INAUGURAL RED ONE REGIONAL ENGAGEMENT FORUM CALVINIA

Transcription

1 EDI Holdings Welcomes All Stakeholders Within the RED ONE AREA

2 INAUGURAL RED ONE REGIONAL ENGAGEMENT FORUM CALVINIA 20 JULY 2007

3 Agenda # POINTS FOR DISCUSSION TIME RESPONSIBLE REGISTRATION 9h00-10h30 1. Opening 5 min Deon Louw: RED ONE RGM 2. Welcoming Address 15 min Executive Mayor Johnson: SALGA 3. Purpose of the Regional Engagement Forum 10 min Deon Louw: RED ONE RGM 4. EDI Restructuring 30 min Dr. W de Beer: COO EDI Holdings 5. Discussions 30 min ALL TEA BREAK@12H00 15 min 6. Municipal Preparations towards RED ONE Establishment 15 min Deon Louw: RED ONE RGM 7. Eskom Preparations towards RED ONE Establishment 10 min ESKOM 8. Discussions 8.1 RED ONE Restructuring Matters 8.2 Debate and Acceptance of REF Terms of Reference 8.3 Setting Date for First RED ONE Sponsors Committee 30 min ALL 9. Way Forward 10 min Deon Louw: RED ONE RGM 10. Closing Remarks 10 min SALGA Northern Cape 13h30 60 min 20 July 2007 Slide 3

4 Agenda # POINTS FOR DISCUSSION TIME RESPONSIBLE REGISTRATION 9h00-10h30 1. Opening 5 min Deon Louw: RED ONE RGM 2. Welcoming Address 15 min Executive Mayor Johnson: SALGA 3. Purpose of the Regional Engagement Forum 10 min Deon Louw: RED ONE RGM 4. EDI Restructuring 30 min Dr. W de Beer: COO EDI Holdings 5. Discussions 30 min ALL TEA BREAK@12H00 15 min 6. Municipal Preparations towards RED ONE Establishment 15 min Deon Louw: RED ONE RGM 7. Eskom Preparations towards RED ONE Establishment 10 min ESKOM 8. Discussions 8.1 RED ONE Restructuring Matters 8.2 Debate and Acceptance of REF Terms of Reference 8.3 Setting Date for First RED ONE Sponsors Committee 30 min ALL 9. Way Forward 10 min Deon Louw: RED ONE RGM 10. Closing Remarks 10 min SALGA Northern Cape 13h30 60 min 20 July 2007 Slide 4

5 Agenda # POINTS FOR DISCUSSION TIME RESPONSIBLE REGISTRATION 9h00-10h30 1. Opening 5 min Deon Louw: RED ONE RGM 2. Welcoming Address 15 min Executive Mayor Johnson: SALGA 3. Purpose of the Regional Engagement Forum 10 min Deon Louw: RED ONE RGM 4. EDI Restructuring 30 min Dr. W de Beer: COO EDI Holdings 5. Discussions 30 min ALL TEA BREAK@12H00 15 min 6. Municipal Preparations towards RED ONE Establishment 15 min Deon Louw: RED ONE RGM 7. Eskom Preparations towards RED ONE Establishment 10 min ESKOM 8. Discussions 8.1 RED ONE Restructuring Matters 8.2 Debate and Acceptance of REF Terms of Reference 8.3 Setting Date for First RED ONE Sponsors Committee 30 min ALL 9. Way Forward 10 min Deon Louw: RED ONE RGM 10. Closing Remarks 10 min SALGA Northern Cape 13h30 60 min 20 July 2007 Slide 5

6 Agenda # POINTS FOR DISCUSSION TIME RESPONSIBLE REGISTRATION 9h00-10h30 1. Opening 5 min Deon Louw: RED ONE RGM 2. Welcoming Address 15 min Executive Mayor Johnson: SALGA 3. Purpose of the Regional Engagement Forum 10 min Deon Louw: RED ONE RGM 4. EDI Restructuring 30 min Dr. W de Beer: COO EDI Holdings 5. Discussions 30 min ALL TEA BREAK@12H00 15 min 6. Municipal Preparations towards RED ONE Establishment 15 min Deon Louw: RED ONE RGM 7. Eskom Preparations towards RED ONE Establishment 10 min ESKOM 8. Discussions 8.1 RED ONE Restructuring Matters 8.2 Debate and Acceptance of REF Terms of Reference 8.3 Setting Date for First RED ONE Sponsors Committee 30 min ALL 9. Way Forward 10 min Deon Louw: RED ONE RGM 10. Closing Remarks 10 min SALGA Northern Cape 13h30 60 min 20 July 2007 Slide 6

