TABLE OF CONTENTS 1. EXECUTIVE SUMMARY 2. INTRODUCTION 3. STRATEGIC MANAGEMENT PROCESS IN ESKOM 3.1 Methodology of Review 3.

2 Management Process 3.2.1 Environmental Analysis 3.2.1.1 Comments 3.2.2 Vision Statement 3.2.2.1 Communication 3.2.2.2 Values 3.2.2.3 Comments 3.2.3 Objectives 3.2.3.1 Short Term Priorities 3.2.3.2 Medium and Long Term Priorities 3.2.3.3 Comments 3.2.4 Crafting of the Strategy 3.2.4.1 Comments 3.2.5 Implementation 3.2.5.1 Comments 3.2.6 Monitoring 3.2.6.1 Comments 4 RECENT CHANGES IN THE STRATEGY 4.1 Factors Which Led to Changes in the Strategy 4.2 Results and Expected Results 5. ESKOM INVESTMENT STRATEGY INTO THE FUTURE 6. RECOMMENDATIONS ON STRATEGIC ACTIONS AND CONTROLS NEEDED 8.1. Revenue Management 8.2. Benchmarking 8.3. Outsourcing 8.4. African Collaboration 7. 8. REFERENCES ANNEXURES

1. EXECUTIVE SUMMARY The aim of the assignment is to: consider the strategic management of an organization of choice and comment on the process and evaluate its effectiveness; discuss the changes made over the last five years and how they took place, and the factors that led to the changes in strategy; and also the results of changes in the strategy; extrapolate into the next five years in order to identify the organization's abilities for attaining a competitive advantage through their strategy. recommend strategic actions required to be implemented, referring to necessary controls. This product is a review of the strategic management process in Eskom Holdings, which is the organization that the group preferred. Eskom is an established company in South Africa with an illustrious history in the role it has played in growing the SA economy since its founding in 1923.

This paper has been confined to the changes introduced in the period after the year 2001 until today. The major objective of government with these changes government was targeting at cutting costs and bringing standardization in the tariff structure. Eskom is to this day striving to implement the changes that were mooted back in the cabinet decision of 2000. As it will be explained this cabinet decision of 2000 set in motion the restructuring that brought about the establishment of Regional Electricity Distribution (RED's) stations. Owing to lack of sufficient progress, the RED's were followed in 2003 by the establishment of the Electricity Distribution Industry Holdings (EDI Holdings). With respect to the strategic management process we found that the practices in Eskom were in line with international standards. Finally, we ended with some recommendations. 2. INTRODUCTION The company that we have chosen for this project is Eskom. Eskom is a public company with government as the sole shareholder. Eskom generates over half the electricity produced in the whole of Africa and aims to extend its transmission grid into neighbouring sub-Saharan countries. Currently, Eskom produces 90% of the South Africa's electricity generated for resale and is the monopoly domestic public power utility. hen we talk about power and power outages, we tend often to focus on South Africa's (S.A.) W growing shortage of electricity generation and capacity. But when the lights go out it's just as likely to be because of troubles in electricity distribution, whether the power is supplied by our local municipality or by ESKOM'' (The business Day Friday May 4 2007 - Opinion and Analysis Electricity's crises page 14) " Poor strategy is expensive, bad strategy can be lethal, while when the stakes include survival, very bad strategy is almost always fatal." Colin S. Gray, Modern Strategy, Oxford University Press, 1999. It will be evident in the discussion that is to follow below, that while Eskom carries its operations as an independent entity, the government has a big influence in the policies that are shaping the operations at Eskom. Consequently, the vehicle with which the government executes its economic strategies has much to do with the success of parastatal organisation such as Eskom. In one of government control mechanism, government determined that electricity was a central medium for achieving its objective of growing the economy. In the eyes of government, affordable electricity will promote stability in the economy, and it will also attract foreign direct investment. But to bring certainty in the equation, government adopted the National Electricity Regulator in 1994. The National Electricity Regulator was empowered to ensure the orderly, effective generation and distribution of electricity throughout South Africa. The existence of this structure means that Eskom may not unilaterally raise the price of electricity. 3. 3.1 STRATEGIC MANAGEMENT PROCESS IN ESKOM Methodology of Review of Strategic Management Process

