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PRESENTATION OUTLINE

PRESENTATION OUTLINE. Establishment Governance Performance Annual Financial Statements Current Status Update Conclusion. ESTABLISHMENT. ESTABLISHMENT. EDI Holdings was established in March 2003 Objective:

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PRESENTATION OUTLINE

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  1. PRESENTATION OUTLINE • Establishment • Governance • Performance • Annual Financial Statements • Current Status Update • Conclusion

  2. ESTABLISHMENT

  3. ESTABLISHMENT • EDI Holdings was established in March 2003 • Objective: • Facilitate the restructuring of the Electricity Distribution Industry in accordance with the requirements of the Energy White Paper of 1998, Blueprint report of 2001 and subsequent Cabinet decisions

  4. ORIGINAL TIME LINE Eskom Distribution 726 migration EDI Oversee and Support Municipal ring fencing and preparation EDI Implementation EDI Planning Refinement EDI Holdings Establishment 1st RED 2nd RED Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY03 FY04 FY05 FY06 FY07 Business Plan Period April 2004 to March 2007

  5. PERIOD UNDER REVIEW Eskom Distribution 726 migration EDI Oversee and Support Municipal ring fencing and preparation EDI Implementation EDI Planning Refinement EDI Holdings Establishment 1st RED 2nd RED Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY03 FY04 FY05 FY06 FY07 Business Plan Period April 2004 to March 2007

  6. GOVERNANCE

  7. GOVERNANCE • Annual Report presented in terms of the Public Finance Management Act,1999 (Act No.1 of 1999) • The Annual Report reflects: • Financial statements of EDI Holdings (Pty) Ltd for the 2004/2005 Financial Year • Prepared in terms of Generally Accepted Accounting Practice (GAAP) • Audited by the Office of the Auditor-General • Financial position at the end of the financial year • Performance against predetermined objectives

  8. GOVERNANCE • Board of Directors in place • Board Committees established • Audit & Risk Management • Human Capital & Remuneration • Programme Management • Finance & Procurement • Operations • Regular meetings held

  9. GOVERNANCE • Internal Audit • Independent auditors • Annual audit plan • Risk management • Fraud prevention • Compliance • Code of Ethics • Stakeholder Communication

  10. PERFORMANCE

  11. PERFORMANCE • Period under review focussed on • Planning for EDI restructuring • Preparation for establishment of the first RED • Development of key positions for engagement • Stakeholder management • Communication • Concluding level 3 and below recruitment • Embedding governance and project management practices

  12. PERFORMANCE • Performance highlights • Preparation for establishment of the first RED • Finalisation of Ringfencing framework and toolkit • Finalisation of Section 78 framework and toolkit • Request for relevant exemptions to the Public Finance Management Act / Municipal Finance Management Act to facilitate RED creation • Draft profiles for REDs Board members • Reservation of company name • Preparation of initial financial and 3 year business case • Establishment agreements: • Sale of Business, Service Delivery Agreement, Shareholder Agreement & Operating Lease Agreement • Articles and memorandum of association

  13. PERFORMANCE • Performance highlights • Development of key positions for engagement • Valuation and compensation framework • Wholesale Energy Purchasing and Pricing Approach • Tariff Approach Framework • Embedded Generation Strategy • Asset Condition Assessment Model & Maintenance Management Framework • Industry change management strategy • Transfer, appointment, migration of employees & bargaining structures

  14. PERFORMANCE • Performance highlights • Stakeholder management • Launch of Transitional Labour Relations Structure (October 2004) • Stakeholder management and engagement strategy • Stakeholder analysis • Stakeholder engagements programme including: • Parliamentary Committees, Ministries, Legislatures, Municipalities, Eskom, SALGA, NEDLAC, NER, etc. • Communication • Media • Communities

  15. ANNUAL FINANCIAL STATEMENTS

  16. ANNUAL FINANCIAL STATEMENTSBalance Sheet

  17. ANNUAL FINANCIAL STATEMENTSIncome Statements

  18. ANNUAL FINANCIAL STATEMENTSCash Flow Statements

  19. CURRENT STATUSUPDATE

  20. CURRENT STATUS – NOVEMBER 2005 In Progress Eskom Distribution 726 migration EDI Oversee and Support Municipal ring fencing and preparation In Progress EDI Implementation EDI Planning Refinement EDI Holdings Establishment 1st RED 2nd RED Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY03 FY04 FY05 FY06 FY07 Business Plan Period April 2004 to March 2007