7 Purpose of the Regional Engagement Forum To enhance a common and shared vision among stakeholders on RED establishment To inform and educate internal and external stakeholders about the establishment of six wall-to-wall REDs To proactively engage and mobilise stakeholders for the acceleration of RED establishment processes To provide technical support and advice in preparation for the establishment of six wall-to-wall REDs through working in liaison with the existing RED establishment structures as well as other relevant provincial and local government structures To monitor and evaluate stakeholder readiness for RED ONE 20 July 2007 Slide 7

8 Membership of the Regional Engagement Forum The Regional Engagement Forum shall comprise of the following members: EDI Holdings Eskom Regional representatives SALGA Provincial Representatives Municipalities within RED ONE Region Municipal Manager Councilor / MMC responsible for Infrastructure and Services Director responsible for Infrastructure and Services Head of Electricity Department 20 July 2007 Slide 8

9 Agenda # POINTS FOR DISCUSSION TIME RESPONSIBLE REGISTRATION 9h00-10h30 1. Opening 5 min Deon Louw: RED ONE RGM 2. Welcoming Address 15 min Executive Mayor Johnson: SALGA 3. Purpose of the Regional Engagement Forum 10 min Deon Louw: RED ONE RGM 4. EDI Restructuring 30 min Dr. W de Beer: COO EDI Holdings 5. Discussions 30 min ALL TEA BREAK@12H00 15 min 6. Municipal Preparations towards RED ONE Establishment 15 min Deon Louw: RED ONE RGM 7. Eskom Preparations towards RED ONE Establishment 10 min ESKOM 8. Discussions 8.1 RED ONE Restructuring Matters 8.2 Debate and Acceptance of REF Terms of Reference 8.3 Setting Date for First RED ONE Sponsors Committee 30 min ALL 9. Way Forward 10 min Deon Louw: RED ONE RGM 10. Closing Remarks 10 min SALGA Northern Cape 13h30 60 min 20 July 2007 Slide 9

10 Presentation Outline Electricity Distribution Industry (EDI) Historical Context 25 October 2006 Cabinet Decision Key Implementation Enablers and Their Status What are REDs? How will we get there? Stakeholder Engagement Conclusion 20 July 2007 Slide 10

11 EDI HISTORICAL CONTEXT 20 July 2007 Slide 11

12 Current Electricity Supply Industry Structure Currently, South Africa operates in the traditional mode of vertical integration with financial and physical flows following the same path Scheduling ESKOM Industry 180 Physical Energy Flow Financial Flow Municipalities Metering & Billing Residential Business 20 July 2007 Slide 12

13 Key Challenges Facing the EDI Current industry structure is highly inefficient owing to fragmentation Absence of economies of scale in respect of investing in assets, sharing of facilities, services, people development. Inadequate maintenance of networks Estimated maintenance backlog: R5 bn accumulated over the past 10 years Supply interruptions cost to the Economy: R2.9 bn to R 8.6 bn p.a.** Inequitable treatment of consumers across the country Significant variance in average tariffs by Distributors: Inconsistent Electrification Performance Access to electricity: ~73 % (National) Slow and Inconsistent Roll-Out of FBE Current rollout is less than 40% of targeted community ** Source: 2003/4 National Integrated Resource Plan (NIRP) ; # Source: NUS Consulting Study July 2007 Slide 13

14 EDI Restructuring Objectives Energy White Paper Objectives (1998) EDI Restructuring Blueprint Objectives (2001) Ensure electrification targets are met Achievement of government s electrification programme Universal access to electricity for all South Africans Provide low-cost electricity Sustainable electricity supply to low-income consumers, regardless of location, at affordable prices Facilitate better price equality Improve the financial health of the industry Future REDs to operate on a sustained, financially viable basis as independent businesses Improve quality of service and supply Acceptable and sustainable levels of supply security and quality Foster proper co-ordination of operations and investment capital Attract and retain competent employees Future REDs to provide secure employment to their employees, provide skills development and training consistent with a high technology, modern distribution business Transition to be done within the context of a comprehensive human resources strategy and an agreed social plan Planned and managed transition 20 July 2007 Slide 14