We have begun our search for information by first approaching a Strategic Management Manager employed at Eskom. He has basically given us an overview of the entire strategic management process at Eskom as well as describes certain key issues that Eskom have gone through and are

currently facing. He has also referred us to some strategic documents of Eskom. The strategic phases of the organization are contained in the strategic plan document Eskom Holdings Business Plan 2007 to 2011. This includes the Environmental Analysis, Planning Directive, Vision, Values, and Strategic objectives, Implementation, Evaluation and Monitoring of the strategy. We review the Strategic Management Process by looking at the major phases of the Eskom strategy and comparing this to the phases as described in "Crafting and Executing Strategy " (see Annexure 1). We describe each phase and give references to an appendix if necessary. After the description we follow up with our comments on the phase. 3.2 Strategic Management Process at Eskom 3.2.1. Environmental Analysis. The environmental analysis is undertaken (as noted in Annexure 2) in line with the PESTLE (Microenvironment - study school lecture notes, February 2007) analysis model. In this stage the focus is on assessing the various factors that will have an impact on how Eskom realises its strategic objectives. The local conditions, for example the state of the economy and its performance are analysed. Furthermore, the global situation is examined to assess for example, how the price of oil in the world markets will impact on our own situation and how this will impact on Eskom in particular. Comments:It is imperative for Eskom to monitor its external environment (e.g. Government) since these external forces play a significant role in determining the output of Eskom strategy. This is also utilised by management in the assurance of the Planning Directive. The Planning Directive contains the so-called management aspirations. This is the stage, which kicks off the Strategic Planning Cycle. 3.2.2. Vision Statement. "Together building the power-base for sustainable growth and development". Table 1: Explanation of the vision statement Together One Eskom united and excited about working together towards a common objective, while also working in partnership with others. Power-base Electricity sector as a foundation for South Africa's competitive position sustainable foundation for growth. Growth To grow the South African economy, Eskom, its people and the nation. Building Forward looking, building infrastructure and the economy (building the engine for growth). Sustainable Economic, environmental and social sustainability (triple bottom-line). Development Economic growth and social equity into the future integrating first and second economy. i. Communication The communication of the strategy by the CEO was undertaken through road shows from head

office to all the regional offices. Materials such as videotapes, pamphlets and posters were distributed in order to ensure continued reference to the strategy after the road shows. The purpose of the exercise was to ensure that the whole organization buys-in on the strategy and also to understand the strategy. ii. Values Eskom continues to promote the values of excellence, innovation, customer satisfaction and integrity, as described below. It seeks to create a culture that visibly aspires towards these values. Table 2: Excellence Acknowledged by all for exceptional standards, performance and professionalism. Innovation Value-adding creativity and results oriented. Lead through excellence in innovation. Customer SatisfactionA commitment to meet and strive to exceed the needs of the receivers of products and services. Integrity Honesty of purpose, conduct and discipline in actions, and respect for people. Comments: This vision is indeed providing an understanding of what management wants the business to look like. It provides managers with a reference point in making strategic decisions and preparing the company for the future. It does indeed say something definitive about how the leadership is intending to position the company beyond where it is today. (Crafting and Executing Strategy p.21). Furthermore it can be seen that management has put considerable effort into broadcasting its vision to all Eskom employees. This shows that Eskom is committed to ensuring all staff feel part of the strategy. Eskom has clearly determined the standard that its members should possess, and this was crafted with the nature of the business kept in mind, which makes adhering to the values more of a living phenomenon than an ideal. Eskom wants to make sure that it does business in a most ethical manner to build a good impression of the company as a whole. These values are complementing the vision of the company. 3.2.3. Objectives Eskom Holdings' strategic objectives fall into three main areas which are:Technical performance to maintain existing quality of supply; Capacity expansion to ensure supply availability for growing SA electricity demand; Funding and financial resourcing to ensure that the appropriate resources are acquired while managing the business to a healthy financial position. These main objectives are categorised into short and long-term goals as indicated below: i. Short Term Priorities Key performance targets have been aligned to the strategic objectives as indicated in the Annexure 3. As can be seen, Eskom is also implementing a stretch policy. This ensures that the organisation performs at its full potential and delivers the best possible results.

