Eskom’s Interim Chairman, Mr Zethembe Khoza, reported that the organisation “… has delivered significant efficiencies supporting the turnaround of the business. We can now move from stabilisation to growth,” he noted.

 Among the top achievements reflected in Eskom’s annual Integrated Report were:

•  Ensuring reliable electrcity supply through improved generation asset performance
•  Delivering additional new build capacity
•         Supporting moderate electricity price increases through cost efficiencies across the business    Increasing universal access to electricity by connecting more than 200 000 households to the grid
•        Enabling growth in the region by supplying more electricity to neighbouring countries facing harsh droughts, and
• Successfully executing Eskom’s funding plans.

 South Africa’s GDP growth continued to slow down with no immediate signs of recovery. Power consumption in the country declined by 0,5% year on year, this from 2006. However, Eskom was now in a position to meet the demands of the country with surplus capacity as well as take an active role in catalysing industrial growth. It also noted that there is a large latent and unserved electricity demand in the Southern African region which Eskom can meet.

The Eskom Board defined seven strategic pillars that would enable it to achieve sustainability and set up the Eskom of the future:

1.    Become a customer-centric organisation that stimulates demand.

2.    Ensure the reliability and availability of power capacity to support South Africa’s economic growth.

3.    Continue capturing efficiencies in operating and capital costs to achieve a sustainable tariff path for the economy.

4.    Decarbonisation of the economy.

5.    Innovation and transformation to create new revenue sources.

6.    Drive value through new capabilities and advanced analytics.

7.    Deliver a funding plan that ensures successful delivery of the strategy.

 To monitor progress in the implementation of these strategic objectives Eskom set up a Results Management Office with the responsibility to identify issues of concern and advise on corrective action which can be taken by the Executive.

 During the year, the Public Protector Adv Thuli Madonsela released a State of Capture Report which contained several adverse findings regarding the state of corporate governance at Eskom, this in addition to findings regarding questionable decisions taken by senior executives. Eskom committed itself to work with the Public Protector and National Treasury on issues relating to procurement, contract management and governance.

 During the financial year it was noted that all four units at Ingula were in commercial operation; Medupi Units 4 and 5 were synchronised with the grid and Kusile Unit 1 achieved full load while testing continued.

 The decline in the global coal price in recent years resulted in reduced private investment in the coal mining industry and fewer suppliers in the market. The Board approved a coal supply strategy which entailed negotiating new coal-purchase contracts, accelerating the migration of road-to-rail transportation and supporting black-owned suppliers and emerging contractors.

 Due to the age of some of the coal-fired stations, some may have to be decommissioned earlier than anticipated. However, no decisions have yet been made and feasibility studies were undertaken to reassess the lifespan of the power stations as well as provide alternative scenarios to be considered.

 Eskom announced that the rebuilding of the silo at the Majuba power station was completed as part of the construction of a permanent coal handling facility. The silo collapsed in November 2014 and caused major disruptions to electricity supply.

 Following a public consultation process Nersa considered a Regulatory Clearing Account application of R22.8bn from Eskom. Nersa allowed a balance of R11.2bn to be recovered, resulting in an average price increase of 9.4% for the 2016/17 financial year. This created a revenue shortfall and cash flow deficit of about R21bn for the year which resulted in a weakening of Eskom’s financial ratios and further negatively impacted its credit ratings.

 Given the pressures on Nersa not to increase the electricity tariffs significantly, decisions were taken to focus on internal cost efficiencies and sales growth programmes to offset Eskom’s fixed cost base.

 A total of 585km transmission lines were constructed during the year and Eskom commissioned 2 300MVA transmission transformer capacity. Plant availability improved significantly to 77.3% for the year, compared to 71% in 2016.

 Eskom’s future growth will be influenced by its ability to create new business opportunities in the storage sector. Multiple new technologies will disrupt the electricity value chain and the cost of energy storage is expected to decline by about 20% in the next four years. Energy storage has the potential to increase the competitiveness of renewables and change the consumption behaviour of customers.

 A major milestone was achieved when Eskom connected its six millionth customer. This was a significant step on the road to achieving universal access to electricity.

 Eskom stated its intention to extend universal access to power through one million electrification connections over the medium term and was investigating the accelerated deployment of battery storage technology.

 The total municipal arrear debt escalated to R9.4bn at year end. Eskom continued to work with local government and national and provincial departments to find solutions for the escalating debts. Payment agreements were reached with 66 local authorities but ‘last resort decisions’ were also taken to interrupt supply to defaulting municipalities.

 The organisation made proposals to Parliament on how the issues could be resolved, including the rationalisation of municipal tariffs, and reductions in the interest charged on overdue accounts. Pilot projects were launched in two provinces to install prepaid electricity meters in households.

 Eskom KeyCare and Top Customer KeyCare indexes, which measure customer satisfaction; improved during the year. However, the surveys also indicated growing concerns about the reliability of supply as well as the escalating price of electricity.

