved availability of hydro generation plant owned
by trading partners. Cross-border purchases were 17% below budget, primarily due to
Cahora Bassa (HCB) reducing their supply due to dam levels still being affected by the
drought.
Medupi Unit 4 achieved full load (794MW) on 19 June 2017; commercial operation is
expected ahead of schedule by the end of the third quarter of the year. Medupi Unit 3
draught group test run milestone was completed on 11 August 2017 and commercial
operation is scheduled for the first half of 2019, based on the P80 schedule. Medupi Unit 2
boiler hydro test milestone was completed on 23 September 2017 and commercial operation
is scheduled for the second half of 2019, based on the P80 schedule.
Kusile Unit 1 achieved commercial operation (CO) status on 30 August 2017, with an
installed capacity of 800MW. Kusile Unit 2 achieved boiler chemical clean milestone on
27 August 2017 and first fire on oil on 2 October 2017. Construction completion progress on
Kusile Unit 3 is 76%. Kusile Unit 4 boiler reheater hydro tests were completed on
2 September 2017 and the steam turbine and generator on turning gear (local) milestone
was also achieved. Kusile Units 5 and 6 have yielded progress ahead of schedule.
The construction of Transmission lines is performing well and exceeded the year-to-date
target. Transformer capacity of 500MVA each were installed and commissioned at the Hydra
and Helios IPP substations on 18 August and 4 September 2017 respectively, adding a
further 1 000MVA transformer capacity to the national grid.
There is a risk of delays on the Duvha project, due to the judgment handed down on
30 June 2017, wherein Eskom and Dongfang were interdicted from executing the contract
for the procurement and fitment of the boiler at Duvha Power Station. The final determination
of the review application is still pending. Demolition works are continuing and completion is
expected by June 2018.
Forging activities at Japan Steel Works for the Koeberg steam generator replacement
project are progressing according to schedule. Both sets of steam generators are planned to
be delivered in time for the X25 refuelling outages in February and September 2021
respectively. The manufacturing progress is on track to meet these dates.
All current nuclear procurement processes have been suspended after the Western Cape
High Court case. Whilst Eskom has terminated all procurement processes, current
development work as the owner and operator is ongoing, in order to reach a state of
readiness for construction.
The particulate (ash) emissions performance for the six months to 30 September 2017 is
0.25kg/MWhSO, which is significantly better than the year end target of 0.34kg/MWhSO and
to increased
opportunities for outages which have improved the condition of the operating plant, as well
as the impact of the Grootvlei fabric filter plant retrofits.
Water usage related to power station operations for the period was 1.29 /kWhSO,
substantially better than the annual target of 1.37
performance of 1.43 /kWhSO.
Sere Wind Farm contributed 153.67GWh to the national grid for the period, with average
plant availability of 99.38% and an average load factor of 33.48%. PV sites in operation
produced total energy sent out of 1.75GWh for the six months.
Sadly, the group experienced three employee and four contractor fatalities during the period.
The group lost-time injury rate (including occupational diseases) has improved to 0.25, from
0.39 at 31 March 2017.
Eskom is losing approximately R5 billion per annum from meter tampering, illegal
connections and ghost vending, as well as other forms of electricity theft. Concerted efforts
are in place to clamp down on criminal activities.
The group headcount (including fixed-term contractors) increased slightly to 47 891 at
30 September 2017 (30 June 2017: 47 809). Learner intake is behind target, although
learners at all levels (engineers, technicians and artisans) are above target.
Corporate social investment spend of R129.3 million was committed on 46 projects for the
period under review, impacting a total of 187 364 beneficiaries. Eskom achieved a total of
100 380 electrification connections (including rollovers) for the period, against a target of
95 409.
During the six months, only the targets for procurement spend with black women-owned and
black youth-owned suppliers have been achieved at group level, largely due to the inclusion
of suppliers that are 30% owned by black women when calculating attributable spend.
Attributable spend with black-owned, BPwD, QSE and EME suppliers performed below
target. Procurement equity performance has deteriorated due to the implementation of the
new B-BBEE Codes of Good Practice, which excludes elements that can no longer be
considered when calculating total measurable procurement spend (TMPS).
At senior management level, gender quarterly targets have been achieved whilst racial
equity is improving slightly. At middle management/professionally qualified level, racial
equity is at acceptable levels, whilst gender equity remains a challenge. Gender and racial
equity have been achieved at supervisory and lower levels. Overall, disability equity is
performing above target.
Governance and risk
There have not been any changes in the Board of Directors during the past quarter.
On 4 July 2017, t
his dismissal, pending the outcome of the High Court application by opposition parties for his
reappointment to be ruled invalid and set aside.
On 27 July 2017, the Board put Mr Anoj Singh on special leave pending an investigation. Mr
Calib Cassim (General Manager: Financial Planning and Economic Regulation) was
appointed as acting Chief Financial Officer, effective 28 July 2017.
Mr Johnny Dladla, who was appointed as interim Group Chief Executive effective
22 June 2017, returned to his previous position as Chief Executive Officer of Eskom Rotek
Industries, effective 6 October 2017. Mr Sean Maritz (Group Executive: Information
Technology) was appointed as interim Group Chief Executive, effective 6 October 2017.
The total number of Priority 1 risks at the end of the current quarter increased to 24, from 23
at 30 June 2017. Four new risks were evaluated at Priority 1, while three risks were
downgraded.
This programme aims to ensure that the audit findings through the external audit process
and qualified audit opinion relating to irregular expenditure for the 2017 year end will be
remedied in the shortest possible time, implementing a sustainable process across
Procurement and Supply Chain.
Feedback on the progress of the recovery programme:

The Audit and Risk Committee (ARC) will oversee progress and provide regular updates,
while the programme team tracks what is due and when
Feedback on progress was presented to ARC on 26 September 2017, Finance
committee on 27 September 2017 and to Exco on 28 and 29 September 2017
A total of 108 contracts over R1 billion (representing 65%) and 3 335 contracts under
R1 billion (62%) have been reviewed to date
The entire population of potential threshold breaches for 2015/2016 and 2016/17 to be
presented as bulk condonations is estimated at 6 206 contracts totalling R961.4 million.
The first pack of thresholds bulk condonations has been prepared. The external auditors
were engaged in this regard on 11 October 2017
The CIO requested a team to fast track the Chain Records Management Solution by year
end. The focus is on the top 183 contracts in the system
All declared emergency procurement for the last two financial years are being reviewed
After a review of emergency and sole source procurement and condonations, a new
system has been implemented group executives are now required to sign off on all
emergency procurement
The CFO of Eskom Rotek Industries (ERI) and team have been engaged to develop a
high-level plan to address irregular expenditure, contract reviews and thresholds
Progress has been made in ERI in dual/triple adjudications, reviewing 2016/17 contracts
and closing 2016/17 audit findings
Compliance with equity conditions

Eskom remains compliant with all conditions of the Government support framework
agreement.
The labour report was submitted to DPE and National Treasury (NT) during October 2017.
Any plans to implement recommendations, if required, will be finalised subsequent to internal
governance process and discussion at the reference panel meeting.
Eskom submitted the report addressing an independent rev

to DPE and NT. The report was reviewed by the reference panel. A management response
report has been developed and will be submitted to DPE shortly. This report indicates which
recommendations have been agreed to, those which have been or will be implemented, and
those which are not supported including reasons why.
As reported earlier, performance of the BPP savings programme is on track.
Actual income from the disposal of non-core properties year-to-date is R26.3 million
(June 2017: R15.5 million, restated) against a year-to-date target of R26 million. The target
for the 2018 financial year is R50.6 million and is expected to be achieved.
Regarding the EFC disposal, the information received after the request for information (RFI)
issued in January 2017 revealed that a market does exist, and gave guidance on what
potential bidders consider the critical components of a successful transaction. The tender
process was relaunched in August on the Eskom and National Treasury portals; the tender
closed on 21 September 2017. Tenders are being currently being evaluated. Eskom will
endeavour to complete the disposal process during the 2018 financial year.
Continual feedback on the progress against the Generation maintenance plan as well as
progress on the new build programme is also included in the report as requested, to track
compliance to the equity conditions. Refer to pages to and to for more
information.
Performance against the shareholder compact
Each year, Eskom agrees on its performance objectives, measures and indicators, as well
as its annual targets in consultation with the shareholder, in line with the Public Finance
period
ended 30 September 2017 in terms of the shareholder compact. With the exception of LTIR,
all KPIs in the compact refer to the Eskom company only.
Actual performance against the year-to-date target and projected performance against the
year-end target is indicated as follows:
Actual performance for the period met or exceeds the target, or it is projected that the
year-end target will be met or exceeded
Actual performance for the period did not meet target, or it is projected that the year-end
target will not be met
Sep 17 Jun 17 Mar 18 Mar 17

Key performance indicator Sep 17 Jun 17
and unit Target Actual Actual Target Proj Proj Actual Page
Focus on safety
Lost-time injury rate, index
(including occupational 0.31 0.25 0.27 0.31 0.27 0.27 0.39
diseases)
Improve operations
Energy availability factor
78.00 83.18 83.45 78.00 80.84 81.03 77.30
(EAF), %
Planned capability loss
9.61 8.42 8.24 10.00 10.23 10.17 12.14
factor (PCLF), %
Total system minutes lost for
1.55 1.04 0.33 3.53 3.20 3.53 3.80
events <1 minute, minutes
System average interruption
duration index (SAIDI), 39.0 39.5 40.0 39.0 39.0 39.0 38.9
hours
System average interruption
frequency index (SAIFI), 20.0 19.1 19.3 20.0 20.0 20.0 18.9
events
Distribution total energy
6.55 8.10 7.65 6.55 7.32 7.55 7.55
losses, %
Deliver capital expansion
Generation capacity installed
and commissioned 794 1 594 794 1 460 2 388 2 388 1 332
(commercial operation), MW
Transmission lines installed,
321.0 350.0 150.7 677.0 677.0 677.0 585.4
km
Transmission transformer
capacity installed and 1 000 1 000 2 010 2 010 2 010 2 300
commissioned, MVA
Reduce environmental footprint in existing fleet
Relative particulate
0.34 0.25 0.23 0.34 0.28 0.30 0.30
emissions, kg/MWh sent out
Specific water consumption,
1.37 1.29 1.32 1.37 1.32 1.29 1.42
/kWh sent out
Implementing coal haulage and the road-to-rail migration plan
Migration of coal delivery
from road to rail (additional
6.7 6.5 3.2 15.1 12.9 12.9 13.2
tonnage transported on rail),
Mt
Ensure financial sustainability
Value add per employee, R
million per full-time 0.91 0.97 0.40 1.32 1.50 1.53 1.44
employee
Cash interest cover, ratio 1.40 1.36 0.47 1.15 1.00 1.14 1.77
Debt/equity (including long-
2.20 2.30 2.34 2.65 2.77 2.70 2.22
term provisions), ratio
Free funds from operations
6.54 6.73 2.61 7.95 8.69 9.29 11.30
as % of gross debt, %
Free funds from operations
88.46 111.60 88.47 62.86 66.63 68.06 74.55
as % of capex, %
Electricity EBITDA margin,
25.40 30.04 23.05 17.00 22.05 21.47 20.55
%
BPP savings, R billion 9.24 9.08 3.21 18.93 18.69 18.95 20.21
Average debtors days
65.82 63.19 60.15 65.82 74.41 74.19 57.31
(including Soweto), days
Arrear debt as % of
electricity revenue 2.02 3.23 5.33 2.17 2.56 2.51 2.43
(company), %
Coal purchase R/ton, %
12.0 3.3 1.7 12.0 4.0 1.2 3.5
increase
Human capital
Training spend as % of
gross employee benefit 4.50 5.08 4.44 5.00 5.00 5.00 4.89
costs
Learner intake 250 79 13 500 195 33 3 048
Disability equity in total
2.50 3.08 3.05 2.50 3.14 3.11 3.01
workforce, %
Racial equity in senior
management, % black 66.73 66.51 66.36 71.39 67.40 67.84 65.77
employees
Racial equity in
professionals and middle
75.99 74.58 74.17 78.22 75.36 74.91 73.60
management, % black
employees
Gender equity in senior
management, % female 32.83 37.13 36.82 35.64 37.18 36.30 36.69
employees
Gender equity in
38.33 37.17 36.76 39.59 37.65 36.90 36.65
management, % female
employees
Economic impact
Local content contracted
70.00 66.99 74.07 70.00 70.00 80.00 73.37
(Eskom-wide), %
70.00 54.94 56.21 70.00 70.00 80.00 85.78
(new build), %
B-BBEE score 2 8 8 2 8 8 2
Percentage of broad-based
black economic
82.00 65.60 50.48 82.00 82.00 82.00 100.75
empowerment spend, % of
TMPS
Procurement spend with
black-owned (BO) suppliers, 40.00 35.14 25.21 40.00 40.00 40.00 36.98
% of TMPS
black women-owned (BWO) 12.00 12.95 11.90 12.00 12.00 12.00 12.67
suppliers, % of TMPS
black youth-owned (BYO) 2.00 1.98 1.46 2.00 2.00 2.00 1.25
suppliers, % of TMPS
suppliers owned by black
1.00 0.06 0.02 1.00 1.00 1.00 0.02
people with disabilities
(BPwD), % of TMPS
qualifying small enterprises 15.00 6.35 4.56 15.00 10.00 15.00 7.67
(QSE), % of TMPS
exempted enterprises 15.00 7.30 5.87 15.00 10.00 15.00 10.15
(EME), % of TMPS
Technology transfer
Acquisition of intellectual
13.00 10.04 5.00 25.00 25.00 25.00 31.00
property, R million
Skills development, number
20 39 21 30 30 35 54
of people
Corporate social investment
CSI committed, R million 78.6 129.3 76.1 192.0 192.0 192.0 225.3
Operating performance
Revenue and customer sustainability

We aspire to consistently satisfy our customers with the level of service they receive. In
order to measure this, we focus on customer service performance in terms of a number of
metrics, as well as revenue and debt management, primarily through the average number of
debtors days.
Customer service performance
All customer service indices are performing well above target
Customer category Sep 17 Jun 17 Mar 17 Sep 16

Local customers
Redistributors 797 798 802 803
1
Residential 5 973 425 5 903 233 5 838 754 5 693 268
Commercial 51 367 51 135 50 956 50 853
Industrial 2 705 2 696 2 706 2 719
Mining 1 002 1 008 1 012 1 016
Agricultural 81 714 81 722 81 806 82 087
Rail 509 510 510 509
Total local customers 6 111 519 6 041 102 5 976 546 5 831 255
International customers
Utilities 7 7 7 7
End-users across the border 4 4 4 4
Total international customers 11 11 11 11
Total customers, number 6 111 530 6 041 113 5 976 557 5 831 266
1. Prepaid customers and public lighting are included under residential.
Eskom uses a range of statistical perception- and interaction-based customer surveys,

conducted by independent research organisations, to measure customers' satisfaction with
Eskom's service. These include KeyCare (Eskom and Top Customer), Enhanced MaxiCare
and CustomerCare.
Sep 17 Jun 17 Sep 16 Mar 18 Mar 17
Sep 17 Jun 17
Measure and unit Target Actual Actual Actual Target Proj Proj Actual
Top customers
Eskom KeyCare, index 104.0 106.9 107.6 106.1 104.0 106.7 107.1 107.0
Top Customer KeyCare,
104.0 108.2 108.7 108.0 104.0 108.6 108.8 108.1
index
Other customers
Enhanced MaxiCare,
93.7 95.9 96.0 94.7 93.7 96.0 95.6 95.8
index
CustomerCare, index 8.2 9.8 9.8 9.3 8.2 9.9 10.0 9.8
The 12-month moving averages for both Eskom and Top Customer KeyCare continue to
perform above target, although both have declined slightly over the past quarter. The Eskom
and Top Customer General Management measurement areas both declined over the quarter
and are currently performing below target. In contrast, the Accounts and Engineering
measurement areas are performing above target. This is a direct result of more targeted
interactions with customers and the proactive sharing of information.
Nevertheless, customers remain dissatisfied with poor quality of supply, perceived high
electricity prices, and slow restoration times. Overall, Eskom is perceived as an unreliable
provider of electricity-related services. The top priority remains the extent to which Eskom
supplies electricity at internationally competitive prices.
CustomerCare remained stable and above target. Staff friendliness consistently continues to
score the highest. Satisfaction levels with the Eskom Contact Centre remained the same
since the previous quarter.
The Enhanced MaxiCare perception survey score decreased since the previous quarter, but
has improved since year end. The most common complaints are about the accuracy of
Eskom estimations, how well Eskom keeps to the notified dates and times of planned
electricity interruptions, and the number of power surges and voltage drops (dips) in
electricity supply. In the PrePaid segment, customers are unhappy about the lack of
community meetings held in their areas.
With the exception of the Agriculture segment, all segments, including Prepaid, performed
above target in the past quarter, reflecting the commitment of staff in the operating units.
Agricultural customers were unhappy about the number of power surges and voltage dips in
electricity supply.
Revenue and debtor management
NERSA approved the silicon smelters application for a two-year negotiated pricing
agreement on 24 August 2017. Silicon smelters must restart their operations based on
the incentive package by no later than 1 July 2018
Municipal arrear debt increased by a further R974 million to R12 428 million in the past
quarter, although the percentage arrear debt remained at 54%
Of the 57 valid municipal payment agreements in place, only 16 are being fully honoured

Sep 17 Jun 17
Arrear debt as % of
2.02 3.23 5.33 3.09 2.17 2.56 2.51 2.43
electricity revenue, %
Average debtors days
65.82 63.19 60.15 TBU 65.82 74.41 74.19 57.31
(including Soweto), days
Debtors days
municipalities, average 67.70 61.78 57.06 45.29 67.70 78.62 78.62 53.25
debtors days
Debtors days large
power top customers
15.40 14.94 15.23 15.65 15.40 15.00 15.40 15.34
excluding disputes,
average debtors days
Other large power user
debtors days (<100GWh
16.30 16.73 16.77 16.32 16.30 16.50 16.30 16.78
p.a.), average debtors
days
Debtors days small
power users excluding
48.20 46.64 47.95 48.76 48.20 48.20 48.20 48.75
Soweto, average debtors
days
1. The figures above exclude the impact of the IAS 18 revenue adjustments.
sales. Average demand for these customers has declined further to approximately 8 200MW
during the past quarter, from an average of 8 500MW in the first quarter of the financial year,
recovery in demand as customers returned plant after the higher winter tariffs and plant
maintenance.
In an effort to increase local demand, customer executives and regional managers continue
to engage with Key Industrial Customers to determine the potential to increase demand.
Eskom is driving customer centricity in our interactions with new investors as it contributes
directly to additional sales. Eskom has engaged with the Landbank to share future plans in
order to understand the electricity needs of the agricultural industry and expedite projects.
Eskom also continues to evaluate customer proposals for support packages.
Whilst Eskom awaits clarification of the NERSA process and the development of a
framework for support packages, the silicon smelters application for incentivised pricing was
approved by NERSA on 24 August 2017.
Thirteen customers have signed up to participate in the incentive scheme, which encourages
electric arc furnace customers to consume more energy during standard and off-peak hours.
Preliminary data analysis reveals approximately 270GWh of additional sales were achieved
for the winter pilot with estimated net revenue of R162.5 million. Customers are required to
maintain their summer profile of 2015/16 for the months of September, October and
November 2017 in order to qualify for the rebate. The estimated customer rebate is
approximately R42 million.
Eskom is participating in an interdepartmental discussion platform, established under the

leadership of DPE, which includes government and industry stakeholders working towards
finding both short- and long-term solutions that would address the sustainability and
competitiveness of South African industries.
The debt-write off process as approved by IFC has been finalised for the following
customers:
Evraz Highveld Steel & Vanadium: R273.71 million
ASA Metals: R9.94 million
International Ferro Metals: R138.72 million
There are no other customers currently under business rescue.
Due to the application of the IAS 18 accounting principle of not recognising revenue if it is
deemed not collectible at the date of sale, year-to-date external revenue and debtors of
R2 643 million were reversed at 30 September 2017 (June 2017: R1 639 million). The
associated impairment was also reversed. The inception-to-date revenue and associated
impairment adjustment is R7 908 million (June 2017: R6 903 million). Debtors days
outstanding is calculated before any IAS 18 adjustments.
The municipal arrear debt provision increased in line with the increase in arrear municipal
arrear debt during the current financial year.
Debtor category, Current 31-60
1
R million Total 0-15 days 0-30 days 16-30 days days >60 days
Large power users
7 452 7 193 100 50 109
(excluding municipalities)
Municipalities 23 031 10 603 17 2 178 10 233
Small power users 2 590 1 666 176 748
Soweto (small power
14 075 408 290 13 377
users)
International 1 908 764 489 199 456
Total 49 056 18 560 2 074 606 2 893 24 923
% of total debt 100% 42% 1% 6% 51%
% of total debt as at
31 March 2017 100% 38% 3% 6% 53%
(comparison)
1. The figures above exclude the impact of the IAS 18 revenue adjustments.
Total municipal arrear debt increased by R974 million during the quarter, from
R11 454 million at 30 June 2017 to R12 428 million at 30 September 2017.
12 000
10 000
Municipal debt,
R million 8 000
6 000
4 000
2 000
0
Dec- Mar- Mar- Mar- Mar- Jun- Sep- Dec- Mar- Apr- May- Jun- Jul- Aug- Sep-
12 13 14 15 16 16 16 16 17 17 17 17 17 17 17
Total Overdue Debt R'm 1 157 1 202 2 593 4 953 6 005 7 342 9 180 9 674 9 406 9 82710 45311 45411 07411 24512 428
Cumulative Impairment Provision -
R'm 380 1 209 3 771 4 678 5 581 7 070 7 668 8 051 8 051 8 05110 12510 12510 12510 642
(if no IAS18 adj)
Cumulative Impairment Provision -
380 1 209 3 320 3 214 3 461 3 558 3 629 3 895 3 895 3 895 4 423 4 423 4 423 4 122
R'm
R million Sep 17 Jun 17 Mar 17 Sep 16

Total municipal debt (including interest) 23 031 21 212 15 258 15 418
Municipal arrear debt (>15 days) 12 428 11 454 9 406 9 180
Percentage arrear debt to total debt 54.0% 54.0% 61.6% 59.5%
Although total municipal arrear debt has increased over the quarter, the percentage arrear
debt remained the same.
The provincial breakdown of the total overdue municipal debt at 30 September 2017 is as
follows:
Total arrear debt, Percentage

Province R million of total
Eastern Cape munics 372 3.0
Free State munics 5 620 45.2
Gauteng munics 862 6.9
KwaZulu-Natal munics 206 1.7
Limpopo munics 548 4.4
Mpumalanga munics 3 058 24.6
North West munics 1 018 8.2
Northern Cape munics 737 5.9
Western Cape munics 8 0.1
Total 12 429 100.0
Total arrear debt,

Name Province R million
Maluti-a-Phofung Municipality Free State 2 257
Matjhabeng Municipality Free State 1 504
Emalahleni Local Municipality Mpumalanga 1 303
Ngwathe Local Municipality Free State 819
Govan Mbeki Municipality Mpumalanga 564
Emfuleni Local Municipality Gauteng 526
Thaba Chweu Local Municipality Mpumalanga 394
Lekwa Local Municipality Mpumalanga 375
Lekwa Local Municipality North West 245
Ditsobotla Local Municipality (including Lichtenburg) North West 234
Thabazimbi Local Municipality Limpopo 221
City of Matlosana Local Municipality North West 177
Dihlabeng Municipality Free State 166
Nala Local Municipality Free State 163
Moqhaka Municipality (including Steynsrus) Free State 159
Nketoana Local Municipality Free State 150
Merafong City Local Municipality Gauteng 143
Msukaligwa Local Municipality Mpumalanga 118
Modimolle Local Municipality Limpopo 114
Mookgophong Local Municipality Limpopo 110
Total 9 740
The top 20 defaulting municipalities constitute 78% of total municipal arrear debt, while the
top five defaulting municipalities account for 52% of total municipal arrear debt. More than
45% of the arrear debt is owed by Free State municipalities. There are currently 27
municipalities with total arrear debt of more than R100 million.
A total of 57 active payment agreements are in place with defaulting municipalities, including
14 of the top 20 defaulters. However, of the 57 agreements, only 16 are being fully
honoured. Of the top 20 defaulters only one is fully honouring their agreement. None of the
Free State municipalities are honouring their payment arrangements.
The top three Free State accounts (Maluti-a-Phofung, Matjhabeng and Ngwathe) account for
almost R4.6 billion of the total outstanding debt. The interest on these accounts increases
the debt significantly. Matjhabeng and Maluti-a-Phofung are in the process of litigation and
as a result, there is still no urgency to settle overdue debt. Customers in Ngwathe have been
earmarked for prepaid installations and therefore the PAJA process was not initiated.
Municipality disconnections
Exco supported the implementation of the PAJA process, which was started directly after
municipalities were advised of their contract breach. During this past quarter, numerous
customers concluded agreements with Eskom or made suitable arrangements that were
supported by their Provincial Treasury. The interventions from the province were not
complied with in some of the municipalities, resulting in supply interruptions in the Northern
Cape, while various other supply interruptions will continue unless agreement can be
reached. The interruption schedule is formally published on the Eskom website.
Eskom continued to make submissions to a number of Parliamentary committees, namely

the inter-ministerial committee chaired by the Minister of Public Enterprises, consisting of
DPE, CoGTA, National Treasury, Eskom and SALGA; the Portfolio Committee on Co-
operative Governance; and the Standing Committee on Public Accounts (SCOPA).
Customer agreements are now being managed and monitored almost on a weekly basis as
the financial risks for non-compliance are material and impact our business directly.
R million Sep 17 Jun 17 Mar 17 Sep 16

Total Soweto SPU debt (excluding
5 668 5 426 5 314 5 163
interest)
Total Soweto SPU debt (including
14 075 13 342 12 770 11 736
interest)
Soweto SPU arrear debt (>30 days,
5 425 5 367 5 259 4 997
excluding interest)
Average SPU payment level, % 17.0% 23.6% 15.9% 14.2%
1. The impact of the IAS 18 revenue adjustment is not included in the above numbers.
Total Soweto SPU payments received year-to-date amounted to R57.2 million, against billing
of R336.9 million, resulting in a shortfall of R279.8 million (including VAT but excluding the
IAS 18 adjustment).
The graph below reflects payments received during the month, while the expected receipts
Soweto SPU revenue shortfall, R million
100
90
80
70
60
50
40
30
20
10
0
Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17
Payments Shortfall
In this sector, arrear debt over 60 days amounts to R791 million (June 2017: R929 million),
of which R496 million relates to stopped supplies, where customers vacated their premises
debt collection will continue to accrue interest. Signed payment arrangements to recover
debt of R56 million are in place. Nonetheless, 100% of all SPU stopped overdue debt has
been provided for, while 91% of the SPU active arrear debt over 60 days has been provided
for. The total SPU provision is R678 million (excluding VAT). Figures exclude Soweto SPU
customers.
International arrears over 60 days has increased to R456 million (June 2017: R440 million).
This mainly consists of debt owed by Zimbabwe, Zambia and Mozambique.
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Mar 18 year end

Total
Area Target Actual Target Actual Target Actual Target Actual Target YTD
Number of prepaid split meters installed
Soweto 5 500 4 100 6 000 2 381 6 000 6 500 24 000 6 481
Midrand
8 000 9 019 3 500 995 11 500 10 014
Sandton
Total 13 500 13 119 9 500 3 376 6 000 6 500 35 500 16 465
Number of meters converted to prepaid split metering
Soweto 5 000 1 003 7 500 3 196 10 000 7 500 30 000 4 199
Midrand
1 000 1 220 1 000 1 766 2 000 2 000 6 000 2 986
Sandton
Total 6 000 2 223 8 500 4 962 12 000 9 500 36 000 7 185
The number of installed meters during the quarter was below target because of contractual
issues for the supply of protective enclosures and installations. Both contracts were only
approved in September 2017. Conversions are also below target due to community
resistance.
Sandton and Midrand installations are below target, due to insufficient funds for the
purchase of meters. The conversion to prepaid in Midrand and Sandton is above target but
conversion is currently optional and customers are not signing up for this in numbers.
Operational sustainability
Operational sustainability focuses on security of supply, as well as balancing the supply and
demand of electricity. Security of supply remains a key concern, with the focus on improving
the Generation plant health and the ability to generate sufficient electricity to meet our
demand management and energy conservation, as well as the need to use the open-cycle
gas turbines (OCGTs) and other supply-side options. It is enabled by the Generation
Sustainability Strategy and, as a regulated business, Eskom has to comply with
environmental and regulatory requirements.
Despite sporadic community protests, no major safety incidents were experienced at any
of the mines; continuous supply of coal to all power stations was maintained
Coal purchase qualities on average met the minimum station requirements for the key
parameter of calorific value
The Vaal River System level was at 78.6% with no risk of water supply restrictions to
Water cost were within the year-to-date target

The Mokolo Crocodile West Augmentation Project Phase 2 water supply project is on
track to be concluded within this financial year
Achieving targeted cost-plus mine production

Rail performance was below target as the testing of the new electric locomotives was
halted by a power supply breakdown at an Eskom substation
Safety remains a challenge as there were 4 public fatalities and 1 contractor fatality
relating to the transport of coal
Although critical water transfers are currently on target, water supply over the medium
term remains a risk until the Lesotho Highlands Phase 2 is commissioned in 2024
Koeberg Power Station is subject to the level 5 water restrictions imposed by Cape Town
. Koeberg is currently pursuing groundwater desalination for the short term and sea water
desalination for the long term

