DSM ESCO FUNDING STANDARD OFFER PACKAGE STANDARD PRODUCT PACKAGE Presented by : Clive Nicosia

1. DSM ESCO FUNDING • STANDARD OFFER PACKAGE • STANDARD PRODUCT PACKAGE • Presented by : Clive Nicosia • Designation : Energy Service Manager • Eastern Region • Date : February 2011

2. Build Programme Project Summaries: Medupi, Kusile & Ingula Ingula Medupi Kusile Project Summary Project Summary Project Summary • Greenfields Project – Lephalale (Limpopo Province) • 6 Unit Coal Fired Power Station • Planned capacity 4,764MW • Greenfields Project – Ladysmith (KwaZulu Natal Province) • 4 Unit pumped storage power station • Planned capacity 1,352MW • Greenfields Project – Delmas (Mpumalanga Province) • 6 Unit Coal Fired Power Station • Planned capacity 4,800MW Financial & Economic Impact Financial & Economic Impact Financial & Economic Impact • Projected project cost to completion ~R125.5bn • Estimated 95% impact on Lephalale town GDP • ~ 70% contracts awarded • Projected project cost to completion ~R141.5bn • Estimated 25% impact on Delmas town GDP • ~ 41% contracts awarded • Projected project cost to completion ~R21.8bn • Estimated 1% impact on Ladysmith town GDP • ~ 75% contracts awarded Project Schedule Project Schedule Project Schedule • Construction commenced March 2007 • First Unit planned to be handed over April 2012 • Subsequent Units at 8 month intervals thereafter • Last Unit planned for handover during August 2015 • Construction commenced Mid 2008 • First Unit planned to be handed over June 2014 • Subsequent Units at 8 month intervals thereafter • Last Unit planned for handover during October 2017 • Construction commenced Mid 2006 • First Unit planned to be handed over January 2013 • Subsequent Units at 3 month intervals thereafter • Last Unit planned for handover during November 2013 2 2 SOURCE: Eskom Build Programme; 30 April 2010 Project Assurance Reports

3. Eskom Funding (1) 3

4. Eskom Funding (2) 4

5. DSM ESCO FUNDING • Appoint an Energy Services Company (ESCo) to identify opportunities, compile • proposal for submission to Eskom DSM for funding, implement and maintain DSM • project in the customer’s plant. Commercial entities may also, on the other hand, • register a project directly with DSM. • The ESCo must be registered on the DSM database before any project will be • accepted. • ESCos need to be technically competent and financially sustainable to enter into • performance contracts and maintain projects over the long-term. • Preliminary task are performed at no cost to the client. • Letter of intent to be issued to the appointed ESCo.

6. Project Evaluation • Eskom DSM will undertake: • Technical evaluation of the project • Financial evaluation of the project • Prepare documentation and present to Eskom investment committee for approval • Prepare documentation and present to Eskom Tender committee for approval • DSM agreement and NEC placement • Pre Measurements and Verification • Eskom DSM evaluation lead time is up to 10 months

7. STANDARD OFFER PACKAGE • Pre-determined rebate 0.34c/kWh for the delivery of verified energy savings • Rebate shall be payable over a period of 3 years • This does not replace the existing EEDSM process. The ESCo can therefore elect to propose a project using the normal EEDSM process or the Std Offer Process • Applicable for Industrial & Commercial end users Reduce energy consumption between 6am and 10pm Monday to Friday only. • This reduction must undergo M&V • Energy reduced after 10pm and before 6am on weekdays and on weekends will not be considered towards the payment for energy reduction. • The pre-approved technology that will be piloted for the std offer will be the replacement or retrofitting of old luminaries (fitting) lamps and inefficient ballasts to the efficient luminaries and efficient ballast's. • The project developer shall ensure that the approved technology complies with all laws and regulations relating to the installation, working environment and lux levels

8. Requirements: • Reduce energy consumption between 6am and 10pm Monday to Friday only. • This reduction must undergo M&V • Energy reduced after 10pm and before 6am on weekdays and on weekends will not be considered towards the payment for energy reduction. • The pre-approved technology that will be piloted for the std offer will be the replacement or retrofitting of old luminaries (fitting) lamps and inefficient ballasts to the efficient luminaries and efficient ballast's. • The project developer shall ensure that the approved technology complies with all laws and regulations relating to the installation, working environment and lux levels. • This does not replace the existing EEDSM process. The ESCo can therefore elect to propose a project using the normal EEDSM process or the Std Offer Process • Applicable for Industrial & Commercial end users

9. Performance Payment Example:

10. Standard Product Package Eskom pays customer a rebate based on standard technologies, pre-determined savings per load factor, post implementation and after disposal of old technologies Savings and Eskom rebate per technology change will be pre-determined Only DSM/IDM pre-approved technologies will be given consideration for participation No formal contract – only signed customer commitment for sustainability Limited Eskom Procurement involvement Standard Product projects will ultimately be managed & monitored at regional level. Energy Advisors and Energy Service Managers will promote & launch the Standard Product process

11. Key Principles Energy saving projects will be undertaken by Energy Services Companies (ESCO’s) or Eskom Customers M&V methodology will be determined and published by the Assurance & Forensic department Standard Product is aimed at giving the Advisors more options to tackle the market. Applicable to savings of 1kW to 100kW: Min Project size: Demand Savings > 1kW and Energy Savings > 2MWh. Load factor > 15% Max Standard Product rebate: R750,000 per project site (single metered entity) No splitting of projects Lighting now, near future heat pumps, showers, insulation. Capped at LF of 85

12. Finance: Rebate Calculation Mechanism System generated savings Input current technology System gives approved DSM options Input number of units Technology payment factor(TPF) Maximum value that could be paid Final value after invoice & actual costs assessed Technology benchmark Energy Advisor input System generated Note: Rebate limited to the least of = Benchmark x TPF x savings or Actual Project Costs.

13. Rebate limitations • Maximum rebate to be paid to customer limited to: • Least of: • 1. Actual costs (Customer to provide proof of costs) • 2. 85% X Technology Benchmark • 3. TPF X Technology Benchmark • TPF = Technology Payment Factor • Rebate could be R/Mw or c/kwh based

14. Heat Pump tank Ranges 100 L 500L 200L 300L 100 L 400L 500L Category 1 Rebate = R 3,668 Purchase Price = R 12,500 Category 2 Rebate = R 4,320 Purchase Price = R 16,000 IDM domestic heat pump rebate structure The rebate and purchase prices to remain unchanged until year 2013

15. Thank you!! 15