Long-term Electricity Supply Contracts (Negotiated Pricing Agreements - NPAs) 20 April 2010

1. Long-term Electricity Supply Contracts (Negotiated Pricing Agreements - NPAs)20 April 2010

2. The Challenge • The current environment made it necessary for Eskom to reflect on its experiences with negotiated pricing agreements (NPAs) and to review existing long-term supply agreements • Eskom entered into NPAs with two large industrial customers during the period of excess capacity and low cost electricity in South Africa, with a view to stimulate economic development in the country and the region • In the changed environment the sustainability of these NPAs became a matter of concern to Eskom due to: • The future negative impact of the agreements on South Africa and Eskom • The embedded derivative (ED) volatility arising from most of these agreements • The key challenge in addressing this was engaging the counter-parties to amend the current price levels as there is no contractual obligation to review the existing NPAs Confidential & Restricted

3. Progress • The counter-parties willingly engaged Eskom on the sustainability of the agreements with the objective of finding a mutually beneficial solution for both parties and for South Africa • Eskom appointed Legal, Financial and Strategic advisors to assist and are involving the external auditors to ensure they are comfortable that no EDs at year end wrt renegotiated agreements • BHP Billiton: • Eskom and BHP Billiton have agreed in principle to amend their current long-term NPAs for the supply of power to BHP Billiton’s Mozal smelter in Mozambique and their smelters (ASA) in South Africa • The Term Sheets for Mozal and ASA were agreed and signed on 31 March 2010 • Anglo American: • Eskom and counter-parties (NamPower & Anglo American (Skorpion Zinc)) have signed a ‘terms-of-reference’ for engagements • No specific progress at this stage - initially expressed willingness but now a perceived reluctance by Skorpion Zinc to engage Confidential & Restricted

4. Way Forward • Conditions Precedent of Term Sheets: • Legally binding document put in place • Boards approving and authorising both parties • All legal and regulatory approvals are in place • Parties’ auditors confirming there are no EDs and no onerous contracts • Support by DPE, DoE, NT & Portfolio Committee • Eskom is confident that the agreements with BHP Billiton will be finalised by 27 May 2010, once consultation has been finalised and approval has been received from the NERSA • The Eskom team is to continue to pursue amending the NPA with Anglo American • The proposed solutions for the future pricing agreements are driven by commercial, relationship, accounting, reputational and sustainability aspects and once concluded: • will reduce the significance of commodity pricing and foreign currency on the NPAs thereby providing significantly more stability to the Eskom financial statements • will result in a bigger overall contribution and could result in a new pricing path which will impact positively on future investment in the country Confidential & Restricted