A balanced scorecard approach (Annexure 4) has been adopted to facilitate implementation of the three strategic objectives outlined above. The objectives are realised through various strategies, which are outlined across the various scorecard perspectives. The objectives are set using a top down approach, which extends to the lowest organizational levels. Feedback is communicated via a bottom up approach. Communication of objectives is thus working coherently within the company. ii. Medium and Long Term Priorities Eskom expects an expansion of R150 billion for the period up to 2012. This will include building additional 9000MW facilities to increase installed capacity to 39 000MW. For the long term Eskom wants to have a capacity of 80 000MW by 2025. Comments: If the communication approach is working for Eskom it will bring about a unity of purpose at all levels of the company, from top management to the lower levels. Through this approach the lower levels gets to feel that they too have value to add in the running of the company with the result that they tend to be imbued with the feeling of ownership of the overall strategy. Having short-term priorities enables Eskom to have immediate attention to these pressing issues. Eskom has catered for further prioritisation even from the list of priorities. This enables Eskom to fix its strategy, commitment and dedication towards making sure these higher priorities are attended to with the highest of urgency. However overemphasizing on higher priorities can make Eskom devote majority of its resources to these goals. This can make Eskom lose track of its long-term priorities and its commitment towards its vision. A Balanced Scorecard has become a popular instrument to measure company's strategic and financial performance. It is very suitable for Eskom as it breaks down the overall objectives into smaller details for accurate measurement. 3.2.4. Crafting of The Strategy The CEO and the managing directors through a committee called Executive Committee (EXCO) orchestrate the crafting of the strategy. The company wide game plan of managing the company, wherein the Top 200'' Senior General Managers align the corporate strategy to the level of the business. The process is then cascaded to the various Business Units (BU), which consists of the different Divisions, which in the main include Generation, Transmission, Distribution and Enterprise. They in turn analyse the various factors, which have an influence in the execution of their business processes. The Divisions undergo a process that can last up to four months. The process is done with consideration of the operational level plans. The product from the Divisions gets fed back to the top; this completes the top down-bottom up interaction in the planning process. Eskom has a Five Year Planning Cycle. Its Medium Term Expenditure Framework (MTEF) has a five-year cycle. However, each year has an In-Year Plan. The In-Year Plan does not result in a drastic revision of the Five Year Plan referred to above. In terms of the current situation in South Africa, with the major infrastructure developments in the wake of the Soccer World Cup in 2010, it is unavoidable that adjustment will be needed on the Plans in order that there is sufficient electricity generated to support the heavy demand of electricity owing to sharp increase in consumption. Other than adjustments that can be necessitated by developments at this scale, the annual Plans are not really meant to make marked adjustments on the strategic objectives.

Comments: The strategy hierarchy at Eskom is consistent with the process described in the Crafting and Executing Strategy'' page 39 15th edition. Eskom is a large and diverse organization, thus the more points of strategic initiative it has and the more managers and employees at more levels of management that have a relevant strategy making roles. 3.2.5. Implementation Eskom has implementation plans for each of its divisions. These are aligned to its vision and are set out in detail. An example of one implementation strategy is attached in the Annexure 5 which is an example taken from the Eskom Holdings Business Plan 2007 to 2011. Comments: Due to constant government involvement, Eskom can be constrained in implementing its strategy according to its aspirations. A very detailed plan is laid out for each of its implementation strategy. Concise tasks are laid out in order to achieve the implementation plans. Eskoms implementation plan is very impressive. 3.2.6. Monitoring Eskom follows a process of reviewal of the Plan, which take place every eighteen months. At this point an assessment is done to confirm that the execution of the Plan is still running smoothly. Where a need for alignment is found in order to align the implementation with the strategic objectives such adjustment is carried out. Eskom goes even further as to track the top 3 priorities that the enterprise wishes to achieve. This is done at Board level and even action centres have been established to ensure their execution. Internal auditors in different disciplines within Eskom, also monitor quality, safety, progress and expenditure, among others. Steering committees which consist of members from the different business level sector disciplines (e.g. finance, information system, human resources) have also been put in place to confirm progress in various areas of the organization. Comments: As can be seen by the several methods that have been put in place, Eskom takes the reviewal of the strategic management process very seriously. Reviewal of the strategic management process is a necessary exercise. Company vision, objectives, strategy and approach to strategy execution are never final because of continuous changes in environment. This also ensures that the targets will be achieved allowing for adjustments where deviation or change has been detected. Managing strategy is an ongoing process, and not an every now and then task. 4. RECENT CHANGES IN STRATEGY The vision at Eskom post 2001 changed from the one pre-2001. The changes this discussion intends addressing are those that occurred during this period, i.e. post 2001. But it has to be stated that further changes had to be instituted after 2003, and the latter will be addressed in the same vein as the changes post 2001.