Sep 17 Jun 17
Coal burnt, Mt 60.24 57.80 29.36 57.58 117.44 115.63 118.46 113.74
Coal purchased, Mt 65.48 59.36 28.93 64.13 130.32 123.09 124.32 120.25
Coal purchase R/ton, %
12.0 3.3 1.7 0.1 12.0 4.0 1.2 3.5
increase
Coal stock days 37 74 71 76 37 88 87 74
Normalised coal stock
37 37 35 45 37 44 43 38
days
Road-to-rail migration, Mt 6.7 6.5 3.2 6.6 15.1 12.9 12.9 13.2
1. Coal purchase R/ton, % increase is compared to the 31 March 2017 actual.
Although coal stock stood at 74 days, adjustments are made for volumes at certain power
stations to arrive at normalised coal stock days of 37 days, which is in line with the overall
target of 37
except for Arnot, Tutuka and Majuba Power Stations:
Arnot: Dedicated supply contracts to Arnot have expired. Switching coal from other
Additional coal from new contracts has been planned going forward
Tutuka: Mine production was lower than planned and has been further impacted by a
"face break" mining incident. While still below expected levels, coal stock days have
improved from 17 days at the end of quarter 1 to 25 days at the end of quarter 2
Majuba: Deliveries were lower than planned, while the actual coal burn was higher. While
still below expected levels, coal stock days have improved from 22 days at the end of
quarter 1 to 32 days at the end of quarter 2
The following volume adjustments are made to arrive at normalised coal stock days:
The high coal stock level at Medupi (11.8Mt) is excluded. This results from Eskom taking
delivery of coal in terms of the underlying colliery contract, rather than pay a penalty, as a
result of the delay in the commissioning of units at Medupi
Likewise coal at Kusile (1.3Mt) is excluded. This is down from the 1.6Mt at June 2017, as
Unit 1 has been burning coal in its testing phase, prior to going into commercial operation
on 30 August 2017
Lethabo is serviced by a cost-plus mine, where there is no financial benefit to Eskom to
reduce coal production, resulting in the higher than targeted stockholding of 79 days at
Lethabo (which is normalised to the target of 30 days)
Coal-related load losses for the first two quarters of the current financial was 0.28% against
a target of 0.58%. Matla (51%) and Tutuka (45%) accounted for 96% of the coal OCLF for
the six months to September 2017 and remain as key focus areas.
Eskom has initiated mitigation measures at the two power stations

The on-site beneficiation plant at Matla Power Station was commissioned in August 2017
to treat the poor quality coal from the Matla 3 Mine. Unit tests were also conducted at the
power station to facilitate usage of Mine 3 coal and thus help reduce the stockpile. As a
result of this exercise, Mine 3 coal is being burnt in selected units
At Tutuka, the focus is on the New Denmark underground contamination and the
verification of the coal quality for imports. These areas are being addressed by the
commissioning of coal quality measurement equipment, and improvement in underground
coal mining practices The focus is also on underground moisture management to reduce
the OCLF impact on the station
Refer to pages and , where the coal variances for the six months to
30 September 2017 are discussed.
A total of 3.3Mt of coal was transported by rail in the second quarter, below the target of
3.7Mt. The main reason for the underperformance was the breakdown of the Majuba
the substation reduced the feeder power to the Palmford rail line, and trains could not be
hauled using electric locomotives. The substations have since been repaired and the rail
service is back to normal. Coal availability was another factor as some mines struggled to
meet their production plans, impacting on rail deliveries. The year end target is expected to
be achieved.
Coal transport related safety remains a challenge in the current year. The PED team has
implemented a fatality reduction strategy which involves engagement with the suppliers and
ampaigns are also being
implemented around the Mpumalanga area where coal trucks frequent.
The request for proposal for Kusile closed on 22 August 2017 and Eskom is busy with the
evaluations. The evaluation process is anticipated to be finalised by end of December 2017
and contracting with the successful suppliers to be concluded by the third quarter of 2018.
The current 12-month logistics arrangement to supply limestone to Kusile will expire on
31 October 2017. Limestone is currently being railed to Vereeniging, stockpiled at the
Distribution facility and then transported by road to Kusile. Mandate has been obtained from
BTC (Board Tender Committee) for a 2 year interim solution; Eskom is awaiting approval
from National Treasury.
The permanent limestone rail solution, which would involve the construction of a railway line
Ang
agreements (CSAs) for Kriel, New Denmark and New Vaal Collieries and for the transfer of
its contractual rights and obligations in respect of historical mining operations at the now
closed Arnot, Coalbrooke, Cornelia and Vierfontein Collieries to Seriti Coal Pty Ltd. A due
diligence is currently underway, facilitated by a legal firm. A recommendation to the Board
Tender Committee is expected to be made by November 2017.
Refer to page where the diesel costs and variances for the period ended
30 September 2017 are discussed.
The water supply to the coal-fired stations in the short term is low risk.
Water supply over the medium term remains a risk. The commissioning of the Acid Mine
Drainage Project by DWS in 2023 and the Lesotho Highlands Phase 2 in 2024 should
contribute to longer term water security for all Water Users in the Vaal River System
including Eskom.
The Minister of Finance approved the DWS funding strategy at the end of March 2017. DWS
has formally notified the Trans Caledon Tunnel Authority (TCTA) to proceed with the
implementation of MCWAP Phase 2A. The project water delivery date is now expected to be
the second half of 2023 while water is required by Medupi FGD by February 2024, leaving
very little slippage time. The water delivery date is contingent upon securing funding,
agreements with future off-takers, completion of the necessary environmental and
engineering studies, and environmental authorisation from the Department of Environmental
Affairs (DEA). The Water Supply Agreement between DWS and Eskom will be concluded
within this financial year.
Eskom is attending to the following water-related environmental issues:

Eskom continues to collaborate with various mining houses to treat and reuse mine-
affected water in order to reduce the future closure liability
Duvha, Kendal, Matla and Kriel Power Stations have commenced with programmes to
modify their water treatment facilities to accommodate water of varying quality from
different raw water sources. However, capital constraints are delaying these projects
The Kilbarchan Colliery continues to decant mine-affected water. Eskom has requested a
further extension of the pilot water treatment plant. The design of the Kilbarchan
desalination plant is expected to commence by end October 2017
Generation performance
Plant availability (EAF) has improved significantly, from 78.41% at September 2016 to
83.18% for the current year.
Generation achieved an LTIR performance of 0.25 for the period ending September 2017
against a target of 0.31
The operating challenge is managing the difference of approximately 11 000MW, between

the night minimum demand and the peak demand, which needs to be supplied by
plant is predominantly base-load and modifications
are required to allow the generating plant to become more flexible and operate in a mid-merit
regime in order to cater for the huge demand swings. These modifications will have a
negative impact on the operating cost of these stations.

Sep 17 Jun 17
Energy availability factor
78.00 83.18 83.45 78.41 78.00 80.84 81.03 77.30
(EAF), %
Unplanned capability loss
11.29 7.80 7.70 9.82 10.90 8.40 8.20 9.90
factor (UCLF), %
Planned capability loss
9.61 8.42 8.24 11.23 10.00 10.23 10.17 12.14
factor (PCLF), %
Other capability loss factor
1.10 0.60 0.61 0.50 1.10 0.80 0.60 0.66
(OCLF), %
1. Because of the extended inoperability of Duvha Unit 3, the resultant lost energy and capacity will be excluded
from the performance reporting from April 2017 onwards until Duvha Unit 3 is returned to service.
Plant availability (EAF) has improved significantly, from 78.41% for the six months to
September 2016 to 83.18% for the current year. EAF of 82.96% was recorded for the quarter
to September 2017, exceeding the target of 78%.
The decrease in PCLF for quarter 2, in relation to the plan, was due to outages that did not
start as planned and outages returning earlier than planned. The PCLF target of 10% is
expected to be met by executing the current PCLF plan of 10.23%. The outages movements
resulted from outage extensions on Matla 2, Matla 6, Tutuka 1 and Duvha 2.
Unplanned breakdowns (UCLF) have remained relatively constant quarter-on-quarter, at

7.86% for quarter 2, compared to 7.75% in the previous quarter. UCLF has improved, from
9.82% for the six months to September 2016 to 7.80% for the current year, due to the
following improvements:
Boiler tube leak improvements: When compared to last year, the unplanned outages due
to tube leaks have decreased by 12%, from 2 938GWh for the previous year to 2
581GWh for the current year. This has been achieved by performing the maintenance
required to prevent boiler tube leaks in outages
Partial load losses: Partial load losses have improved and the energy lost due to
unplanned outages resulting from these losses has decreased by 20% compared to last
year. This translates into a reduction of energy lost from 5 796GWh to 4 642GWh. This
was achieved due to opportunity maintenance given to plant to address the plant areas
resulting in partial loadlosses
Koeberg Unit 1 has been online for 332 days, since returning from a 42 day refuelling outage
on 2 November 2016.
Koeberg Unit 2 has been online for 160 days since returning from a 37 day refuelling outage
on 24 May 2017.
From submission of the three-year maintenance plan to National Treasury on 1 April 2016 to
30 September 2017, a total of 111 outages were scheduled. The status is set out below:
Base plan Completed Execution Deferred Cancelled Additional outages

111 66 8 26 11 67
Planned
Planned start Planned end duration
No Station/Unit Type time time Quarter Status (days)
1 Kriel 6 IR 19-Sep-16 30-Oct-16 Q2 Completed 115
2 Majuba 5 IN 21-Jun-16 05-Jul-16 Q1 Completed 14
3 Arnot 1 ST 05-Apr-16 21-Apr-16 Q1 Completed 16
4 Drakensberg 2 MG 03-Jul-16 23-Jul-16 Q2 Completed 21
5 Ankerlig 12 GO 21-Nov-16 02-Jan-17 Q3 Completed 43
6 Ankerlig 31 GO 06-Sep-16 18-Oct-16 Q2 Completed 43
9 Ankerlig 42 GO 08-Nov-16 20-Dec-16 Q3 Completed 43
10 Arnot 1 MG 01-May-16 25-Jun-16 Q1 Completed 56
11 Drakensberg 1 IR 21-Sep-16 07-Oct-16 Q2 Completed 17
12 Drakensberg 2 IR 07-Feb-17 01-Jun-17 Q4 Completed 115
13 Drakensberg 4 IR 20-Jul-16 05-Aug-16 Q2 Completed 17
14 Duvha 1 IN 12-Dec-16 25-Dec-16 Q3 Completed 14
15 Duvha 4 IN 13-Feb-17 26-Feb-17 Q4 Completed 14
16 Duvha 5 IR 14-Mar-17 17-Apr-17 Q4 Completed 35
Planned
Planned start Planned end duration
No Station/Unit Type time time Quarter Status (days)
17 Gourikwa 12 GO 10-Sep-16 22-Oct-16 Q2 Completed 43
18 Gourikwa 22 GO 21-Nov-16 02-Jan-17 Q3 Completed 43
19 Grootvlei 1 MO 01-Aug-16 14-Sep-16 Q2 Completed 45
20 Grootvlei 2 GO 15-Oct-16 11-Feb-17 Q3 Completed 120
21 Hendrina 10 IR 20-Jun-16 13-Dec-16 Q1 Completed 177
22 Hendrina 2 GO 01-Mar-17 03-Jun-17 Q4 Completed 95
23 Hendrina 4 IN 05-Feb-17 18-Feb-17 Q4 Completed 14
24 Hendrina 6 IN 15-Mar-17 28-Mar-17 Q4 Completed 14
25 Kendal 5 GO 01-May-16 28-Jul-16 Q1 Completed 88
26 Koeberg 1 GO 22-Aug-16 26-Oct-16 Q2 Completed 66
27 Koeberg 2 GO 20-Mar-17 24-May-17 Q4 Completed 66
28 Komati 1 MO 29-Aug-16 09-Oct-16 Q2 Completed 42
29 Komati 4 IR 01-Aug-16 28-Aug-16 Q2 Completed 28
30 Komati 5 IR 16-Jun-16 13-Jul-16 Q1 Completed 28
31 Kriel 1 IR 13-Nov-16 24-Dec-16 Q3 Completed 42
32 Kriel 4 IR 27-Oct-16 29-Dec-16 Q3 Completed 64
33 Lethabo 4 IN 03-Oct-16 16-Oct-16 Q3 Completed 14
34 Lethabo 5 IR 09-Oct-16 27-Nov-16 Q3 Completed 50
35 Majuba 1 IN 27-Mar-17 10-Apr-17 Q4 Completed 14
36 Majuba 3 GO 19-Sep-16 31-Oct-16 Q2 Completed 42
37 Matimba 2 GO 21-Nov-16 06-Jan-17 Q3 Completed 47
38 Matimba 4 IR 08-Aug-16 11-Sep-16 Q2 Completed 35
39 Matimba 6 IR 06-Oct-16 16-Nov-16 Q3 Completed 42
40 Matla 2 MG 02-Aug-16 29-Nov-16 Q2 Completed 120
41 Matla 3 IR 11-Oct-16 25-Oct-16 Q3 Completed 15
42 Matla 4 IN 11-Mar-17 25-Mar-17 Q4 Completed 15
43 Medupi 6 IN 01-Sep-16 14-Sep-16 Q2 Completed 14
44 Palmiet 2 GO 07-Feb-17 07-May-17 Q4 Completed 990
45 Port Rex 2 RM 21-Jul-16 20-Aug-16 Q2 Completed 31
46 Port Rex 3 RM 09-Sep-16 13-Nov-16 Q2 Completed 66
47 Tutuka 3 MG 12-Apr-16 25-May-16 Q1 Completed 44
48 Tutuka 4 MG 01-Aug-16 29-Oct-16 Q2 Completed 90
49 Tutuka 5 IR 24-Feb-17 09-Mar-17 Q4 Completed 14
50 Tutuka 6 IR 16-Jul-16 29-Jul-16 Q2 Completed 14
51 Vanderkloof 1 MG 06-Apr-16 01-May-16 Q1 Completed 26
52 Ankerlig 43 GO 07-Feb-17 20-Mar-17 Q4 Completed 42
53 Arnot 5 MG 06-Feb-17 12-Apr-17 Q4 Completed 66
54 Camden 1 MG 24-Apr-16 22-Jul-16 Q1 Completed 90
55 Gourikwa 21 GO 02-Sep-16 14-Oct-16 Q2 Completed 43
56 Gariep 4 MG 03-Sep-16 27-Sep-16 Q2 Completed 25
57 Grootvlei 4 IR 29-May-16 25-Sep-16 Q1 Completed 120
58 Duvha 2 IN 28-Oct-16 10-Nov-16 Q3 Executing 14
59 Kriel 2 ST 01-Jan-17 23-Feb-17 Q4 Executing 54
60 Komati 7 IR 16-Aug-16 12-Sep-16 Q2 Executing 28
61 Medupi 5 GI 11-Dec-16 21-Jan-17 Q3 Executing 42
During the second quarter, six outages were completed, three are in execution, seven
outages were deferred and four were cancelled. A total of 18 additional short-term outages
were completed.
Planned
Station/ Planned Planned duration
No Unit Type start date end date Qtr (days) Status Comment
1 Tutuka 1 GO 28-Jul-17 09-Sep-17 Q2 44 Completed
GO ID:19113 completed in
2 Grootvlei 2 IR 31-Jul-17 27-Aug-17 Q2 28 Completed
July 2017
GO ID:13865 completed in
3 Kriel 1 IR 02-Aug-17 05-Sep-17 Q2 35 Completed
April 2017
Scope of work done on
4 Gariep 1 MG 31-Aug-17 25-Sep-17 Q2 26 Completed
outage ID 28530
5 Kriel 3 IR 14-Sep-17 04-Oct-17 Q2 21 Completed
6 Port Rex 3 RM 25-Jul-17 24-Aug-17 Q2 31 Completed
7 Matla 6 MO 01-Jul-17 08-Sep-17 Q2 70 Executing
8 Duvha 2 IR 02-Aug-17 05-Sep-17 Q2 142 Executing
9 Camden 3 MGO 20-Sep-17 05-Dec-17 Q2 76 Executing
10 Kusile 3 IN 10-Jul-17 24-Jul-17 Q2 15 Deferred Unit is not commercial
Deferred to later
11 Matla 5 MO 12-Jul-17 19-Sep-17 Q2 70 Deferred 2018/03/04 Due to ML06
MO extension
Deferred to later
12 Kendal 1 IR 13-Jul-17 11-Aug-17 Q2 30 Deferred 2018/02/13 due to LP
Rotor spares availability
Deferred due to
procurement processes,
13 Kendal 6 ST 01-Aug-17 30-Aug-17 Q2 30 Deferred contracts will not be in
place by the start of the
outage.
Moved by the station to
Drakensber
14 IR 24-Aug-17 21-Dec-17 Q2 120 Deferred accommodate technical
g3
plan projects
IN ID: 26127 completed in
15 Majuba 2 MGO 28-Aug-17 09-Oct-17 Q2 42 Deferred
April 2016
To align outage to HSSD
16 Tutuka 2 IN 30-Aug-17 12-Sep-17 Q2 14 Deferred
in Jan 2018
Unit on extended cold
17 Komati 3 MO 01-Aug-17 11-Sep-17 Q2 42 Cancelled reserve - due to cost
savings and capacity
Unit on extended cold
18 Hendrina 8 GO 01-Aug-17 03-Nov-17 Q2 95 Cancelled reserve - due to cost
savings and capacity
Outage cancelled due to
the scope of work
19 Port Rex 2 OP 09-Sep-17 13-Nov-17 Q2 66 Cancelled changes, the new scope
will be covered in another
outage ID:28568.
Planned
Station/ Planned Planned duration
No Unit Type start date end date Qtr (days) Status Comment
Unit was commercial on
20 Kusile 1 IN 26-Sep-17 09-Oct-17 Q2 14 Cancelled
the 31 August 2017
Planned Planned Actual start Actual end

Status
No Station/Unit Type start date Qtr duration date date
1 Duvha 6 IN 11-Jul-17 Q2 14 12-Jul-17 24-Jul-17 Completed
2 Lethabo 3 UP 20-Jul-17 Q2 14 20-Jul-17 29-Jul-17 Completed
3 Hendrina 4 UP 24-Jul-17 Q2 14 24-Jul-17 04-Aug-17 Completed
4 Matimba 3 ST 26-Jul-17 Q2 14 27-Jul-17 06-Aug-17 Completed
5 Duvha 4 UP 03-Aug-17 Q2 18 04-Aug-17 22-Aug-17 Completed
6 Grootvlei 5 UP 03-Aug-17 Q2 10 04-Aug-17 22-Aug-17 Completed
7 Camden 8 UP 04-Aug-17 Q2 10 04-Aug-17 17-Aug-17 Completed
8 Arnot 5 IN 08-Aug-17 Q2 21 06-Aug-17 15-Aug-17 Completed
9 Ingula 4 GO 14-Aug-17 Q2 11 14-Aug-17 22-Aug-17 Completed
10 Kriel 5 MO 17-Aug-17 Q2 10 18-Aug-17 27-Aug-17 Completed
11 Medupi 5 GO 24-Aug-17 Q2 12 25-Aug-17 06-Sep-17 Completed
12 Hendrina 1 LL 29-Aug-17 Q2 46 29-Aug-17 13-Oct-17 Completed
13 Medupi 6 UP 06-Sep-17 Q2 11 06-Sep-17 15-Sep-17 Completed
14 Matimba 1 LL 15-Sep-17 Q2 14 14-Sep-17 26-Sep-17 Completed
15 Duvha 1 UP 21-Sep-17 Q2 7 21-Sep-17 30-Sep-17 Completed
16 Majuba 5 IN 21-Sep-17 Q2 25 21-Sep-17 13-Oct-17 Completed
17 Kusile 1 UP 26-Sep-17 Q2 10 26-Sep-17 05-Oct-17 Completed
18 Grootvlei 3 UP 29-Sep-17 Q2 10 29-Sep-17 13-Oct-17 Completed
From the original 50 outages deemed to be in backlog; 39 outages are completed or in

execution, eight will be executed between 2017/18 and 2018/19 and these outages are no
longer considered as backlog since the strategy has changed from time-based to a condition
or risk-based maintenance regime. Of the 50 outages, three have been cancelled as the
units were placed on cold reserve.
Network performance
Excellent system minutes lost <1 performance and no major incidents

Good line faults performance trend is being sustained
Although the severity of interruptions has reduced, reducing the number of interruptions
remains a challenge
Sep 17 Jun 17
Number of system minutes
1.55 1.04 0.33 2.74 3.53 3.20 3.53 3.80
lost <1 minute, minutes
Number of major incidents
2 1 1
>1 minute, number
Number of interruptions,
15 14 8 13 34 34 34 36
number
Number of line faults,
1.14 0.88 0.45 0.67 2.20 2.00 2.00 1.60
faults per 100km
1. One system minute is equivalent to interrupting the entire South Africa at maximum demand for one minute.
The system minutes lost <1 improvement initiatives introduced in 2016/17 are being
sustained and have contributed to the excellent performance attained for the six months to
September 2017. This includes the focus on improving restoration response time, risk
management and plant availability.
No major incidents have occurred and good line fault performance is being sustained.
Interruptions experienced were primarily caused by plant failures and the related protection
system operations. However, the impact of these interruptions was limited due to effective
restoration response.
NERSA has approved the Transmission exemption application to comply with the network
reliability (N 1) requirements by the end of 2027.
Customer interruption frequency is performing better than target
Managing the network performance with an increasing number of outages due to the
overloading from illegal connections, high levels of vandalism and equipment theft
Abnormal weather conditions being experienced in the coastal operating units, impacting
technical performance
Strengthening networks to accommodate the growth of over 200 000 new customers over
the past year
Sep 17 Jun 17
System average
interruption frequency 20.0 19.1 19.3 19.8 20.0 20.0 20.0 18.9
index (SAIFI), events
System average
interruption duration index 39.0 39.5 40.0 38.3 39.0 39.0 39.0 38.9
(SAIDI), hours
Distribution capex for
strengthening and 1 391 1 301 545 963 3 523 3 523 3 523 2 911
refurbishment, R million
Network interruption performance in terms of frequency is better than target, while the
average duration of interruptions is slightly worse than target. This sustained performance is
achieved through establishing a centralised capability for maintenance and operations to
monitor performance, identify areas of operational efficiency improvements and implement
necessary actions. The focus is on:
Execution of the refurbishment projects to improve the integrity and reliability of the
current network infrastructure
Effective coordination of planned maintenance to minimise the duration of outages.
Increased utilisation of live line techniques to execute planned maintenance
Prioritised inspection and attending to defects on the MV feeders
Inspections and attending to defects on the Pareto feeders prior to the summer storm
months
Addressing specific networks with recurring faults to improve its performance. These
networks have been identified and Operating Units are prioritising maintenance activities.
This is monitored by the Maintenance and Operations Management departments at the
OUs and through the monthly Maintenance and Operations committee
Continued management of data quality and internal assurance to areas for improvement.
The data quality of identified feeders is assessed on a monthly basis, including the
correction of data in the systems
Recovery of R119 million historically unaccounted revenue during the period under
review
Increase in distribution energy losses due to the impact of IPPs

12-month moving Sep 17 Jun 17
average, % Target Actual Actual Actual Target Proj Proj Actual
Distribution energy losses 6.55 8.10 7.65 5.81 6.55 7.32 7.55 7.55
Transmission energy
3.00 2.02 2.25 3.25 3.00 2.74 2.78 2.22
losses
Total Eskom losses 8.73 9.61 9.54 8.58 8.73 9.45 9.71 8.85
The impact of IPPs, given their location on the network, has resulted in reducing the
transmission losses and increasing distribution losses.
Eskom uses targeted meter audits to improve the efficiency of losses detection and
resolution. A combination of analytics methods (i.e. load profile analysis, exception reports
and tip-offs) is used to target metering points for audits. The following progress was made
during the quarter:
93.5% of feeders with multiple customers are being balanced
Targeted meter audits on 734 large power users, 17 503 small power users and 169 726
prepaid users have been completed
Historically lost revenue amounting to R119 million due to meter tampers, faulty or
vandalised metering installations or customers incorrectly loaded on the system was
billed to large and small power customers
Tamper fees amounting to R7.7 million were recovered from prepaid customers who had
tampered with their electricity meters
Other interventions in progress include the implementation of split metering and protective
enclosures to prevent access to the metering unit to restrict meter tampering; the conversion
of customers to prepaid; and the conversion of supply group codes on prepaid meters to
prevent the use of illegal prepaid vouchers.
External socio-economic conditions continue to drive equipment theft and vandalism of

network equipment, of which conductor theft makes up the highest number of incidents.
Equipment theft impacts network performance and causes loss of revenue, and leads to loss
of life and injury to the public and employees.
Eskom aims to improve the security of the network through the early detection of potential
threats by implementing surveillance technology, in conjunction with a national guarding
strategy. Treatment tasks executed to date have been effective in containing current levels
of network theft and vandalism, although the socio-economic conditions prevail.
A first-of-its-
West Rand. The imbizo, attended by Eskom representatives and members of the South
African Police Service and Community Policing Forum, gave members of the public the
opportunity to discuss the issue of electricity theft and its implications on the safety of
residents.
The impact of electricity infrastructure theft and cable theft was emphasised when the
Johannesburg inner city experienced a multi-day outage following an incident of mass cable
theft in September 2017. The public relations team used this opportunity to garner public
support in the fight against infrastructure theft and electricity theft through an opinion piece,
which further highlighted the extent to which cable theft affects society. The incident was
also incorporated into the messaging in media releases related to cable theft.
News about technological developments in the fight against electricity theft was spread
through an interview on SAFM, broadcasting across all nine provinces.
Arrests in cases related to infrastructure theft remain the main drivers of public relations
activity in the form of media releases writing and pitching.
-
which was held in Johannesburg, attracting approximately 25 000 visitors from across South
Africa. The campaign promoters engaged attendees on the issue of electricity theft and its
impact on small businesses. A supporting media release was distributed.
-electricity theft campaign also participated in the inaugural Mpumalanga

Lowveld Show Expo. The expo provided a platform for businesses to market their products
and services, as well as networking opportunities for business owners and other key
stakeholders, including provincial government authorities and the community.
The show was held from 31 August to 3 September 2017 and provided the anti-electricity
theft campaign team a critical platform to engage business owners, community members
and school children. It also provided the team an opportunity to influence and educate those
in attendance about the dangers and impact of electricity theft. The Mpumalanga Premier
and local councillors visited the anti-electricity theft campaign stand, and the media
conducted interviews with local spokespeople.
Managing supply and demand

The System Operator provides an integrative function for the operation and risk
management of the interconnected power system by balancing supply and demand in real
time, trading energy internationally and buying energy from IPPs, which assists in
implementing
power system, Eskom has to apply demand management practices, which include supply-
side and demand-side options.
Given the surplus capacity, a very low usage of OCGTs was required to support the power
system during the winter months of Quarter 2. However Eskom and IPP-owned OCGTs
must be operated for two hours every quarter to ensure that plant is in a reliable working
order and ensure a turnover of diesel at the stations. In the case of the IPPs, OCGTs must
be operated in accordance with the minimum contracted load factor.
During the second quarter of the financial year, coal-fired units continued to be placed into
cold reserve to allow for better economic dispatch of the available capacity. Generators in
cold reserve are taken offline but are available to be called back into service at short notice
(typically 12 to 16 hours). The number of units in cold reserve varies from six to eight units
during weekdays and up to ten units over weekends. Units at Grootvlei, Hendrina and
Komati have been placed in extended cold reserve with a call-back time of five days or
more.
Kusile Unit 1 achieved commercial operation on 30 August 2017.
The improved performance in the existing fleet in terms of energy availability has resulted in
a reduction of OCGT usage and costs compared to the prior year. The usage of the OCGTs
for the period to 30 September 2017 is reflected in the table below.

Sep 17 Jun 17
OCGT production, GWh 85 12 7 19 211 17 14 29
OCGT diesel usage, R
280 58 29 288 690 120 125 340
million
The OCGT cost of R58 million for the quarter comprises OCGT burn of R28 million and
diesel storage and demurrage costs of R29 million, incurred as a result of not running the
OCGTs.
Eskom acknowledges the role that independent power producers (IPPs) must play in the
South African electricity market and remains committed to facilitating their entry.
is supplemented by energy purchased from IPPs, mainly from

onshore wind, solar thermal, solar photovoltaic (PV) and gas peakers. The DoE RE-IPP
Programme called for 3 725MW of renewable energy technologies in commercial operation
by the end of 2018.
No power purchase contracts have been signed since September 2016; Eskom is engaging
with the relevant Government departments to reach agreement on the way forward. The
Minister of Energy has announced that Eskom will sign the contracts announced under the
Renewable Energy IPP (RE-IPP) Programme bid windows 3.5 and 4 (pending negotiations
with those projects where their base price is greater than 77c/kWh).
The Grid Access Unit facilitates the connection of IPPs and generators
manages the end-to-end service relationship. Since inception, a total of 63 projects have
been connected to the grid, enabling access to 4 424MW, as detailed in the table below. The
commissioning of IPP generators at some connections is in progress.
Incepton to Sep 17
Projects
Total grid Total grid
number of Total MW connected, connected,
Programme type projects allocated number MW Status/comments
Bid 1 28 1 436 28 1 425 All 28 projects are commercially
operational, with the final capacity
totalling 1 425MW
Bid 2 19 1 090 19 1 040 All 19 projects are grid connected,
with the final capacity totalling
1 040MW
Bid 3 21 1 456 14 719 A total of 14 projects have
achieved grid connection. The
remaining seven are still in
execution phase, in line with the
schedule. Two projects are
connecting to a municipality
Bid 3.5 2 200 One project in execution and the
other in budget quotation phase
Bid 4 13 1 121 In budget quotation phase
Bid 4B 13 1 084 In budget quotation phase
Gas peakers 2 1 200 2 1 005 Both are grid connected with the
final capacity totalling 1 005MW
Small hydros: 20 100 In budget quotation phase
1-5MW
Renewable RFP and cost estimate letters
energy expedited issued. Programme still at the
programme DoE procurement stage
Base coal 2 864 DoE announced two preferred
bidders, currently at budget
quotation phase
Cogeneration 1 13 In budget quotation phase
Total 121 8 564 63 4 424
At 31 March 2017 60 4 189
Eskom enters into annual contracts at wholesale prices with cogenerators outside the ambit
of the MTPPP and short-term contracts. A total of 189MW of capacity is expected to be
contracted for the year to March 2018. The previous contracts expired on 31 March 2017
and have not yet been renewed. An Eskom procurement process has been initiated in this
regard.
-term IPP programmes, Eskom's role is that of
network operator, where Eskom owns the network and grid connection infrastructure, as well
as the designated purchaser of energy supplied.
IPP OCGT (Peakers) Programme

Power purchase agreements of 1 005MW were entered into for the Avon and Dedisa plants.
The load factors for the quarter to September 2017 have been above target, in order to
achieve the minimum required dispatch of 1% load factor for the six months ending
30 September 2017.
Procurement Programme (RE-IPP)

Renewable projects with signed power purchase agreements are in various stages of
construction. New operational capacity during the first half of the year includes 100MW
Concentrating Solar Power (CSP), 50MW wind and 2MW landfill gas.
Sep 17 Jun 17 Mar 17

Signed Operational Signed Operational Signed Operational
MW contracts contracts contracts contracts contracts contracts
RE-IPP 4 000 3 262 4 000 3 162 4 000 3 110
Load factor, % 30.5 26.6 30.7
Deemed energy payments of R0.6 million were made during the period due to system
curtailment events.
The table below summarises the energy procured under various IPP programmes for the
period to 30 September 2017.

