OUR JOURNEY TOWARDS 2030 NELISIWE MAGUBANE DIRECTOR GENERAL, DOE, - PowerPoint PPT Presentation

OUR JOURNEY TOWARDS 2030 NELISIWE MAGUBANE DIRECTOR GENERAL, DOE, RSA

Overview of the RSA electricity industry sources of power Outline of presentation 1. Macro-Economic Overview of South Africa 2. Overview of the South African Electricity Industry 3. Summary of the Policy Adjusted IRP 4. Implementation of the IRP2010 4. Implementation of the IRP2010 5. SAPP Future Energy Outlook 2

1. Macro-economic overview of South Africa

Macro-economic overview of South Africa Key macro economy indicators Nominal GDP vs Real GDP growth Key facts ZARbn � South Africa is Africa’s largest economy and the 25 th 5,000 5.3% 5.6% 5.6% 6.0% largest economy globally 4.5% 4.4% 4.2% 5.0% 3.8% 3.6% � Real GDP is expected to grow at 3.7% in 2011 4,483 3.4% 4,000 4.0% 2.8% 4,041 � South Africa’s Net Public debt to GDP ratio (33%) is 3.0% 3,635 3,000 3,266 2.0% relatively low compared to comparative countries. In 2,941 2,659 1.0% addition, the Government expects the fiscal deficit to 2,000 2,396 2,274 2,016 0.0% 1,767 narrow to 5.4% of GDP in 2010/11, and 4.7% in 2011/12 1,571 -1.0% 1,000 � The state plans on investing $114.31bn over the next -2.0% (1.7%) 0 -3.0% three years on economic and social infrastructure 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 GDP contributors Main trading partners Main share of imports Main share of exports Taxes less subisidies on products 10.6% Finance, real estate and Electricity, gas and w ater 1.9% business services Agriculture, forestry & fishing 21.2% European European 2.3% Construction 3.2% Other Union (27) Union (27) Mining and quarrying 5.3% 37.0% 26.5% Other 32.2% Manufacturing Personal services 5.7% 42.2% 15.0% Transport, storage and China communication 9.1% Genral government services 10.5% Japan 13.6% Wholesale, retail, motor China trade and accomodation 4.9% 13.1% 12.0% United States Sw itzerland Japan Saudi Arabia 9.0% United States 4.2% 7.6% 5.0% 7.8%

Macro-economic overview of South Africa Key macro economy indicators Current account deficit is expected to widen Reserves and external debt Exchange rate forecasts to 5.5% of GDP in 2011 (2010: 3.9%) as exports fail to keep up with imports owing to fragility in OECD markets Spot Exchange (1) : R/US 7 46,559 45,633 43,829 41,811 41,811 12.9 Gradual depreciation of the currency is 40,131 39,675 14 50,000 38,346 37,389 expected during 2011 because of indirect 11.3 34,916 34,069 10.8 10.6 32,943 10.4 action by the authorities to weaken the Rand 12 11 30,053 40,000 10 9.7 (by building foreign-exchange reserves) 9.6 9.4 9.3 9.3 9.3 25,587 10 8.8 8.8 8.1 7.4 30,000 Interest rates are currently at a 35 year low 8 6.9 6.6 7 6 Outlook of South Africa’s economy is rated 20,000 stable, Fitch cited the smoother than 4 expected recovery from the recession 10,000 2 0 0 2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011F2012F2013F2014F2015F Intl Reserves Intl Reserves Ext. Debt Ext. Debt R/€ (av) R/€ (av) R/US (av) R/US (av) Credit ratings Credit ratings Government net debt (total and as % Prime interest rates GDP) forecasts ZAR m Prime Interest Rate 1 6 (End Period; %) 1,400 40% 1,201.2 1 3.6 1 4 1,200 Foreign Currency Long-Term A3 BBB+ BBB+ 1 1 .7 1,023.5 36% 1 1 .2 1 2 Debt 1 0.5 1 0.5 1 0.5 1 0.1 1,000 9.8 9.7 35.5% 32.1% 832.5 9.2 1 0 Local Currency Long-Term A3 A A 32% 800 646.9 33.7% Debt 8 28.7% 532.0 517.9 600 500.1 30.3% 28% Foreign Currency Short-Term 6 P-2 A-2 F2 Debt 525.5 400 4 24% 26.1% Local Currency Short-Term NR A-1 NR 200 2 24.0% Debt 22.9% 0 20% 0 2005 2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 201 0 201 1 F 201 2F 201 3F 201 4F 201 5F