Eskom has been a 100% government owned company, dating back to the days of the National Party Government, before the 1994 democratic changes. Government always maintained a major influence on how Eskom carried out its business activities and strategy. After 1994 the ANC Government found it prudent to follow the example of its predecessor. The ANC aimed to reach out to the previously disadvantaged communities by addressing their abject conditions using parasitical organisations; in this case Eskom was to be central in the ANC economic strategy through the RDP programme. However, what is key about this is that during the era of the NP, government was the sole shareholder in Eskom, and this situation carried on in the ANC government. However this situation was tempered with in the changes that were effected by the ANC government post 2001. Whereas prior to 2001, Eskom's vision was crafted as: to provide worlds lowest cost electricity for growth and prosperity''; and had a mission which was satisfy all our customers electricity needs in cost effective way'; with its strategy being develop Eskom as a business that maximizes the value of its product and services.'' All this was to change after 2001. Eskom directed its efforts to bringing affordable electricity to all. This was as a result of Government RDP programme, which was to roll out services to reach out to the rural areas by bringing electrification at the lowest cost. In 2001 Eskom adopted the strategic intent to be the pre-eminent African energy and related services business, of global stature. A new Eskom corporate identity and logo, which was approved in 2001, was implemented in 2002. Eskom was advised by government to halt any expansion in building new power stations. In 2000 government decided on restructuring Eskom in order to improve service delivery. The process entailed the merging of the country's 400 electricity suppliers into six regional electricity distributors, creating Regional Electricity Distribution stations (RED's). Each was to be run as a separate, self-sufficient business entity. For an example in the case of Johannesburg, City Power was established, which was to form the core of region four (4), which was constituted by the municipality of Johannesburg, probably in partnership with Eskom. Eskom geared itself to be positioned as a competitive African energy and related services business, it aimed to, a. vigorously promoting economic growth in South Africa, its region and the rest of Africa, b. expanding globally, and supporting social and economic objectives in our markets

Changes that were introduced were aimed to restructure Eskom in order to improve efficiency and ensure Eskom's sustainability as a top-performing organisation. Eskom's structure was to contain the existing regulated businesses of Generation, Transmission and Distribution as separate businesses, as well as the three supporting functions of Finance, Human Resources and Technology. The Office of the Chief Executive would contain Head Office Support Services and the Secretariat. A wholly owned subsidiary, Eskom Enterprises would be formed, which would focus on nonregulated business activities, both local and international. Existing subsidiaries and joint ventures, as well as commercial non-regulated activities, would fall under this structure. Management had the task of responding to these challenges in an innovative and creative manner. A sharper focus was required and the decision to separate Eskom's regulated and non-regulated business activities would provide the appropriate emphasis in each business area. Eskom Enterprises was registered as a separate company, and a board of directors was appointed. It