Sep 17 Jun 17
IPP capacity available, MW
Medium-term PPP
13 13
(MTPPP)
Short-term PPP (STPPP) 557 557
Wholesale Electricity
189 89 189 189 189 92
Pricing System (WEPS)
Municipal base-loads 250 250
RE-IPPs 3 557 3 262 3 162 2 879 4 327 3 780 3 780 3 110
IPP OCGT Peakers 1 005 1 005 1 005 1 005 1 005 1 005 1 005 1 005
Cogeneration programme
Total capacity, MW 4 751 4 267 4 167 4 793 5 521 4 974 4 974 5 027
Sep 17 Jun 17
IPP purchases, GWh
Medium-term PPP
15 29
(MTPPP)
Short-term PPP (STPPP) 1 195 3 003
237 64 424 151 202 105
Municipal base-loads 606 1 098
RE-IPPs 4 804 4 025 1 835 3 048 10 705 9 458 9 613 7 227
IPP OCGT Peakers 44 45 17 21 88 82 84 67
Total energy, GWh 5 085 4 070 1 852 4 949 11 217 9 691 9 899 11 529
Expenditure, R million
Medium-term PPP
19 37
(MTPPP)
Short-term PPP (STPPP) 1 140 2 861
187 47 274 70 105 70
RE-IPPs 9 682 8 242 3 724 6 643 20 611 19 219 19 562 15 105
IPP OCGT Peakers 1 172 1 134 550 1 699 2 338 2 160 2 143 2 186
IFRIC 4 accounting
(1 002) (985) (490) (735) (1 999) (1 887) (1 861) (1 964)
adjustment, R million
Network cost 84 168 112 140
Deemed energy payment 1 1 76 477
Total spent, R million 10 123 8 392 3 785 9 432 21 392 19 674 20 089 19 757
Unit cost, c/kWh

Medium-term PPP
127 128
(MTPPP)
Short-term PPP (STPPP) 95 95
79 73 65 46 52 67
RE-IPPs 202 205 203 218 193 203 203 209
1
IPP OCGT Peakers 2 664 2 520 3 235 8 090 2 657 2 634 2 551 3 263
Weighted average cost,
219 230 231 191 209 222 222 188
c/kWh
1. With lower volumes for the IPP OCGT Peakers, the fixed capacity charge increases the unit cost of power.
RE-IPP Programme Other
Province, MW CSP Solar PV Hydro Wind Landfill Diesel short-term Total
Eastern Cape 70 997 335 1 402
Free State 196 4 200
Gauteng 5 5
KwaZulu-Natal 670 670
Limpopo 118 118
Mpumalanga 0
Northern Cape 300 950 10 153 1 413
North West 7 7
Western Cape 134 319 452
Total 300 1 474 14 1 469 5 1 005 4 167
1. Capacities (MW) indicate the contract maximum (or operational capacity if lower).
opportunity to make additional

international electricity sales. However, international sales for six months to September 2017
have declined by 7% compared to the six months to September 2016. This can be attributed
to the increased rainfall within the region which has resulted in improved availability of hydro
generation plant owned by trading partners. Given this, Eskom has focused on increasing
sales into the day-ahead and intra-day markets.

Sep 17 Jun 17
GWh Target Actual Actual Actual Target Proj Proj Actual
1
International sales 7 699 7 276 3 549 7 841 15 118 15 029 15 121 15 093
International purchases 4 848 3 825 1 976 3 670 9 670 6 805 7 077 7 418
Net sales/(purchases) 2 851 3 451 1 573 4 171 5 448 8 224 8 044 7 675
1. International sales for the period to 30 September 2017 include 49GWh sold to Lesotho and Botswana at
Distribution voltage levels direct from the Distribution networks.
The sales rate was unfavourable at R663/MWh against a budget of R762/MWh, which is
attributable to Eskom reducing regional tariffs in order to ensure a competitive and
sustainable offering.
The volume of cross-border purchases was 17% below the planned budget, with the
purchase rate of R322/MWh being higher than the plan of R310/MWh. The lower volumes
are due to Cahora Bassa (HCB) reducing their supply as water levels at HCB are still
affected by the drought in the region, in spite of improved rainfall in
trading partners in the region.
The export strategy aims to maximise cross border sales through the existing transmission
infrastructure, as well as building additional transmission lines. A PFMA approval to
maximise and ensure a competitive and sustainable offering has been received.
Firm power agreements concluded with Botswana Power Corporation (BPC), Copperbelt
Energy Corporation (CEC), NamPower and ZESA Holdings are now operational. Following
the conclusion of these agreements, year-to-date sales to NamPower and ZESA are 28%
and 55% higher than budget.
Negotiations are currently in progress with SNEL in the DRC for the conclusion of a firm
power supply agreement of up to 200MW firm power and day-ahead additional energy for
five years. The agreement is expected to commence from January 2018, with SNEL initially
taking capacity of 70MW until March 2018, then ramping up to 130MW by March 2019, and
200MW from April 2019.
Work is ongoing to conclude agreements with ZESCO of Zambia, as well as a mine in

Zambia. These agreements are expected to commence in December 2017/January 2018.
Engagements are ongoing with ZESA (Zimbabwe), ZESCO (Zambia), CEC (Zambia), SNEL
(DRC) and the Katanga Chamber of Mines, and their government officials and potential
funders regarding their participation in the export growth initiative and the development of
the central transmission corridor in order to export 500MW to the DRC. The central corridor
entails the construction of the transmission lines between the listed countries as well as
strengthening of their internal grids to allow for increased power flow to the DRC..
MOZISA (RSA-Zimbabwe-Mozambique interconnectors)

Eskom and ZESA have been investigating how best to transmit power from South Africa into
and through Zimbabwe. To this end, the MOZISA (RSA-Zimbabwe-Mozambique)
interconnector was identified. Indications are that the construction of the first phase of this
line (RSA-Zimbabwe), as well as making a few upgrades on the ZESA network, will allow an
additional 700MW to flow into Zambia.
An Environmental Authorisation for the South African portion of the line was approved by the
Department of Environmental Affairs in August 2017. No appeals have been lodged.
Triangle-Orange Grove
To complete the MOZISA, ZESA needs to construct the Triangle-Orange Grove line. ZESA
reports that it has now completed the process to award an EPC tender to build this line, and
selected a preferred bidder. It now awaits a
which it will sign a contract with the winning bidder, thus allowing for construction to proceed.
Zimbabwe Zambia
Discussions have been held with ZESCO regarding wheeling power to the DRC. However,
ZESCO has indicated that they cannot wheel all 500MW to the DRC as it would endanger
their network. Preliminary studies indicate that to be able to transfer the 500MW to the DRC
a 765 kV line may be required. This has a potential to make the expansion unaffordable.
Additional studies are underway to determine the most optimal solution.
Eskom and EDM of Mozambique have settled on a framework agreement that governs
areas of potential cooperation to improve the energy and various technical aspects of the
respective electricity businesses. The agreement has been approved by Eskom but final
approval from EDM is still outstanding.
EDM has indicated a desire to increase its supply from HCB, which could require Eskom and
South Africa to relinquish such capacity. The Energy Ministers of both countries have
committed the two utilities to engage and develop options by end November 2017.
BOSA (Botswana-RSA interconnector)

The Department of Environmental Affairs has indicated that an environmental authorisation
for the BOSA line will not be obtained by March 2018. This will negatively impact the
conclusion of the feasibility studies. A way forward is being investigated.
A PFMA information letter was submitted to the Minister of Public Enterprises in January
inter--utility MOU with BPC to develop the project. The Minister raised some concerns, and
the MOU with BPC has been reworked to address these, and is being processed internally
for approval.
Technical cooperation with BPC

The Eskom and BPC chief executives met on 31 March 2017 and agreed to establish a
broad joint technical cooperation, initially with a view to improve the technical performance
a
from 14-18 August 2017 and a draft report, highlighting their findings, has been submitted to
BPC for comments. We are awaiting their response.
Kudu (RSA-Namibia interconnector)

A PFMA application for Kudu was approved by the Minister of Public Enterprises during this
quarter. A budget quote has been finalised and is currently being processed internally for
approval.
Second RSA/Namibia 400kV Interconnector

Feasibility studies for a second 400kV interconnector between South Africa and Namibia
were jointly conducted by the two utilities with a view to enhance security of supply and
facilitate more exports into and through Namibia. A draft report has been completed and
NamPower has requested additional studies. These are in progress.
The Inga project was discussed as part of the RSA/DRC Binational Commission. The DRC
government advised that they have directed the two remaining bidders to form one bid and
resubmit a combined offer in October 2017.
DoE shared the preferred transmission solution for the RSA power with the DRC delegation.
This is also a subject of the intergovernmental MOU that is being developed between RSA,
Botswana, Zambia, Zimbabwe and the DRC. A decision was taken to activate the Grand
Inga implementation structures, called the Joint Permanent Technical Commission (JPTC).
The JPTC that was supposed to meet in September 2017 has been rescheduled for October
2017.
Gauteng Province installed 262 571 compact fluorescent lamps (CFLs), with an
anticipated demand savings of 8.4MW
Fewer customers are participating in the demand response (DR) programme due to
economic conditions and labour disputes, resulting in less flexibility for System Operator
to manage supply/demand balance
Failure to put contracts in place will drastically impact the performance of the DR
programme, thereby placing the System Operator at risk

Sep 17 Jun 17
R million Target Actual Actual Actual Target Proj Proj Actual
Total energy efficiency
259.3 91.7 55.1 216.1 561.2 286.5 406.6 375.8
demand side management
Demand response 139.4 65.8 39.9 102.4 301.4 209.1 220.0 193.9
Total (excluding transfer
398.7 157.4 95.0 318.5 862.6 495.6 626.6 569.7
pricing)
The peak demand reduction target was reduced from 415MW to 110MW, when taking the
system outlook into account.
Sep 17 Jun 17
Demand savings (evening
22.0 21.1 12.7 82.0 110.0 102.0 110.0 236.9
peak), MW
Internal energy efficiency,
0.3 0.3 0.3 0.1 1.1 1.2 1.1 6.0
GWh
IDM continues to support the System Operator by providing demand response to maintain
adequate daily operating reserve levels, even during times of surplus capacity. The DR
programme has achieved an average certified capacity of 1 246 MW during the period.
DR is primarily used worldwide to reduce load when electrical grids are constrained.
Nevertheless, a recent pilot demonstrated that DR can be used as a mechanism to increase
sales. Eskom could be the first utility in the world to utilise DR in this manner.In this regard,
2017 for the balance of the
winter period, achieving a total of 10.4GWh incremental sales in the second quarter.
Additional sales are derived by incentivising an increased uptake in the last hour of the
morning peak period (i.e. 8:00 to 9:00). The base sales in the last hour of the morning peak
period is charged at the existing winter peak rate, while additional sales over and above the
base consumption in that last hour is charged at the winter standard rate.
A total of 262 571 CFLs were installed during the period in Gauteng Province. A total of
637 465 CFLs have been installed in KwaZulu Natal, North West and Gauteng since the
beginning of the financial year. Since inception of the programme in November 2015, a total
of 5 403 386 CFLs have been installed.
Eskom continues to improve the internal energy efficiency of its facilities by undertaking
energy audits and implementing efficiency programmes that focus on lighting, water heating;
heating, ventilation and air-conditioning. Several National transmission substation perimeter
fence lighting projects were installed, with a projected energy saving of 0.3GWh.
Sustainable asset creation

Our capital expansion strategy focuses on new build projects, infrastructure upgrades aimed
at generation sustainability and environmental compliance, transmission strengthening,
customer connections, as well as asset maintenance and replacement projects. We strive to
deliver projects on time, within budget and to the right quality.
Capacity expansion

Sep 17 Jun 17
Generation capacity
installed and
commissioned 794 1 594 794 999 1 460 2 388 2 388 1 332
(commercial operation),
MW
Transmission lines
321.0 350.0 150.7 52.8 677.0 677.0 677.0 585.4
installed, km
Transmission transformer
capacity installed and 1 000 1 000 1 050 2 010 2 010 2 010 2 300
commissioned, MVA
N 1 compliance - new
2 410 1 727 794 1 959 3 751 3 520 3 703 3 917
build, R million
Environmental
174 188 107 154 285 278 272 328
compliance, R million
Kusile Unit 1 achieved commercial operation (CO) status on 30 August 2017, with an
installed capacity of 800MW. The unit joins Medupi Unit 5 that attained CO on 3 April 2017,
with an installed capacity of 794MW. Both units were commercialised ahead of the P80
schedules of March 2018 and July 2018 respectively. The year-end target has already been
exceeded.
It is currently projected that Medupi Unit 4, synchronised on 31 May 2017, will be

commercialised by the third quarter of the current financial year, with an installed capacity of
794MW, resulting in a total installed capacity of 2 388MW for the financial year.
stability, as far as any potential delays and cost overruns on the new build programme is
c
and operational constraints given the negative implications associated with further delays. It
is currently not envisaged that the new build programme will be delayed beyond the P80
schedules and will not exceed the current approved project costs.
Efforts continue to expedite additional capacity from Medupi and Kusile within the P80
schedule and costs, which would result in a R14 billion saving. Medupi will be fully
commissioned by 2021, whereas Kusile will be fully commissioned by 2023, both projects to
be completed within the P80 schedules. All four units at the Ingula Pumped Storage Scheme
achieved CO ahead of the P80 schedule during the previous financial year.
The construction of Transmission lines is performing well and exceeded the quarterly target.
Transformer capacity of 500MVA each were installed and commissioned at the Hydra and
Helios IPP substations on 18 August and 4 September 2017 respectively, adding a further
1 000MVA transformer capacity to the national grid.
Although not part of the shareholder compact for this financial year, expenditure on N 1
compliance and Generation coal environmental projects are ongoing, with actual expenditure
of R1 727 million and R188 million respectively for the period.
For detailed highlights, challenges and project performance, refer to Section 9 of the
Investment Monitoring Report, contained in Section 2 of the Shareholder Report.

Variance Sep 17
R million Budget Actual to budget Actual Budget Proj Actual
Capital and Properties 19 763 15 384 4 379 7 730 32 300 32 817 35 458
Telecoms and Aviation 167 22 145 7 501 163 159
Service functions 92 6 86 4 273 19 7
Strategic functions 332 43 290 13 491 308 114
Group Commercial 42 4 38 3 85 47 8
Technology 216 43 173 111 224 235 812
Renewables 21 10 11 8 43 22 24
System operator 1
Generation 4 959 4 168 791 1 817 8 445 11 575 14 376
Transmission 549 302 247 114 948 780 940
Distribution 2 679 2 295 383 985 7 028 5 486 5 220
Customer Services 105 18 87 256 146 2
Shared Services 276 148 128 87 581 585 596
Group IT 212 163 48 73 560 555 1 094
Total capex before future fuel 29 413 22 606 6 829 10 953 51 735 52 738 58 810
Future fuel (coal) 167 137 30 106 333 700 216
Fuel inventory work in progress
1 595 1 095 500 546 1 266 1 265 (102)
(nuclear)
Total Eskom company capex 31 175 23 837 7 338 11 605 53 334 54 703 58 924
Eskom Enterprises 646 348 298 133 1 549 826 1 107
Total Eskom group funded
31 821 24 185 7 636 11 738 54 883 55 530 60 032
capex
At a company level, year-to-date capex spend is below budget, due to underspend mainly in
Group Capital mainly due to underspend at Kusile, Medupi and Power Delivery Projects,
partially due to phasing of expenditure. Much of the shortfall is however expected to be
recovered by year end, as the year end budget of R54 883 million is forecast to be slightly
exceeded by R677 million, mainly as a result of additional spend in Generation due to
additional outage and technical plan projects.
Unit 4 was synchronised on 31 May 2017 and achieved full load (794MW) on
19 June 2017. Performance and compliance tests, as well as the optimisation process,
are progressing according to schedule, with commercial operation planned to be
achieved ahead of schedule by the end of the third quarter of the current financial year
On Unit 3, the draught group test run milestone was completed on 11 August 2017. CO is
scheduled for the first half of 2019, based on the P80 schedule
On Unit 2, the boiler hydro test milestone was completed on 23 September 2017. CO is
scheduled for the second half of 2019, based on the P80 schedule
Delayed mechanical completion on Unit 3 is a challenge, as timeous access cannot be

given to interfacing or follow-on contractors to complete key milestones. Daily and weekly
tracking is in place to improve mechanical works. The risks on achieving key milestones
are being addressed with the boiler contractor to ensure optimal use of resources
Resource constraints remain an issue, due to personnel being allocated to the completion
of Units 4 and 3
On 14 September 2017, Exxaro experienced a protected strike by National Union of
Mineworkers (NUM) workers. Project security is liaising with Exxaro to prevent possible
acts of sabotage against the conveyors bringing coal from the mine
Although labour stability remains satisfactory and construction momentum is maintained,
increasing workforce demobilisation could lead to unrest due to unemployment issues in
the town. However, the situation is being closely monitored, with attention being paid to
stakeholder concerns. A three-year agreement has also been reached in the Metal
Engineering Industry Bargaining Council (MEIBC) national wage negotiations
With Units 6 and 5 handed over to Generation Division, the focus is on the performance
and other tests to meet the commercialisation requirements for Unit 4, which is
progressing satisfactorily, without any delays expected to CO
Units 3 to 1 are also progressing well against the P80 schedule
Employee safety performance remains excellent with a zero LTIR. Contractor safety
performance worsened slightly to 0.17 LTIR against a target of 0.30 (June 2017: 0.16)
A number of key milestones have been achieved since the Unit 2 generator step-up unit
back energisation on 14 May 2017. The draught group test run was completed on
15 August 2017, followed by the steam turbine and generator on turning gear (distributed
control system) on 17 August 2017. Subsequently, the boiler chemical clean milestone
was completed on 27 August 2017 and the first fire on oil milestone was achieved on
2 October 2017
Construction completion progress on Unit 3 is 76%. Following completion of the Unit 3
boiler hydro test in July 2017, the unit has managed to lift the pulse jet fabric filter row gas
cell in support of the first fire on oil milestone. In addition, the completion of the insulation
of the steam turbine and generator crossover pipes contributes to the satisfactory
progress of Unit 3
On Unit 4, the boiler reheater hydro tests were completed on 2 September 2017 and the
steam turbine and generator on turning gear (local) milestone was achieved
Units 5 and 6 have yielded progress ahead of schedule, as a result of innovative ideas
such as the insulation of ducting components before lifting and installation
Kusile experienced a further three contractor lost-time injuries (LTIs) during the second
quarter. The project continues to reinforce the need for safety and safe operating
practices during meetings with contractor management
Continued focus is on the Behavioural Based Safety (BBS) Programme, as well as
scheduled site-wide stand-downs for safety briefings with all workers. In addition,
fortnightly Site Finishing, Logistics, Appearance, Storage and Housekeeping (FLASH)
inspections have been embedded in daily operations, while the message boards across
site are being used as a communication tool on safety, health and environmental matters
Pressure groups in the community are demanding work and business opportunities,
which pose strike threats, exacerbated by the possibility of transport disruptions.
Engagements with key stakeholders in this regard are ongoing
Since the CO of Unit 1, focus has moved towards the achievement of synchronisation of
Unit 2, which is expected by December 2017, ahead of the P80 schedule of November
2018. CO is on track for the second half of 2018, ahead of the P80 schedule of July 2019
Units 3 to 6 have displayed measurable progress in terms of achieving milestones ahead
of the scheduled dates and are tracking well within the P80 schedules
Employee safety performance remains excellent with a zero LTIR. Despite the three
contractor LTIs, contractor safety performance remains consistent at 0.08 (June 2017:
0.08) against a target of 0.30
As part of the Bloemfontein Strengthening phase 1B scheme, the Everest Merapi 400kV
line has been completed, with 115km strung
Line inspections on the Borutho Witkop 400kV line, which is part of the Medupi
Transmission Integration phase 2 lines, were completed and defects have been
corrected. Optical ground wire installation was completed in September and final testing
is planned for October 2017
The Dedisa Grassridge 132kV line was completed in August 2017, with 6.6km line strung
and regulated
Civil works commenced in June 2017 at Aggeneis Gamsberg substation (40MVA) and
progress is on track. All structural steel has been erected and completed during
September 2017 at the 66kV and 220kV yard extension
Civil works on the Koeberg risk reduction scheme were completed in September 2017
The foundations and earth mat at the Venus substation on the Ariadne Venus line were
completed in September 2017. The project is on track for completion by the end of
October 2017, ahead of schedule
Civil works have been completed at the Pinotage substation, as part of the Firgrove
Pinotage new main transmission system. Both 500MVA transformers have also been
delivered to site
Site establishment for the stringing, cabling and civil works have been completed at
Midas substation, which forms part of the Waterberg phase 2 scheme
As part of the Kusile Transmission Integration scheme, civil construction work is
progressing well at Zeus substation. Stringing from the generator transformer to the high
voltage yard for Unit 3 has commenced
The Witkop 1 protection upgrade at the Matimba high voltage yard was completed and
commissioned in July 2017. Outage 1 works at Medupi have also been completed
successfully. This work forms part of the Medupi transient stability scheme (TSS) of the
Medupi Transmission Integration (high voltage integration) scheme
Stringing and cabling commenced in August 2017 at Simmerpan strengthening phase 1A
Tubular busbar work commenced in July 2017 on the Dwarsberg (Dwaalboom)
strengthening project
The 500MVA transformer of the Highveld South Reinforcement Project Solution Main
Transmission System (MTS) was delivered on 31 August 2017 and civil works are in
progress
The 500MVA transformer at Helios substation at the Khobab and Loeriesfontein 140MW
wind farms was commissioned on 4 September 2017
The 500MVA transformer at Hydra substation at Longyuan Mulilo De Aar (Maanhaarberg
and Plateau North) was commissioned on 18 August 2017
Since April 2013, the total number of schemes that have been completed remain at 40,
including 13 IPP projects
Employee safety performance remains excellent with a zero LTIR, while contractor safety
performance worsened slightly to 0.22 (June 2017: 0.19). Safety awareness continues to
be reinforced on all sites to achieve Zero Harm
Proactive stakeholder management and interventions continue to manage site stability
issues. The implementation of a comprehensive and sustainable stakeholder
management strategy to manage site stability is in under way
Close contractor management and review of schedules continue to address poor
contractor performance, to ensure line construction is not negatively affected
Following the completion of the civils, earthworks and permanent railway line, attention is
focused on closely monitoring construction of the overhead traction equipment (OHTE), by
managing the contractor to ensure productivity is maintained and progress remains on track.
Progress on the yard optimisation and tippler works is ongoing. The excavation of buildings
is in progress, building foundations are under way, structural steel quality inspections
commenced at the manufacturers and designs are currently being reviewed by the
Engineering team as they are received from the contractor.
In the case of the main line enabling works, the shutdown during June and July 2017 was
concluded successfully and on time. Defects that were identified will be corrected before the
contract terminates.
Project completion is currently planned for the first half of 2018.
There is a significant risk of delays on this project, due to the judgment that was handed
down on 30 June 2017, wherein Eskom and Dongfang were interdicted from executing the
contract for the procurement and fitment of the boiler at Duvha Power Station. The final
determination of the review application is still pending.
Demolition works are continuing and completion is expected by June 2018. In addition to the
completion of demolition from the 0 to 16 metre level by end March 2017, demolition from
the 16 to 33 metre level was completed on 7 September 2017. Demolition from the 33 to
57 metre and 57 to 95 metre levels, as well as demolition of the headers, tubes and dividing
walls, are in progress.
A second Acacia-Koeberg 400kV line is required for the network to be grid code compliant.
This project is required to release the Acacia-Koeberg 132kV line, currently used as the
dedicated line for the Koeberg off-site supply, to be energised as the second 400kV line.
The contractor and subcontractor schedules in support of the Koeberg auto start
(commercial operation) by March 2020 are being finalised.
The forging activities at Japan Steel Works are progressing according to schedule. Delivery
of the new steam generators for Unit 1 is planned for September 2020, while the delivery of
Unit 2021. Both sets of steam generators are
planned to be delivered in time for the X25 refuelling outages in February and
September 2021 respectively. The manufacturing progress is on track to meet these dates.
This project is on hold until the revised integrated resource plan (IRP) has been promulgated
and allocation given to Eskom by the Department of Energy (DoE). The expected release
date for the revised IRP is February 2018.
Whilst Eskom has terminated all procurement processes, current development work as the
owner and operator, to reach a state of readiness for construction, is ongoing.
The current Government guarantees issued to Eskom does not provide for any investment in
future capital expenditure beyond the current committed build programme. As such, Eskom
Government support for its consideration, should Government decide to restart the nuclear
build programme procurement process and mandate Eskom to be the procurer.
Eskom investigated various technology options of photovoltaic (PV) generating plant, wind
and a combination of PV and wind. However, the World Bank and other co-financiers
highlighted risks with this option associated with the fact that the power purchase
agreements (PPAs) for bid windows 3.5 and 4 have not been signed, which poses a risk for
Eskom to build the PV generating plant. Furthermore, the completion of an environmental
impact assessment is a lengthy process that could delay the project beyond the constraint
date of December 2019.
Eskom is therefore considering a second alternative, namely solar PV generating power

plant with centralised and distributed battery storage, located at various Eskom distribution
constrained sites, at Sere Wind Farm and IPP renewable energy sites. Eskom awaits formal
approval from the World Bank on its proposal.
All 14 OCGT units at Ankerlig and Gourikwa have been converted to dual-fuel capability
nine at Ankerlig and five at Gourikwa. Feasibility studies for the balance of plant required to
complete the dual-fuel conversion is under way.
As part of the feasibility studies for a gas-fired power station of up to 3 000MW, an

environmental impact assessment (EIA) has commenced. Scoping report activities are in
progress.
Actual income from the disposal of non-core properties year-to-date is R26.3 million
(June 2017: R15.5 million, restated) against a year-to-date target of R26 million. The target
for the 2018 financial year is R50.6 million and is expected to be achieved.
Information received after the request for information (RFI) issued in January 2017 revealed
that a market does exist, and gave guidance on what potential bidders consider the critical
components of a successful transaction.
The tender process was relaunched in August on the Eskom and National Treasury portals;
the tender closed on 21 September 2017. Tenders are being currently being evaluated.
Eskom will endeavour to complete the disposal process during the 2018 financial year.
Research, testing and development
70 work packages, which are all directed at ensuring long-term organisational sustainability.
These projects drive all opex, capex and supporting resource requirements of RT&D, as
effective and efficient management of the portfolio is essential to realising value in this area.
RT&Ds operating expenditure of R230.9 million for the first half of financial year has been
managed against a half-year projection of R243.3 million. The underexpenditure is primarily
due to internal efficiencies as well as a higher than projected recovery from laboratory and
testing services rendered to the organisation.
RT&D has committed to delivery on five flagship projects for the year, while simultaneously
continuing delivery against existing high priority large capital projects. The five flagship
projects are key deliverables on the roadmaps for the future customer, coal, Distribution and
Transmission asset management grand challenges and are listed in the table below.
Sep 17 Mar 18 Mar 17

Flagship projects, R Sep 17
million Purpose Target Actual Proj Actual
eMobility Development of an eMobility programme to
drive future sales and revenue from this 2.00 1.80 4.86
untapped sector
Distributed energy Establish an Eskom footprint within the
resources (DER) rapidly growing DER market through
1.00 0.91 2.64
development of product offerings to ensure
market entry and revenue protection
Flagship projects, R Sep 17
million Purpose Target Actual Proj Actual
Coal logistics and Provide Primary Energy Division with quality
characterisation assurance that coal procured is of the right
quality, as well as a real-time fingerprint of
2.84 2.41 11.38 0.75
each type of coal being procured and
transported, thereby enabling more effective
operational burn decisions
Energy storage Development of bulk energy storage
solutions value propositions that will allow
Eskom to deploy energy storage 0.50 0.98 0.40
technologies at scale, for grid strengthening
and other operational and financial benefits
Robotics and UAV Development of an unmanned robotic
inspection and technology to assist in efficient and effective
maintenance fault location on distribution and 1.59
transmission lines to reduce downtime and
inspection and maintenance costs
The eMobility business case is on track for finalisation by 31 October 2017 and is due for
presentation to the Exco in November 2017. Delivery on coal logistics and characterisation is
on track for financial year end. The business cases for distributed energy resources and
energy storage are on track for delivery by 31 March 2017, although the robotics and UAV
inspection and maintenance project is currently lagging on scheduled quarterly delivery.
Large capital flagship project expenditure is R20.22 million at 30 September 2017, with a
year end projection of R83.56 million. The table below summarises the progress made on
high priority projects during the period under review.