2. Overview of the South African electricity industry

Overview of the South African electricity industry: Sources of power Electricity consumption Overview Other 8.1% Transportation � Electricity market grew by $1.4bn in 2009 to reach $5.6bn 2.7% Industrial � Commercial Electricity generation dominated by state-owned power company Eskom (2) , Segment 11.4% which currently produces over 96.7% of the power used in the country 40.9% � Residential Eskom has a current nominal installed capacity of 44,175MW Segment � Government addressing electricity supply issues with Eskom and Independent 36.8% Power Producers (“IPPs”) Electricity production (1) � South Africa needs over 40,000 MW new generation capacity by 2025 Hydroelectric Pumped � 0.5% Eskom is part of Southern African Power Pool, a group of utilities in the region 1.2% Gas Turbine aiming to create a common market for electricity in the region Nuclear Pow er 0.1% 5.7% Transmission and Distribution Overview Coal-Fired 92.6% � Currently, the transmission of electricity in South Africa is undertaken by Eskom � The company has over 28,000km of transmission lines spanning the Electricity market entire country 12 350 291.2 286.2 280.5 273.3 � Electricity distribution is the final stage in the delivery of electricity to end 300 10 240.6 10.3 221.2 250 9.3 8 users, currently undertaken by Eskom, together with 187 municipalities 8.5 7.8 200 6 6.5 150 � Municipalities account for c.40% of the total electricity sales and c.60% of 5.6 4 100 the customer base 2 50 0 0 2009 2010 2011E 2012E 2013E 2014E Market Value ($bn) Market Volume (Twh)

Overview of the South African electricity industry: Sources of power (cont’d) Coal power � c.93% of power in South Africa is generated from coal fired power stations South Africa is the 5 th largest coal producing country in the world with coal � reserves of 30,408mt (3.68% of world total) � Coal accounts for 86% of Eskom’s nominal current capacity (37,755MW) Eskom Power Grid (1) Nuclear power � Only one nuclear power station (Koeberg), a base-load station with a nominal installed capacity of 1,930MW (c.5%) � Construction for the plant began in 1976 and full operation in 1985 – Produced 12,806 GWh electricity in year ended 31 March 2010 � � Uses c.30tpa of enriched uranium Uses c.30tpa of enriched uranium � Government authorized contracts in place to supply Koeberg for the next 8 years � It is intended that nuclear will comprise 17% of South Africa’s base load energy mix by 2030 Hydro-electric, Gas fuel and Renewable Projects � Hydro-electric power stations account for less than 2% of nominal installed capacity, while the gas/liquid fuel turbine accounts for c.6% (2) � With assistance from the World Bank, plans currently in place for the development of a 100MW Sere wind power project, as well as the Upington concentrating solar thermal power (CSTP) project, covering 4km 2 � Should the CSTP project prove to be commercially feasible, a larger facility could be constructed

Overview of the South African electricity industry: Regulatory environment � National Energy Regulator (NERSA) regulates the South African electricity industry National � NERSA licences electricity generation, transmission, distribution and trading activities in South Africa Energy � NERSA sets tariffs based on its Multi-Year Price Determination Methodology (MYPD) Regulator – Annual revenues are set for a three year period currently from 1 April 2010 to 31 March 2013 � In November 2008, the Government approved the Energy Pricing Policy (EPP) which sets the determination of regulated revenues going forward – Future regulated revenues will be based on the replacement value of its assets Electricity – Ensures long-term sustainability of the industry to fund future capacity expansion requirements Pricing Policy � EPP aims to reach cost-reflective tariffs that will reflect the full economic cost of supplying electricity to a customer – EPP determines a 5 year transition period that will end in FY2015 to reach cost-reflective tariffs – EPP determines a 5 year transition period that will end in FY2015 to reach cost-reflective tariffs � Department of Energy is mainly responsible for electricity generation planning via Integrated Resource Plan (IRP), which determines electricity generation capacity expansion requirements in South Africa Department of – Objective is to develop a sustainable electricity generation capacity over the next 20 years Energy – Sets capacity requirements by energy source that will be provided by Eskom and other IPPs – NERSA can only license a power station that is built in accordance with the IRP

3. The Integrated Resource Plan 2010

Overview of the IRP 2010 � The policy objective of the IRP is to determine South Africa’s long-term electricity demand and detail how this demand should be met in terms of generating capacity, type, timing and cost � the 1 st draft of the IRP was the Revised Balanced Scenario (RBS) of energy supply options published by the department in 2009 � The Final IRP2010 is a result of modelling changes to the RBS as a result of extensive public participation processes � The Final IRP2010 (Policy-Adjusted IRP) represent a trade-off between: – – Least investment cost and consideration for economic growth Least investment cost and consideration for economic growth – Climate change mitigation – Diversity and security of supply – Job creation – Sustainable development