15 History of Restructuring Considerable Debate over EDI RED s Approach Endorsed ERIC Report Cabinet Approved Start of Restructuring Process EDIRC Established Appointment of PWC Blueprint Approved by EDIRC Early 1990s End 1999 April 2000 Aug 2000 Blueprint approved by Cabinet EDI Holdings established RED 1 established Cabinet decision Cabinet decision May 2001 July 2003 July 2005 Sept 2005 Oct July 2007 Slide 15

16 CABINET DECISION: 25 OCTOBER July 2007 Slide 16

17 Cabinet Decision: 25 October 2006 Having considered technical submissions on: The financial viability of the different RED models; The institutional and governance arrangements for the REDs; and How the various models respond to the restructuring policy objectives. The Cabinet approved the following: That 6 wall to wall REDs be implemented; That the REDs be established as public entities and be regulated according to the PFMA and the Electricity Regulation Act; That Eskom becomes a shareholder in the respective REDs for a transitional period and that they reduce their shareholding over time; That DME, through EDI Holdings, will oversee and control the establishment of REDs; That a roadmap will be put in place to move from the current scenario into the future industry structure That a strategy needs to be developed to deal with capital investment requirements for the REDs That EDI Restructuring legislation will be introduced; and That a National electricity pricing system will be developed. 20 July 2007 Slide 17

18 KEY IMPLEMENTATION ENABLERS AND THEIR STATUS 20 July 2007 Slide 18

19 Key Considerations and Implementation Enablers Key Implementation Enabler Responsible Status Governance of the REDs DME This issue will be addressed in the EDI Restructuring Bill Electricity Restructuring Legislation DME The process is driven by DME and indication from them is that the Electricity Restructuring Act is targeted for mid 2007 Promulgation of Asset Transfer Framework to enable effective and orderly transfer of assets from local government and Eskom to the REDs National Treasury NT exempted municipalities and municipal entities from sections 14 & 90 of the LG: MFMA with regard to electricity transfers. National Electricity Pricing System NERSA The process is driven by NERSA National Tariff Harmonisation Framework to ensure rationalisation of tariffs nationally NERSA EDI Holdings will submit a position paper by 31 March 2007 for input into the NERSA process Salary Harmonisation Framework EDI Holdings A proposal served at the TLRS during January 2007 as part of the process of addressing the COS and salary harmonisation Capital Investment Strategy for Infrastructure DME / EDI Holdings Will be attended to through the RED Establishment Business Case Surcharge Principles Framework National Treasury The principles are being covered in the Municipal Fiscal Powers and Functions Bill to be promulgated during 2007 Local Government Amendment Bill dplg Considering relaxing of MSA S78 process 20 July 2007 Slide 19

20 FUTURE REGIONAL ELECTRICITY DISTRIBUTORS (REDs) 20 July 2007 Slide 20

21 6 Wall-to-Wall RED Boundary Map Johannesburg Metro RED 6 Tshwane Metro (Pretoria) Provincial Boundaries RED 1 RED 4 RED 2 RED 5 Ekhuruleni Metro ethekwini Metro (Durban) Cape Town RED 3 Nelson Mandela Bay Metro (Port Elizabeth) 20 July 2007 Slide 21

22 REDs Statistical Information DESCRIPTION RED ONE RED TWO RED THREE RED FOUR RED FIVE RED SIX 2004 FIGURES No of customers: Eskom No No of customers: Municipality No Energy Sales: Eskom TWh Energy Sales: Municipality TWh , Assets: Eskom Rbn Assets: Municipalities Rbn Personnel No Revenue Rbn Current Surplus Transfer (Unaudited) Rm YEAR PROJECTED Refurbishment Capital Requirement Rbn Maintenance Backlog Rbn New Work Rbn July 2007 Slide 22

23 Future REDs ( 1) New companies into which both municipalities and Eskom will transfer their electricity distribution businesses Shareholding to be split between Eskom, National and Local Government Service providers of choice to the service authorities: Municipality remains service authority and RED becomes Service provider REDs will collect surcharges in accordance with the Municipal Fiscal Powers & Functions Bill on behalf of the municipalities and pay it over to them REDs will pay dividends to shareholders subject to financial performance Relationship between RED and municipalities to be governed through the Service Delivery Agreement as contemplated in Section 81 of Municipal Systems Act Streamlined relationship reducing duplication and creating clear accountability Better regulation with role clarity between service authorities, service providers and the National Energy Regulator of South Africa 20 July 2007 Slide 23