High priority Sep 17
projects, R million Purpose Target Actual Proj Actual
Flow laboratory Provides Eskom and industry with the ability
refurbishment to accurately calibrate fluid flow instruments,
which is critical to improve efficiency in large 7.00 0.36 28.60 0.84
industrial processes. This project is for a
complete refurbishment of the facility
High voltage direct Will provide Eskom with knowledge and
current (HVDC) test expertise for HVDC use in future 13.00 2.25 26.03 62.06
facilities Transmission expansion projects
Non-destructive resting The centre will provide a critical service to
and evaluation centre the industry and would fill an existing gap 3.00 0.10
established with CSIR that exposes the organisation to risk
Off-grid smart A community has been identified in which
community in Eskom RT&D will invest in several off-grid
Wilhelmina technologies and control systems to assess
the ability to provide remote communities 6.30 6.65 7.71 2.85
with sustainable power solutions.
Renewable energy and storage technologies
will be part of the mix
High priority Sep 17
projects, R million Purpose Target Actual Proj Actual
Commercialisation of Equity partners are being sought for the
Underground Coal project to enable it to bridge the gap from
Gasification (UCG) research and demonstration to
demonstration commercialisation. The focus will be on local
supplier development and opportunities
found in the local primary energy market.
The project is in care and maintenance but TBD 0.10
has not been stopped. All work on site and
on developing commercial partnering
opportunities is being covered by operating
expenditure and not recorded against the
asset, resulting in the negligible asset
expenditure figures
The year-to-date underexpenditure is due to delays encountered with the flow laboratory
project, where progress and expenditure was delayed due to design complications during
the first quarter of the financial year. The designs have been reworked and accepted during
the second quarter.
Due to a four month delay in SABS approval on access to the NETFA site, the HVDC project
is at risk of underexpenditure by year end. Access was initially agreed upon and
subsequently retracted after SABS presented alternative terms, requesting monthly rental for
site access. The project team has however effected alternative arrangements to move the
HVDC site the adjacent vacant land at Apollo substation. Line redesign has subsequently
been finalised and EIA exemption obtained. The second HVDC site at the Corona Cage in
Suninghill will meet the year end target.
The CSIR enabling work is awaiting placement of a new contract; the flow lab design was
reworked and subsequently approved by Eskom Engineering after initial submissions had
been rejected.
The UCG equity partnership identification has been delayed due to budget exhaustion on
the Eskom legal panel contract, therefore the project team will not meet its target for equity
partner identification by financial year end.
Environmental and climate change sustainability

Environmental compliance, in terms of air quality, land, biodiversity, water, waste (including
nuclear waste) and ash management, impacts operational sustainability. It is critical to
maintaining our licence to operate, thereby ensuring security of supply. It is also underpins
our principle of Zero Harm to the environment, while operating under complex and evolving
environmental requirements.
emissions or carbon footprint (mitigation) and

safeguarding Eskom from the adverse impacts of climate change (adaptation).
Environmental performance
An environmental (EIA) authorisation to build Nuclear 1 at Duynefontein, Western Cape

Relative particulate emissions performance year to date is significantly better than target
at 0.25 kg/MWhSO
Water performance year to date is significantly better than target at 1.29l/kWhSO
Completion of the fabric filter plant retrofit at Grootvlei
50 facilitated environmental behavioural change leadership interventions were conducted
in the period to September 2017
Eskom awarded second in the Consumer Green category and third position the
Consumer Social Investment category of the Sunday Times Top Brands Survey 2017
The Biodiversity Centre of Excellence won an award from WESSA for the work that has
been undertaken to mainstream biodiversity into the Eskom business
The upper site at Ingula has not yet been proclaimed as a nature reserve
budgetary constraints
Accurate reporting of emissions (particulates, CO2, SO2 and NOx) remains a challenge
The timelines committed for the fabric filter plant installation at Tutuka Power Station will
not be met and the Medupi flue gas desulphurisation project is at risk of being delayed;
these delays have legal implications for Eskom

Sep 17 Jun 17
Relative particulate
emissions, kg/MWh sent 0.34 0.25 0.23 0.29 0.34 0.28 0.30 0.30
1
out
Specific water
consumption, l/kWh sent 1.37 1.29 1.32 1.43 1.37 1.32 1.29 1.42
2
out
Environmental legal
contraventions in terms of
1 1 1
the Operational Health
3
Dashboard, number
Environmental legal
12 7 1 17 22 18 22 28
contraventions, number
1. Relative particulate emissions values include Medupi Unit 6 but exclude Medupi Unit 5 and Kusile Unit 1.
Medupi Unit 5 will be included from April 2018, being one year after commercial operation.
2. Specific water consumption values include Medupi Unit 6 but exclude Medupi Unit 5 and Kusile Unit 1.
3. In defined circumstances where the management of a legal contravention indicates specific management
issues/failings, it is recorded as legal contravention in terms of the OHD incident.
The particulate (ash) emissions performance for the six months to 30 September 2017 is
0.25kg/MWhSO, which is better than the year end target of 0.34kg/MWhSO and an
improvement on
due to the increased opportunity for outages which has improved the condition of the
operating plant. The reduced demand and improved plant availability, together with
disciplined execution, have enabled lower load factors.
National Environmental Management Act (NEMA) section 30 performance

The Atmospheric Emission Licences (AEL) issued to power stations require the reporting of
unexpectedly high atmospheric emissions in terms of section 30 of the National
Environmental Management Act, 1998 (NEMA). Five section 30 incidents occurred during
the second quarter (four incidents at Duvha and one incident at Tutuka power stations)
bringing the total year to date to ten. This is an improvement compared to the 29 incidents
reported in the six months to September 2016.
Nine of the section 30 incidents reported were due to particulate matter emission limit
exceedances. The main causes for high particulate matter emissions can be attributed to
SO3 plant problems, dust handling plant problems and fabric filter plant related issues. One
section 30 incident was reported due to high NOx emissions measured at Tutuka Power
Station, this incident was found to be due to a monitor malfunction.
Power stations operated under conditions where section 30 has been triggered for 0.27% of
the time during the reporting period, compared to 2.65% of the time in the previous year.
Compliance with Atmospheric Emission Licences (AELs)

n programme, the period saw the completion of the
third and final fabric filter plant retrofit at Grootvlei Power Station, as well as the installation
and testing of the high frequency transformer pilot at Duvha Unit 5 to reduce particulate
emissions.
The installation of planned retrofits and upgrades proceeded during the past quarter.
HFTs for Duvha Units 4 and 6 were completed in August 2017. Routine maintenance,
including fabric filter bag replacements and electrostatic precipitator repairs, was also
conducted as required. The budget for abatement technology refurbishments is under threat
ter plant
installation at Tutuka power station will not be met and the Medupi flue gas desulphurisation
project is at risk of being delayed; these delays have legal implications for Eskom.
Air quality offsets programme

In KwaZamokuhle, a pilot to test an electricity intervention (houses insulated and coal stoves
replaced with electric stoves/ovens and heaters) was rolled out on 30 formal (RDP) houses
during the winter. Households were keen to participate. The results of in-depth household
interviews and indoor temperature monitoring are now being analysed to assess the success
of the intervention. In Sharpeville, a baseline assessment of air pollution sources and
household behaviours was also conducted to inform the design of an offset intervention for
the Vaal.
DEA granted approval in May 2017 in terms of the National Environmental Management:
Waste Act, 2008 to 14 exempted off-takers (small and medium enterprises) who require ash
from different Eskom Power Stations. Commercial processes have commenced to award the
contracts. Those off-takers that urgently required ash and could not wait for the commercial
process to be completed have been given permission to load ash on a trial and controlled
basis so that they can complete the product development in the brick making process.
Eskom participated in Operation Phakisa, a Government initiative to involve a cross section

of society in the identification of commercial opportunities associated with the beneficiation
of waste, including the beneficiation ash. Eskom have commenced with discussions to
further develop possible new markets for ash.
Water usage related to power station operations for the period was 1.29 /kWhSO,
substantially better than the annual target of 1.37
performance of 1.43 /kWhSO.
Continued focus on the station specific water strategy implementation plans and a focus on
improving water management resulted in an increase in water performance related projects
at the power stations. Water strategy road shows were held at all stations to assess
progress in the implementation on the water strategy implementation plans and to drive the
need for continuous improvement in water management.
There were no legal contraventions in terms of the OHD incidents reported during the period.
Seven legal contravention incidents were identified in the six months to 30 September 2017,
compared to seventeen contraventions incurred the same period last year.
Work on the environmental behavioural change programme continues as planned. In the six
months to September 2017 a total of 169 Eskom environmental practitioners underwent two-
day envir
Programme, 371 middle managers were exposed to a module on environmental leadership,
while 463 senior managers attended an intervention to how to lead the change in
environmental behaviour in Eskom.
DEA issued a draft inspection report in February 2017 alleging various non-compliances to
2017, the DEA have on 13 October 2017 requested additional information from Eskom.
Additional information and a status on issues raised in the Tutuka pre-compliance notice was
requested by DEA in July 2017 and a response was provided on 3 August 2017.
Camden received a pre-directive from Gert Sibande District Municipality in July 2017 for
allegedly interfering in environmental management inspectorate inspection processes. A
response to the matter was submitted in August 2017. Camden has also received notice of
a DEA Environmental Management Inspectorate inspection on 17 and 18 October 2017.
All divisions with significant environmental impacts are required to maintain or obtain
ISO 14001 environmental management systems certification. Divisions are increasingly
focussing on transition to the new ISO 14001:2015 standard. Koeberg, ERI and four
close issues and obtain their certificates.
Proclamation of the Ingula Nature Reserve under the National Environmental Management:
Protected Areas Act, 2003 by the KZN and Free State Provincial governments is still
awaited.
There have been 71 red data bird mortalities recorded in quarter 2, caused by bird
smission and distribution infrastructure. This
brings the total of mortalities recorded to 135 for the year to date. This compares to
351 mortalities recorded for the six months to September 2016.
Work is ongoing on the proactive bird mitigation strategy to reduce the number of bird
collisions and electrocutions on Eskom infrastructure. Success thus far in the project
includes the replacement of 1 427 bird-unfriendly poles in the Free State and Eastern Cape
Operating Units. Bird guards were fitted on 1 054 steel structures on 66kV and 132kV
powerlines, extending for 382km, to prevent phase to earth mortalities in vulture sensitive
areas in the Northern Cape.
Engagement with stakeholders on wildlife mortalities is on-going but several parties have
expressed concerns regarding the slow implementation of actions by Eskom. Efforts to
address their concerns continue.
For the six months ended 30 September 2017, Sere contributed 153.67GWh to the national
grid, with an average load factor of 33.48%. An availability factor of 99.38% was recorded
over the period, with no lost-time injuries or significant environmental findings.
The small hydro plants in the Eastern Cape recorded an average unplanned capability loss
factor of 2.35%. However, total energy sent out amounted to only 5.68GWh during the
period, as a result of low rainfall and lack of water in the dams and catchment areas.
The eight rooftop and ground mounted PV commissioned sites in operation produced total
energy sent out of 1.75GWh during the period. The sites are: MWP rooftop and car park,
Sunilaws in East London, Bellville, Kendal, Lethabo, Rosherville and Mkondeni in
Pietermaritzburg.
Activities have been limited to site assessments as there is currently no capital expenditure
allocated for new plant. As a result, the projects are currently on hold, although wind data
collection continues at two sites, Aberdeen and Kleinsee.
The decision to terminat

power (CSP) plant was reached in September 2017. Discussions between Eskom and
lenders continue.
The Eskom Board IFC approved and endorsed the strategic direction and technology option
of solar PV with battery storage as a suitable alternative to CSP on 7 April 2017. Eskom
communicated its intention to replace the Kiwano CSP project with a solar PV with battery
storage alternative to the World Bank, and provided an outline of the alternative.
The lenders (AFD, AfDB, EIB, KfW, World Bank) requested a project proposal, which was
submitted on 16 May 2017. Based on this proposal, the lenders undertook a mission from
24 May to 1 June 2017 to discuss and agree upon a project design acceptable to the
lenders, and gauge the feasability of implementation by 31 December 2019, being the World
Bank closing date. Discussions between Eskom and lenders continue.
Climate change and sustainable development
In South Africa, power consumption has declined on average by 0.5% a year since 2006,
due to a wide range of factors, including economic slow-down, commodity market volatility,
increasing electricity costs and lack of supply security. The current demand outlook is for
sales to decline further in 2017/18 and then slowly start to recover. Given the nearly 1:1
2) emissions, this
2 emissions declining from 233.3Mt in 2013/14 to 211.1Mt in

2016/17.
DEA has granted Eskom a favourable carbon budget for the period 2016-2020, and Eskom
is on track to meet the 2017 carbon budget and has met the 2016 budget. It is important to
note that the budget given by Government is a five year cumulative budget (2016-2021)
which Eskom is meant to meet at the end of the period. However, Eskom tracks monthly
performance to ensure we come within the budget on an annual basis. Eskom is currently
preparing its pollution prevention plan to submit to the Department of Environmental Affairs
in December this year. This is a mandatory requirement according to the greenhouse gas
reporting regulations published in July this year.
Eskom is currently preparing for COP 23 to be held in Bonn in November 2017. The
negotiations will continue to work on the details of how the Paris Agreement will be
implemented, the so-
complete the rulebook for the Paris Agreement by COP 24 in 2018.
In partnership with the National Business Initiative (NBI) and some member companies, the
DEA will be putting up a South African pavilion at COP 23. This pavilion will showcase the
work being done in South Africa by Government and Business to address climate change.
Eskom will be providing print and video material for this pavilion.
Eskom met with National Treasury (NT) to share the impact of the carbon tax on electricity
tariffs to 2023/24. The Carbon Tax Bill makes provision for a rebate for the renewable
energy premium.
calculations, without reaching agreement. Discussions on this matter are being pursued with
NT. Whereas NT had publicly indicated that a revised Carbon Tax Bill should be available for
public comment in June 2017, no revised Bill has yet been published. Eskom has not had
any further engagements with NT in this regard. This status remains unchanged as the NT
has not requested further engagement at this stage.
Eskom has progressed its work with the Council for Scientific and Industrial Research
(CSIR) in generating high resolution projections of future climate change over South Africa
over the last two years. This data set has been used by Eskom through its GIS team to
perform analyses of the plausible impacts of extreme events on Eskom operations and
infrastructure, for near-future periods (2021 to 2050) extending until the end of the 21st
century. This work is being further devolved into specific business areas within Eskom where
the events such as drought, flooding, snow loading and extreme temperatures will have a
major impact. This information will be used to develop plans in order to deal with these risks
posed by Climate change. Thus far indications are that the country faces significant climate
change the Western part of the country becoming drier and the eastern part wetter. This
means the Eskom infrastructure is vulnerable to flooding, droughts etc.
On the other hand Eskom also remains subject to penalties and costs related to emissions
as discussed above. The carbon budgets and carbon taxes will result in financial penalties
should Eskom not be able to meet emission reduction targets.
Eskom
the economy, environment and society. We have completed the prioritisation exercise and
the data collation. The data analysis will now begin. A first comprehensive draft is due end of
October. The project is expected to be completed by December 2017.
Safety
performance. Eskom is committed to achieving its goal of Zero Harm, and strives to manage
activities to eliminate incidents, mitigate occupational hygiene and safety risks and promote
excellence in safety performance. In intensifying efforts to improve safety performance, a
number of safety improvement initiatives are being implemented, with a view to decrease the
number of fatalities and injuries for Eskom employees, contractors and members of the
public to zero.
Eskom's leadership genuinely believes that all incidents are preventable, and have ensured
that policies, procedures, processes, tools, protective clothing and behavioural expectations
are in place to assist their employees and contractors in achieving the Zero Harm goal.
Eskom's leadership sets the direction and empowers all employees to do what is necessary
to achieve Zero Harm.
Safety
Seven Safety Leadership for Managers courses and one Safety Leadership for
Supervisors course were facilitated
During August 2017, Eskom launched Electricity Safety month which is aimed at
educating the communities and schools about electricity safety
Eskom Company maintained its Occupational Hygiene Approved Inspection Authority
accreditation following a SANAS assessment
The number of serious incidents resulting in injuries and/or fatalities are a challenge
Although there has been an improvement in the professional registration of construction
health and safety professionals, registration continues to pose a compliance risk to the
organisation
Compliance with the Construction Regulations 2014 across the organisation remains a
challenge, coupled with moderate levels of non-compliance with health and safety
legislation generally
Figures in the fatalities table below reflect the Eskom group. Figures exclude incidents where
third parties were at fault.
Sep 17 Jun 17 Mar 17 Sep 16

Total employee fatalities 2 2 4 1
Electrical contact fatalities 2 1
Vehicle accident fatalities 1 1
Other fatalities 1 1 2
Total contractor fatalities 5 3 6 3

Electrical contact fatalities 1 1
Vehicle accident fatalities 1 1 2 1
Other fatalities 4 2 3 1
Total public fatalities 13 6 20 10

Electrical contact fatalities 8 2 16 8
Fatalities from other causes 5 4 4 2
1. One employee vehicle accident fatality was confirmed by the Safety Data Integrity Committee as being solely
a third party fault.
Eskom sadly experienced two employee fatalities during the six months to September 2017,
one due to a motor vehicle accident and one struck by a moving object.
There were five contractor fatalities during the six months to September 2017; one caught
between or under, one struck by, one motor vehicle accident and two gunshot incidents.
Of the 13 public fatalities, four were due to vehicle incidents, eight were electrical contact
incidents and one person fell into a hole made by a contractor to plant a pole.
The progressive LTIR is a proportional representation of the occurrence of lost-time injuries

over 12 months per 200 000 working hours, and includes occupational diseases and
fatalities.

12-month moving Sep 17 Jun 17
average, % Target Actual Actual Actual Target Proj Proj Actual
(including occupational 0.31 0.26 0.28 0.31 0.31 0.27 0.29 0.43
diseases) - company
(including occupational 0.31 0.25 0.27 0.31 0.31 0.27 0.27 0.39
diseases) - group
(excluding occupational 0.31 0.24 0.27 0.28 0.31 0.26 0.28 0.29
diseases) - company
(excluding occupational 0.31 0.23 0.26 0.28 0.31 0.26 0.27 0.28
diseases) - group
1. The comparative data has changed as a result of incident information presented to the Safety Data Integrity
Committee which resulted in certain LTIs being reclassified as a result of medical issues, confirmation that the
incident is work-related or confirmation of third party fault.
Motor vehicle accidents, slips, trips and falls and caught between or under remain the main
causes of injuries. Refer to the safety programmes detailed below for initiatives to improve
A total of ten occupational diseases have been confirmed for the six months to September
2017 for the Eskom group. These work related incidents include, one occupational asthma,
one contact dermatitis, one pleural thickening and seven noise induced hearing loss
incidents.
The accuracy levels for LTIR are at 95% due to incidents changing from medical (no time
lost) to lost-time injuries as a result of the deterioration of medical conditions, reclassification
of questionable incidents after further assessment, as well as the late reporting of lost-time
injuries.
regarding fatalities and injuries.
Fire risk and emergency management

Emanating from the fire risk and emergency management compliance inspections, there is a
good understanding of the requirements of the fire risk and emergency management
standards at the sites inspected. However, a risk has been identified which relates to the
inspection, testing and maintenance of fixed fire installations such as fire sprinkler systems,
fire pumps, fire detection and public address systems. The responsible department has
established programs to address and mitigate these risks.
The quarterly fire risk and emergency management report has been circulated to the
business to share the findings. Eskom conducts emergency preparedness awareness
training, training on the completion of fire risk assessments and fire safety plans.
Working at height
Working at height is a significant part of work in Eskom and is regarded as a high-risk
activity; as a result, all precautions must be taken to prevent incidents while working at
height. The working at height standard, which aims to standardise the requirements for
matters related to working at height, has been reviewed. Additionally, technical specialists
have been appointed to the working at height workgroup to provide advisory and support on
technical working at height matters.
Risk assessment training

Eskom continues to roll out risk assessment training to raise awareness on all hazards
identified and the development of baseline risk assessments for work areas and scope of
work. For the quarter, 24 employees have been trained on conducting risk assessments.
OHSAS 18001 Certification

OHSAS 18001 Certification maintenance at both Generation and Group Capital divisions is
on track. Transmission division has successfully conducted OHS Stage 1 audits in July
2017. Distribution North West and Northern Cape Operating Units have been OHSAS 18001
certified whilst the remaining operating units are in the various stages of OHS certification.
Safety leadership and training

Safety leadership conversations, a facilitated 90-minute leader led conversation, focusing on
safety performance in a specific division, continue to be rolled out across Generation,
Distribution, Transmission, Group Capital and Group Customer Service with current
progress at 37% against a target of 70% by year end.
An organisation wide safety culture survey was launched during the past quarter with more
than 7000 responses received. Results are in the process of being consolidated and will be
shared with the divisions during the next quarter.
An OHS Coaching Programme for OHS professionals has been developed and
SAP EH&S and Incident Management Procedure (32-95) training is conducted on a monthly
basis. For the period April 2017 to September 2017, a total of 57 employees were trained
across Eskom on SAP EH&S and 135 were trained on Incident Management Procedure.
Eskom continues to focus on the implementation of the Construction Regulations 2014

Compliance Roadmap and implementation strategy in order to ensure a consistent and
standardised approach to the requirements of the Construction Regulations.
Eskom has embarked on a project to assist in the development of all employees who are
registered with the SACPCMP (South African Council for the Construction and Project
Management Professions) either as Candidate Construction Health and Safety Agents
(CHSA) or Construction Health and Safety Managers (CHSM) to enable them to register as
Professional Construction Health and Safety Agents.
In order to ensure the proactive management of contractor safety performance, a decision

was taken that all contractors conducting critical or high risk activities must have written safe
work procedures in place for those activities. The Contractor Health and Safety
Requirements Standard (32-136) will be revised to include this mandatary requirement and
compliance will be monitored through inspections and audits.
Continued comprehensive analysis of all contractor safety incidents is conducted on a

monthly basis, and shared with safety managers within the respective divisions. During the
quarter, 17 poor performing contractors were highlighted with the respective divisions
requested to develop and submit improvement plans to Sustainability Systems OHS
department These improvement plans will be presented to divisional representatives in the
Contractor Safety workgroup for sharing of best practices.
Ongoing training with respect to the Eskom SHE Requirements for Commercial Process
Standard (32-726) continues to take place, to ensure a standardised approach to contractor
safety management in Eskom and to improve the current contractor safety performance. For
the period to September 2017, there were 193 people trained.
During the period, a total of 127 SHE evaluations were conducted on new supplier
registrations, of which 115 approved and 12 rejected.
On 22 August 2017, Eskom applied for an exemption regarding emergency work and minor
reticulation in terms of Construction Regulations 4(1) of the Occupational Health and Safety
Act, 1993. The exemption will afford Eskom an opportunity to conduct emergency work
without awaiting the 30 days permit application (Construction Regulations 2014, sub-
regulation 3) from the Department of Labour.
Eskom remains committed to Zero Harm, and continues to embark on various activities
which highlight electricity safety and the benefits of using electricity safely to the public.
During the quarter, Eskom conducted 2 844 school visits, 1 780 community visits, 26
agricultural forums and 154 other engagements that covered commercial consultations,
municipalities, large power users and stakeholders. These interventions reached an
estimated audience of 634 637. In addition, there have been ongoing social media
notifications, television advertisements and media statements intended to educate the
members of the public about electricity safety. Furthermore, Eskom hosts two radio
interviews on a monthly basis, on two community radio stations per province, to address
questions on public safety and electricity safety.
In addition, Electricity Safety month was launched on 1 August in Protea South in Soweto.
The first event took place at the Protea South Primary School where Eskom, SAPS and
Disaster Management educated the children on electricity safety and other security matters.
The Media also attended and conducted interviews. All Distribution Operating Units hosted
various community and school events within their provinces. The launch event was followed
up by a media tour to Oukasie near Brits on 25 August, focusing on illegal connections.
Building a sustainable skills base

This strategy focuses on driving a culture of performance and creating a productive
workforce, which includes building a strong learner pipeline. In order to sustain our business,
we aim to recruit, develop and retain appropriately skilled, committed, engaged and
accountable employees.
The group headcount (including fixed-term contractors) increased slightly to 47 891 at

30 September 2017 (30 June 2017: 47 809). Refer to page for the headcount breakdown
and an analysis of employee benefit costs.
During the period under review, a total of 299 employees have been taken through the
Recognition of Prior Learning (RPL) process against various registered unit standards and
qualifications outcomes.
Furthermore, 1 290 employees are currently enrolled with various academic institutions to
further their studies, of which 909 are new enrolments.

Sep 17 Jun 17
Number Target Actual Actual Actual Target Proj Proj Actual
Engineering learners 200 1 974 1 673 881 391 2 138 1 937 1 480
Technician learners 400 1 364 1 499 435 652 1 509 2 123 1 209
Artisan learners 1 000 1 952 1 977 2 058 1 434 1 918 1 781 2 155
Learner intake 250 79 13 195 500 195 33 3 048
The Eskom learner pipeline currently exceeds target, with 5 762 learners in the system. This
is more than adequate to meet the future skills requirements of the company. Eskom trains
learners not only for its own business needs but also to contribute to the skills development
strategy of the country. A Career Fair is planned with Eskom suppliers in October 2017, in
order to introduce them to qualifying learners to assist learners to acquire meaningful
exposure to the world of work.
The provincial breakdown of learners by category is set out in the table below:
Sep 17 Provincial breakdown

Kwa-
Learner Eastern Free Gau- Zulu- Lim- Mpuma- Northern North Western
categories Total Cape State teng Natal popo langa Cape West Cape
Engineer
1 974 58 48 1 515 63 68 132 21 24 45
(incl. EITs)
Technician 1 364 43 33 705 78 76 215 53 79 82
Artisan 1 952 130 100 394 253 234 610 66 54 111
Other (incl.
472 4 14 339 17 8 65 6 8 11
GITs)
Total 5 762 235 195 2 953 411 386 1 022 146 165 249

Sep 17 Jun 17
Training spend as % of
gross employee benefit 4.50 5.08 4.44 4.31 5.00 5.00 5.00 4.89
costs
Training spend for the period amounts to R723 million, which is translates to 5.08% of gross
manpower expenditure, above the year-to-date target of 4.50%.
At 30 September 2017, 14 employees were on suspension with pay (June 2017: 17).
The overall Industrial Relations Index has increased in comparison to the previous quarter
due to more grievances being resolved. Targets for disciplinary action with sanctions and
achieved.
Income differential adjustments for bargaining unit employees in the Eskom group are
planned for the third quarter of the financial year. The implementation of income differentials
for managerial employees is planned for the first quarter of the next financial year.
Transformation and social sustainability

This dimension supports economic development and supplier transformation. It also covers
people transformation and managing our corporate social investment initiatives.
-wide management of sustainability is detailed in the Eskom

Sustainable Development Framework. The framework shows the relationship between the
We aim to transform society through our supplier localisation drive, as well as corporate
social investment in community education, health and developmental projects. Our most
programme.
Corporate social investment
social investment mandate to promote transformation and social sustainability. The

Foundation was to be absorbed into Eskom effective 1 April 2017, although CSI initiatives
would continue.
On 29 September 2017, Exco took a decision to recommend to Board IFC that the
Foundation operates as a subsidiary again from 1 April 2018, following advice from the
shareholder to delay the dissolution of the Foundation as a subsidiary, pending the review of
Initiatives are focused on developing small and medium enterprises, education, health, food
security, community development, energy and the environment.

