Independent Power Producers Procurement Programme (IPPPP) An Overview

Transcription

1 Independent Power Producers Procurement Programme (IPPPP) An Overview As at 31 March 2015

2 1 Table of Contents Page IPPPP Context and Highlights 2 The REIPPPP Contribution 11 Energy supply capacity impact 17 National impacts 30 Investment / economic and socio-economic contribution 31 Climate change 45 Provincial and community impacts 46 Appendix A Clarification notes, glossary of terms and icons A

3 2 IPPPP context and highlights

4 3 Introduction Introducing the context for the IPPPP The National Development Plan (NDP) identifies the need for South Africa to invest in a strong network of economic infrastructure designed to support the country s mediumand long-term economic and social objectives. Energy infrastructure is a critical component that underpins economic activity and growth across the country; it needs to be robust and extensive enough to meet industrial, commercial and household needs. The NDP requires the development of 10,000 MWs additional electricity capacity to be established by 2025 against the 2013 baseline of 44,000 MWs. The (policy adjusted) Integrated Resource Plan (IRP) developed the preferred energy mix for meeting the electricity needs over a 20 year planning horizon to In line with the national commitment to transition to a low carbon economy, 17,800 MW of the 2030 target are expected to be from renewable energy sources, with 5,000 MW to be operational by 2019 and a further 2,000 MW (i.e. combined 7,000 MW) operational by Planning requirements 2 further include capacity to supply for base load and medium term risk mitigation (MTRM) plans. In May 2011, the Department of Energy (DoE) gazetted the Electricity Regulations on New Generation Capacity (New Generation Regulations) under the Electricity Regulation Act (ERA). The ERA and Regulations enable the Minister of Energy (in consultation with NERSA) to determine what new capacity is required. Ministerial determinations give effect to components of the planning framework of the IRP, as they become relevant. New capacity determinations include: MW of renewable energy MW designated from coal-fired plants 800 MW of cogeneration under the MTRM plan MW of gas-fired power plants (2 652 MW base load MW MTRM) MW of imported hydro Opening the market for IPPs A significant share of the new electricity capacity will be developed and produced by Independent Power Producers (IPPs). The introduction of private sector generation offers multiple benefits. It will contribute to the diversification of both the supply and nature of energy production, assist in the introduction of new skills and in new investment into the industry, and enable the benchmarking of performance and pricing. Note 1. Electricity Regulations on the Integrated Resource Plan , under the Electricity Regulation Act, 2006 (Act No. 4 of 2006) as promulgated and gazetted on 6 May Note 2. Given effect by various Ministerial Determinations.

5 The New Generation Regulations establish rules and guidelines that are applicable to the undertaking of an IPP Bid Programme and the procurement of an IPP for new generation capacity. These guidelines include: compliance with the IRP; the acceptance of a standardised power purchase agreement (PPA); a preference for a plant location that contributes to grid stabilisation and mitigates against transmission losses; and a preference for a plant technology and location that contributes to local economic development. The Independent Power Producers Procurement Programme (IPPPP) Office and mandate The Department of Energy (DoE), National Treasury (NT) and the Development Bank of Southern Africa (DBSA) established the IPPPP Unit for the specific purpose of delivering on the IPP procurement objectives. In November 2010 the DoE and NT entered into a Memorandum of Agreement (MoA) with the DBSA to provide the necessary support to implement the IPPPP and establish the IPPPP Office. The programme s primary mandate is to secure electrical energy from the private sector for renewable and non-renewable energy sources. With regard to renewables, the programme is designed to reduce the country s reliance on fossil fuels, stimulate an indigenous renewable energy industry and contribute to socio-economic development and environmentally sustainable growth. Non Renewable 2 Energy Procurement Coal (base load) Cogeneration Gas The IPPPP has been designed not only to procure energy, but has been structured to also contribute to the broader national development objectives of job creation, social upliftment and broadening of economic ownership. The programme is contributing to alleviating the electrical energy shortfall South Africa is facing. In this context the Department of Energy (DoE) is in the process of procuring significant additional renewable energy, coal, gas and cogeneration capacity from the private sector to fill the electricity supply gap up to This implies a sharp ramp-up in procurement to MW. To contextualise this capacity, it is equivalent to introducing 3.5 times the Medupi plant capacity, within a period of only 10 years. The activities of the office are in accordance with the capacity allocated to renewable energy and non-renewable generation in the Integrated Resource Plan (IRP) 2010; subsequent ministerial determinations and DoE support service requirements. The IPPPP Office provides the following services: Professional advisory services; Procurement management services; Monitoring, evaluation and contract management services (as from 7 July 2014) with contract period up to 30 years. 1 3 Renewable Energy Procurement Advisory services 4 REIPP Procurement Programme (onshore wind, solar PV, CSP, small hydro, biomass, biogas, landfill gas) Small RE IPPs Hydro Cogeneration (from agricultural waste / byproducts) Gas Utilisation Master Plan (GUMP) Small projects fund Biofuels