24 Future REDs ( 2) Decentralised geographical service delivery Enable Government s social policy, e.g. electrification and free basic electricity Single institution Focus on service Consistency in operating policies and application across RED geographical area Development and application of best practices Support Government s objective of universal access to electricity by 2012 Become more efficient and able to service customers equally well, at realistic tariff levels through: Lower Interest charges due to improved access to capital markets Efficiencies in non-payroll related areas, i.e., general costs Accounts Receivable. Using best practices in a reasonable, good faith effort approach to reduce bad debt accounts 20 July 2007 Slide 24

25 Municipal Revenue Stream Municipalities will continue to derive income from electricity sales within their area of jurisdiction The income will be based on the current audited revenue generated from electricity sales and transferred to the municipality to support other services The method through which municipalities will receive a continued revenue stream from electricity sales would be through: A surcharge to customers on electricity sales Dividends from the relevant RED, subject to financial performance and within the approved policy of the relevant RED Surcharges collected by the RED will be paid over to the relevant municipality on a basis agreed to between the relevant municipality and the RED 20 July 2007 Slide 25

26 RED Future Business Model Bundled but clearly demarcated wires and retail businesses Wires business key characteristics: Asset intensive Capital intensive Geared for serving an one to many relationship Monopoly business with strong regulation Retail business key characteristics: Customer driven Trading in energy Products and services aligned according to market segmentation Business geared towards competition and less regulation Shared corporate and support services to wires and retail Focus on buy in of services to avoid stranded costs and duplication Business model to be customised to complement the geographical composition of the RED area of jurisdiction 20 July 2007 Slide 26

27 Indicative RED Topography DEPOT AREA OFFICE DEPOT DEPOT DEPOT AREA OFFICE AREA OFFICE DEPOT DEPOT DEPOT DEPOT HEAD OFFICE DEPOT 20 July 2007 Slide 27

28 Roles and Responsibilities Shareholder RED Board ROLE RESPONSIBILTY Establish and contract shareholders compact with RED Board Monitors the performance of the RED Define socio and economic requirements Define business performance expectations Appoint the Board and CEO Ensure compliance with the shareholders compact Establish RED Policy, Direction and Compliance requirements Develop and implement strategies to create shareholder value and to ensure effective service delivery Ensure governance, legal, regulatory and policy compliance Appoint Executive Management RED Management Develop and implement strategies to create shareholder value Ensure effective business operations and compliance Ensure effective service delivery Appoint resources and ensure effective resource management 20 July 2007 Slide 28

29 Relationship Governance Relationship Owner Relationship Partner Governance Instrument National Government RED Board Shareholders Agreement Shareholder Compact Business Plan Local Government (Service Authority) RED Board (Service Provider) Shareholders Agreement Service Delivery Agreement (SDA) Eskom Holdings RED Board Shareholders Agreement Asset Transfer Agreement RED Board RED Management Business Plan Performance Contract National Energy Regulator of South Africa (NERSA) RED Board NERSA Licence 20 July 2007 Slide 29

30 HOW WILL WE GET THERE? 20 July 2007 Slide 30

31 Generic RED Establishment Roadmap 20 July 2007 Slide 31

32 Regional Project Governance Structures 20 July 2007 Slide 32

33 Agenda # POINTS FOR DISCUSSION TIME RESPONSIBLE REGISTRATION 9h00-10h30 1. Opening 5 min Deon Louw: RED ONE RGM 2. Welcoming Address 15 min Executive Mayor Johnson: SALGA 3. Purpose of the Regional Engagement Forum 10 min Deon Louw: RED ONE RGM 4. EDI Restructuring 30 min Dr. W de Beer: COO EDI Holdings 5. Discussions 30 min ALL TEA BREAK@12H00 15 min 6. Municipal Preparations towards RED ONE Establishment 15 min Deon Louw: RED ONE RGM 7. Eskom Preparations towards RED ONE Establishment 10 min ESKOM 8. Discussions 8.1 RED ONE Restructuring Matters 8.2 Debate and Acceptance of REF Terms of Reference 8.3 Setting Date for First RED ONE Sponsors Committee 30 min ALL 9. Way Forward 10 min Deon Louw: RED ONE RGM 10. Closing Remarks 10 min SALGA Northern Cape 13h30 60 min 20 July 2007 Slide 33