Sep 17 Jun 17
Percentage of CSI budget
95.00 165.00 138.00 67.00 98.00 98.00 98.00 100.00
committed on projects, %
CSI committed, R million 78.6 129.3 76.1 74.7 192.0 192.0 192.0 225.3
Reduce opex (%) against
5.00 5.00 76.00 26.00 5.00 5.00 5.00 12.00
budget
Number of beneficiaries 250 000 187 364 99 988 120 246 400 000 400 000 400 000 841 845
Number of rural
development projects 2 n/a 6 6 6 3
completed
Number of projects
30 46 19 35 120 120 120 173
approved in strategic sites
Number of learners
graduated from the Eskom n/a n/a n/a n/a 140 140 140 150
Contractor Academy
Number of learners and
teachers impacted with
12 000 56 209 10 478 29 540 50 000 50 000 50 000 55 353
maths and science
programmes
For the period to 30 September 2017, the Foundation approved a total of 80 projects, grants
and donations to the value of R129.3 million, and impacting 56 209 beneficiaries.
The annual Business Investment Competition (BIC), which started in 2008, is run by the
Eskom Development Foundation. It recognises and rewards small businesses that are
significantly contributing to the fight against unemployment and poverty and growing our
economy. The Foundation announced the 2017 BIC winners at an awards evening in
Johannesburg on 30 August 2017.
The overall national prize winner was Reba Chemicals (Pty) Ltd, based in Johannesburg.
The business, which was created to replace imported chemicals from Europe and the USA,
has created 19 permanent jobs over the years while awarding 10 learnerships. As a
manufacturer of industrial chemicals, Reba Chemicals has built a substantial customer base,
including the manufacturing of water treatment chemicals for esteemed customers like
RandWater and industrial chemicals for CureChem. The business also provides water
treatment and automotive chemicals.
Over 100 registered companies competed for prizes worth R1.3 million within the
agri-processing as well as construction and engineering.
As part of their prizes, all BIC finalists would exhibit their enterprises at the Small Business
Expo (SBE) held from 31 August to 2 September 2017 at the Ticketpro Dome in
Johannesburg, alongside the Buy a Business Expo. The expo helps small and medium
enterprises to grow by giving them an opportunity to market themselves and interact with
some 7 000 corporates, investors and potential clients over three days. Amongst the benefits
of participating at the expo are that entrepreneurs can meet face to face with a qualified
target audience, get access to prearranged meetings, which proactively connect participants
to help them achieve their business goals.
The winners in the four categories were:

Manufacturing: IKIM Solutions (King Williams Town, Eastern Cape)
Trade and services: EWASTE Africa (Pietermaritzburg, KwaZulu-Natal)
Construction and engineering: Oakantswe Construction and Projects (Pretoria, Gauteng)
Agriculture and agri-processing: Eden All Natural (Cape Town, Western Cape)
Category winners received R100 000 each, first runners-up R50 000 each and second
runners-up R25 000 each. All other finalists received R5 000 to invest in their businesses.
At Nkonisa Primary School, work completed included the construction of a new kitchen
block, renovations to 10 existing classrooms and external works. A total of 251 people
benefitted from this project.
At Dinokeng Primary School, work completed included the construction of an administration

Electrification
The DoE-funded electrification programme continues to connect previously disadvantaged
households and farm w

Sep 17 Jun 17
DoE funded direct
95 409 100 162 37 880 99 665 201 200 214 097 214 097 206 089
connections
Eskom funded direct
218 204 218 1 347
connections
Total connections,
95 409 100 380 37 880 99 869 201 200 214 315 214 097 207 436
number
DoE funded investment 1 942 1 618 646 1 536 3 846 4 218 4 218 3 298
Eskom funded investment 2 1 2 1 2
Total capital investment,
1 944 1 619 646 1 538 3 846 4 219 4 218 3 300
R million
1. DoE direct funded connections includes farm worker connections.
The implementation of the Distribution Performance Centre has enabled the excellent
connection performance, with only the Eastern Cape Operating Unit not meeting its target.
The results are a clear indication that Eskom has changed gear and has set itself up to
deliver on this service.
The provincial breakdown of electrification connections against target for the period to
30 September 2017 is set out below.
Sep 17 Provincial breakdown

Kwa-
Number of Eastern Free Gau- Zulu- Lim- Mpuma- Northern North Western
connections Total Cape State teng Natal popo langa Cape West Cape
Actual
100 380 23 579 1 033 1 478 28 799 21 801 11 791 1 230 6 504 4 165
connected
Target 95 409 26 555 522 1 361 26 911 20 422 10 676 1 026 5 690 2 246
Surplus/
4 971 (2 976) 511 117 1 888 1 379 1 115 204 814 1 919
(shortfall)

Sep 17 Jun 17
Capital investment, R 000 n/a 6 194 2 200 238 n/a TBU 9 400 10 684
Total connections, number n/a 12 7 2 n/a 12 18 31
Universal access has been reached in terms of clinics and Eskom is only addressing growth.
Some schools targeted to be connected were found to be vandalised and some closed or in
the process of being closed and could therefore not be connected. These have been
reported to DBE through regular engagements. Only roll overs of schools not completed in
the 2016/17 financial year are being concluded now.
Procurement equity

Sep 17 Jun 17
70.00 66.99 74.07 80.40 70.00 70.00 80.00 73.37
(Eskom-wide), %
70.00 54.94 56.21 75.16 70.00 70.00 80.00 85.78
(new build), %
Eskom-wide, a total of 946 contracts worth R43.3 billion were awarded and commenced
during the period under review, of which 67% (or R29 billion) of the contract value was
committed to local content. Of the contracts awarded, 48 contracts worth R571 million were
awarded within the capacity expansion programme. Of these, the local content committed
amounted to R314 million, representing 55% of the total contract value in new build projects.
e a level 2 B-BBEE
rating. However, at the moment, Eskom is rated as level 8, until June 2018, when the current
certificate expires.
Eskom used to be rated at level 2, but due to amendments to the B-BBEE Codes of Good
Practice, the level decreased to 8. The main reason is that Eskom is deemed not to have
any black ownership, as it is state owned. The categories relating to skills development, and
enterprise and supplier development, also contributed to the lower score.
Group total measured procurement spend (TMPS) amounted to R67.6 billion, of which
78.7% was spent with B-BBEE compliant suppliers.
Sep 17 Jun 17
R billion Target Actual Actual Actual Target Proj Proj Actual
B-BBEE compliant
suppliers (attributable n/a 48.1 17.6 47.7 n/a n/a n/a 127.7
spend)
B-BBEE non-compliant
n/a 14.4 16.0 26.3 n/a n/a n/a 20.7
suppliers (actual spend)
Total measured
procurement spend n/a 67.6 35.9 73.0 n/a n/a n/a 129.9
(TMPS)
1. Targets for procurement spend are not estimated in rand terms, but are set in percentage terms (see
attributable expenditure table below).
2. Non-compliant spend is reclassified as compliant once updated certificates are received.

Sep 17 Jun 17
B-BBEE attributable
82.00 71.19 48.82 65.38 82.00 82.00 90.00 98.25
spend, % of TMPS
Black-owned (BO) spend,
40.00 38.87 28.87 30.18 40.00 40.00 40.00 41.49
% of TMPS
Black women-owned
12.00 14.33 13.60 8.69 12.00 12.00 12.00 14.92
(BWO) spend, % of TMPS
Black youth-owned (BYO)
2.00 2.28 1.91 0.84 2.00 2.00 1.50 1.52
spend, % of TMPS
Black people with
disabilities (BPwD), % of 1.00 0.08 0.06 0.01 1.00 1.00 0.50 0.02
TMPS
Qualifying small
enterprises (QSE), % of 15.00 7.25 5.49 4.87 15.00 10.00 9.00 8.91
TMPS
Exempted enterprises
15.00 7.87 6.79 7.62 15.00 10.00 9.00 11.24
(EME), % of TMPS
In the first half of the 2017/18 financial year, the targets for procurement spend for black
women-owned and black youth-owned companies have been achieved. The performance
can be attributed to the inclusion of BWO that are 30% owned by black women, when
calculating the procurement spend. -BBEE compliant
suppliers, BO suppliers, companies owned by BPwD, QSE and EMEs are below the target,
and this can be attributed to the increase in the non-compliant suppliers due to expired B-
BBEE certificates.
Recovery initiatives are in place to address and improve the B-BBEE performance. These
initiatives include, but are not limited to:
Eskom has reopened the existing panels so that the pool of suppliers can be broadened
to include more designated suppliers (BO, BWO, BYO and BPwD)
Eskom is preparing the market in terms of demand, by holding focused supplier forums
All purchase requisitions are directed at more designated suppliers using objective
criteria, as per the PPPFA
Non-compliant suppliers are contacted three months prior to the expiry of their B-BBEE
certificates, to facilitate the timeous renewal of these certificates
Eskom is constantly engaging with IPPs to submit their B-BBEE certificates. Although
IPPs are currently exempted from submitting B-BBEE certificates, this effectively
-BBEE spend
suppliers
Group Commercial continues to monitor the initiatives above through ongoing management
involvement in the procurement of goods and services. All reopened panels are being
utilised to include black owned QSE & EME suppliers as incubates where necessary.
Incubation is implemented through sub-contracting. The IPP engagement is continuing with
a view to obtain their BBBEE certificates, in order to include their spend in the calculation of
TMPS.
618
jobs were created for the period ended 30 September 2017, as a result of ongoing
construction at Medupi, Kusile, Ingula and Power Delivery Projects (PDP).

Sep 17 Jun 17
Job creation, number n/a 40 618 40 377 37 399 n/a 40 000 40 000 39 277
The following table depicts the regional spread of the job creation number indicated above.
Jobs created in terms of PDP have been classified at a national level, as the projects are
spread across the country.
KwaZulu- Mpuma-
National Natal Limpopo langa
Measure and unit Actual (PDP) (Ingula) (Medupi) (Kusile)
Regional spread, number 40 618 3 562 2 388 14 985 19 683
The process to localise selected technologies through the acquisition of intellectual property
(IP) and design know-how is continuing on an ongoing basis. Various technologies have
been acquired during recent years; skills development associated with those technologies is
currently in progress. New opportunities are being explored to expand the technology
transfer approach to different areas of the business.
Sep 17 Jun 17
Acquisition of intellectual
13.00 10.04 5.00 3.14 25.00 25.00 25.00 31.00
property, R million
Skills development,
20 39 21 35 30 30 35 54
number of people
Acquisition of intellectual property

Intellectual property acquisition transactions planned for the first half of the year were
processed during the last quarter of the previous financial year resulting in the targets for the
first and second quarter not being met. IP transfer payments associated with existing
agreements for circulating fluidised bed based flue gas desulphurisation design know-how
continued in the second quarter.
A request for proposals is currently underway for the acquisition of heat recovery steam
generator design know-how. A commercial strategy for the acquisition of additional
electrostatic precipitator design know-how is currently being processed for approval
Skills development
On-the-job training related to flue gas desulphurisation plant and boiler design continued
during the quarter. Training associated with risk-based inspection know-how, which was
acquired in the previous financial year has commenced
Employment equity
Eskom continues to progress in ensuring that all occupational levels of the workforce reflects
the demographics of the country, although at some occupational levels, gender and disability
performance remains a challenge.
The table that follows detail the employee profile for Eskom's senior management, middle
management and professionals in terms of gender and race.
Sep 17 Jun 17
Racial equity in senior
management, % of black 66.73 66.59 66.45 61.67 71.39 67.43 67.89 65.80
employees
Racial equity in
75.99 74.50 74.06 72.74 78.22 75.29 74.76 73.50
management, % of black
employees
Gender equity in senior
management, % of female 32.83 36.92 36.62 28.50 35.64 37.18 36.54 36.58
employees
Gender equity in
38.33 36.54 36.11 35.65 39.59 37.05 36.27 35.98
management, % of female
employees
Although not reflected in the shareholder compact, at top management (F-band) level, the
organisation is lagging behind with regards gender equity. The same applies to
representation of persons with disabilities, not represented at this level.
At senior management (E-band) level, gender quarterly targets have been achieved whilst
racial equity is improving slightly due to renewed efforts within divisions to use all recruitment
and promotion opportunities available to address employment equity. However, disability
equity is still lower than the target.
At middle management/professionally qualified level, racial equity is at acceptable levels,
Plan strives to address the gender gap by 2020 through the Eskom Women Advancement
Programme (EWAP).
Gender and racial equity have been achieved at supervisory and lower levels.
The Employment Equity Manager acts as a gatekeeper to ensure that shortlisting of

recruitment opportunities is aligned to the workforce profile and aims to achieve employment
equity targets.
Employment equity and gender awareness training is being rolled out across the business to
sensitise employees on the Employment Equity Act, 1998. A total of 5 434 employees have
been exposed to the programmes since inception of the programmes in the previous
financial year.
The focus over the next quarter will be to facilitate the implementation of the Employment
Equity Plan objectives.
Sep 17 Jun 17
Disability profile, % Target Actual Actual Actual Target Proj Proj Actual
Eskom group disability 2.50 2.98 2.97 2.75 2.50 3.02 3.03 2.93
Eskom company disability 2.50 3.08 3.05 2.96 2.50 3.14 3.11 3.01
The overall picture regarding people with disabilities in Eskom remains a concern, as they
are represented mainly at lower occupational levels and not across all levels. It is worth
noting that persons with disabilities are not represented at top management level, and
disability equity remains a challenge at senior and middle management/professional levels.
Included in the Employment Equity Plan for 2017 to 2020 is a renewed drive to encourage
employees to declare their disability for reasonable accommodation purposes. Measures are
already in place to encourage employees (in underrepresented occupational levels) with
known medical impairments to go for medical assessments to determine if their impairments
can be categorised as disabilities as defined by the Employment Equity Act, 1998. To date,
781 or 55% of people with disabilities, have been reasonably accommodated.
To ensure that the business is disability-friendly, managers will be encouraged to recruit and
promote more employees with disabilities, including exposing all managers and employees
to disability awareness training.
The implementation of a disability access audit has been concluded at 705 Eskom-owned
sites, to ensure that physical barriers to access are being addressed. Project teams headed
by the Eskom Real Estate (ERE) General Manager have been established in every province
with the purpose of executing modifications to Eskom buildings to ensure easy access for
people with disabilities.
Strategic support functions
Other strategic functions discussed here include:
Group Information Technology
Quality Management and Business Excellence
Security
Strategy Support
Legal and Compliance
Corporate Affairs
Group IT has continued to meet and exceed its targets during the period to
30 September 2017, with 99.94% availability of the top critical applications against a target
of 98%. On the project delivery front, 90% of projects are in a healthy state against a target
of 80%. There were no Priority 1 system, security or data-loss incidents in the first half of this
financial year.
As Eskom aims to achieve the objectives agreed in the Design-to-Cost II (DTC II) strategy,
Group IT has and will continue to align its objectives in accordance with the strategy. In
achieving this, there will be delivery of the following key initiatives during the current financial
year:
Advanced analytics
Primary energy (the automation of the pit to plant value chain across this area)
Cloud migration (adoption of hybrid IT commercial process currently underway)
Smartgrid, which is reliant on various divisions across the business (an Executive
sponsor has been appointed to lead this stream and the detailed project plan will be
presented on October)
SAP Hana implementation (scheduled for go-live on 14 December 2017)
the DTC II strategy. The use of advanced analytics will assist Eskom in realising a saving of
R8 billion over five years, primarily across predictive maintenance, fraud detection and
improved customer interaction.
The IT environment is experiencing system and infrastructure incidents across the various
platforms due to ageing infrastructure, application and integration challenges, which are
swiftly being dealt with by the support teams. The Enterprise Integration Platform project is
currently underway and fully on track to mitigate the risks experienced, the risks will be
closed by 29 December 2017. The project is at 95% completion and the current status of this
initiative is as follows:
Release 3, Sprint 3.3 went live on 6 October 2017
Outstanding tasks is the go-live of the last set of solutions and the decommissioning or
reallocation of the legacy hardware
The legacy hardware will be decommissioned or re-allocated post stabilisation
With one of the key focus areas being the securing and protection of Eskom assets against
cyber threats, there has been successful management of firewalls and threat and
vulnerability management solutions.
Group IT continues to test disaster recovery plans. There were no failed disaster recovery
tests during the previous financial year and 40 tests have been planned for the forthcoming
year. Four systems (ALFS, Maximo, Tertiary and CNL) disaster recovery plans have been
tested since the previous quarter.
There is a continued effort to increase the number of self-

compliance to best practice and legislation.
Eskom and all its divisions are currently still ISO 9001:2008 certified. Since April 2017
Eskom embarked on the transition from ISO 9001:2008 to ISO 9001:2015,it is to be certified
by 30 September 2018.
The progress on the transition from ISO 9001:2008 to ISO 9001:2015 is currently under-way
and to date Eskom readiness status stands at 68%. The current focus is on the quality
training and gap assessment activities to ensure a successful transition in order to retain
The Security Division (SD) contributed in locating the missing student from KZN who went
missing from Eskom Academy of Learning. He was found unharmed
The Cyber Security Framework and Operating Model were implemented. The Model was
supported and the mandate approved by the Chief Information Officer and the Divisional
Executive
The SD is particularly focused on improving women safety in the workplace and personal
protect
Eskom Women Advancement Programme
Eskom Security Investigations made 102 arrests, recoveries amounted to R2.8million
There were 1 518 incidents in the six months to September 2017, totalling R28.1 million
The Security Business Intelligence (SBI) Incident Management System & Cyber
Intelligence platforms are gradually progressing but not at the expected rate
The lack of an integrated cyber security capability results in Eskom being vulnerable to
cyber-attacks. The cyber threat is compounded by the increased convergence of
Operational Technology and IT
The resource constraints are inhibiting the successful implementation of security
initiatives, as well as safety resources that are required to aid in the implementation of
safety interventions
Safety performance of contractors remains a challenge; the Division has experienced
three contractor fatalities to date that were experienced at the Gauteng Operating Unit
Phase 2 of the Security Optimisation Programme is in progress and is 83% complete. The
conversant with the developments in the implementation of the optimised structure.
Twenty physical security designs for Eskom sites were reviewed. A security assessment was
completed for the Pieterboth substation (where an Eskom employee was found murdered)
and it was observed that the security systems implemented at the site had deteriorated due
to minimal and/or no maintenance activities. A project has been raised with the Gauteng
Operating Unit to improve the security condition at the site .The Security Division is providing
support as and when required.
The Security Physical Guarding Commodity Strategy for National Key Points and Non-
national Key Points is to be submitted for Board Tender Committee approval in July 2017. It
was approved by the Board and subsequently the tender was submitted to the market; it is
currently in the technical evaluation phase.
Eskom is losing approximately R5 billion per annum from meter tampering, illegal
connections, and ghost vending as well as other forms of electricity theft. There are
concerted efforts to clamp down on criminal activities. In an attempted infrastructure theft
case, three men accused of trespassing at Majuba Power Station were sentenced to two
years imprisonment. Ghost vending is an ongoing project which has led to the recovery of 32
machines. Criminal prosecutions included two cases in terms of POKA where significant
sentences were handed down in the Johannesburg High Court; the two main culprits were
sentenced to 58 and 42 years imprisonment respectively.
SAPS is currently conducting firearms reviews in all the Eskom sites, no adverse findings
have been identified thus far.
successfully coordinated. Members of the Security Division Tactical Command Centre (TCC)
actively participated and played their roles exceptionally well. National Joint Operation
Centre responded very well, by deploying South African Police Services and South African
National Defence Force on sites that needed protection. The TCC dealt with all the security
incidents and issues that were sent to it.
In regards to the Cyber Security National Training, three new facilitators were appointed
from Distribution. A system to manage offsite facilitators is being developed. A plan to
include these resources to increase the number of sessions rolled out to the business is to
be developed. Cyber Security training has been given to 378 employees.
There were 60 security design documents signed off by the Divisional Executive: Security
and will be converted to Eskom security and technical standards in due course.
Strategic direction for the longer term future of Eskom has been discussed at the Exco
strategic breakaway in September 2017. One of the key outcomes of this breakaway was
agreement on a set of position papers which are to be presented to the Board at its Strategic
Breakaway in October 2017. A new sales and Marketing Strategy has been initiated. The set
of strategic risks and treatment plans have been reviewed and new strategic risks identified.
A Management Response Report on the Independent Operating Model Review conducted
by PwC has been approved by Exco and will now be submitted to DPE.
The draft 2018/19 Shareholder Compact was approved by Exco and Board in September
2017, and was submitted to the Minister DPE on 29 September 2017. Both Exco and Board
noted that the targets for Human Capital, Commercial and Debtor Days for both 2017/18 and
2018/19 were too stretched and were not achievable in view of the current context and
challenges. Eskom will consequently continue to renegotiate achievable targets with the
Shareholder.
Eskom has commenced consolidating inputs for the 2018/19 Corporate Plan, including
-To-
where Eskom positions itself as a catalyst for economic growth in South Africa. The 2018/19
Corporate Plan will reinforce this momentum through continued performance improvement
while starting to navigate new external threats and opportunities facing its business.
In light of Eskom having more than 5 GW of excess capacity, one of the key objectives of the
2017/18 Corporate plan is to drive demand stimulation over the next five years with a
ramping up target of 2.3% sales growth over the period. Due to the prevailing lacklustre
economic climate and low demand for commodities, the sales volume growth remains a
challenge. This has been evidenced by a slight drop in actual sales compared to the prior
year. In an effort to arrest the declining sales and stimulate growth, Eskom has identified a
number of initiatives, including the following:
Engaging with key customers and municipalities to ascertain the potential to increase
demand
Accelerating customer connections
Engaging NERSA for special pricing arrangements for customers in distress
Driving cross-border sales volumes
Launching a winter pilot initiative that aims to encourage specific energy intensive
customers to consume more energy
Going forward, Eskom will continue to engage the DoE and NERSA in developing products
that induce growth and support key industries. In addition, Eskom continues to engage
various Government Departments so as to support a drive to make South Africa an
investment destiny of choice. In addition, Eskom is aware that the business model has to
evolve and change, not only grow sales from the current market, but to explore other
sources of revenue by accessing new products and markets. In determining the optimal
future role of Eskom, a number of action items have been identified that will inform targets
for the Growth and Innovation work stream, which includes activities outside of South Africa
and the identification of new customers.
The Eskom Legal Department is attending to the following legal matters which have been
escalated to the shareholder:
The Mzwanele Manyi Decolonisation Foundation has instituted an application in the Gauteng
agreements with IPPs and possibly close power stations. Eskom is defending the
application. The matter has not been set down for trial.
On 9 March 2017 OUTA lodged a complaint to the Competition Commission to investigate

and refer alleged anti-competitive conduct of Eskom to the Competition Tribunal for
position in the electricity supply industry in that it seeks to deny new participants access to
an essential facility (the national grid) when it is economically feasible to do so by not signing
PPAs with approved IPPs. The Commission has not yet asked Eskom to respond.
South African Wind Energy Association (SAWEA) has also lodged a complaint to the
Competition Commission to investigate and penalise Eskom for an alleged abuse of its
dominant position in the electricity supply market by refusing to sign Power Purchase
Agreements (PPA) with IPPs. Eskom has complied with information requests, and the
Commission is still investigating. In a separate application SAWEA has lodged a complaint
with NERSA to investigate and penalise Eskom for an alleged breach of its license
conditions for refusing to sign PPAs with IPPs and issue budget quotes to IPPs. A closed
hearing was held at NERSA on 29 September 2017. Further information was requested by
the NERSA investigation committee and was provided by Eskom on 6 October 2017. The
NERSA investigation committee has indicated that its report will be tabled at a meeting of
the energy regulator, of which will be open to the public.
The Coal Transporters Forum (CTF) served an application on Eskom on 28 June 2017
seeking to interdict Eskom from signing PPAs with IPPs. Eskom, NERSA and the Minister of
Energy are cited as first, second and third respondents respectively. The rest of the 35
respondents are IPPs. The CTF seeks an interdict preventing Eskom from signing the PPAs
decision in terms of section 10 of the Electricity Regulation Act. Another order sought by the
applicant is that all PPAs concluded and signed arising out of Bid Window 4 between Eskom
and IPPs be declared null and void.
The Nuclear New Build Programme (NNBP) was impacted by the ruling of the Western Cape
the section 34 determinations gazetted in December 2015 and December 2016 respectively,
as well as the Intergovernmental Agreements between South Africa and Russia, USA and
South Korea respectively, were declared to be unlawful, unconstitutional and were set aside.
Eskom is therefore no longer the procurer of the NNBP but does intend proceeding with
owner and operator activities as it is still designated as such in terms of the Nuclear Energy
Policy of 2008. On 12 October 2017 Eskom received notification from the Department of
Environmental Affairs of the environmental authorisation for the proposed construction of a
nuclear power station at Duynefontein, Western Cape.
Eskom is facing various regulatory challenges. Two separate cases were filed by OUTA and
Borbet respectively, seeking to interdict the implementation of the tariff increases approved
by NERSA under the RCA process. The OUTA matter was dismissed and all subsequent
appeals by OUTA were unsuccessful. In the Borbet matter, the application was successful
in the court of first instance setting aside the MYPD adjustment granted to Eskom by
NERSA. In May, NERSA and Eskom led a successful appeal before the Supreme Court of
Appeal. Subsequently, the applicants sought leave to appeal from the Constitutional Court.
Eskom and NERSA, on strategic grounds, agreed not to oppose the application. On 16
August 2017 the Constitutional Court dismissed the application on the basis that it did not
bear prospects of success. Accordingly, NERSA may now consider the remaining two RCA
applications submitted by Eskom in the previous round.
On 30 June 2017 the High Court issued an order (Part A) interdicting Eskom and Dongfang
from implementing the contract concluded between Eskom and Dongfang Electric
Corporation for the Duvha Unit 3 boiler, pending the outcome of a review application (Part B)
instituted by the unsuccessful tenderers (Alstom S&E Limited (Pty) Ltd t/a GE Steam Power
Systems (Alstom) and Murray & Roberts/Shanghai Electric Consortium (MRSEC) to set
aside the decision to award the tender. (Part B) of the review application is currently in
progress. On 14 September 2017, the parties met with the Deputy Judge President for the
purposes of reaching agreement regarding the timelines for the filing of the record, further
papers and the allocation of a date for the hearing. On 13 October 2017, Eskom filed the
record of the tender decision in court as required under the review application. The Deputy
Judge President has yet to allocate a hearing date for the review application.
Mitsubishi Hitachi Power Systems (MHPS) referred two claims to adjudication totalling
R3 691 million, in relation to contractual entitlement under the Medupi Boiler Works Contract,
due to not being given full access to the relevant areas at Medupi. The Dispute Adjudication
Board (DAB) ruled in favour of Eskom and did not grant MHPS any monetary compensation
or extension of time for either claim. The hearing for the third claim by MHPS under this
contract took place during the week of 18 September 2017. Eskom is in the process of
Mitsubishi Hitachi Power Systems (MHPS) referred three claims to adjudication, totalling
R3 057 million, in relation to contractual entitlement under the Kusile Boiler Works Contract
due to not being given full access to the relevant areas at Kusile. MHPS only claimed the
additional payment as the extension of time entitlement had already been settled between
the parties. The Dispute Adjudication Board (DAB) ruled that MHPS was entitled, in total to
the capital amount payment of R1 178.5 million with total interest of R117.2 million.
Forward Air Sea (FAS) wrote to the Minister of Public Enterprises complaining that Eskom is
disempowering black-owned business; and that Eskom has cancelled its contract without a
valid reason and has appointed a foreign white supplier. The DPE wrote to Eskom on
19 June 2017 requesting a brief on the complaint. A meeting took place between Eskom and
FAS on 2 August to determine the cause of the complaint, and a response will be sent to
DPE shortly.
Eskom is defending an application lodged by NUMSA requiring the Essential Services
Committee (ESC) to investigate whether the designation declaring the generation,
transmission and distribution of power as an essential service should be cancelled or varied.
If the ESC varies or cancels the designation, all employees employed in the generation,
transmission and distribution of power could be entitled to embark on industrial action.
Eskom is defending disputes referred by its recognised trade unions (NUM, NUMSA and
Solidarity) in terms of which they seek a ruling by the CCMA that Eskom is not entitled to use
temporary employment service providers as well as subcontractors. This is set down for
arbitration on 23 to 25 October 2017.
Eskom is defending two disputes lodged in the CCMA by its recognised trade unions in
which they seek a ruling that Eskom should have a single bargaining unit or alternatively two
bargaining units for all its employees. This dispute will be arbitrated on 5 to 7 March 2018.
Eskom is in the process of discussing with its recognised trade unions the implementation of
income differentials and/or equal pay. The parties are in dispute as to the ambit, extent,
timing and methodology of implementation of the income differentials and/or equal pay if
any. The engagements are ongoing.
Assessment of compliance status
It is based on a per-act assessment and is focusing on the following:

The extent of unpacking of the compliance universe (content of applicable Acts analysed
and understood on a per-section level)
The extent to which specific controls have been linked to individual obligations
The extent of monitoring of implementation of the linked controls
The assessment will be completed in the third quarter of the 2017/18 financial year. It will
provide an indication of the overall compliance risk faced by the organisation as well as the
progress made from the previous financial year end review.
The staggered implementation of the electronic legal register and management tool is in
progress, with full rollout expected by the end of the current financial year. This will greatly
improve the integrity of information.
Concerning the incidence of irregular expenditure and the close-out of the procurement-
related external audit findings raised in the previous financial year, a recovery plan was
developed and is being implemented throughout the organisation. Progress has been
challenging, and is being monitored on a regular basis by a working committee chaired by
the acting CFO. Verification of the information by a dedicated internal audit team forms part
of the process. Progress is also reported to the Board Audit & Risk Committee.
former Interim Chief Executive, Mr Johnny Dladla, prioritised stakeholder

engagements and, as such, Eskom will continue with vigorous, open and transparent
engagements with a wide range of stakeholders. Eskom attracted positive responses on
successes of the new build programme as it announced that Unit 5 at Medupi and Unit 1 at
Kusile had been brought into commercial operation ahead of the revised schedule. Senior
officials from the Department of Energy visited the Kusile Power Station as part of their
economic impact assessment.
While there has been very little shift in its media sentiment, Eskom continues to increase its
approach of sharing good news stories via social and traditional media. There was some
positive coverage of stories emanating from the Eskom Development Foundation of CSI
initiatives, the Expo for Young Scientists, successes in bringing criminals to book for cable
theft, a stable power supply as well as exceeding electrification targets.
dropped by 6.5% from 33.2% to 26.7% with governance and leadership being the lowest
reputation dimensions recording 21.2% and 22.1% respectively. The best performing
reputation dimensions were workplace and product and services by 33.8% and 31.3%
respectively though they have dropped
share of voice was also under pressure declining from 31% in July to 15% in September.
Eskom engaged with stakeholders and the media in this quarter, where the main events that
were shared were its financial results in July and announcing the signing of a loan
agreement with the Chinese Development Bank.
Financial review
Financial sustainability
Financial sustainability strives to move the organisation towards a state where the rate of
return on assets is at least equal to the weighted average cost of capital, and to ensure that
Eskom remains a going concern, able to meet short-term liquidity requirements as well as
service long-term debt and financial commitments.
Financial results for the period ended 30 September 2017

Refer to pages to for a summary of financial performance for the period under review.
Sep 17
R million Budget Actual Variance Budget Proj Variance Actual
Revenue 99 251 95 504 (3 747) 180 629 177 246 (3 383) 177 136
Revenue (gross) 101 349 98 147 (3 202) 183 578 180 584 (2 994) 180 332
Revenue not recognised (2 100) (2 643) (543) (2 949) (3 340) (391) (3 196)
Internal sales and purchases 2 (2) 2 2
Other income 634 671 37 1 552 1 781 229 1 574
Insurance proceeds
Other 634 671 37 1 552 1 781 229 1 574
Primary energy 45 130 41 256 3 874 89 804 84 678 5 126 82 760
Operating expenditure 29 971 25 264 4 707 61 436 52 157 9 279 58 418
Employee benefit expense 16 194 15 152 1 042 32 218 31 480 738 33 177
Net impairment loss/(reversal) 572 679 (107) 1 019 1 437 (418) 1 669
Other operating expenses 13 206 9 433 3 772 28 198 19 240 8 959 23 571
EBITDA 24 785 29 655 4 870 30 942 42 193 11 251 37 532
Depreciation and amortisation
9 885 10 877 (993) 20 814 23 282 (2 469) 20 297
expense
Net fair value (loss)/gain financial
instruments, excluding (1 439) (1 010) 429 (3 349) (1 967) 1 382 (3 341)
embedded derivatives
Net fair value gain/(loss) on
1 179 1 115 (64) 1 674 1 149 (526) 1 611
embedded derivatives
Operating profit before net
14 640 18 883 4 243 8 454 18 093 9 638 15 504
finance cost
Net finance cost (8 385) (10 026) (1 641) (19 765) (23 212) (3 447) (14 379)
Profit of equity-accounted
31 (31) 31 8 (23) 35
investees
Profit/(loss) before tax 6 286 8 857 2 571 (11 280) (5 111) 6 169 1 161
Income tax expense 1 755 2 476 (721) (3 168) (1 558) (1 610) 272
Profit/(loss) for the period 4 531 6 381 1 850 (8 111) (3 553) 4 559 889
Target Sep 17
Measure and unit Target Actual met? Actual Proj Actual
Company
Electricity revenue per kWh, c/kWh 92.45 93.55 86.02 85.49 83.60
Electricity operating costs, R/MWh 705.95 656.87 668.51 670.60 677.91
Value add per employee, R million per
0.91 0.97 0.40 1.50 1.44
full-time employee
Group
EBITDA, R million 24 785 29 655 10 560 42 193 37 532
Electricity EBITDA margin, % 25.08 31.30 24.18 23.98 21.44
Working capital, ratio 1.00 1.06 0.96 1.03 0.85
Free funds from operations (FFO),
22 584 29 088 11 327 42 314 47 571
R million
FFO as percentage of gross debt 5.19 6.95 2.75 9.36 11.69
FFO as percentage of total capex 65.14 112.70 91.22 67.63 75.11
Gross debt/EBITDA, ratio 17.56 14.11 39.03 10.71 10.84
Cash interest cover, ratio 0.90 1.50 0.96 1.09 1.82
Debt service cover, ratio 0.65 0.99 0.61 0.68 1.37
Debt/equity (including long-term
2.18 2.17 2.21 2.54 2.11
provisions), ratio
Gearing, % 69 68 69 72 68
1. Only March 2017 figures have been restated for the impact of accounting for self-built assets.
2. Shareholder compact targets for finance KPIs have been amended per the proposed addendum agreed to by
the Minister.
3. FFO is calculated according to the shareholder compact definition, i.e. before interest paid, and not according
to the ratings agency methodology.
Due to the improved performance against budget, the majority of ratios are performing
positively, although in many cases, still below investment-grade requirements.
However, due to the fact that profits during the first half of the financial year are generally
higher, due to lower maintenance and higher winter tariffs, profitability is expected to decline
towards year end. As a result, financial ratios are anticipated to weaken by year end.
Sales volumes of 106 361GWh are 2 799GWh or 2.56% lower than budget, and 1 808GWh
or 1.67% lower than the prior year. The s
categories is set out below.