was to look after new business opportunities relating to non-regulated business activities. 4.1. FACTORS THAT LED TO CHANGES The first ANC-led government adopted the RDPan integrated policy platform which set out a Marshall Plan-like programme for social and economic advancement, centered on the development of infrastructure in poor communities. The RDP promised to redistribute land, promote affirmative action, create employment, provide houses, electricity and water, and attack poverty and deprivation. Government established the National Electricity Regulator (NERSA) in 1994. The National Electricity Regulator was empowered to ensure the orderly, effective generation and distribution of electricity throughout South Africa. The demise of communism gave rise to a general perception that market economy was the right way to go. Therefore government in order to attract foreign direct investment chose to privatise sectors of the economy which included Eskom. Two drivers, in particular, continue to shape Eskom's response to change: firstly, globalisation and, secondly, the combination of forces and needs that have been articulated and given direction in the then Deputy President Thabo Mbeki's vision of the African Renaissance Government's main objectives of reform are to: a. increase economic efficiency in investment decisions and operation so that costs and prices are as low as possible; b. maximize financial and economic returns to government from the ESI and reducing government debt; c. increase the opportunity for black economic empowerment; and to d. protect public benefits such as widened access to the poor, energy efficiency ongoing R&D and environmental sustainability. Also: Giving customers the right to choose their electricity supplier, by a. Introducing competition into the industry especially the generation sector b. Permitting open non-discriminatory access to the transmission system, and c. Encouraging private sector participation in the industry. All of these became important considerations in the future role envisaged for Eskom. Governments stipulation towards Eskom :Structure of the generation industry: Eskom is expected to retain no less than 70% of the existing electricity generation market, with privatization of the remainder, with the initial aim of transferring 10% to black economic ownership no later than 2003; Vertical unbundling: to ensure non-discriminatory and open access to the transmission lines, a separate state-owned Transmission Company will be established, independent of generation and retail businesses, with ring- fenced transmission system operation and market operation functions. Initially this transmission company would be a subsidiary of Eskom. Market structure: Over time a multi-market model electricity market framework will ensure that transactions between electricity generators, traders and power purchasers may take place on a variety of platforms, including bilateral contracts, a power exchange and a balancing mechanism. The market design should facilitate both physical and financial hedging. A transparent and independent governance mechanism would be developed for the power exchange; and Regulation: A regulatory framework will be put in place that ensures the participation of

Independent Power Producers (IPPs) and the diversification of primary energy sources. 4.2 RESULTS AND EXPECTED RESULTS CHANGES Government indicated its intention to convert Eskom into a company, which would be subject to taxation and the payment of dividends. The high demand for electricity has compelled Eskom to increase its capacity for electricity supply. This now has seen Eskom adopting strategy to build more power stations, however the first station will only get commissioned in 2012. In the meantime Eskom is on a campaign to encourage saving of electricity. This is through the use of different incentives, such as billing Eskom after utilisation of own power generation equipment, which mines are doing, and creating awareness via the media. Also Eskom is making proposals to government for tariff increases which is aimed at reducing the high demand and also to make possible generation of sufficient capital for infrastructure upgrade. Eskom has developed a strategy to acquire and retain the appropriate critical skills for the build programme and beyond, as well as for the operation of the existing plant (operating and maintenance). This strategy includes: a. Training unemployed South African citizens, through a variety of recognized learning programmes, including learnerships, experiential training, development programmes, skills programmes, bursaries and scholarships,. b. Through utilizing grants accessed from Eseta for the development of core, critical and scarce skills categories in the energy sector, c. Enter into strategic alliances or establish contracts with third parties,. d. Partnering with original equipment manufacturers (OEMs) by sharing costs through offering on-job training and subsidized formal education,. e. Utilizing governmental institutions for formal subsidized education as opposed to in-house, full cost training f. Partnering with professional institutes (e.g. Institute of Welding), g. Encouraging an organisational culture of life long learning, and h. Mentorship of young engineers by the existing skills pool. 5. OUR CONSIDERATIONS ABOUT ESKOM STRATEGY INTO THE FUTURE Currently Eskom is bombarded with negative media about the recent power cuts in South Africa. Clearly if Eskom can't relinquish the capacity, things would fall apart and Eskom would be blamed. Therefore Eskom needs to upgrade its current infrastructure as well as build new powerplants. Eskom also needs to be concerned about the diminishing supply of coal and water for its electricity production. Therefore the primary focus of Eskom's portfolio approach to investments is to secure supply. Eskom may need to look into striking a deal with its suppliers or government to guarantee that it receives its coal supplies within a certain period of time eg 40 years. Eskom may need to look into opportunities of introducing other (non-coal) generation technologies into the Eskom generation portfolio. A feesibilty study needs to be done in order to consider the financial cost and risk on introducing other generation technologies. Another risk that Eskom may face is a change in legistlation from government. Government may introduce international competition as well as environmental laws. Eskom must not lose sight of its expansion into Africa strategy. Although this is not highest priority at the moment, this can greatly assist Eskom with growth and revenue in the future especially if a