34 QUESTIONS/DISCUSSIONS 20 July 2007 Slide 34

35 Agenda # POINTS FOR DISCUSSION TIME RESPONSIBLE REGISTRATION 9h00-10h30 1. Opening 5 min Deon Louw: RED ONE RGM 2. Welcoming Address 15 min Executive Mayor Johnson: SALGA 3. Purpose of the Regional Engagement Forum 10 min Deon Louw: RED ONE RGM 4. EDI Restructuring 30 min Dr. W de Beer: COO EDI Holdings 5. Discussions 30 min ALL TEA BREAK@12H00 15 min 6. Municipal Preparations towards RED ONE Establishment 15 min Deon Louw: RED ONE RGM 7. Eskom Preparations towards RED ONE Establishment 10 min ESKOM 8. Discussions 8.1 RED ONE Restructuring Matters 8.2 Debate and Acceptance of REF Terms of Reference 8.3 Setting Date for First RED ONE Sponsors Committee 30 min ALL 9. Way Forward 10 min Deon Louw: RED ONE RGM 10. Closing Remarks 10 min SALGA Northern Cape 13h30 60 min 20 July 2007 Slide 35

36 Agenda # POINTS FOR DISCUSSION TIME RESPONSIBLE REGISTRATION 9h00-10h30 1. Opening 5 min Deon Louw: RED ONE RGM 2. Welcoming Address 15 min Executive Mayor Johnson: SALGA 3. Purpose of the Regional Engagement Forum 10 min Deon Louw: RED ONE RGM 4. EDI Restructuring 30 min Dr. W de Beer: COO EDI Holdings 5. Discussions 30 min ALL TEA BREAK@12H00 15 min 6. Municipal Preparations towards RED ONE Establishment 15 min Deon Louw: RED ONE RGM 7. Eskom Preparations towards RED ONE Establishment 10 min ESKOM 8. Discussions 8.1 RED ONE Restructuring Matters 8.2 Debate and Acceptance of REF Terms of Reference 8.3 Setting Date for First RED ONE Sponsors Committee 30 min ALL 9. Way Forward 10 min Deon Louw: RED ONE RGM 10. Closing Remarks 10 min SALGA Northern Cape 13h30 60 min 20 July 2007 Slide 36

37 MUNICIPAL PREPARATIONS TOWARDS RED FOUR ESTABLISHMENT 20 July 2007 Slide 37

38 RED ONE Calvinia 20 July 2007 Slide 38

39 About RED ONE 6 wall-to-wall REDs as approved by Cabinet in May 2001 & October 2006 Mainly 2 Provinces: Western Cape & Northern Cape and a small part of Eastern Cape Metro: City of Cape Town Eskom Region: Western 36 Local Municipalities 8 District Municipalities Key Statistics No of customers - 1,256,864 Sales (GWh) - 15,129 Revenue (R m) - 5,169 Assets (R m) - 5,777 Employees - 5,170 Strategic Approach Eskom Western Region as footprint Critical mass Leverage on the work done in establishing the RED1 (2005) Phased Approach 20 July 2007 Slide 39

40 Municipal Preparations for RED Readiness Council Resolution that the Municipality participate in RED ONE establishment Accession to Co-operative Agreement Legal Compliance MSA Section 78 process Ringfencing of Electricity Distribution Business Participation in the RED ONE Regional Project Governance Structures 20 July 2007 Slide 40

41 State of Readiness: Municipalities within RED ONE ( 1) Municipality MSA S78 Ringfencing Matzikama Local Municipality (WC011) No No No Cederberg Local Municipality (WC012) No No No Bergrivier Local Municipality (WC013) No No No Saldanha Local Municipality (WC014) No No No Swartland Local Municipality (WC015) No No No West Coast District Municipality (WC01) No No No Witzenberg Local Municipality (WC022) No No No Drakenstein Local Municipality (WC023) Yes Yes Yes Stellenbosch Local Municipality (WC024) Busy Busy No Breede Valley Local Municipality (WC025) Yes Yes No Breede River/Winelands Local Municipality (WC026) Busy Busy No Cape Winelands District Municipality (DC02) No No No Theewaterskloof Local Municipality (WC031) No No No Overstrand Local Municipality (WC032) No No No Cape Agulhas Local Municipality (WC033) No No No Swellendam Local Municipality (WC034) No No No Overberg District Municipality (DC03) No No No Accession Agreement 20 July 2007 Slide 41