Sep 17
GWh Budget Actual Variance Actual Proj Actual
Industrial 23 428 22 904 (524) 11 971 47 147 48 295
Mining 15 705 15 545 (159) 7 771 30 551 30 559
Distributors 46 572 44 995 (1 578) 22 316 87 949 89 666
Remaining categories 15 709 15 593 (115) 7 667 31 140 30 508
Total Customer Service sales 101 413 99 037 (2 377) 49 725 196 787 199 028
International 7 747 7 325 (423) 3 549 15 120 15 093
Total Eskom sales 109 161 106 361 (2 799) 53 274 211 907 214 121
Both local and international sales reflect a negative variance. Local sales are affected by
higher than planned generation of 706GWh by City Power, while international sales to BPC
are lower due to additional self generation of 428GWh. Delays in contract finalisation have
resulted in reduced sales of 277GWh to Zesco.
The year end sales projection of 211 907GWh is 1.64% below the budget of 215 442GWh by
3 535GWh. It also translates to a year-on-year decline of 1.03%.
Electricity revenue (adjusted for revenue not recognised) amounted to R94 752 million,
which is R4 068 million below the budget of R98 820 million. Group revenue of
R95 504 million was R3 747 million less than the budget of R99 251 million. The
unfavourable variance on both is attributable to an unfavourable sales volume variance, as
well as the capitalisation of pre-commissioning revenue at Medupi and Kusile.
Electricity revenue at year end is projected at R175 961 million against a budget of
R179 653 million, a shortfall of R3 692 million, which is attributable to lower domestic sales
(R1 440 million) and a higher IAS 18 adjustment than budgeted (R391 million).
Primary energy costs are underspent by R3 874 million, with all main categories coal,
OCGTs, IPPs and international purchases being underspent. The following table reflects
the detailed primary energy breakdown.
Sep 17
R million Budget Actual Variance Actual Proj Actual
Coal usage 24 372 23 526 846 11 918 46 564 44 164
Net coal obligation raised/(reversed) 67 (67) 488
Environmental levy coal 3 902 3 800 102 1 915 7 580 7 536
Water usage 1 250 856 393 421 2 088 1 751
Fuel procurement service 88 66 22 35 147 134
Water procurement service 17 15 2 7 37 29
Coal handling 1 184 1 042 142 494 2 034 1 758
Water treatment 198 220 (21) 105 500 423
Sorbent usage 4
Gas and oil (coal-fired start-up) 1 294 1 071 224 609 2 074 2 216
Total coal 32 305 30 663 1 642 15 504 61 026 58 500
Nuclear 401 418 (17) 191 846 727
Environmental levy nuclear 255 261 (6) 111 516 550
Coal and gas (gas-fired start-up) 4 2 2 8 10
OCGT fuel cost 278 58 221 29 120 340
Environmental levy OCGTs 3 3 1 1
Total Eskom generation 33 247 31 402 1 845 15 836 62 516 60 128
IPPs 10 122 8 392 1 730 3 783 19 674 19 757
International purchases 1 612 1 397 216 728 2 278 2 681
Demand response and cogeneration 148 66 83 40 209 194
Total 45 130 41 256 3 874 20 387 84 678 82 760
The year end forecast reflects underspend of R5 126 million on primary energy against a
budget of R89 804 million, due to underspend on all categories. IPPs and OCGTs are
expected to be underspent due to underutilisation, while imports and coals costs are also
expected to be lower. Nuclear will be underspent due to a change in the useful life of
Koeberg Power Station from 40 years to 60 years.
Refer to page for detailed technical primary energy performance.
The unit cost per category (including the environmental levy) is set out below:
Sep 17 Jun 17 Mar 17

Cost, Production, Unit cost, Unit cost, Unit cost,
Category R million GWh R/MWh R/MWh R/MWh
1
Coal 30 665 100 900 304 303 293
Nuclear 679 7 130 95 100 85
2
OCGTs 58 12 2 306 2 397 2 072
IPPs 8 392 4 070 2 062 2 043 1 714
International purchases 1 397 3 825 365 368 361
1. Pre-commissioning production of 2 688GWh has been excluded at Medupi (1 137GWh) and Kusile
(1 551GWh).
2. Included in the OCGT fuel cost of R58 million (including the environmental levy) in the preceding table is
storage and demurrage charges of R29 million. The unit cost in this table has been calculated excluding those
charges, thus on fuel burnt and start-up costs only.
3. The IPP cost is after taking account of the IFRIC 4 adjustment.
Underspend on coal usage is due to a favourable mix variance as a result of increased burn
at less expensive stations and decreased burn at more expensive stations. The main
contributors are Medupi Power Station (cheaper station) with more burn than budgeted. EAF
for Medupi improved by 5.99% compared to budget, resulting in an extra 2 359GWh being
produced. Burn at Arnot (more expensive station) decreased by 2 167GWh compared to
budget. A favourable volume variance also contributed to the underspend (with actual
generation from the coal-fired stations was 100 900GWh, excluding pre-commissioning
production, compared to a budget of 103 153GWh) combined with a favourable power
station efficiency variance as a result of a better than budgeted burn rate. The favourable
variances were partially offset by an unfavourable coal quality variance due to lower calorific
values at Matimba, Lethabo and Kendal.
Eskom had 74 days of coal stock at 30 September 2017 (normalised 37 days). Refer to
page for more information on stock days performance.
The utilisation of the OCGTs was kept to a minimum due to the improved availability of the
coal fleet.
IPPs continue to be underspent as a result of challenges experienced by renewable IPPs

and late connections.
For a breakdown of costs related to independent power producers and demand

management, refer to the relevant sections on pages and respectively.
xpenditure (excluding depreciation and amortisation) of

R25 264 million is below budget by R4 707 million as a result of an underspend on employee
benefit costs and other operating expenses.
Employee benefits of R15 152 million are underspent by R1 042 million year-to-date, a
variance of 6.43%. This was largely due to the reversal of a performance bonus provision of
R1 523 million and underspend on performance awards, partially offset by higher than
budgeted overtime and contract labour costs. A decision has been taken that the
performance bonus should be self-funded, resulting in the reversal. Furthermore, savings
from other cost categories will be required to fund overtime costs going forward.
Headcount
The Eskom group headcount at 30 September 2017 was 47 889, derived from the number of
permanent employees and fixed-term contractors (FTCs) employed at this date.
Sep 17 Mar 17
Number of Permanent Contrac- Permanent Contrac-
employees employees FTCs Total tors employees FTCs Total tors
Eskom company 41 260 605 41 865 2 557 41 531 409 41 940 2 319
Subsidiaries 5 484 540 6 024 6 280 5 348 370 5 718 6 598
Group 46 744 1 145 47 889 8 837 46 879 779 47 658 8 917
The Eskom company headcount is 41 865, slightly lower than the target of 42 127 and 75
lower than the previous year end, while the Eskom Rotek Industries headcount is 6 024
against a budget of 5 922, an increase of 306 compared to the previous year end.

Sep 17
Property, plant and equipment 104 (104) (35) 123 484
Loans receivable 10 (10) 8 15 32
Trade and other receivables 572 568 4 803 1 305 1 159
Bad debts recovered (3) 3 (1) (5) (6)
Inventory
Total 572 679 (107) 775 1 437 1 669
Net impairment losses are overspent by R107

aligned to expectations, although only one of the top 20 defaulting municipalities is fully
honouring their signed payment arrangement, resulting in impairment of trade and other
receivables being in line with budget.
At group level, other operating expenses are underspent by R3 772 million against budget,
with repairs and maintenance (before capitalisation) accounting for R1 542 million of the
favourable variance.
Repairs and maintenance (after capitalisation) per division

Maintenance expenditure remains the single biggest contributor to other operating
expenses, amounting to R7 313 million, before eliminating intergroup transactions. The
following table depicts the repairs and maintenance expensed per division (amounts are net
of capitalisation).
Sep 17
Generation 6 087 4 785 1 302 2 356 9 549 9 176
Transmission 384 389 (5) 177 913 713
Distribution 2 348 2 126 222 984 4 084 4 235
Other 36 12 24 8 53 (24 )
Total 8 855 7 313 1 542 3 525 14 599 14 099
Both PCLF and UCLF are still lower than budget, leading to maintenance being underspent
against budget.
Integrated Demand Management (IDM) spend

Refer to the integrated demand management section on page for spend on the IDM
programme for the period ended 30 September 2017.
Depreciation and amortisation expense of R10 877 million is overspent by R993 million, as
units from the new build programme have been brought into use earlier than originally
anticipated, thereby attracting higher depreciation than budgeted.
Other income for the group of R671 million is R38 million above the budget of R634 million.
The overall favourable net fair value variance on financial instruments and embedded
derivatives amounted to R365 million, due to exchange rate and commodity price
fluctuations.
The following table reflects the breakdown of the unfavourable net finance cost variance.

Sep 17
Finance cost 18 239 17 552 688 8 910 36 550 32 234
Finance income (2 064) (1 865) (199) (1 136) (3 330) (5 212)
Borrowings capitalised to PPE (10 316) (8 706) (1 610) (4 700) (15 612) (18 233)
Unwinding of discount 2 526 3 046 (521) 1 399 5 603 5 588
Total 8 385 10 026 (1 641) 4 473 23 212 14 379
The unfavourable variance is largely due to lower capitalisation of borrowing cost due to
units from the new build programme having been brought into use earlier than originally
anticipated, therefore no longer attracting capitalised interest. The value of the units
capitalised is higher than the values assumed in the budget.
Major balance sheet movement year-to-date is an increase in net interest-bearing debt,
which is reflected in the table below.

Sep 17
Debt securities and borrowings 393 235 367 027 26 208 360 836 402 623 355 300
Net financial trading assets and
(2 602) (1 690) (912) (1 971) (2 047) (1 299)
liabilities
Investments in securities (13 627) (7 206) (6 421) (12 590) (9 333) (12 078)
Cash and cash equivalents (11 849) (8 507) (3 342) (7 605) (5 639) (20 425)
Derivatives held for risk management (19 345) (13 297) (6 048) (7 715) (10 959) (7 276)
Total net interest-bearing debt 345 812 336 326 9 485 330 956 374 645 314 222
Since 31 March 2017, debt securities and borrowings increased by R11 727 million mainly
due to R12 035 million debt raised, and R7 581 million debt repaid (excluding rollovers).
Cash and cash equivalents decreased by R11 918 million since 31 March 2017.
Refer to the Revenue and debtor management section on pages to for information on
the performance of electricity debtors for the period ended 30 September 2017.
Provisions can be broken down into the following categories:

Sep 17
Power station-related environmental
24 802 30 830 (6 028) 30 031 29 985 30 293
restoration
Mine-related closure, pollution control and
9 860 12 171 (2 311) 11 832 12 761 11 706
rehabilitation
Other provisions 2 071 8 404 (6 333) 9 881 7 479 11 080
Provision for onerous contracts 4 34 (30) 22 12 16
Sundry provisions (2 107) 1 485 (3 592) 1 427 972 1 303
Provision for compensation events 717 2 502 (1 785) 3 967 2 277 5 065
Coal-related obligation 3 457 4 383 (926) 4 465 4 218 4 696
Total 36 733 51 405 (14 672) 51 744 50 225 53 080
securities) is R15 714 million against a budget of R25 476 million (and R32 504 million at
31 March 2017), due to debt raised being substantially lower than budget, coupled with
higher debt repaid, offset by higher operating cash flows generated. The biggest contributor
to the variance against budget is a lower opening cash balance of R11 182 million, which is
due to lower debt than anticipated being raised in the last quarter of the previous year.
The cash balance at 30 September 2017 amounted to R8 507 million (31 March 2017:
R20 425 million), while investments in securities amounted to R7 206 million
(31 March 2017: R12 078 million).
The table that follows provides a modified cash flow statement, which reflects that the
interest payments. Even accounting for funding raised, cash flows are not adequate to fund
capital expenditure.

Sep 17
Net cash from operating activities 13 534 22 361 8 828 4 955 34 446 45 343
Debt repaid (5 580) (7 581) (2 001) (2 947) (19 091) (7 034)
Interest paid (16 405) (15 673) 731 (5 615) (32 582) (28 789)
Net cash before investing activities (8 451) (893) 7 558 (3 607) (17 227) 9 520
Acquisition of property, plant and equipment
(30 944) (25 596) 5 348 (11 873) (61 922) (57 258)
and intangible assets
Other investing activities (7 671) (4 067) 3 604 (3 923) 2 898 (4 528)
Net cash before funding activities (47 066) (30 556) 16 510 (19 403) (76 251) (52 266)
Debt raised 21 829 12 035 (9 795) 5 978 55 158 49 898
Other funding activities 5 472 6 658 1 186 622 6 278 (6 222)
(Shortfall)/surplus for the period (19 765) (11 863) 7 901 (12 803) (14 815) (8 590)
Opening cash balance 31 607 20 425 (11 182) 20 425 20 425 28 454
Other movements 7 (55) (62) (17) 19 561
Closing cash balance 11 849 8 507 (3 342) 7 605 5 629 20 425
EBITDA and net profit for the period were better than budget, with a negative revenue
variance offset by primary energy and other operating costs performing substantially better
than budget. Of concern is the negative trend in sales volumes, which is expected to
continue to year end. Employee benefit expenses is higher than budget due to overtime and
contract labour.
Although the projected EBITDA is better than budget and the previous financial year, a net
loss after tax of R3 553 million is projected due to an increase in depreciation and net
finance cost. However, further decline in revenue and an increase in impairment for overdue
municipal debt are major risks that could impact the projected results.
The fact that cash from operations and debt raised is not sufficient to meet asset acquisition
and debt service requirements is also of concern. While some financial ratios are performing
better than target, it is expected that these ratios will weaken by year end, and will be below
the accepted norm.
For the period to 30 September 2017, savings of R9 077million were achieved against a
target of R9 244 million, underperforming against target by R167 million. This was primarily
the result of lower savings in manpower and revenue (particularly energy losses).
Inception-to-date savings at 30 September 2017 amount to R57 729 million versus a target
of R52 214 million, an overall stretch of R5 515 million.
Savings projected at year end amount to R18 693 million against a target of R18 929 million.

Sep 17 Jun 17
Category, R million Target Actual Actual Target Proj Proj Actual
Revenue 560 (109) (95) 1 120 (109) 201 (469)
Debt collection (working capital) 182 586 25 346 586 600 180
Other 378 (695) (120) 774 (695) (399) (649)
Repairs and maintenance 510 724 186 1 020 1 310 1 046 2 142
Primary energy 2 296 2 473 1 024 4 591 6 492 7 124 9 428
Diesel discounts 17 34
Coal (operational expenditure) 1 1 887 3 093 1 411 3 774 7 180 7 562 9 438
Water 12 374 189 25 306 138 541
Coal (working capital) 318 (994) (576) 635 (994) (576) (551)
Other 62 123
Finance 76 243 122 152 486 487 451
Manpower 2 3 256 2 222 734 6 386 4 662 4 759 4 206
External spend 2 546 3 524 1 237 5 660 5 852 5 336 4 448
Fleet 69 45 20 138 138 138 121
Subscriptions 38 47 18 75 75 75 92
Transformers 143 -- 286
Cables and conductors 178 456
Other 2 118 3 432 1 199 4 705 5 639 5 123 4 235
Total 9 244 9 077 3 208 18 929 18 693 18 953 20 206
1. Coal includes Majuba Rail and coal transport rates.
2. Manpower includes span of control, voluntary separation and other employee benefits.
Net performance for the period to 30 September 2017 is attributed to a combination of

actively managed value packages and other cost containment activities:
Revenue stream targets have not been met due to revenue losses, which have been
partially offset by recovery of unbilled energy
Repairs and maintenance stream cash savings are efficiencies which have been realised
via the Tetris maintenance plan (through optimisation of time and people) and relate to
the BPP items monitored within the larger Eskom maintenance spend.
The additional savings on primary energy are due to cash savings on coal and lower
international purchases. This is partially offset by an increase in coal stock at Matla,
Matimba, and Lethabo Power Stations to levels higher than the BPP target due to
contractual obligation to purchase coal
The finance stream cash savings are due to restructuring and implementation of financial
market instruments, such as cross-currency swaps and other swap transactions
The underperformance on the manpower stream is due to the higher than anticipated
headcount, as the levers identified in the value packages have not fully materialised
Cash savings in external spend are due to operational savings value packages, as well
as other savings arising from new value packages identified to close any leakage gap
The number of days to pay suppliers stands at 25 days at end of second quarter
Top customer and large power user (LPU) billing targets were exceeded despite
challenges with avoidable errors
The number of days to fill normal vacancies stands at 53 days at 30 September 2017 as
compared to 54 days of the second quarter of the previous financial year
Tax planning initiatives for the 2017/18 financial year consist of legislative tax planning and
process improvement initiatives, which are discussed below:
South Africa is a party to international agreements with various DFIs which grant tax
immunity to the DFIs. Eskom plans to make a submission to National Treasury for a
change in legislation to provide for a tax exemption of all DFIs that have tax immunity in
terms of their international agreements with South Africa
Foreign exchange differences on loans used to acquire capital assets and financial
instruments used to hedge such loans are included in taxable income when asset is
brought into use. Eskom plans to make a submission to National Treasury for a change in
legislation to provide for taxation of these foreign exchange differences as and when they
are incurred
Eskom plans to conduct research and develop a technical document on the components
of a new nuclear power station that should qualify for accelerated capital allowances
The payments of interest to non-residents are subject to a withholding tax, subject to
certain exemptions. The definition of interest has been changed to include amounts that
are similar to interest. Eskom plan to conduct research on withholding tax on various
costs and fees paid to non-resident lenders
Eskom is developing automated data analytics to monitor compliance in respect of PAYE,
Customs and VAT
Eskom plans to develop tax eLearning has commenced internal discussions with Eskom
Academy of Learning
All returns for the 2016 year of assessment were submitted on time except for Natal
Navigation Colliers & Estate Company. Escap has already submitted its 2017 tax return. The
returns for the 2017 year of assessment are only due on 31 March 2018.
Update on RCA and MYPD applications
RCA RCA RCA RCA

application application application forecast
R million 2014/15 2015/16 2016/17 2017/18
Revenue 8 787 15 578 20 017 24 690
Local IPPs 4 346 620 2 451 (1 457)
International purchases 3 299 3 567 2 282 1 808
Coal 574 3 258 (359) (3 183)
OCGTs 1 944 689 (1 259) (1 604)
Other primary energy 1 355 728 916 971
Environmental levy (683) (1 180) (1 404) (1 650)
Demand Market Participation (379) 248 194 209
Other (CECA, EEDSM, inflation, SQI,
(58) 124 1 030 459
etc.)
Total application 19 185 23 633 23 868 20 243
The MYPD 3 decision is not determined quarterly and therefore the RCA is not computed
quarterly. The RCA forecast is calculated over a full year as presented above. The RCA
2017/18 forecast is R20 243 million, driven by revenue under recovery of R24 690 million,
reduced by primary energy under expenditure of R4 906 million and other underspend of
R459 million.
Eskom has submitted the 2016/17 RCA to NERSA on 27 July 2017, consistent with previous
two submissions. Copies have been submitted to the deputy director-generals of DOE, DPE
and National Treasury. Eskom is giving back R3 022 million for coal, OCGTs and
environmental levy and is claiming costs of R6 873 million comprising of other primary
energy (R916 million), DMP (R194 million), IPPs (R2 451 million), international purchases
(R2 282 million) and other areas (R1 030 million). The balance and majority of the RCA
submission is attributable to revenue under recovery of R20 017 million due to lower sales.
The Constitutional Court has dismissed an application by Borbet SA and others for leave to
appeal the decision of the Supreme Court of Appeal (SCA) which affirmed the NERSA
ment in relation to the MYPD3
that the SCA judgment stands as the final decision in relation to the original application by
Borbet to review the NERSA decision of 1 March 2016. The RCA tariff adjustment approved
by NERSA for 2013/14 was effected by adjusting the tariff for 2016/17 and it remains
for 2014/15, 2015/16 and 2016/17 by considering the implication of this decision and
determine the way forward.
It has been clarified that the 2018/19 revenue application does not include any RCA
adjustments. It is envisaged that the NERSA approved RCA adjustments will be phased in
over a few years starting from April 2019.
Eskom submitted a one-year revenue application (supported by NERSA) of R219 514 million
for 2018/19 on 25 August 2017 to NERSA which equates to a standard tariff price increase
of 19.9%. NERSA a
guidance relating to the regulatory asset base when making the revenue application.
This revenue application is based on the NERSA revenue decision made in 2013 for the
2017/18 year, where it approved the total allowable revenue of R205 billion. The allowed
revenue resulted in an average increase of 2.2% due to the base adjustments made in the
preceding years following the approved RCA balances for Eskom (12.69% for 2015/16 for
MYPD2 and 9.4% for 2016/17). The increase resulted in consumers receiving an effective
decrease in real electricity prices while costs to produce the electricity are increasing
resulting in a marked jump in the requested electricity price for 2018/19 partly due to the
increases from an artificially low base and this would not allow for smoothing of price
increases with a compounding effect over a number of years
R million 2018/19 application

Return based on a return of 2.97% on a regalatory asset base of
22 690
R763 589 million
Expenditure 62 221
Primary energy 59 340
IPP local 34 209
International purchases 3 216
Depreciation 29 140
IDM 511
Research and development 193
Levies and taxes 7 994
Total allowable revenue 219 514
Return on assets is computed on the revalued regulatory asset base (RAB) with the intention
to cover interest costs and earn an equity return. The opening RAB balance for 2018/2019 is
based on the MYPD 3 decision adjusted for the latest capital expenditure forecasts for the
period 2013/2014 to 2017/2018. The average RAB value for 2018/2019 is R764 billion.
Eskom has maintained the principle to phase-in the return on assets as the full return on
assets will place further upward pressure on the electricity price. This revenue application for
2018/19 assumes a return on assets at 2.97% (amounting to R22.7 billion) compared to a
cost of capital of 8.4%.
The standard tariff revenue has increased by R7 251 million an increase of 3.6% on
2017/18. As the revenue is recouped from a lower sales volume, the overall electricity price
increase required is 19.9% for 2018/19. This is mainly due the price increase required to
adjust for the low sales volumes (9.4% price impact) and growth in IPP cost (5.5% price
impact). NERSA will make a decision on the allowed revenue related to IPP costs.
Eskom is required to include responses received from government departments in terms of

the Government Support Framework Agreement (GSFA) when determining IPP projects to
be included. Due to certain contracts not being signed as originally envisaged, NERSA will
review the final revenue related to IPP costs.
The table below reflects the standard tariff increase.
MYPD 3 decision
Standard tariff price impact 2017/18 2018/19 application
Standard tariff revenue in R million 198 954 206 205
Standard tariff sales volumes in GWh 223 217 192 953
Standard tariff in c/kWh 89.13 106.87
Standard tariff price adjustment, % 2.2% 19.9%
process from 13 September 2017 to invite written comments by 13 October 2017. The
national public hearing process across all provinces will be undertaken from
30 October 2017 to 17
tariffs is expected by 7 December 2017.
Treasury
raise funding remains deeply concerning. Prior to the qualified financial statements for
2016/17, Eskom had projected liquidity reserves of approximately R26.8 billion at
31 March 2018.
At 30 September 2017, Eskom Treasury has secured 56%, of the reduced funding
requirement of R54.2 billion (previously R71.7
reserves at the end of September 2017 amount to R9.1 billion with a projection of R5 billion
for March 2018. This is significantly lower than the previously projected R26.8 billion mainly
due to the inability to access planned funding for the rest of 2017/18, comprising of domestic
and foreign funding and the postponement of the sale of Eskom Finance Company.
The audit qualification relating to irregular expenditure, governance related issues and
continuous changes in executive management has had a severe impact on the ability to
raise funding in the domestic and foreign markets and has also resulted in delays in
drawdowns on existing facilities. This will have a negative impact on financial sustainability
and going concern status of Eskom.
In order to improve both liquidity and execution of funding initiatives; it is critical that
governance related issues and investigations are resolved as well as Eskom regaining
stability in its executive management. Investors are heavily reliant on these issues being
resolved before any firm commitments on funding will be made. Rating agencies have also
indicated their deep concerns regarding governance and leadership at Eskom and are
closely monitoring the execution of the funding initiatives. Any further downgrades would
exacerbate the current situation and put at risk the execution of the funding plan.
Rating Standar Fitch: local currency

Foreign currency B+ Ba2 n/a
Local currency B+ Ba2 BB+
Standalone ccc+ b3 B
Outlook Negative Negative Stable
Last rating action Downgrade Downgrade Downgrade
Last action date 6 April 2017 13 June 2017 11 April 2017
billion.
The funding plan was approved at R72 billion for the financial year 2017/18. The
projected funding has since been decreased by R19 billion mainly due to the following
reasons:
Reduced market appetite of domestic bonds and international funding resulting from
governance issues and qualified audit report
Reduction in organisational requirement due to savings on capital and operational
expenditure
Anticipated buy back of existing debt reduced by R12 billion due to reduced surplus cash
The revised funding plan of R54 billion is highly dependent on the execution of the following:
Issuance of an international bond of R13.2 billion
The issuance of the international bond has been postponed from August 2017 to
February 2018 but remains at risk as appointed lead arrangers indicated that investors
require clarity on investigations related to governance. Eskom to provide investors with
status of investigations, indicating actual implementation of corrective measures so as
to give investors comfort on governance concerns
China Development Bank drawdown of R7 billion
Largely dependent on sufficient expenditure on Medupi
African Development Bank drawdown of R3 billion
On track for drawdown
Issuance of domestic bonds and commercial paper pills of approximately R5.5 billion
Require investor due diligence to give them comfort and restore trust regarding
Recent suspensions of executives would delay the due diligence until the outcome of
the investigations is known. This will further compromise the issuance of bonds
ECA financing of R5 billion
At risk should the financiers raise concerns regarding outcomes of investigations, due
diligence and further changes in leadership
At 30 September 2017, Eskom also had committed facilities of R3.25 billion with local banks.
The table below includes the adjusted funding plan with committed funding.
Funding initiatives, 2017/18 2018/19 Combined

