In 2016 Eskom committed itself “to re-establish the organisation as a catalyst for growth.” A 5-year corporate plan was developed to drive ongoing improvement in Eskom’s financial and operational sustainability, contribute to economic growth and drive socio-economic development. “We will no longer be a constraint to South Africa’s growth,” the Chairman, Dr Ben Ngubane, noted in the annual Integrated Report.

To achieve these objectives Eskom introduced the concept of a ‘design-to-cost paradigm’ which set to achieve a number of objectives:

•              Drive a turnaround in  generation performance by increasing plant availability to 80% by 2021;
•   Deliver the new build programme – Ingula, Medupi and Kusile – on schedule;
•   Direct a cost containment effort focused on primary energy, manpower and other external spend to ensure the long-term sustainability of the business;Stretch the balance sheet in the short term while achieving long-term stability;
•         Deliver on Government’s strategic objectives by meeting targets on transformation and facilitating the entry of independent power producers.

Eskom’s performance in 2016 took place against the backdrop of a deteriorating South African economy. GDP growth, of 1.3%; was the lowest since 2009, the economy struggled to cope with a sharp decline in commodity prices and the worst drought in more than a century.

 Eskom noted that South Africa’s energy mix is expected to shift considerably towards renewables over the next two decades. Although coal will remain a core part of the country’s energy mix for the foreseeable future, South Africa will have to diversify towards lower carbon emitting energy sources in line with its commitments to global climate change targets.

 According to Eskom, its operating costs were rising faster than the electricity selling price and revenue. Coal costs – which account for some 30% of operating expenses – have increased by 17% per year over the preceding six years. Income statements and balance sheets were under pressure and credit rating downgrades have resulted in increased borrowing rates.

 In 2016 Eskom operated 28 power stations with a total nominal capacity of 42 810MW. This consisted of coal fired stations, nuclear power, gas-fired[L1]  , hydro and pumped storage systems as well as the 100MW Sere Wind Farm which, together, produced 90% of the electricity used in South Africa.

 The commissioning of Medupi Unit 6 was a major milestone during the year while synchronisation of Units 3 and 4 of Ingula was achieved ahead of target. Plant availability improved from 67.85% in April 2015 to 74.21% in March 2016. This also contributed to a reduction in load-shedding during the year.

 During the year, the Department of Energy released a draft update of the Integrated Resource Plan, 2010-2030, for public comment. The document had important implications for Eskom in that it projected lower economic growth in the country and accelerated the country’s trend towards renewable energy.

 Group revenue amounted to R163.4bn despite lower sales volumes but Eskom’s liquidity position improved significantly to R38.7bn compared to R17.4bn in the previous financial year. This was mostly attributed to the equity injection of R23bn from the shareholder.

 Electricity sales in key segments of the market – such as industrial, mining and commercial sales remained stagnant at – or nearing a -15-year low. Prices of alternative technologies were declining, and consumers increasingly defected from the grid. The adverse macro-economic climate also had an impact on non-payment by customers and higher incidences of illegal connections and theft of electricity infrastructure.

 Eskom and the China Development Bank signed an inaugural $500m credit facility agreement to contribute towards the utility’s capital expenditure programme.

 Transmission achieved its best ever reported performance for system minutes lost and line faults. This was supported by high levels of maintenance as well as improved transmission plant availability.

 Security at several critical transmission substations was upgraded to curb the alarming incidence of cable theft and vandalism of network equipment.

 A further 158 000 households were connected to the electricity grid while 345km of lines were installed. About 90% of households in the country were connected to the grid and Eskom intended to reach a further 840 000 households through connections, and an additional 70 000 through non-grid solar electrification programmes. Procurement from B-BBEE compliant suppliers was raised to 82% which exceeded the targets set by the board.

 The rollout of smart prepaid meters continued with 17 527 conventional meters converted to prepaid in Soweto, a further 3 026 in Kagiso and 5 992 new meters installed in Sandton and Midrand.

 Debt collection in the municipal and residential markets remained a significant challenge and Eskom anticipated that the rollout of smart prepaid meters would assist in improving revenue recovery. Load management interventions were introduced to manage situations in which municipalities continued to default on their payments to Eskom.

 Eskom’s initiative to support responsible household consumption of electricity gathered further momentum with a target to distribute more than 10-million energy-saving lamps/bulbs to communities across all nine provinces.

 Operation Khanyisa, a national campaign to fight electricity theft was expanded during the year. Eskom suffered a R4.2bn loss in revenue through theft and illegal connections. Working closely with partners, contractors and local communities Operation Khanyisa focused on customer education, communication and thorough investigations which could lead to successful prosecutions.