42 State of Readiness: Municipalities within RED ONE ( 2) Municipality MSA S78 Ringfencing Kannaland Local Municipality (WC041) Yes Yes No Hessequa Local Municipality (WC042) Yes Yes No Mossel Bay Local Municipality (WC043) Yes Yes No George Local Municipality (WC044) Yes Yes No Oudtshoorn Local Municipality (WC045) Yes Yes No Bitou Local Municipality (WC047) Yes Yes No Knysna Local Municipality (WC048) Yes Yes No Eden District Municipality (WC04) No No No Laingsburg Local Municipality (WC051) Yes Yes No Prince Albert Local Municipality (WC052) Yes Yes No Beaufort West Local Municipality (WC053) Yes Yes No Central Karoo District Municipality (DC05) No No No Richtersveld Local Municipality (NC061) No No No Nama Khoi Local Municipality (NC062) No No No Kamiesberg Local Municipality (NC064) No No No Hantam Local Municipality (NC065) No No No Karoo Hoogland Local Municipality (NC066) No No No Accession Agreement 20 July 2007 Slide 42

43 State of Readiness: Municipalities within RED ONE ( 3) Municipality MSA S78 Ringfencing Accession Agreement Khai-Ma Local Municipality (NC067) No No No Namakwa District Municipality (DC06) No No No Kareeberg Local Municipality (NC074) No No No SiyathembaLocal Municipality (NC077) No No No Pixley Ka Seme District Municipality (DC07) No No No Mier Local Municipality (NC081) No No No!Kai! Garib Local Municipality (NC082) No No Yes Khara Hais Local Municipality (NC083) No No No!Kheis Local Municipality (NC084) No No No Siyanda District Municipality (DC08) No No No Eskom n/a Yes Yes City of Cape Town Metropolitan Municipality Yes Yes Yes 20 July 2007 Slide 43

44 Accession Agreement EDI Co-operative Agreement entered into between National Government (DME), SALGA, Eskom Holdings Limited, EDI Holdings and NERSA during 2002 All Municipalities and Municipal Entities become party to this agreement by way of the Accession Agreement On signing the Accession Agreement, Municipalities undertake to: Provide the necessary assistance to EDI Holdings to enable it to meet its objective of restructuring the EDI in accordance with the overall intent of the reform process Ringfence its Electricity Business (where applicable) in a manner agreed with EDI Holdings in preparations for the establishment of the REDs Use their best endeavour to initiate the required process in terms of the Municipal Systems Act Keep EDI Holdings promptly and fully informed of any activities that would materially affect the business and/or the objectives of EDI Restructuring 20 July 2007 Slide 44

45 MSA Section 78 What is a Section 78 Assessment: A Section 78 Assessment is a process required by the MSA to assess potential service delivery mechanisms for the provision of a municipal service Purpose of a Section 78 Assessment: To select the most appropriate and optimal service delivery mechanism that will ensure access to services for all. Methodology for a Section 78 Assessment: Assessment of Internal Mechanism [S78(1)] Decision by Council [S78(2)] Exploration and Assessment of External Mechanism [S78(3)] Decision by Council [S78(4)] 20 July 2007 Slide 45

46 MSA Section 78 Process STEP 1 STATUS QUO ASSESSMENT STEP 2 ASSESS INTERNAL SERVICE DELIVERY MECHANISMS INTERNAL STEP 3 DECIDE EXTERNAL STEP 4 IMPLEMENT APPROPRIATE INTERNAL SERVICE DELIVERY MECHANISMS Allocate sufficient human, financial and other resources necessary for proper provisioning of the service STEP 4 GIVE NOTICE TO THE LOCAL COMMUNITY STEP 5 Assess external service delivery mechanisms Conduct a feasibility study On Internal Mechanism STEP 6 DECIDE On External Mechanism 20 July 2007 Slide 46

47 Ringfencing in Context Ringfencing is the initial step to the process of RED creation, during which the Electricity Distribution Business is separated from the parent municipality for incorporation into the RED Electricity Distribution Business Wires Activities Retail Activities Functional Support Activities Ringfencing Phases Financial Ringfencing Operational Ringfencing Human Resources Ringfencing Consider establishing an internal EDI Restructuring Steering Committee 20 July 2007 Slide 47