new electricity supplier is introduced. Eskom may also either need to improve the environmental impact of its coal burning technologies or introduce cleaner burning technologies into the portfolio. This may impact Eskom's position as a low-cost provider of electricity and the implications thereof need to be assessed. 6. RECOMMENDATIONS ON STRATEGIC ACTIONS AND CONTROLS NEEDED 6.1. Revenue Management Maximising the cash generated from the business will be enhanced significantly through targeted revenue management strategies including billing, metering, revenue collection, and credit management strategies. 6.2. Benchmarking exercises Although Eskom has a proud record and is internationally recognized as a leader in the electricity sector from both a technical and financial performance perspective, the company needs to continue to look for opportunity to improve its performance. Part of this can involve periodic benchmarking exercises conducted in the various divisions. This can cover aspects of the business like Generation technical performance, usage measures, Transmission technical performance, Distribution technical performance, customer service, manpower utilisation and financial indicators. These exercises may include benchmarking Eskom against the best in the world, understanding how the performance is achieved and devising divisional strategies to target similar standards. 6.3. Outsourcing In a drive to improve the effectiveness of the business and to reduce the cost of electricity, in order to reduce the cost of doing business in South Africa, work outsourcing may need to be undertaken. This means that Eskom may stop doing certain jobs, work or business activities using its own employees, and then buys the jobs, work or business activities from outside suppliers. Employees now doing the work, may, wherever this is viable, be given the opportunity to leave Eskom and to contract with Eskom to do that work as part of a new business formed by or with participation by such ex-employees. 6.3. African Collaboration Eskom has been recently establishing itself in other areas of Africa. Eskom may try to develop relationships with other countries in order to try to utilize these countries resources. eg Eskom may use hydropower from north and coal from the south to generate electricity. 7. REFERENCES Personal Interviews Leo Dlamini, Senior General Manager Corporate Strategy and Planning, Eskom Eskom Personnel e.g -Tando Documents Strategic Document of Eskom Annual Report 2006 Books Lecture notes comment on page 6 assignment Newspapers Page 14 Business Day Friday 4 May 2007 Electricity Crises

Business Report Websites Eskom 8. ANNEXURES Annexure 1: Strategy-Making, Strategy Executing Process Annexure 2: Environmental Analysis external driving forces Internal driving forces The government's stated Accelerated and Shared Growth Initiative for South Africa (ASGI-SA) and the need for Eskom to increasingly contribute to this programme Government's commitment to universal access to electricity by 2012. Increasing drive for Black Economic Empowerment (BEE), Small enterprise, Medium enterprise and Black woman-owned business (BWO) development. Increasing expectations for collaboration with other State Owned Enterprises (SOEs) on various fronts e.g. procurement, skills development, infrastructure development, etc (second economy). Electricity Distribution Industry (EDI) restructuring. A changing legislative and regulatory environment, including environmental legislation. Increasing environmental performance expectations, particularly related to climate change, renewable energy and energy efficiency. Introduction of Independent Power Producers (IPPs). Regional power demand and potential supply project Regulatory environment including Environmental Impact Assessments (EIAs), licensing and National Energy Regulator of South Africa (NERSA) pricing agreement. Efficiency and effectiveness in service delivery Limited resource and skills availability Increased need for partnerships and collaborations with other entities. EIA processing time lines. Maintaining the sustainability balance. Climate change response strategies. Occupational health and safety (including the impact of HIV/AIDS) Increased pressure on profitability and emphasis on cost management. Change management to align people with the dynamic Electricity Supply Industry / Electricity