 Cost-cutting measures introduced by Eskom were bearing fruit, with savings of more than R20bn realised during the year; mostly from coal operational expenditure.

 Far-reaching measures were introduced to combat vandalism and theft of cabling, conductors and equipment. Copper conductors were replaced by aluminium conductors; anti-theft bolts and support lattices were placed on steel pylons and alarms were installed on overhead lines.

 Some 235 arrest were made and stolen material to the value of R5m were recovered as result of the collaboration with the SA Police Service and prosecuting authorities.

 Eskom’s nuclear power programme came under the spotlight following the publication of a request for information for a new build programme. Nuclear power was seen to be a possible solution for large base-load generation, taking into account the future decommissioning of coal-fired plants. Nuclear energy supplied more than 10% of the world’s electricity needs and has the potential to deliver clean and sustainable energy at competitive prices.

 The Koeberg power station – which generates about 4.4% of South Africa’s total requirements – has an exemplary track record of reliability and safety. It is located in a stable geological area and is cooled by sea water, which minimises its impact on the environment.

 Eskom is a founding member of the World Association of Nuclear Operators and its training programme for key personnel is accredited by international bodies. The operations are supervised by the National Nuclear Regulator, a public entity that was established to set standards and safeguard the health and safety interests of people, property and the environment against nuclear damage.

 The volume of used fuel generated by Koeberg is small by industrial standards and is stored under conditions of exceptional safety at the Vaalputs waste repository in Namaqualand. In April 2017 Koeberg set a new record of 485 days of continuous operation since its last outage.

 International sales grew by12,2% due to Eskom having surplus capacity. The SADC region was experiencing its worst drought in decades which limited the ability to generate power from hydro-electric power stations.

 The governments of South Africa and of the Democratic Republic of the Congo signed a treaty for the establishment of a 4 800MW hydroelectric station on the Congo River, of which 2 500MW would be allocated to South Africa.

 A framework agreement was signed between Eskom and the French development agency (AFD), to support investments in the extension and reinforcement of the power transmission grid. The focus was on the strengthening of the grid in areas where future renewable energy resources were envisaged. A $1.5bn loan agreement was also signed with the China Development Bank as part of the efforts to diversify Eskom’s funding sources and improve the levels of liquidity.

 An air quality offset plan for communities living adjacent to coal-fired stations was approved by the Department of Environment Affairs and the relevant licencing authorities. A successful pilot project was introduced at KwaZamokuhle in Mpumalanga during the year.

 The ash strategy approved by the Board delivered improvements in ash utilisation and Eskom was working with Government to facilitate exemptions for businesses who want to use ash for brick and block making. This would create jobs and new skills and contribute to responsible environmental management.

 Certain coal-fired stations such as Hendrina, Grootvlei and Komati would be gradually ramped down to zero production and placed in lean preservation. Should the demand grow beyond current assumptions, these stations could be fully recalled to meet demand. The timing of any new build programmes – after Medupi and Kusile – would be determined by the Government’s Integrated Resource Plan.

 Short-term water security improved as dam levels in the Vaal River system increased. Government strategies to address acid mine drainage and implement phase 2 of the Lesotho Highlands Water Project would contribute to longer term water security for Eskom. However, the deteriorating quality of the raw water remained a major concern and Eskom had to implement treatment plans to manage this risk.

 All power stations have developed water strategy implementation plans, focusing on actions to reduce usage and ensure compliance with environmental standards.

 More than R440m was allocated to research projects, testing and development. Among the projects were a collaboration with electric vehicle manufacturers to develop future pricing models and shift demand for power to optimal periods; developing innovative business models for the deployment of commercial and industrial rooftop solar photo-voltaic systems; as well as investigating solutions to deploy energy storage technologies at scale.

 Significant progress was made in improving gender equity in senior management and measures were put in place to support women in their new roles as part of a broader retention strategy. A women advancement programme was launched with the objective to equalise the gender gap by 2020. The programme focused on key areas such as women in leadership; women in technical roles; the creation of a conducive work environment and partnerships with institutions so as to facilitate the development of women within Eskom.

 Eskom’s supplier development programme continued to grow, and some 5 388 contracts were placed with 2 937 suppliers. Total procurement spend amounted to R178bn and close on 40 000 jobs have been created, to date, at the Medupi, Kusile and Ingula new build sites.

 The Eskom Development Foundation was recognised in the Sunday Times Top Brands Survey in the Consumer Green and Social Investment categories. During the year the Foundation funded 228 projects to a value of R225m, influencing the lives of 842 000 beneficiaries.

 The Eskom Expo for Young Scientists attracted interest from more than 600 of the country’s future engineers, scientists and innovators who submitted to South Africa’s largest science fair and stood the change of winning prizes worth more than R4m.

 The Eskom Development Foundation completed a three-year programme aimed at supporting secondary schools in Mpumalanga to improve the quality of maths and science learning. The programme formed part of the Foundation’s drive to bring about meaningful and sustainable improvement in education through the provision of resources and training.