1
R billion Source Committed Source Committed Source Committed
Swap restructuring 2.5 2.5 2.5 2.5
2
Signed DFIs 19.7 19.7 6.8 5.9 26.4 25.6
3
Signed ECAs 4.0 4.0 0.9 2.2 4.9 6.2
Total committed and
26.2 26.2 7.7 8.1 33.9 34.3
signed
% of total funding 48% 12% 28%
Domestic bonds 4.0 2.0 8.0 12.0 2.0
Commercial paper/
5.9 2.3 8.0 13.9 2.3
short-term notes
International bonds 13.2 16.5 29.7
Total signed
documentation in 23.1 4.3 32.5 55.6 4.3
place
% of total funding 8% 3%
New DFIs 0.1 19.7 19.8
New ECAs 4.9 9.2 14.2
4
Other
Currently under
5.0 28.9 33.9
negotiation
Total 54.2 30.4 69.1 8.1 123.4 38.5
% of total funding 56% 12% 31%
1. Excludes short-term funding issued/matured funding.
2. Adjusted based on the latest Group Capital model and drawdowns carried over.
3. Adjusted based on the latest Group Capital model and drawdowns carried over.
4. Aspirational funding including structured products.
5. CDB & AFDB.
Funding Target
initiative/source Amount Comments/risks signing date
DFI: Chinese USD1.5 billion Guarantee agreement has been signed. Signed in
Development First drawdown of USD300 million completed in July 2017
Bank (long-term September 2017.
facility) Medupi
Foreign bond USD1 billion Prospectus will be updated based on the September February
2017 results 2018
ECA framework USD1 billion Mandated letter with coordination role has been March 2018
concluded with JP Morgan.
ICBC Huawei USD300 Signed termsheet and board resolution in place March 2018
Sinosure million Funding dependent on outcome of the procurement
process for the supply contract
Awaiting feedback on appointment of Huawei as a
supplier
Funding Target
initiative/source Amount Comments/risks signing date
ECA: Hermes/ Second draft of loan agreement under review by all November
SACE Kusile C&I parties which includes Eskom, White & Case HSBC and 2017
SACE
DFI: AFD Most of the terms for the first tranche approval have October
framework been concluded 2017
agreement An application for the utilisation of guarantees is with
tranche 1 Government
ECA: Bpi Koeberg The updated mandate letter and term sheet has been March 2018
steam generator received for review and finalisation
Completion/commissioning dates to be confirmed in
order to finalise the availability period, full term of the
loan and the period of the ECA Bpi France cover
The qualified audit opinion relating to irregular expenditure, governance issues and changes
in leadership has a negative impact on investor sentiment which is affecting the volume of
future funding; current drawdowns and liquidity position of Eskom.
Without any further funding, Eskom will have approximately R1.2 billion liquid assets at end
November 2017 against a target of R20 billion, and will move into a negative liquidity
position of approximately R5 billion by end of January 2018. This figure assumes the
successful draw down of R2.2 billion from DFI financing and R1.3 billion export credit agency
facilities.
Eskom is in discussion with banks to provide a short term bridge-to-bond facility to mitigate
funding risks and improve liquidity. In order for banks to approve the facility they require
certain due diligence requirements including inter alia responses on governance, proposed
timelines, process and publication of findings and implementation of all recommendations
arising from findings. The outcome and timing of responses could further delay the approval
of this funding.
It is imperative that Eskom consider reducing its short-term capital expenditure by R5 billion
to R10 billion until funding issues are resolved. Eskom will continue its engagements with
lenders and investors to mitigate impact of the qualified audit report and governance related
matters to secure committed and bridge funding facilities
The days cash on hand as at 30 September 2017 is 60 days. The liquid assets have
decreased from R13.6 billion as at 30 June 2017 to R9.1 billion at 30 September 2017. The
The liquidity reserves of R9.1 billion are made up as follows:

Instrument, R billion Sep 17 Jun 17 Mar 17
Bonds 3.5 3.5
NCDs 1.5 3.0
Fixed deposits 3.0
Foreign and local bank accounts 0.3 0.02 3.6
Call deposits (including CPD) 8.8 8.6 13.2
Total 9.1 13.6 26.3
Instrument, R billion Sep 17 Jun 17 Mar 17

1
ZAR150 billion DMTN programme 111.0 112.7 111.1
Other domestic funding 33.3 34.5 33.8
Foreign bonds 59.5 58.6 58.6
Foreign ECA facilities 34.6 31.8 31.4
1
DFI funding 96.9 89.3 89.1
Other DFI funding 16.6 18.8 18.7
Other funding 15.0 15.0 12.5
2
Total 366.9 360.7 355.2
1. Government guaranteed.
2. Debt and borrowings in net interest-bearing debt for Eskom company only.
Of the R350 billion Government guarantee, R274.71 billion (or 79%) has been committed to
date. A further 19% is under negotiation and 2% remains unallocated for future funding. The
recent credit rating downgrades have triggered loan covenants on the loans held with AfDB
and DBSA. Eskom has agreed with AfDB to provide a guarantee for R5.2 billion. As a result
of the inclusion of AfDB and the exclusion of the AfDB CSP loans which have now been
cancelled, the net impact results in available guarantees of R11.72 billion (R11.72 billion as
at 31 March 2017).
For the Government guarantee schedule, refer to Appendix F.
The following graph sets out the projected debt maturity profile. At 30 September 2017, 76%
of borrowings had a fixed rate and 24% a floating rate.
Loan repayments and interest cashflow
(net of swaps) at 30 September 2017, R billion
60
50
40
30
20
10
Interest Capital
Eskom continues to experience a lack of demand in the local bond market due to market
concerns over corporate governance, future funding requirements and tariff structures. Most
stability in
the market before announcing public auctions.
Discussions with domestic market investors will be focussed around proposed amendments
to the domestic multi term note programme received following the governance due diligence
process by Futuregrowth Asset Management.
The strategy of allowing the spread to widen in both the bond and money market has been
period up to one year decreased from R5.56 billion at 30 June 2017 to R5.55 billion at
30 September 2017. Cash raised in the bond market was limited to R836m million.
ECA framework agreement

3 period,
Treasury seeks to maximise the ECA funding through the establishment of an ECA
Framework Agreement with a panel of capable ECA banks. The mandated letter with
coordination role has been concluded with JP Morgan.
Koeberg steam generator replacement

Eskom and the syndicate of banks have previously successfully negotiated the mandate
letter and term sheet but due to the time elapsed due to the court case the mandate letter
and the term sheet will be revised.
The environmental review and due diligence report was finalised and released to the
satisfaction of all parties during March 2016.
administration and the ECA Bpi France to discuss and recommit to cover the transaction.
Eskom appointed the legal counsel. The loan facility will also finance Unit 2 reactor pressure
vessel replacement project. The updated mandate letter and term sheet has been received
for review and finalisation. All five banks are still on board. Completion/commissioning dates
to be confirmed in order to finalise the availability period, full term of the loan and the period
of the ECA Bpi France cover.
The second loan agreement is under review by Eskom, White and Case, Allen & Overy,
HSBC and SACE. White and Case submitted the updated draft agreement with the latest
comments to Allen and Overy for HSBC and SACE to consider. SACE preliminary cover has
been extended by six months subsequent to the previous cover expiring on
26 November 2017, with a revised ECA premium following two credit downgrades. The
cover has no renewal option due to OECD rules. Hermes version to be drafted when SACE
loan agreement is concluded.
ICBC Huawei Sinosure

Signed term sheet and board resolution are in place. Funding is dependent on outcome of
the procurement process for the supply contract. Awaiting feedback on the appointment of
Huawei as a supplier.
Kusile FGD
Eskom is in process of finding alternative financier and contemplating including the financing
as part of CDB Kusile financing.
China Development Bank (CDB)

Eskom concluded a loan agreement of US$1.5 billion (approximately R19.6 billion) with the
China Development Bank (CDB) and the loan agreement was signed on 6 July 2017. The
facility will form part of the financing of Medupi. A drawdown of US$300 million (approximately
R4.2 billion) was accomplished on 27 September 2017.
KfW
The loan is dependent on successful transfer of CSP loan. Eskom is still in a process of
identifying projects to finance.
Agence Française de Developement (AFD)

Process to draw the first tranche has been initiated, with 26 October 2017 being targeted as
the signing date.
International bond
In May 2017, Standard Bank, Barclays and JP Morgan were appointed as joint lead
managers (JLMs) to arrange and issue an unguaranteed US Dollar denominated bond along
with their empowerment partners Quartile Capital, Dew Partners and Africa Rising Capital.
White and Case, London and Johannesburg along with Mchunu Attorneys will act as
external legal counsel to Eskom. The JLMs appointed Allen and Overy along with Poswa
Incorporated as their legal counsel. SizweNstalubaGobodo (SNG) will act as auditors for the
transaction.
Management due diligence interviews with Eskom divisional executives and general
managers took place on 27 and 28 June 2017. The JLMs raised concerns around the
marketing of the transaction as investors would have placed a greater focus on the negative
publicity surrounding Eskom. Given these developments the JLMs recommended for Eskom
to issue the international bond based on the interim results in September 2017. A roadshow
will be scheduled in January 2018 and a potential benchmark issuance of between
US$1 billion to US$1.5 billion may follow, subject to favourable market conditions.
Eskom Treasury is currently negotiating with the JLMs to provide a short term bridge-to-bond
facility to mitigate against funding initiatives at risk as a result of governance concerns raised
by investors. The facility is also intended to provide a liquidity backstop over the next few
months and will only be drawn should the liquidity be urgently required.
Sukuk bond
The RFP issued in February 2017 also requested the banks to submit proposals detailing
requirements to execute a Sukuk bond. Some respondents omitted to provide their specific
Sukuk experience and given the minor differences in the final evaluation scores, the
evaluation team recommended hosting meetings with the shortlisted candidates excluding
the successful JLMs for the international bond (Standard Bank, JP Morgan and Barclays).
Following the decision to postpone the international bond to later in the financial year the
scheduled beauty parade meetings were also postponed until further notice.
The World Bank and AfDB send a mission from 17 to 25 July 2017 during which they
reviewed implementation progress on projects funded. Meetings were held with officials from
DPE, National Treasury (NT), DEA, DWS together with Eskom. The lenders held a separate
meeting with NERSA.
The mission commended the project for construction progress, Unit 4 synchronised end May
2017 and P80 schedule for remaining three units have not slipped since last mission. The
mission noted with concern several operational issues:
High sulphur (SOx) and particulate emissions (PM) spikes from higher sulphur coal
combustion and design deficiencies in fabric filter plant. SOx peaks occur a few times per
week and month higher than allowed limit of 3 500mg/Nm3
Eskom controls emission spikes by reducing boiler load and is applying for increased SOx
emission limit of 4 000mg/Nm3. The mission is concerned that an increased limit will raise
x emissions, despite the fact that
ambient values (from only two ground ambient air monitoring stations) show acceptable
values to date
Coal blending is not very effective or responsive, timewise (due to bunker storage
drawdown), and not in full operation pending commissioning of final north/south leg of the
stacker/reclaimer path and installation of an online coal analyser for effective stockpiles
management. Both of which are not expected to be ready for testing for another 18
months. The mission expressed concern over the long duration without effective control
and suggested Eskom consider interim solutions such a limestone injection to the boilers
and/or procurement of lower sulphur coal as available. The feasibility of limestone
injection, without underestimating the cost implications, has not been explored by Eskom
Given the high ambient levels of PM10 particulate matter and PM2.5 fine particulate
matter in the area, the mission advised Eskom to expedite the pilot offset programme in
Marapong to help prevent illnesses caused by such emissions and would also be a good
public relations gesture to the community within the vicinity of Medupi and Matimba.
Concerns raised about reported design defects on the boilers for Units 5 and 6, observed
over last nine months or longer, which is posing serious performance challenges. Issues
discussed with MHPSA by holding weekly meetings but to date no satisfactory replies or
practical solutions received. A notice to retain up to 15% of monthly payment certificates
has been placed on contractor for latent defects. Mission concerned that retention may
be inadequate
Eskom has sent license request variation to DEA in August 2017 to increase the limit to
4 000mg/Nm3 from 3 500mg/Nm3
Coal blending at the Medupi site is being pursued by installing the required infrastructure
by the end of 2018
Eskom informed the mission that steps are being taken, the baseline studies and
thereafter by looking at doing a pilot in the community, most of which will take place in
2018
Eskom's back up plan is to fix the defects for Units 5 and 6 and charge the supplier if
resolution is not reached soon. Eskom will inform the banks monthly of progress being
made with the contractor to address the issues
In the longer term the installation of FGD will reduce the SO2 emissions to below
500mg/Nm3
Despite holding final symbolic cleansing ceremony on 4 May 2016, in which closure was
officially brought to the exhumation and reburial of graves, indications are that there are
potentially more cases. The mission met with the local Waterberg Environmental Justice
Forum (WEJF) and they indicated a healthy relationship with Eskom. They raised challenges
such as increased crime rates, accidents on the roads, uncertainties surrounding
demobilisation and associated job losses once construction phase is over. They indicated
that Eskom has tried its best to mitigate negative impacts. Eskom was encouraged to hold
regular consultations with other civil society organisations (CSO) as well.
Eskom is taking steps to address this and needs to provide an update on the status.
DMR investigated the issue of illegal sand mining. An inspection was conducted in
April 2017 on Schaapplaats and it shows that the farm has a mining right and five mining
permits issued along the banks of Mokolo river. DMR will continue to monitor the situation.
The mission requested the environmental impact report of the sand mining activities and
expects Eskom to participate in restoring the environmental damage caused by sand
supplied to Medupi. Eskom also undertook to contact a complainant to confirm if DMR
contacted them or not.
There is further slippage of four months in completion of the water augmentation project for
the Flue Gas Desulphurisation (FGD) plant for Unit 3, now projected to be only four months
ahead of completion of the FGD installation. It is likely that water may not be available on
time and Medupi may not be able to meet the minimum emissions standards six years after
the commercial operation of Units 3, 2 and 1. This will perpetuate concerns raised with
regard to the perceived health risks. Unless there is concrete progress on implementation of
MCWAP-2, delays in operation of three of the six FGD units will be inevitable. The mission
requested a strategy to mitigate SO2 emissions if the delay materialise, which could mean
not operating the units requiring the additional water, until water is available and the FGD is
operational.
The mission noted that Eskom has made further progress in developing the FGD design and
two financiers have indicated interest in financing the project.
DEA conducted an environmental compliance inspection (8 February 2017) and identified

several cases of non-compliance/partial compliance and Eskom responded to the DEA
mission.
FGD:
Eskom committed to FGD
R4.5 billion included in the five year budget
Eskom to accelerate execution timelines
-2A water augmentation

scheme
Eskom committed to FGD
R4.5 billion included in the five year budget
Eskom to accelerate execution timelines
The mission was informed about the poor performance of contractors, which has caused one
contract to be on the critical path as it is required for Unit 4. Agreement was reached to
award the contract to an alternative supplier. One contract has been awarded and the other
is awaiting negotiation.
The mission was informed regarding a second fatality on the transmission lines from Medupi
tion to address the issues.
Eskom response to the fatalities:

Eskom submitted action plan to World Bank including progress made
Compensation paid to the deceased for transmission accident and to be paid for power
plant
Eskom has indicated that it would like to replace the Kiwano concentrating solar power
(CSP) project with a project it considers less risky than the CSP. The mission advised that
the alternative would need to achieve similar performance indicators as CSP.
Subsequently (13 April 2017); Eskom communicated its intention to replace the CSP project
with a solar photovoltaic (PV) system with batteries. The financiers identified several issues
with the proposal. Consensus was reached to allow Eskom to consider an alternative of
storage with no PV. Eskom subsequently submitted a more detailed proposal for the battery
storage option. A simulation over the period up to 2040 showed that apart from the addition
of battery storage having a higher net present value than the base scenario without battery
storage, it would also result in higher carbon emissions because the batteries would be
charged from coal-based generation, with a lower short run marginal cost. Eskom
subsequently submitted and discussed the results of two other scenarios with battery
storage.
The revised project proposal, which takes into account the World Bank recommendations
was submitted to the bank on 2 October 2017.
implementation stage.
The mission was pleased with the progress on the Majuba rail project.
Eskom explained to the mission the actions taken to address compliance issues, including
the recent qualified audit report and issues involving corruption allegations. Most of the
uncontested recommendations from recent assessments had been implemented. Eskom
agreed to provide information showing that the procurement issues did not affect projects
financed. The mission was also informed of several investigations, planned or underway, on
governance and non-compliance. In addition, Eskom also discussed remedial measures to
strengthen ethics monitoring covering issues such as asset declaration and conflict of
interest management. Subsequently, as agreed, the procurement recovery plan was sent to
the DFI lenders, including the World Bank. Eskom also undertook to submit the Ernst and
Young report by the end of October 2017.
16/17 was perceived as a mixed picture. Cash

generated from operating activities has significantly improved although interest costs were
up sharply as well as depreciation resulting in a sharp decline in profits.
Eskom met the covenant on the debt service coverage ratio of 1.3 for 2016/17. The ratio the
previous year was below 1.3. The improvement was due to higher cash flow and lower debt
repayments. Eskom failed to meet the EBITDA margin covenant of 25% with the margin at
20.6% in 2016/17. However, the EBITDA margin has been rising steadily over time and the
current forecasts indicate that this covenant should be achieved in 2018/19 or 2019/20.
In the meetings held between Eskom and Government departments it was indicated that an
extended impasse/non-
may also impact the progress of any new funding including the proposed alternative project
components.
Eskom reiterated the unfavorable impact REIPPP is having on its financial performance and
explained its ongoing discussion with Government to enable the signing of the outstanding
power purchase agreements (PPAs), including the possibility of a Government Support
Framework Agreement in the absence of sufficient tariff adjustments.
signed by the end of October 2017.
Facilities and disbursements shown Disbursed

in R million Currency Facility Sep 17 Jun 17 Mar 17
World Bank (IBRD) Medupi, Sere,
USD 3 750 2 866 2 866 2 866
CSP, Majuba Rail
CTF (World Bank) CSP USD 200
CTF (World Bank) Sere USD 50 35 35 35
AfDB public sector Medupi EUR 930 752 719 719
AfDB public sector Medupi ZAR 10 630 10 501 10 501 10 501
AfDB public sector Sere USD 45 9 9 9
AfDB public sector CSP USD 220
AfDB private sector Capital expansion USD 500 500 500 500
CTF (AfDB) Sere USD 50 42 42 42
CTF (AfDB) CSP USD 50
Total 14 705 14 672 14 672
No events of default have occurred to date. Eskom met the debt service coverage ratio for
2016/17 but did not meet the EBITDA margin of the World Bank as discussed above. This
does not result in a default, but requires Eskom to submit a financial action plan bi-annually.
Current operations are fully compliant with the AfDB loan covenants.
In order to transact in international markets, Eskom is required to remain within a specified

prescribed foreign borrowing limit set by National Treasury.
The approval of the prescribed foreign borrowing limit was granted in the following manner:
R242 billion for 2015/16 financial year
Eskom is in compliance with this condition, as the nominal value of foreign currency debt is
monitored on a quarterly basis as shown in the table below. The detail of the loans is
included in Appendix F.
Foreign currency Nominal value of Eskom

Quarter borrowing limit foreign currency debt Compliance
June 2016 R282 billion R241 billion
September 2016 R282 billion R248 billion
December 2016 R282 billion R249 billion
March 2017 R282 billion R251 billion
June 2017 R308 billion R252 billion
September 2017 R308 billion R281 billion
on end-of-day rates
(Thomson Reuters) and is sensitive to exchange rate movements. Eskom is in the process
of applying for an increase in the foreign borrowing limit from the DPE and NT to ensure the
successful execution of the borrowing programme for 2017/18 to 2021/22.
Appendix F also indicates the year-to-date actual and projected borrowings and repayments
for the next 12 months (per quarter).
Eskom is aware that the current Government guarantees do not include future capital
expenditure. Should Eskom be mandated to be the procurer of the new nuclear build
programme the a new application for Government support will be required.
Please see discussion under management of loan covenants of World Bank and AfDB
CSP/battery storage.
The PIC has indicated that they are unable to assist in funding Eskom through the domestic
bond market due to limit constraints. Material funding through the issuance of domestic
bonds to the PIC has not taken place since the private placement of R20 billion
unguaranteed bonds between September 2015 and September 2016.
Operating subsidiaries
Eskom Holdings SOC Ltd has the following direct subsidiaries:
Eskom Enterprises SOC Ltd group
Escap SOC Ltd
Eskom Finance Company SOC Ltd group
For a full list of subsidiaries, refer to Appendix 4.

Eskom Enterprises SOC Ltd group
Year end
Key performance Key performance target to be
area indicators Year end target Progress met?
Achieve the Resourcing of Growth Office 31 March 2018 Refer below Yes
strategic objective Development of value
to become a 6 Refer below Yes
propositions
holding company
Development of business
2 Refer below Yes
cases
Conclusion of new RBCT
31 August 2017 Completed Yes
contract
Optimisation of subsidiaries 31 March 2018 In progress No
Regarding resourcing, 12 employees have joined the Growth Office on secondment from
Eskom Holdings. They are further supported by four consultants who are currently working
on the Integrated Africa Strategy project.
on hold by Commercial. The initial request was to process the RFP based on a risk-based
-
based task order. This will result in a delay of the appointment of consultants to proceed with
the resourcing of the Growth Office.
The Growth Office is busy with two value packages, namely energy agencies and
environment and waste management. Both of these packages have numerous streams of
offerings which have the potential to translate into more value packages once the detailed
scope has been clarified.
The waste and environmental value package is scheduled to be presented to the Growth
Office panel during November 2017, while the other value package has been scheduled for
April 2018, but will be expedited to the last quarter of the current financial year.
The fibre commercialisation business case was approved by the Eskom Enterprises Board
of Directors on 11 September 2017.
The business case for the boiler maintenance joint venture with Steinmuller is undergoing
internal approval and is proposed to be submitted to the Eskom Enterprises Board during the
last quarter of the financial year. The year-end target is expected to be met.
The closure of the remaining dormant companies have not materialised although significant
progress has been made on the Nigerian companies. Refer to the table on page .
The table below summarises the group performance for the period ended
30 September 2017.

Sep 17 Jun 17
R million Target Actual Actual Actual Target Proj Proj Actual
Revenue 5 196 4 997 2 542 4 662 10 102 10 389 9 841 9 799
Operating income 200 356 136 281 406 826 374 551
Net profit before tax 216 410 165 334 439 880 399 655
ERI is the main contributor to group performance. EE derives income mainly from interest on
available funds and lease income relating to its export entitlement in Richards Bay Coal
Terminal (RBCT).
The performance of the main EE subsidiaries is summarised below.
ERI has delivered revenue on par to budget of R2.4 billion for the second quarter, yielding
an EBITDA of R371 million against a budget of R351 million. For incentive bonus purposes,
ERI participates in the Eskom primary bonus pool which determines the extent of the bonus
pool. As the primary drivers for the incentive scheme is forecast not to be achieved, the
incentive bonus provision of approximately R132 million was reversed, contributing to the
better than budgeted EBITDA for the period.
During the quarter Construction Services determined a number of projects as being onerous,
namely the Tubatse Silimela Duvha Leseding 400kV line (R29 million), the Dedisa
Grassridge Line (R4 million) and the Delphi Shunt Cap Bank (R1 million). Profitability for the
period was also impacted by lower activity levels experienced by Turbo Gen Services (TGS),
Transformer & Switchgear Services (TSS) and Logistics Services (LS).
Safety remains a key priority and employees are regularly engaged on safety, health and
of 0.23. For the quarter, six employee lost-time incidents and one employee fatality, due to a
motor vehicle accident, was reported.
Sep 17 Jun 17
Measure and unit Target Actual Actual Target Proj Proj Actual
Queuing and offloading in power
80 63 59 80 72 72 71
stations, minutes
Plant availability (coal and ash
90.00 97.10 98.68 90.00 90.00 90.00 97.17
plant), %
Construction projects success
100.00 103.00 100.37 100.00 100.00 100.00 106.88
rate, %
Logistics Services diesel
42.00 40.03 41.86 42.00 41.50 41.50 41.04
consumption, /100km
Due date performance
Generation Outage (3.79) (4.13) (1.78)
Management, days
Generation Outage 55.00 100.00 100.00 55.00 100.00 100.00 83.00
Management, %
90.00 89.00 29.00 90.00 90.00 87.50 79.00
Transformers, %
The consistent improvement in queuing and offloading in power stations is a result of various
initiatives implemented, namely the deployment of monitors at the various delivered sources,
limiting the number of vehicles and the installation of two outbound weighbridges at the
Matla mine.
Plant availability (coal and ash plant), relates specifically to the plant at Hendrina and
Camden Power Stations. The above-target performance is due to the maintenance of the
common plant as well as the training of personnel managing the plant. The positive
performance is attributable to the Kusile P20 Cabling and Karatara Substation projects, both
of which are performing ahead of their respective milestones.
Diesel consumption refers to the Johannesburg, Durban, Cape Town, freight and waste
trucks, and is calculated on the weekly report supplied by Wesbank. Diesel consumption for
the period was slightly better than target, attributable to improved vehicle load distribution,
monitoring of diesel consumption and improved driver behaviour.
Due date performance (Generation Outage Management, days) refers to the Turbo Gen
early against an on-time target. The product group has completed 12 units early, which
contributed to the positive performance. Most notably, the Gourikwa GT13, Gourikwa GT21
and Gourikwa GT22 units were completed 14, 13 and nine days early.
Due date performance (Generation Outage Management, %) refers to the percentage of

successfully completed outages (including unplanned outages) in a 12-month window.
Due date performance (Transformers, %) refers to the percentage output from the TSS
Workshop as calculated per the TSS Methodology and reported by TSS for the financial year
ending 31 March 2018. At reporting date, due date performance was marginally lower than
target. TSS had renegotiated due dates with the respective customers of four units, which
has substantially improved current reporting statistics as well as the forecast to year end.
Eskom Uganda (December year-end) operates a 20-year operating and maintenance
concession, currently in its fifteenth year, with the electricity utility in Uganda. The plant is old
and continues to age; this is mitigated by continued plant lifecycle management and
equipment upgrades.
Plant performance remained stable, mainly due to high lake levels and fewer forced outages.
Energy delivered was slightly below target due to system constraints imposed by the
customer. There were no lost-time incidents during the period under review.
Profit before tax for the period ended 30 September 2017 was R54.3 million and was higher
than budget due to a favourable variance on operating expenses and delayed project
2016, with a cash balance
of R80.2 million at 30 September 2017.
Cash remains closely controlled; cash available at 30 September 2017 was R2 million
(31 March 2017: R6 million) against a target of R3 million. R25 million approved shareholder
The company remains in care and maintenance until such time as the mandate is changed
by the ultimate shareholder.
The dispute with SARS regarding the 2012 and 2013 income tax appeal is still ongoing; no
pleas have been exchanged since the previous meeting in October 2016. Additional
information was again submitted in September 2017 but otherwise there are no new
developments in this regard.
The Advance High Temperature Reactor research initiative launched in August 2016 is
progressing well. The concept design has been concluded and analysis of the design has
commenced. Eskom Holdings has approved R250 million for the research project up to
31 March 2019.
The post-irradiation testing of the PBMR advance fuel by the US Idaho National Laboratories
has commenced. The first fuel compact testing was completed in early July 2017. The
second test at 1600 C (simulating accident conditions) was completed by the end of
September 2017. The overall programme is scheduled over a period of 27 months.
The collapse of Golang into SDCT is still in progress due to various tax implications.
Management is in discussion with all stakeholders to agree on the most suitable method for
all shareholders.
The EE Board has approved the extension of the lease c

entitlement rights in RBCT to Namane for an additional three years.
The following subsidiaries are dormant or not trading. The table below proves a summary of
these companies and their current status.
Company Status Comment

Pebble Bed Modular Dormant
Reactor Plant SOC Ltd companies are required under current licence agreements
Pebble Bed Modular PBMR awaits a final decision from Government as to its
Reactor Fuel SOC Ltd future, which will influence how the dormant subsidiaries are
Pebble Bed Modular dealt with. The future of the subsidiaries is not intricately
Reactor Technology SOC
Ltd
Rosherville Properties SOC Not The interest is being considered as part of the wider Eskom
Ltd trading group disposal of ash dumps
The process to dispose of properties has commenced
Eskom Enterprises Global Dormant Part of the non-core disposal process and clean-up of the EE
West Africa Limited group
In process of liquidation the process is dependent on the
requirements in Nigeria; progress was hindered by a lack of
sufficient information
Financials for all outstanding years are complete awaiting
latest financials
Nepskom Communications Dormant Part of the non-core disposal process and clean-up of the EE
Limited group
In process of liquidation final documents to be submitted to
the High Court to request liquidation are being drawn up
Financials for all outstanding years are complete awaiting
approval before they can be filed with relevant authorities
Escap SOC Ltd

Sep 17 Jun 17
Equity portfolio return (1 year) >
11.14 13.91 (2.05) TBC 11.14 (2.08) 1.05
SWIX, %
Money market portfolio return
7.60 8.48 8.47 TBC 7.60 7.62 8.42
(1 year), > STEFI, %
Expense ratio, % 6.00 0.31 1.90 6.00 0.39 2.12 2.74
Incurred loss / claim ratio, % 70.00 36.01 36.69 70.00 44.24 70.00 9.88
Solvency Assessment Measure,
904 6 122 5 543 TBC 6 122 5 543 5 111
R million
Return on equity, > Eskom's
11.00 35.76 32.24 11.00 30.13 20.02 53.06
WACC, %
1. SWIX shareholder weighted index.
2. STEFI short-term fixed-interest composite index.
Escap reported a profit after tax of R1 004 million for the period ended 30 September 2017,
which is R452 million above budget, driven by the following:
Net insurance premium revenue exceeded budget by R66 million, mainly due to higher
than budgeted insurance premiums resulting from an increase in capital expansion
project values and an earlier than expected commercial operation date for Kusile Power
Station
Net investment income was above budget by R99 million. Money market investment
performance of 8.48% exceeded the target of 7.60%, and listed share investment
performance of 13.91% exceeded the target of 11.14%
Net insurance claims expense was below budget by R433 million, due to lower than
expected current year claims. The claims expense as a percentage of net earned
premiums (i.e. claims ratio) was 36.01% compared to the target of less than 70%
Net operating expense was below budget by R30 million, due to lower administration,
survey and Treasury fees and higher than budgeted net commission income. The net
operating expense as a percentage of net earned premiums (i.e. expense ratio) was
0.31% compared to the target of less than 6%
Income tax exceeded the budget by R175 million, due to higher than budgeted taxable
income
Veld fire: The event occurred on 7 and 8 June 2017 in the Knysna and Plettenberg Bay
areas of the Western Cape and caused damage to various farms, factories and plantations.
The claim is estimated at R200 million. Escap has
appointed a fire expert to investigate the cause, in order to determine the merit of the claim.
Fidelity Guarantee (crime): The claim relates to procurement fraud detected by Assurance
claim is estimated at R513 5 million. The reinsurers

have requested additional information, which Eskom is collating.
Floater claim for Ingula Power Station: The incident occurred on 6 April 2016 during
synchronisation of Unit 3, damaging the rotor poles and stator. The claim is estimated at
R423 million. The reinsurers have admitted liability
and determined that the claim relates to one incident.
Electrical contact: The incident occurred on 11 August 2013 and resulted in a cyclist
suffering severe electrical burns from a low hanging live power line spanning a footpath. The
matter was settled out of court for R23.5 million on 20 October 2017.
Veld fire: The event occurred on 31 August 2012 and resulted in damage to farms in the
North West. The claim is estimated at R32 million. A
pre-trial conference was held on 1 June 2017, but the matter has not yet been set down for
trial will take place in 2018.
Veld fire: The event occurred on 11 August 2012 and affected 90 farmers in the Free State.
The claim against Eskom was not proved in court and withdrawn on 20 October 2017.
Explosion and fire: The incident occurred on 24 July 2011, causing property damage at the
North West Development Corporation, SM Plastics and SA Yungcheng Plate Manufacturing
premises. The claim is estimated at R56 million. The
matter was initially set down for trial on 17 July 2017, but has been postponed to
26 April 2018.
Veld fire: The event occurred on 27 April 2007 at Komati Forest near Sabie in Mpumalanga
Province, resulting in estimated timber plantation damages of R142
portion is R25 million. No further steps have been taken by the plaintiff and the matter
remains dormant. Escap is considering how to proceed further.
Eskom Finance Company SOC Ltd group

Sep 17 Jun 17
Maximise shareholder value:
Optimise home ownership cost
to Eskom and its employees in 128.3 121.6 58.4 255.4 241.2 248.7 256
the form of economic value
added (EVA), R million
Achieve company operational
efficiency: Cost-to-income ratio, 35.30 38.10 33.10 33.50 35.20 33.10 25.18
%
Profitability (finance margin), % 2.80 2.88 2.90 2.90 2.85 2.87 3.01
Arrear management (loan loss
0.11 0.11 0.09 0.21 0.21 0.21 0.15
ratio), %
Liquidity management (EFC debt
7.4 6.0 6.0 7.4 7.4 7.4 6.0
balance), R billion
Maintain discipline: No repeat or
overdue audit findings. Only
3.0 n/a n/a 3.0 3.0 3.0 4.1
housekeeping items on rating
scale of 1 to 5
Maintain good customer
satisfaction: Customer 97.00 97.39 97.40 97.00 97.00 97.00 97.40
satisfaction rating, %
Maintain good macro customer
relationship: Macro customer 3.0 4.0 4.0 3.0 3.0 3.0 4.0
rating on scale of 1 to 5
Work allocated to B-BBEE
90.00 99.83 99.80 90.00 90.00 90.00 99.83
attorneys, %
Controllable expenses to B-
65.00 68.99 73.30 65.00 65.00 65.00 67.10
BBEE companies, %
Securitised debt of R577 million was successfully refinanced in May 2017.