 The availability of coal stock improved during the year and Eskom noted that it “is no longer under the threat of a coal cliff over the next five years”. It identified coal sources for all its power plants and put in place plans to minimise cost escalations.

 A land and biodiversity policy was developed to assist Eskom to comply with legislation and to manage the impact of biodiversity across the business. The policy emphasised the value of partnerships that work to reduce the negative interactions between wildlife and electricity infrastructure and a commitment to conduct further research aimed at resolving issues of concern, especially relating to high-risk bird groups.

 In the KwaZulu-Natal Midlands, a partnership was in place with conservation bodies to protect the wetlands near the Ingula power station and to monitor the impact of construction activities on the more than 250 bird species in the region.

 Eskom adopted a phased approach to emissions reductions which considered the impact of its coal-fired power stations on ambient air quality and the health of communities located close to its operations.

 An ash utilisation strategy was introduced to expand the existing uses of ash – including in the brickmaking and cement industries – and to find new uses in the agricultural sector and applications in mine backfilling and road construction.

 Major concerns were expressed that the water usage at power stations was significantly worse than in the previous years. This was attributed to operational inefficiencies, poor water management and the prevailing hot and dry conditions in the country. A number of counter-strategies were introduced, including the resuscitation of the Water Management Task Team.

 Close on R400m was spent on research, testing and development projects with a strong emphasis on large-scale battery energy storage, high voltage direct current test facilities and biomass torrefaction.

 Environmental authorisation was received for the establishment of the Kleinzee Wind Farm in the Northern Cape and further prospective wind farm sites were identified in the Western Cape and Eastern Cape. The business case for a photo-voltaic plant at the Grootvlei Power Station was also approved.

 By April 2016 Eskom had 47 978 employees comprising both permanent staff and full-time contractors. Of these, approximately 84% were covered by collective bargaining agreements. A rigorous transformation programme was in place to ensure equity in the workplace and a strong focus on skills development to train the next generation of engineers, technicians and artisans.

 Procurement spend with B-BBEE compliant vendors and women-owned businesses exceeded the annual targets and steps were taken to increase procurement from enterprises owned by the youth.

 The Eskom Contractors Academy received global recognition from the International Education Business Partnership Network for its promotion of entrepreneurship and enterprise skills. Since its inception in 2008 the Academy successfully trained more than 1 000 emerging contractors.

 In the first 25 years since its establishment Eskom’s tertiary education support programme (TESP) contributed greatly to skills development, training and advanced research at academic level. In 2016 TESP supported more than 1 300 students in the areas of science, engineering and technology. It provided grants to academics from 21 universities and financial assistance to post-graduate students involved in ground-breaking research.

 Agreements were signed with the SA Institute of Electrical Engineering and the Durban University of Technology to provide on-the-job experience for young people. The Maths and Science programme offered to high school learners by the Eskom Development Foundation reached 20 schools in all nine provinces.

 As part of its contribution to primary health care, the Eskom Development Foundation sponsored mobile units – or ‘health buses’ – which visited communities in four provinces. The estimate was that each bus would see 14 000 learners per year, providing healthcare examination, primary dental care and vaccinations,

 The Eskom Expo for Young Scientists International Science Fair culminated in a three-day event in Gauteng. This is the largest school-level science fair in South Africa and also attracted participation from countries as far afield as Kenya and Mexico. Since its inception the initiative has inspired countless young learners to pursue studies in the fields of science and technology and several participants in the programme subsequently joined Eskom as engineers or scientists.

 The Ingula project, located near Ladysmith in KwaZulu-Natal, won two prestigious awards from the SA Institute of Civil Engineering and the SA Forum of Civil Engineering Contractors. The awards recognised achievements by Eskom and its engineering partners in the construction of the hydro-power station in the Little Drakensberg Mountain range.

 Eskom’s Dr Nhlanhla Mbuli was named Engineer of the Year by the SA Institute of Electrical Engineers in recognition of his professional achievements and his mentoring of young professionals within the workplace.

 Eskom’s chief engineer, Anton Kotze, was recognised for his team’s pioneering work on concrete containment deformation by the Electrical Power Research Institute based in the USA. In partnership with the CSIR, Eskom’s Research and Innovation Centre developed technology which improved awareness about potential fires on the country’s 28 000km transmission lines. A strategic partnership agreement was signed with the CSIR to conduct advanced research on issues which will contribute to an energy-secure and low-carbon economy.

 The South African Human Rights Commission named Eskom as the winner of its Golden Key Award for the Most Responsive Public Body. This award, voted for by the media and political parties, recognised Eskom’s commitment to openness and transparency.