Eskom is giving a world lead in the adoption of cutting-edge technologies. For example, we plan to develop the world’s largest solar thermal power plant capable of generating 100MW, subject to technical and commercial feasibility. Furthermore, a pilot project to harness the power of underground coal gasification has already reached an advanced stage.

Our overall mix of energy solutions is intended to reduce our reliance on fossil fuels while emphasising the growing contribution of renewable energy sources and nuclear power. This brave strategic decision was one of the key achievements of the past year.

I say brave because the alternative was to hide behind South Africa’s status as a developing nation seeking high growth to combat poverty and use this as an excuse to evade our global responsibility to contain greenhouse gas emissions. Instead, we have positioned ourselves as a key emerging market contributor to international efforts to address climate change.

In support of this, we have been instrumental in the Business Action for Energy. This business platform, which I have had the honour to chair, was created to provide international energy related business input into the United Nations Commission on Sustainable Development. Our role is to ensure that we are at the forefront of determining business input into the process of energy, industrial development, atmosphere and climate change. These issues are of primary importance to Eskom; in particular as we are starting to build new plant and therefore need to be aware of the long- and shorter-term risks and opportunities at international, regional and national levels.

It will be difficult, but we intend to act as an enabler of South Africa’s economic growth and discharge our international duty to fight global warming. All leading-edge companies are factoring climate change into decision making and Eskom is no exception. We will be drawing on our wealth of experience and innovative capabilities to develop strategies that balance these drivers of our business.

We acknowledge that for the foreseeable future coal will be by far the biggest contributor to our energy mix, though this reliance will slacken over time. On face value, coal remains our cheapest energy source, offering significant pricing advantages over nuclear power, for example.

However, it is short-sighted to remove from these calculations the wider impact of carbon dioxide emissions. The higher financial cost of nuclear power and renewables is offset by long-term benefits to health, air quality and the environment. These benefits will be energetically pursued.

Eskom’s primary responsibility is to keep the lights on. This factor drove the board decision to increase infrastructure investment from R97 billion to R150 billion; another brave decision as the board was fully aware that this would mean doubling the size of the Eskom balance sheet in only five years.

Expansion of this magnitude is a challenge for any organisation, but the decision could not be deferred nor could the timeframe be extended in view of the crucial contribution made by Eskom to the national growth strategy.

To illustrate the scale of this step change, the original total cost of Eskom’s current property, plant and equipment in commission is approximately R113 billion. The cost of building just one major base-load power station in our new expansion programme is about R80 billion.

The higher cost of building new capacity not only applies to South Africa, but worldwide. The cheap electricity era is coming to an end, here and in all other markets.

Over 20 years, we are expected to double the size of our capacity. This involves a significant increase in investment. These long-term financial demands can only be addressed in three ways: Eskom maximising its efficiencies, an injection of capital from government (our only shareholder) or through higher prices to the consumer, as determined by the regulator.

The challenges of the review period brought these realities into sharp focus.

It remains Eskom policy to fund its own capital expansion programme through its own resources and by a judicious level of borrowings via the domestic and international bond markets. It would therefore be inappropriate to declare a dividend during the capital expansion programme.

Eskom has met all but one of the targets set out in the shareholder compact with government and has benefited from this clear statement of objectives and expectations. The one target that was not met was the number of major incidents in terms of system minutes lost where we had two such incidents against a target of one. The compact’s value as a strategic planning tool and guide to expected levels of performance was highlighted in the past year.

In addition, we should record the contribution made to strategy formulation by the Minister of Public Enterprises, Alec Erwin and his important role in ensuring strict adherence to national priorities. In addition, the overall support of the Department of Public Enterprises is gratefully acknowledged.

The importance of strategic direction at the top should not detract attention from the crucial role that can be played by every business and every household in the country as we step up the national energy-saving campaign. Everyday actions such as putting a timer on a geyser and switching off lights are vital to efficient demand-side management (DSM).

In common with many consumer societies around the world, we have become used to the idea of instantly available electricity and continuous appliance usage, even when this is unnecessary and wasteful. Most countries now accept that this drain on resources cannot continue. All of us – ordinary families and entire industries – have to develop better habits, economise on power and reduce the drain on capacity.

Eskom, ready to face the challenges head-on, has accelerated its national DSM target to 8 000MW over the next 18 years. Savings on this scale will entail considerable discipline and significant behavioural change.

The effectiveness of DSM was demonstrated by the success of a special DSM campaign during the Western Cape power shortages in the winter of 2006. Savings of approximately 500MW a day were achieved. As it was a crisis-driven, short-term situation these savings are only partially sustainable.

Thankfully, a start has been made, creating a platform for a much more intense energy-saving effort in the years to come. Eskom has taken the lead globally.

Recent energy-saving efforts in the Western Cape included the free distribution to householders of 5,3 million compact fluorescent lamps (CFLs) in return for standard incandescent light bulbs. We were handing out more expensive bulbs (with a longer rated life at lower power usage) for older, cheaper bulbs – an energy-efficient swap without precedent.

In the realm of energy saving Eskom has a responsibility to lead by example. As such, there is significant scope for internal energy efficiency. We have therefore introduced an internal electricity-saving programme designed to deliver savings of one billion kilowatt hours, and have already achieved some 18 million kilowatt hours to date with initiatives since 2006.

Eskom may lead, but it can never do it alone. Our fellow citizens and our business peers need to join us in the energy efficiency programme, this year and in years to come. We salute all our customers who made a major contribution to reducing the peak demand in the Western Cape last year.

Our capital expenditure programme cannot succeed at the required pace without the cooperation of numerous stakeholders, including communities, municipalities, regional authorities, suppliers and a wide array of official departments.

The prompt response to the capacity challenge has been made possible in no small measure by the contribution of partners such as these. We acknowledge as much and thank them all.