MYPD3 Briefing Session – Portfolio Committee on Energy
27 March 2013
1
ESKOM MYPD3 Application in Summary
R'm
Return
2013/14
Eskom primary energy
81 885
62 328 65 368 69 657 75 330
82 266
5 189
13 302 18 043 20 143
21 042
5 189
13 302 18 043 20 143
21 042
44 857 48 952 54 934 59 346
61 478
153 378 179 604 212 758 248 332 293 501
Independent power producers-primary energy
Depreciation
Integrated demand management
Operating costs
Eskom revenue requirement
7 271
2014/15
14 643
2015/16
31 187
2016/17
MYPD 3
2017/18 Total
51 878
186 864
354 949
77 719
77 719
269 568
1 087 574
2
MYPD3 Decision in Summary
R'm
Return
Primary Energy Costs
Independent Power Producers
Depreciation
Integrated Demand Management
Operating costs
Total Allowed Revenues
2013/14 2014/15 2015/16 2016/17 2017/18
23 477 26 511 26 436 27 657 33 667
51 067 54 966 56 779 62 060 68 620
2 686 5 108 14 826 19 269 23 018
25 733 27 481 28 564 28 911 29 197
1 455
953
819
712 1 244
45 519 48 565 52 908 57 769 60 576
149 937 163 584 180 332 196 378 216 322
MYPD3
Total
137 748
293 492
64 907
139 886
5 183
265 337
906 553
3
Approved Regulatory Asset Base
R'm
RAB Applied for
RAB Adjustments
RAB Approved
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
911 686 779 203 852 265 919 662 981 853 1 043 100
(122 095) (79 594) (145 874) (209 712) (269 073) (325 587)
789 591 699 609 706 391 709 950 712 780 717 513
• Adjustments to align with the MYPD2 phasing in of the RAB
• Assets commissioning dates adjusted to cater for the delays
• Depreciation rate not adjusted (Depreciation amount will change due
to changes in asset base costs)
4
Actual Return Approved
R'm
Weighted Average Cost of Capital used (%)
Return (R'm)
MYPD3
2013/14 2014/15 2015/16 2016/17 2017/18 Total
3.4% 3.8% 3.7% 3.9% 4.7%
23 477 26 511 26 436 27 657 33 667 137 748
•The allowed returns were calculated to allow Eskom to meet its debt
obligation – see next slide
•These returns were also considered to allow for affordable and
gradually increasing pricings and to avoid price spikes
5
Primary Energy
Primary Energy (R’m) including Environmental Levy
MYPD 3 Total
Applied for
418 940
Adjustment s
(60 441)
Allowed
358 399
• Coal Prices escalated at 10% over the MYPD3 period
• Base price for 2013/14 adjusted to reflect actual history
• IPP Commissioning dates and associated costs re-adjusted to reflect
delays
• Efficiencies on the burn rate and load factors
• Renewable IPP adjusted to reflect revised dates
• Electricity purchases & SBP procurement costs disallowed
6
Depreciation
R'm
Depreciation Applied
Depreciation disallowed
Depreciation Allowed
2012/13
37 220
(19 340)
17 880
2013/14
30 792
(5 059)
25 733
2014/15
34 848
(7 366)
27 482
2015/16
38 447
(9 883)
28 564
2016/17
40 846
(11 934)
28 912
2017/18 MYPD3 Total
44 271 189 204
(15 073) (49 316)
29 198 139 888
7
Integrated Demand Management (IDM)
IDM R'm
IDM
DMP
Buy Back
Applied for
13 090
2 543
8 513
Adjusted
(7 906)
(688)
(8 513)
Approved
5 184
1 855
0
• Operational DMP maintained
• Supplemental limited to 800 MW
• Power Buy Back allocation not approved
• SWH & Heat pumps not approved
• Compressed air, process optimisation removed or limited
8
Operating expenditure (excl Primary Energy)
OPEX R'M
MYPD3 TOTAL
APPLIED
310 595
ADJUSTED
(45 258)
APPROVED
265 337
 Manpower costs were adjusted in line with inflation plus a salary negotiating margin (1.4%)
• Additional staff compliment for new power plants included (Benchmarked @
1.24/MW)
 Debt arrears reduced from 0.6% from 0.5%
 “Other costs” limited to increase by inflation
 Double counted items removed
9
Capital Expenditure
Capex (R'm)
MYPD3
Capex Applied
336 370
Adjusted
Capex Approved
(106 357)
230 012
• Transmission adjustment based on detailed scope assessment and benchmarked
costs/km or MVA.
• Distribution capex was adjusted from Eskom unit cost of R2.18/km to R1.74/km over
the MYPD3 period – projects not altered
• Generation adjusted to remove excessive contingency fees and Owners
Development Costs,
10
Weighted Average Cost of Capital
12 Months Average
25 Years Average
Real risk free rate
2.29%
4.51%
Real cost of equity
6.75%
8.96%
Real cost of debt
2.86%
5.07%
Pre-tax real WACC
5.14%
7.65%
Post-tax real WACC
3.70%
5.51%
CAPM
• The current methodology prescribes the use of 25 years average to calculate the
real risk free rate
• The 12 months average reflect the current market conditions
11
Eskom’s Financial sustainability Goals 2
EBITDA-To-Interest Cover Ratio
(EBITDA/Interest Payments)
3.50
3.00
2.50
2.00
EBITDA-To-Interest
Cover Ratio
(EBITDA/Interest
Payments)
1.50
1.00
0.50
Year
2014
Year
2015
Year
2016
Year
2017
Year
2018
12
Source: NERSA Rfd
Eskom’s Financial Sustainability: Cash Flow
Allowable revenue (R'million)
Allowable return (R'million)
Calculated WACC (%)
Allowable prices (c/kWh)
Net Cash movement for year (R'million)
Cash at end of year
EBITDA-To-Interest Cover Ratio (EBITDA/Interest Payments)
Price increase (%)
Year 1
142 746
23 477
3.4%
65.51
21 913
41 623
2.49
8.0%
Year 2
155 477
21 454
3.0%
70.75
28 552
70 175
2.92
8.0%
Year 3
171 838
20 454
2.9%
76.41
389
70 564
1.88
8.0%
Year 4
189 396
20 562
2.9%
82.53
(12 104)
58 460
1.92
8.0%
Year 5
209 025
25 676
3.6%
89.13
(48 126)
10 334
2.08
8.0%
13
Source: NERSA Rfd
The Tariffs – issues considered and approved
•
•
•
Increase to Homelight 20A customers consuming up to 350 kWh/month
limited to inflationary increase of 5.6 %. Above this consumption level
customers will see an increase of 7.6 %
All residential customers will see an increase of 8 % p.a.
Eskom to ensure:
–
–
–
–
–
•
T-O-U off-peak to peak demand adjusted from a ration of 1:9 to 1:8
Tariff cross-subsidies to be shown transparently
The use-of-system charges to be based on cost per voltage level for all large power
customers
The reliability and service charge to be unbundled from the energy charge
The environmental levy to be included in the energy charge and not shown separately
Eskom to ensure alternate tariff options are made available to municipalities
with a predominantly residential load mix
14
THANK YOU
15