48 EDI Holdings Support Toolkits available for: Ringfencing MSA S78 Modeling Information Financial Statistical Funding NERSA approved, through Eskom Multi Year Price Determination, the allocation of R1,2bn over a 3 year period Projects initiated after 1 April 2006 will be considered for pro-rata funding Establishment of a Central Panel of Service Providers for Ringfencing and MSA S78 20 July 2007 Slide 48

49 MFMA Act, 2003 (Act No.56 of 2003): Exemption To facilitate the EDI restructuring National Treasury provided exemption from certain specific provisions of the MFMA (Government Gazette No , 05 April 2007) Municipalities and Municipal Entities are exempted from or in respect of the provisions of sections 14 and 90 of the MFMA subject to the following conditions: Exemption relates to the transfer of ownership or otherwise disposal of capital assets (moveable and immoveable), owned by municipalities and used for the provision of electricity reticulation and other electricity services, to REDs or public entities The exemption requires that: Municipalities must enter into a Service Delivery Agreement (SDA) and any other agreement with the relevant RED Municipalities must undertake a due diligence and ringfence their electricity business All capital assets, current assets, loans and liabilities associated with the assets to be transferred to the relevant RED must be identified All the assets to be transferred to the relevant RED must be recorded in an asset register Assets to be transferred must be valued through a transparent and auditable methodology 20 July 2007 Slide 49

50 Agenda # POINTS FOR DISCUSSION TIME RESPONSIBLE REGISTRATION 9h00-10h30 1. Opening 5 min Deon Louw: RED ONE RGM 2. Welcoming Address 15 min Executive Mayor Johnson: SALGA 3. Purpose of the Regional Engagement Forum 10 min Deon Louw: RED ONE RGM 4. EDI Restructuring 30 min Dr. W de Beer: COO EDI Holdings 5. Discussions 30 min ALL TEA BREAK@12H00 15 min 6. Municipal Preparations towards RED ONE Establishment 15 min Deon Louw: RED ONE RGM 7. Eskom Preparations towards RED ONE Establishment 10 min ESKOM 8. Discussions 8.1 RED ONE Restructuring Matters 8.2 Debate and Acceptance of REF Terms of Reference 8.3 Setting Date for First RED ONE Sponsors Committee 30 min ALL 9. Way Forward 10 min Deon Louw: RED ONE RGM 10. Closing Remarks 10 min SALGA Northern Cape 13h30 60 min 20 July 2007 Slide 50

51 ESKOM PREPARATIONS TOWARDS RED ONE ESTABLISHMENT 20 July 2007 Slide 51

52 Eskom Preparations towards RED ONE Establishment PROGRAMME 726 The Financial, People & Communication streams are all complete. Retail Stream ± 2000 customers to be transferred between regions, This will occur during June 2007 Wires Stream Some metering points still outstanding. To be completed by end of October Regional Internal Boundary Optimisation (RIBO) project completed to be signed of between regions. One Technical service area (TSA) to be established as normal business The BP&S stream is reliant on the changes to the others streams and will complete all changes during June with system shut down 20 July 2007 Slide 52

53 Agenda # POINTS FOR DISCUSSION TIME RESPONSIBLE REGISTRATION 9h00-10h30 1. Opening 5 min Deon Louw: RED ONE RGM 2. Welcoming Address 15 min Executive Mayor Johnson: SALGA 3. Purpose of the Regional Engagement Forum 10 min Deon Louw: RED ONE RGM 4. EDI Restructuring 30 min Dr. W de Beer: COO EDI Holdings 5. Discussions 30 min ALL TEA BREAK@12H00 15 min 6. Municipal Preparations towards RED ONE Establishment 15 min Deon Louw: RED ONE RGM 7. Eskom Preparations towards RED ONE Establishment 10 min ESKOM 8. Discussions 8.1 RED ONE Restructuring Matters 8.2 Debate and Acceptance of REF Terms of Reference 8.3 Setting Date for First RED ONE Sponsors Committee 30 min ALL 9. Way Forward 10 min Deon Louw: RED ONE RGM 10. Closing Remarks 10 min SALGA Northern Cape 13h30 60 min 20 July 2007 Slide 53