  21. RED ONE • First RED: • RED ONE Commenced operations on 1 July 2005, in line with Presidential deadline • Initial area of supply consists of the area of jurisdiction of the City of Cape Town • SDA signed between the RED & CCT • Operating agreements in place between the RED, City of Cape Town and Eskom whilst finalising transfer of business arrangements • Issued with a license by the NER • 6 Independent Board Members, CEO & COO appointed

  22. RED ONE • Progress update: • Induction of the Board of Directors • Operational strategy development • Population of macro structure • Preparation for transfer of business of City of Cape Town and Eskom Distribution in the area of jurisdiction of the City of Cape Town • Stakeholder engagements

  23. CURRENT STATUS – NOVEMBER 2005 In Progress Eskom Distribution 726 migration EDI Oversee and Support Municipal ring fencing and preparation In Progress EDI Implementation EDI Planning Revised Restructuring Approach Refinement EDI Holdings Establishment 1st RED 2nd RED Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY03 FY04 FY05 FY06 FY07 Business Plan Period April 2004 to March 2007

  24. REVISED RESTRUCTURING APPROACH • Key concerns raised over original boundaries/approach: • Fiscal and financial risks of transferring Eskom and Municipalities electricity businesses to the REDs • Financial impact on municipalities and Eskom • Credit rating impact • Credit control implications • Cost and liabilities implications of transferring Eskom and Municipalities staff to the REDs • Impact on personnel benefits – Pensions, medical aid, etc. • Salary harmonisation • Definition of reticulation to eliminate possibility of constitutional challenge

  25. REVISED RESTRUCTURING APPROACH • Restructuring approach • Create 6 Metro REDs after Local Government Elections • Conduct modelling, within 6 months, to determine feasibility of creating a National RED, its viability and sustainability, organisational structure and governance arrangements • Based on modelling results, make recommendations on the best model to achieve the objectives of restructuring and to optimise service delivery • Introduction of restructuring legislation to provide the legislative framework for RED formation and to remove the risk of the currently open-ended process

  26. REVISED RESTRUCTURING APPROACH Structure of National RED(s) subject to modelling exercise National RED(s)

  27. REVISED RESTRUCTURING APPROACH • Implementation principles • Restructuring must be in accordance with the Constitution, taking into account that the responsibility of electricity reticulation is a municipal function • Financial state of municipalities currently performing the electricity function must not be adversely affected • Aggregate personnel costs must not increase in a way that undermines the objective of a single public service • No additional funds or taxes (fiscus and/or local government) without the approval of Cabinet

  28. REVISED RESTRUCTURING APPROACH • Key Policy Assumptions • National cross subsidy framework • Constitutional powers of municipalities regarding “reticulation” • Regulation of municipal surcharges • Impact on Eskom • Role of Eskom in National RED • Contestable customers • Transfer of assets • Competition

  29. REVISED RESTRUCTURING APPROACH • Progress thus far: • Ministerial Committee in place • Minerals & Energy, Provincial & Local Government, Public Enterprises and Finance • Inter-governmental Forum established • DDG’s: Minerals & Energy, Provincial & Local Government, Public Enterprises and Finance • Modelling technical team established • Commencement meetings held • Agreed on approach, process and timeline to modelling • Participation of all stakeholders critical

  30. CONCLUSION

  31. CONCLUSION • Way Forward • Consolidate the gains made • Complete modelling and agree final REDs boundaries • Ensure the creation of an enabling legislative environment for the establishment of the REDs • Establish financially viable and sustainable REDs within the set timelines

  32. CONCLUSION • Acknowledgements • Ms Phumzile Mlambo Ngcuka, Minister of Minerals and Energy for period under review • Ms Lulu Xingwana, Deputy Minister of Minerals and Energy • Advocate Sandile Nogxina, Director General – DME, Chairman of the Board for period under review • Board of Directors of EDI Holdings • Stakeholders: • Parliamentary Committees, Ministries, Legislatures, Municipalities, Eskom, SALGA, NEDLAC, NER • Management & Staff of EDI Holdings (Pty) Ltd • Welcome • Mrs Lindiwe Hendricks, Minister of Minerals and Energy

  33. THANK YOU

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