6 The IPPPP has been applauded 1 for effectively avoiding the quicksand of laborious administrative arrangements, without undermining the quality or transparency of the programme. The IPPPP partnership is funded by a Project Development Facility (PDF) financed through bid registration fees payable by all bidders and the Development Fee paid by selected bidders. An evolving scope of services Economic growth and development Industry Physical 5 The IPPPP Office has three interrelated focus areas: It is a key procurement vehicle for delivering on the national renewable energy capacity building objectives; It is responsible for securing electricity capacity from IPPs for non renewable energy sources as determined by the Minister of Energy; and It is providing advisory services, related to programme / project planning, development, delivering and financing focused on creating an enabling and stable market environment for IPPs. Civil society Energy access and security Energy sources Carriers Markets & demand sectors Social Boundary constraints Government Environmental sustainability The IPPPP activities continue to evolve in order to effectively respond to the planning and development needs in the current energy context. As an example, the IPPPP Office has been requested to coordinate the development of the Gas Utilisation Master Plan (GUMP) that will in turn guide the procurement of the required gas capacity as per the IRP Energy triangle 2 Increasingly, a sound, comprehensive energy strategy is structured as a triangle with the three sides denoting, respectively: promoting economic development, providing energy security and access while achieving environmental sustainability. South Africa s current electricity development strategy aims to achieve a greater balance between these three aspects, focusing on achieving a balanced energy mix to include more gas and renewables. An appropriate approach to development of a sustainable energy portfolio has to take cognizance of how new development and capacity delivers against the imperatives of the energy triangle. Renewable energy procurement approach Historically, feed-in tariffs (FITs) have been the most widely used international government policy instrument for procuring renewable energy (RE) capacity. After investigating a REFIT, the South African government favoured a competitive tender approach that has proven to be exceptionally successful for attracting substantial private sector expertise and investment into gridconnected renewable energy at competitive prices. Tenders are structured as a rolling bid-window programme that not only allows for continued market interest, but increased competitive pressure among bidders to participate and offer reduced pricing. In achieving a competitively priced, clean energy bid programme, the IPPPP is meeting successfully the challenges of the energy triangle through the Renewable Energy Independent Power Producers Procurement Programme (REIPPPP). Note 1. South Africa s Renewable Energy IPP Procurement Program: Success Factors and Lessons, May 2014, World Bank Group. Note 2. Source: World Economic Forum Global Energy Architecture Performance Index Report (2013).

7 6 IPPPP - giving effect to the IRP 2010 diversified energy mix Baseload/midmerit determination 25 May 2012 Share of total new (GW) 29% 9% 4% 2% 17% 5% 33% 1% Baseload/midmerit determination 25 May New builds Existing fleet (2010) Procurement Primary procurement focus Coal (base load) 1 Cogeneration 2 Gas (Monitoring of DoE IPP Peaking Plant) Renewable Energy determinations 1 Aug 2011 and 19 Dec 2012 REIPPPP 3 (onshore wind, solar PV, CSP, small hydro, biomass, biogas, landfill gas) Advisory Planning and strategy development inputs in support of the future procurement objective: Gas Utilisation Master Plan (GUMP) Biofuels programme alignment Energy share % 5% 0% 4% 4% 5% 0% 1% % 8% 3% 3% 13% 5% 21% 1% Small REIPPs 3 Hydro Small projects fund Denotes active programmes Note 1. Ministerial Determination Baseload/mid-merit determination 25 May Note 2. Ministerial Determination for Medium Term Risk Mitigation (MTRM), 19 December Note 3. Ministerial Determinations for REIPP, 1 August 2011 and 19 December Note 4. New builds include all. Note 5. Energy share 2030 takes into consideration decommissioned coal units (10.9GW) and previously committed Wind and CSP (i.e. 1.0 GW over and above 17.8 GW IPP target).