Distribution Industry operating environment. Aligning culture and maintaining motivation to support the Eskom Vision. Annexure 3: Key Performance Areas Key Performance Area Key Performance Indicator - Measure Target 2006/7 Base Stretch Capital / Financial EfficiencyEconomic Operating Profit - Budget (R'm) 7 173 *Infrastructure Investments (Capacity delivery) Generation Capital expenditure - Budget (R'm) 6 058 Transmission Capital expenditure - Budget (R'm) 1 000 Generation capacity installed & commissioned - Budget (MW) 1 041 1241 Transmission lines installed - Plan (Km) 410 440 Transmission MVA installed - Plan (MVA) 500 1000 Distribution Capital expenditure - Budget (R'm) 2 888 Operating Efficiency & Effectiveness Major Incidents Plan 1 Deg 1 System Minutes Lost ( 1 min) - Plan (SML) 3.9 Unplanned Capability Loss Factor (UCLF) -Plan (%) 4.5 3.8 System Average Interruption Duration Index (SAIDI) - Plan 52.8 Rand/Megawatt Hour (R/MWh) (before embedded derivative - Budget 167.26 Skills Development Eskom Trainees / Bursars - Target Annexure 4: Balanced Scorecard Performance Indicator Plan 2006/7 2007/8 2008/9 2009/10 2010/11 Economic Profit before tax (Rm) 2,535 1,987 2,406 3,529 4,457 Cost of electricity (R/MWh) 163.29 174.09 184.78 195.40 211.18 Customer debtors (days) 20.5 20.5 20,0 20.0 19.5 Electricity Sales (GWh) 202,198 209,354 218,154 Electricity Revenue (Rm) 37,606 41,412 46,295 51,524 58,091 Arrear debt (Rm) 189 188 189 197 207 Historic return on assets (%) 6.02 5.69 6.06 6.75 7.22 Debt / equity (excluding long-term provisions) 0.23 0.39 0.57 Debt / equity (including long-term provisions) 0.467 0.649 0.839 Total operating expenditure / revenue (excluding depreciation) (%) 68.9 Net profit before interest / revenue (%) 12.0 11.7 12.6 14.4 Net profit after interest / revenue (%) 6.7 4.8 5.2 6.8 Net interest cover 2.17 1.93 2.02 2.20 2.26 Economic Operating Profit (R'm) 20.83 23.99 25.12 tbc tbc Customers / Stakeholders Enhanced Maxicare / Precare Dx 87.55 89.15 90.65 90.65 90.65 CustomerCare (customer satisfaction) Dx 7.90 7.95 8 8 Bedrock Factors (customer satisfaction) Dx 82.45 83.15 83.85 KeyCare - KSACS 108 108 108 108 108 BEE (% discretionary expenditure) 52 52 52 52 52 Black women empowerment (% of BEE) 10 10 10 10 4000

224,995

231,694

0.76 0.95 1.045 1.244 73.3 73.6 72.6 15.5 7.7

70.1

8 84.55 85.25 10

Technical Operations Unplanned automatic grid separations (UAGS) / 7000 system hrs Unit capability factor (UCF) (%) 89.2 89.1 90.2 91.0 Energy availability factor (EAF) (%)88.2 88.1 89.2 90.0 Unplanned capability loss factor (UCLF) (%) 3.8 3.9 Number of supply interruptions 40 39 38 37 Total system minutes lost (SML) 3.9 3.9 3.8 3.8 Residential electrification revenue losses (%) Dx 15 15 Disturbance (Distribution QOS) (%) Dx 50 48 45 Waveform quality (Distribution QOS) (%) Dx 97.0 97.20 Reliability (Distribution QOS) (%) Dx 22 19.5 18.5 Customer focus (Distribution QOS) (%) Dx 80 80 80 New direct connections Dx tba tba tba tba Additional Capacity incl. RTS & contingency plans (WM)1580 Transmission lines installed 450 tbc tbc tbc tbc Transmission MVA installed 300 tbc tbc tbc tbc System Average Interruption Duration Index (SAIDI) 52.8 People and Growth Disabling injury incident rate DIIR 0.4 0.4 0.4

1.5 91.0 90.0 3.8 36 3.8 15 45 97.0 17.5 80 tba 758 50.2 0.4

1.6 3.0 15 45 97.0 17.5 80

1.6 3.0 15 97.0

1.5

1.5

1148 1007 tbc 47.2 47.2 47.2