54 QUESTIONS / DISCUSSIONS 20 July 2007 Slide 54

55 Agenda # POINTS FOR DISCUSSION TIME RESPONSIBLE REGISTRATION 9h00-10h30 1. Opening 5 min Deon Louw: RED ONE RGM 2. Welcoming Address 15 min Executive Mayor Johnson: SALGA 3. Purpose of the Regional Engagement Forum 10 min Deon Louw: RED ONE RGM 4. EDI Restructuring 30 min Dr. W de Beer: COO EDI Holdings 5. Discussions 30 min ALL TEA BREAK@12H00 15 min 6. Municipal Preparations towards RED ONE Establishment 15 min Deon Louw: RED ONE RGM 7. Eskom Preparations towards RED ONE Establishment 10 min ESKOM 8. Discussions 8.1 RED ONE Restructuring Matters 8.2 Debate and Acceptance of REF Terms of Reference 8.3 Setting Date for First RED ONE Sponsors Committee 30 min ALL 9. Way Forward 10 min Deon Louw: RED ONE RGM 10. Closing Remarks 10 min SALGA Northern Cape 13h30 60 min 20 July 2007 Slide 55

56 WAY FORWARD 20 July 2007 Slide 56

57 Conclusion EDI Holdings welcomes the certainty created by the Cabinet Decision to create 6 wall to wall REDs as Public Entities, regulated under the PFMA EDI Holdings would like to urge RED ONE Municipalities to support the implementation of the Cabinet Decision by: Signing Accession Agreement; and Commencing the preparatory work: MSA Section 78 Ringfencing Due Diligence Join the Engagement Forum EDI Holdings will continue to work with all industry players to ensure fast-tracking of the restructuring process in order to ensure the realization of the restructuring objectives 20 July 2007 Slide 57

58 EDI Holdings RGM Contact Information Name Telephone Number Cell phone Address Deon Louw (RED ONE) Thandi Mazibuko (RED TWO) Nigel Waters (RED THREE) Nhlanhla Zondo (RED FOUR) Nigel Waters (RED FIVE) Diamond Mushwana (RED SIX) July 2007 Slide 58

59 Agenda # POINTS FOR DISCUSSION TIME RESPONSIBLE REGISTRATION 9h00-10h30 1. Opening 5 min Deon Louw: RED ONE RGM 2. Welcoming Address 15 min Executive Mayor Johnson: SALGA 3. Purpose of the Regional Engagement Forum 10 min Deon Louw: RED ONE RGM 4. EDI Restructuring 30 min Dr. W de Beer: COO EDI Holdings 5. Discussions 30 min ALL TEA BREAK@12H00 15 min 6. Municipal Preparations towards RED ONE Establishment 15 min Deon Louw: RED ONE RGM 7. Eskom Preparations towards RED ONE Establishment 10 min ESKOM 8. Discussions 8.1 RED ONE Restructuring Matters 8.2 Debate and Acceptance of REF Terms of Reference 8.3 Setting Date for First RED ONE Sponsors Committee 30 min ALL 9. Way Forward 10 min Deon Louw: RED ONE RGM 10. Closing Remarks 10 min SALGA Northern Cape 13h30 60 min 20 July 2007 Slide 59

60 Agenda # POINTS FOR DISCUSSION TIME RESPONSIBLE REGISTRATION 9h00-10h30 1. Opening 5 min Deon Louw: RED ONE RGM 2. Welcoming Address 15 min Executive Mayor Johnson: SALGA 3. Purpose of the Regional Engagement Forum 10 min Deon Louw: RED ONE RGM 4. EDI Restructuring 30 min Dr. W de Beer: COO EDI Holdings 5. Discussions 30 min ALL TEA BREAK@12H00 15 min 6. Municipal Preparations towards RED ONE Establishment 15 min Deon Louw: RED ONE RGM 7. Eskom Preparations towards RED ONE Establishment 10 min ESKOM 8. Discussions 8.1 RED ONE Restructuring Matters 8.2 Debate and Acceptance of REF Terms of Reference 8.3 Setting Date for First RED ONE Sponsors Committee 30 min ALL 9. Way Forward 10 min Deon Louw: RED ONE RGM 10. Closing Remarks 10 min SALGA Northern Cape 13h30 60 min 20 July 2007 Slide 60

61 THANK YOU 20 July 2007 Slide 61