The loan book is currently showing a lower growth than anticipated. The effects of the
restrictive lending conditions previously imposed to manage liquidity have had a negative
effect on the loan book. This has resulted in a decrease in home loan subsidy savings,
thereby reducing economic value added.
The decrease of 25 basis points in the prime lending rate in the current quarter has resulted
in a decrease in financing income. This has also contributed to the decrease in net profit and
has had a negative effect on the cost-to-income ratio.
Governance and risk
Corporate governance
The Board provides the strategic direction, while the Group Chief Executive, assisted by the
Executive Management Committee (Exco), is accountable to the Board for implementing the
strategy.
There have not been any changes in the Board of Directors for the period from 01 July 2017
to 30 September 2017.
Mr Anoj Singh was placed on special leave with effect from 27 July 2017, however no
communication with regards to his status as non-executive director was received from the
shareholder, who has exclusive powers to appoint and remove directors.
Refer to the table of attendance of Board meetings for the Board composition at
30 September 2017.
Board committees were constituted as follows as at 30 September 2017:
Audit and Risk Committee (ARC) Investment and Finance Committee (IFC)
S Gounden (Chairperson) S Dingaan (Chairperson)
P Naidoo P Naidoo
S Dingaan Z Khoza
PE Molokwane PE Molokwane
People and Governance Committee (P&G) Social, Ethics and Sustainability Committee (SES)
B Makhubela (Chairperson) P Naidoo (Chairperson)
PE Molokwane G Leonardi
Z Khoza B Makhubela
S Gounden S Gounden
Board Tender Committee (TC)
PE Molokwane Chairperson)
P Naidoo
S Dingaan
B Makhubela
Induction training was conducted for Board and Board Committees. The training covered at
the different Board committees and Board is as detailed below.
Board: Eskom business, regulatory and governance
Board Tender Committee: B-BBEE, public tendering, PPPFA, National Treasury
regulations
People and Governance Committee: Terms of Reference, HR Division purpose and
mandates, tour of the Eskom Academy of Learning
Investment and Finance Committee: SD&L strategy
Social, Ethics and Sustainability Committee: Operational sustainability for Primary
Energy; Generation; Transmission; Distribution; Revenue and Customers
A total of five Board meetings, including special and in-committee meetings, were held
during the quarter ended 30 September 2017. Board decisions during this period dealt,
amongst others, with the following matters:
Group audit strategy for the year ended 31 March 2018
Initiatives to address and remedy the 2016/17 audit qualification
Assurance & Forensics: Modification of value limit for probity checks
Group Capital: Review of the Eskom Procurement and Supply Chain Management
Procedure (PSCM) 32-1034 rev 2
Group Customer Services: Modification of Online Vending Agency service contracts to
add Municipal Revenue Recovery
Group Customer Services: Request for Information (RFI) for Municipal Debt Turnkey
proposition
escalation parameters in the coal supply agreement

Group Capital: The contracting and procurement strategy for the Tutuka Low NOx Burner
Refurbishment Project
Group Capital: Eskom Private Sector Participation (PSP) Policy
Group Capital: Huarong asset financing
Group Customer Services: Tariff Suite for Electricity Intensive Industry Customers
silicon carbide production facilities at Kriel in Mpumalanga

Group Customer Services: Bad Debts write-off: Large Power Users (LPU) IFM SA,
ASA Metals and Evraz HSV (R422 million)
Group Customer Services: Bad debts write-off: Terminated Small Power User (SPU)
excluding Soweto (R229 million)
Group Customer Services: Municipal overdue debt - allowing all municipalities to once
again repay capital and connection charges over a ten year period at relevant interest
rate instead of cash up front
Group Finance: South African Reserve Bank imports undertaking dispensation extension
Group IT: Group IT: Five year capital expenditure requirements
Group Capital: Purchase of land for open cast block mining at Khutala Colliery
Group Finance: Appointment to ESCAP Board
Finance Group: Appointment of Chairman to Eskom Pension & Provident Fund
On 4 July 2017, the Labour Court postponed the hearing of Mr Brian

his dismissal, pending the outcome of the High Court application by opposition parties for his
reappointment to be ruled invalid and set aside.
On 27 July 2017, the Board put Mr Anoj Singh on special leave pending an investigation.
Mr Calib Cassim (General Manager: Financial Planning and Economic Regulation) was
appointed as acting Chief Financial Officer, effective 28 July 2017.
Mr Johnny Dladla, who was appointed as interim Group Chief Executive, effective
22 June 2017, returned to his previous position as Chief Executive Officer of Eskom Rotek
Industries, effective 6 October 2017.
Mr Sean Maritz (Group Executive: Information Technology) was appointed as interim Group
Chief Executive, effective 6 October 2017.
Refer to the attendance of Exco meetings for the Exco composition at 30 September 2017.
The table below depicts the attendance of all directors at Board and committee meetings for
the quarter ended 30 September 2017.
Social,
Invest- People Ethics
Audit ment and and
and and Govern- Sustain- Board
Members Board Risk Finance ance ability Tender
Number of meetings 5 7 2 2 1 4
Independent non-executives
Current members
Mr ZW Khoza *5/5 2/2 2/2
Mr SD Dingaan 5/5 6/7 *2/2 4/4
Mr S Gounden 4/5 *7/7 2/2 1/1
Mr GM Leonardi 1/5 1/1
Ms BCE Makhubela 5/5 *2/2 1/1 3/4
Dr PE Molokwane 5/5 6/7 2/2 1/2 *4/4
Dr P Naidoo 4/5 7/7 2/2 *1/1 3/4
Executives
Mr A Singh 2/3
1. Attendance as reflected above refers to directors who were members of that committee during the quarter to
30 September 2017, and reflects changes due to rotation of members in committee memberships.
2. An asterisk (*) denotes the current chairmanship of the Board or Board committee.
Number of
meetings
Executive Divisional responsibility attended
Total number of meetings 4
Mr JA Dladla Interim Group Chief Executive 1/4

Mr A Singh Chief Financial Officer 1/1
Mr C Cassim Acting Chief Financial Officer 3/3
Mr P Govender Acting Group Executive: Group Capital 4/4
Mr T Govender Group Executive: Transmission and Sustainability 4/4
Mr W Majola Acting Group Executive: Generation 3/4
Mr S Maritz Group Executive: Information Technology and Chief Information Officer 4/4
Mr AA Masango Acting Chief Executive: Eskom Enterprises 2/2
Ms A Noah Group Executive: Customer Service 4/4
Mr MM Ntsokolo Group Executive: Distribution 3/4
Ms EM Pule Group Executive: Human Resources 3/4
Key focus areas and associated risks
Risk analysis is done in terms of likelihood and consequence or impact, on the basis of most
likely to impact operations and the effect on Eskom and its stakeholders. Priority 1 risks are
identified by the divisions based on these criteria, and plotted on the Eskom Risk Matrix in
the red zone of the heat map (below).
The total number of Priority 1 risks at the end of the current quarter increased to 24, from 23
at 30 June 2017. Four new risks were evaluated at Priority 1, while three risks were
downgraded.
The risk matrices below indicate the number of Priority 1 risks based on how they were rated
by the divisions.
The following new Priority 1 risks were added during the quarter.
Division Risk title Description

Generation Water Shortage leading to loss of The risk shutting sown of the two
production Koeberg units due to unavailability of
water as a result of current drought in the
Western Cape. The risk has been
escalated to Generation divisional level
for strategic monitoring and reporting
due to the severity of impact should the
risk materialise. Execution of treatment
plans, monitoring and management of
this risk will still take place at Koeberg
OU level.
Transmission The decision not to sign any new The risk rating is largely informed by the
financial sustainability, legal and
impacts EPMD in staffing, structure, compliance as well as reputation. Nersa
performance has received a complaint from SAWEA
which demands action to be taken
against Eskom for contravening its
license conditions. In addition laid a case
against Eskom at the competition
commission This has also attracted
adverse media coverage and negatively
reputation. This trend will continue whilst

seeking solutions to these problems.
This risk has financial, reputational, legal
and compliance consequences
Primary Energy Non-acceptance by current Free The overall treatment movement in the
Carrier Arrangement (FCA) quarter has gone from 0%(the risk was
contractors of the new contract reviewed from a zero base) to 28%
regime
Security Attacks on security guards leading to The main objective is to treat this risk by
Fatalities expediting the replacement of security
guards at high risk areas with security
technology. The successful
implementation of these treatments will
lower the likelihood of this risk and
consequently drop the risk rating to a
Priority 2. The main cause to this is
influenced by the current socio-economic
circumstances and high crime rates of
the country.
The following risks were removed as Priority 1 risk during the quarter:
Division Risk title Reason for change
Distribution Unacceptable levels of network theft SHEQS Forum reviewed this risk at
and vandalism August meeting. The outcome of the
review was a change in risk rating to P2.
Reviewed against Financial, Operations,
and Reputation criteria. The current
external socio economic conditions
continue to drive equipment theft and
vandalism. Consequences of
operational nature effecting >10000
customers for > 12hrs
Distribution The ability to sustain technical The reason for retiring the risk is that
Performance funding is no longer viewed as a
constraint. The business focus is to
increase effort to fully execute all
projects in capital and maintenance
environment with available funding to
sustain technical performance
EE Rotek Poor Industrial Relations ERI has experience two industrial action
in the past financial year. Following the
review of the ERI strategic risk profile,
the risk was rated a P2 due to the
reduction of the likelihood.
Implementation of treatment plans is in
progress and is monitored
An analysis of Priority 1 risks indicates that the majority will have an adverse impact on the
following DTC II objectives:
Demand stimulation and customer centricity
Capital optimisation
More than half of the Priority 1 business risks are caused by the external environment where
Eskom may not have direct control over key outcomes. The second largest cause is related
outcomes.
sustainability, with impacts felt across the entire value chain with the most significant
business risks being:
Financial sustainability being compromised
Increase in coal costs above the MYPD 3 allowance.
Increase in late or non-payment of electricity accounts (municipalities and key industrial
customers)
Increasing Soweto SPU debt, caused by continuing non-payment
Non-compliance to licence conditions, environmental legislation and statutory
maintenance requirements
Weak and vulnerable Eskom brand
Eskom has undertaken a high-level examination of the key material issues, along with the
associated risks and a reference to the relevant key indicators associated with the risks and
material items. This information is presented in the table below.
Treatment response and

Strategic risk Timeframe
controls
Financial sustainability
Impact of energy policy and IRP allocations with Regulatory strategy Short, medium and
unclear industry structure, impacting or altering our Stakeholder engagement long term
energy mix and flexibility to balance the system
Energy policy and price path misalignment, which Regulatory strategy Short, medium and
could result in delays in migrating to prices reflecting Stakeholder engagement long term
prudent and efficient costs, thereby impacting financial
sustainability, energy mix and emissions
Declining long-term profitability, requiring higher tariffs, Financial strategy Medium to long
cost cutting or increased borrowings to fund the Optimisation of opex and term
shortfall capex
Impact of the following on the ability to borrow: credit Funding strategy Medium to long
ratings downgrades; loss or exhaustion of Government term
guarantees; country-level fiscal crisis; inadequate
electricity prices; regulatory uncertainty
Revenue and customer sustainability
Escalating municipal debt and revenue shortfalls, Debt management strategy Short to medium
leading to financial and liquidity constraints Installation of split, smart and term
prepaid meters
With decreasing local sales volumes coupled with Sales growth strategy Medium to long
surplus capacity, the inability to sell surplus capacity Asset management strategy term
into the region may lead to stranded assets
Operational sustainability
Changing load profile and impact of adding IPP Generation Sustainability Short, medium and
capacity, leading to base-load plant being operated as Strategy long term
mid-merit, with the knock-on effect on plant health Asset management strategy
Sustainable asset creation
Inability to build transmission lines fast enough to Integrated project Medium to long
connect IPPs and the region management term
Environmental and climate change sustainability
Inability to meet climate change mitigation targets (e.g. Climate change strategy Medium to long
carbon budgets) and failure to implement climate term
change adaptation measures
Building sustainable skills
Lack of adequate, available and affordable skills Human resources strategy Medium to long
Succession planning term
Skills development and
training
All deliverables included in the Eskom Holdings Enterprise Risk and Resilience Plan
(approved on 19 February 2016) have been delivered. The appetite and tolerance
framework was recommended to Board by the Audit and Risk Committee on 15 June 2017,
but the Board meeting was postponed.
An upgrade to improve the adequacy and effectiveness of the current risk management
information system to cater for real-time risk monitoring capability is supported by findings
that were raised during a benchmark assessment. This is a significant requirement towards
achieving the objective of becoming risk intelligent by 2021. This has been raised as a risk.
A recent audit completed by Grant Thornton is still in draft and as soon as the findings have
been agreed on and responded to it will be tracked and reported.
Enterprise Risk and Resilience will be focused on the following during the upcoming year:
Updated and approved Eskom Risk Appetite and Tolerance statement and model
First pass at building risk-based scenarios
Embedding key risk indicators
Internal audit
The information below is based on the audit findings database which tracks significant
findings (rated 3 and 4). Housekeeping findings (rated 1 and 2) are followed up by the
business and therefore not included in this report. For
control environment, refer to the Auditor-General dashboard in Appendix G.
There were no repeat and overdue audit findings at Eskom level at 30 September 2017. The
findings reported below impact the divisions only.
Repeat findings
No repeat findings were reported.
Overdue findings
Overdue findings reported were identified in the divisions listed below.
Period to Year to
Division Sep 17 Mar 17
Generation 1
Distribution 1
Commercial 1
Finance 1
Total 2 2
The overdue findings relates mainly to compliance. Overdue findings have decreased over
time, due to the implementation of an integrated compliance management framework within
Eskom, together with an audit findings tracking database.
Appendices
Abbreviations and glossary of terms
ARC Audit and Risk Committee

B-BBEE Broad-based black economic empowerment
COGTA Department of Cooperative Governance and Traditional Affairs
CSP Concentrated solar power
DEA Department of Environmental Affairs
DoE Department of Energy
DPE Department of Public Enterprises
DTC, DTC II -to-Cost strategy; Design-to-Cost version 2
DWS Department of Water and Sanitation
EAF Energy availability factor (see glossary)
Earnings before interest, taxation, depreciation, amortisation and fair value
EBITDA
adjustments
EUF Energy utilisation factor (see glossary)
Exco Executive Management Committee
GE Group executive
GW Gigawatt = 1 000 megawatts
GWh Gigawatt-hour = 1 000MWh
IDM Integrated demand management
IPP Independent power producer (see glossary)
King IV King Code of Corporate Governance in South Africa 2016
kt Kiloton = 1 000 tons
kV Kilovolt = 1 000 volts
kWh Kilowatt-hour = 1 000 watt-hours (see glossary)
kWhSO Kilowatt-hour sent out
LTIR Lost-time injury rate (see glossary)
M Megalitre = 1 million litres
mSv Millisievert
Mt Million tons
MVA Megavolt-ampere
MW Megawatt = 1 million watts
MWh Megawatt-hour = 1 000kWh
MYPD Multi-year price determination
NERSA National Energy Regulator of South Africa
OCGT Open-cycle gas turbine (see glossary)
OCLF Other capability loss factor
OHS Occupational health and safety
PCLF Planned capability loss factor
PAIA Promotion of Access to Information Act, 2000
PAJA Promotion of Administrative Justice Act, 2000
PFMA Public Finance Management Act, 1999
PPA Power purchase agreement
PPPFA Preferential Procurement Policy Framework Act, 2000
RCA Regulatory Clearing Account
RE-IPP Renewable independent power producer
SAIDI System average interruption duration index
SAIFI System average interruption frequency index
TMPS Total measured procurement spend
UAGS Unplanned automatic grid separations
UCLF Unplanned capability loss factor (see glossary)
Base-load plant Largely coal-fired and nuclear power stations, designed to operate continuously
borrowings by utilising cash generated from operating activities. It is calculated

Cash interest cover as (net cash from operating activities divided by net interest paid (interest
received from investment and financing activities plus interest paid on financing
activities)
Daily peak Maximum amount of energy demanded by consumers in one day
Debt/equity including long- Net financial assets and liabilities plus non-current retirement benefit obligations
term provisions and non-current provisions (after tax) divided by total equity
Cash generated from operations divided by the sum of (net interest paid from
Debt service cover ratio
financing activities and debt securities and borrowings repaid)
To remove a facility (e.g. reactor) from service and either store it safely or
Decommission
dismantle it
Planning, implementing and monitoring activities to encourage consumers to use
Demand side management
electricity more efficiently, including both the timing and level of demand
Electricity EBITDA margin EBITDA as a percentage of electricity revenue
Electricity-related costs (primary energy costs, employee benefit costs, net
Electricity operating costs per
impairment losses, other operating expenses and other income) divided by total
kWh
electricity sales in kWh multiplied by 100
Electricity revenue billed (before electricity revenue not recognised due to
Electricity revenue per kWh
uncollectability adjustments) divided by total kWh sales multiplied by 100
Financial instrument that causes cash flows that would otherwise be required by
Embedded derivative
modifying a contract according to a specified variable such as currency
Energy availability factor Measure of power station availability, taking account of energy losses not under
(EAF) the control of plant management and internal non-engineering constraints
Programmes to reduce energy used by specific end-use devices and systems,
Energy efficiency
typically without affecting services provided
Ratio of actual electrical energy produced during a period of time divided by the
total available energy capacity. It is a measure of the degree to which the
Energy utilisation factor available energy capacity of an electricity supply network is utilised. Available
(EUF) energy capacity refers to the capacity after all unavailable energy (planned and
unplanned energy losses) has been taken into account, and represents the net
energy capacity made available to the System Operator or national grid
A fatality is an incident occurring at work, or arising out of or in connection with
the activities of persons at work, or in connection with the use of plant or
machinery, in which or in consequence of which, any person (an employee,
Fatality contractor, or member of the public) dies, regardless of the time intervening
between the injury and/or exposure to the cause and death. The date of the
incident will reflect the date on which the incident occurred, irrespective of the
date of death
Shutdown of a generating unit, transmission line or other facility for emergency
Forced outage reasons or a condition in which generating equipment is unavailable for load due
to unanticipated breakdown
Amount of electricity deemed sufficient to provide basic electricity services to a
Free basic electricity
poor household (50kWh/month)
Free funds from operations Cash generated from operations adjusted for working capital
Debt securities and borrowings plus finance lease liabilities plus the after-tax
Gross debt
effect of non-current provisions and employee benefit obligations
Gross debt divided by earnings before interest, taxation, depreciation,
Gross debt/EBITDA ratio
amortisation and fair value adjustments
A director who is:
Not a full-time salaried employee of the company or its subsidiary
Not a shareholder representative
Independent non-executive
Has not been employed by the company and is not a member of the immediate
director
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, significant supplier or customer of the company
Independent power producer Any entity, other than Eskom, that owns or operates, in whole or in part, one or
(IPP) more independent power generation facilities
Basic unit of electric energy equal to one kilowatt of power supplied to or taken
Kilowatt-hour (kWh)
from an electric circuit steadily for one hour
Load Amount of electric power delivered or required on a system at any specific point
Typically larger industrial customers reduce their demand by a specified
percentage for the duration of a power system emergency. Due to the nature of
Load curtailment
reduce demand
Activities to influence the level and shape of demand for electricity so that
Load management demand conforms to the present supply situation, long-term objectives and
constraints
Scheduled and controlled power cuts that rotate available capacity between all
customers when demand is greater than supply in order to avoid blackouts.
Load shedding
Distribution or municipal control rooms open breakers and interrupt load
according to predefined schedules
A work injury which arises out of and in the course of employment and which
renders the injured employee or contractor unable to perform his/her
Lost-time injury (LTI)
regular/normal work on one or more full calendar days or shifts other than the
day or shift on which the injury occurred. It includes occupational diseases
Proportional representation of the occurrence of lost-time injuries, including
Lost-time injury rate (LTIR)
occupational diseases and fatalities, over 12 months per 200 000 working hours.
Any confirmed disease/illness arising out of, and in th
employment, that is listed in Schedule 3 of the Compensation for Occupational
Injuries and Diseases (COID) Act, 1993, or any other condition as determined by
Occupational disease/illness
an occupational medical practitioner. In the case of employees placed through a
labour broker, the onus is on the relevant operating or business unit to ensure
that pre-employment medical examinations are performed
Maximum demand Highest demand of load within a specified period
Off-peak Period of relatively low system demand
Open-cycle gas turbine Liquid fuel turbine power station that forms part of peak-load plant and runs on
(OCGT) kerosene or diesel. Designed to operate in periods of peak demand
Period in which a generating unit, transmission line, or other facility is out of
Outage
service
Maximum power used in a given period, traditionally between 06:00 10:00, as
Peak demand
well as 18:00 22:00 in summer or 17:00-21:00 in winter
Generating equipment normally operated only during hours of highest daily,
Peaking capacity
weekly or seasonal loads
Gas turbines, hydroelectric or a pumped storage scheme used during periods of
Peak-load plant
peak demand
Energy in natural resources, e.g. coal, liquid fuels, sunlight, wind, uranium and
Primary energy
water
A lower and an upper reservoir with a power station/pumping plant between the
two. During off-peak periods the reversible pumps/turbines use electricity to
Pumped storage scheme pump water from the lower to the upper reservoir. During periods of peak
demand, water runs back into the lower reservoir through the turbines,
generating electricity
Reserve margin
requirements (peak load or peak demand)
EBIT divided by the regulated asset base, which is the sum of property, plant
Return on assets and equipment, trade and other receivables, inventory and future fuel, less trade
and other payables and deferred income
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
System minutes
minute
Technical losses Naturally occurring losses that depend on the power systems used
Measure of availability of a generating unit, indicating how well it is operated and
Unit capability factor (UCF)
maintained
Energy losses due to outages are considered unplanned when a power station
Unplanned capability loss
unit has to be taken out of service and it is not scheduled at least four weeks in
factor (UCLF)
advance
Nuclear fuel irradiated in and permanently removed from a nuclear reactor. Used
Used nuclear fuel
nuclear fuel is stored on-site in used fuel pools or storage casks
The watt is the International System of Units' (SI) standard unit of power. It
Watt
specifies the rate at which electrical energy is dissipated (energy per unit of time)
(Inventory plus the current portion of payments made in advance, trade and
other receivables and taxation assets) divided by (the current portion of trade
Working capital ratio
and other payables, payments received in advance, provisions, employee benefit
obligations and taxation liabilities)

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ESKOM HOLDINGS SOC LTD

FOR THE PERIOD ENDED

Appendix 1 Abbreviations and glossary of terms

iquidity position (cash and cash equivalents plus investments in

On 25 August 2017, Eskom submitted a one-year revenue application for 2018/19 of

Distribution network interruption performance in terms of interruption frequency is better than

Feedback on the progress of the recovery programme:

Compliance with equity conditions

Eskom submitted the report addressing an independent rev

As reported earlier, performance of the BPP savings programme is on track.

Sep 17 Jun 17 Mar 18 Mar 17

Revenue and customer sustainability

Customer service performance

All customer service indices are performing well above target

Customer category Sep 17 Jun 17 Mar 17 Sep 16

Eskom uses a range of statistical perception- and interaction-based customer surveys,

Sep 17 Jun 17 Sep 16 Mar 18 Mar 17

Eskom is participating in an interdepartmental discussion platform, established under the

There are no other customers currently under business rescue.

R million Sep 17 Jun 17 Mar 17 Sep 16

Total arrear debt, Percentage

Total arrear debt,

Eskom continued to make submissions to a number of Parliamentary committees, namely

R million Sep 17 Jun 17 Mar 17 Sep 16

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Mar 18 year end

Water cost were within the year-to-date target

Achieving targeted cost-plus mine production

Sep 17 Jun 17 Sep 16 Mar 18 Mar 17

Eskom has initiated mitigation measures at the two power stations

Eskom is attending to the following water-related environmental issues:

The operating challenge is managing the difference of approximately 11 000MW, between

Sep 17 Jun 17 Sep 16 Mar 18 Mar 17

Unplanned breakdowns (UCLF) have remained relatively constant quarter-on-quarter, at

Base plan Completed Execution Deferred Cancelled Additional outages

Planned Planned Actual start Actual end

From the original 50 outages deemed to be in backlog; 39 outages are completed or in

Excellent system minutes lost <1 performance and no major incidents

Customer interruption frequency is performing better than target

Increase in distribution energy losses due to the impact of IPPs

External socio-economic conditions continue to drive equipment theft and vandalism of

-electricity theft campaign also participated in the inaugural Mpumalanga

Managing supply and demand

Kusile Unit 1 achieved commercial operation on 30 August 2017.

Sep 17 Jun 17 Sep 16 Mar 18 Mar 17

is supplemented by energy purchased from IPPs, mainly from

IPP OCGT (Peakers) Programme

Procurement Programme (RE-IPP)

Sep 17 Jun 17 Mar 17

Sep 17 Jun 17 Sep 16 Mar 18 Mar 17

Unit cost, c/kWh

opportunity to make additional

Sep 17 Jun 17 Sep 16 Mar 18 Mar 17

Work is ongoing to conclude agreements with ZESCO of Zambia, as well as a mine in

MOZISA (RSA-Zimbabwe-Mozambique interconnectors)

BOSA (Botswana-RSA interconnector)

Technical cooperation with BPC

Kudu (RSA-Namibia interconnector)

Second RSA/Namibia 400kV Interconnector

Sep 17 Jun 17 Sep 16 Mar 18 Mar 17

Sustainable asset creation

Sep 17 Jun 17 Sep 16 Mar 18 Mar 17

It is currently projected that Medupi Unit 4, synchronised on 31 May 2017, will be

Sep 17 Jun 17 Mar 18 Mar 17