8 7 IPPPP - portfolio status at a glance Summary of the current status for each of the IPPP programmes in terms of the determinations by the Minister of Energy to date. Carrier (Capacity determined) 1 Master planning Project preparation RFP Bid submission Bid announce ment Financial close COD Coal (2 500 MW) IRP completed 15 Dec 2014 Q1 2015/16 Q2 2015/16 Q4 2015/16 End 2020 Cogen (800MW) IRP completed Q2 2015/16 Q2 2015/16 Q2 2015/16 Q3 2015/16 Q3 2016/17 Gas (3 126MW) IRP & GUMP 4 concept stage Peakers (1 020MW) IRP completed completed completed completed Sept and 2016 Renewable energy (6 925 MW) Bid window 1 IRP completed 3 Aug Nov Dec Nov 2012 Bid window 2 IRP completed 3 Aug Mar Mar May % COD 96% GC 3 47% COD 63% GC 3 Bid window 3 IRP completed 3 May Aug Oct 2013 Q1 2015/ Bid window 3.5 IRP completed - 31 March Dec 2014 Q2 2015/16 - Bid window 4 IRP completed 26 May Aug 2014 Q1 2015/16 Q3 2015/16 - Bid window 5 IRP Concept stage Q3 2015/16 Q1 2016/17 Q2 2016/17 Q4 2016/17 - Small renewables (50 MW of 200MW) IRP ongoing Aug 2013 Oct May 2015 April 2015 Q1 2015/16 Q3 2015/16 - Where COD Commercial Operation Date, FC Financial Close; RFP Request for Proposals; IRP Integrated Resource Plan (*Green areas indicate milestones completed with completion dates shown. Grey areas indicate planned milestone dates.) Note 1. Determined capacity is indicated in bold and bracketed (MW). Note 2. Two phase RFP process to evaluate for selected and preferred bidders (refer report for detail). Note 3. GC Grid connected. Note 4. The Gas Utilisation Master Plan is currently being developed. Note of the 17 projects have signed on 11 December Two IPPs still need to sign to finalise financial close.

9 8 IPPPP - highlights to date, with REIPPPP being the most advanced MAKING TOP 10 OVER It was a well-run process which could be duplicated in other countries, and hopefully also in other sectors in South Africa 1 1 South Africa enters solar power world top 10 - Emile Du Toit, head of infrastructure investment with Harith General Partners and chairman of the Southern African Venture Capital and Private Equity Association, Feb With respect to established utility scale capacity (installations of 5MW and larger) 2 - South Africa info, July 2014 Amongst top 10 RE investing countries in 2014 UNEP's 9th Global Trends in Renewable Energy Investments, It s really the big story on the continent. You definitely don t see that kind of scale or that kind of level of investment, nor participation from international investors anywhere else in Sub-Saharan Africa. 1 hugely successful. 1 - Margo Buchanan, specialist consultant in the power sector for Futuregrowth Asset Management, Feb 2015 Note 1. Reported by AFK Insider, Feb 2015; Note 2. Based on Wiki-Solar database, Wiki-Solar is a leading authority on the deployment of utility-scale solar power - photovoltaic (PV) power stations of 5 to 10 megawatts (MW) and above. Note 3. Prepared by Frankfurt School-UNEP Collaborating Centre for Climate & Sustainable Energy Finance and Bloomberg New Energy Finance, March 2015

10 The REIPPPP is successfully delivering clean energy timeously and cost effectively Since the first IPP achieved commercial operation in November 2013, up to March 2015, MW RE production capacity has been connected to the power grid of which 187 MW started commercial operation during the last semester of the 2014/15 financial year. Even without a full year of production by those IPPs that only concluded construction during the course of the year, 3.0 TWh of energy was generated and supplied to the network in FY 2014/15. Highlights include: 187 megawatts generation capacity started commercial operation during the last quarter with a total of MWs operational by Q /15 N9 9 Delivery of critical generation capacity quickly (short lead times) and on time. 92% of IPPs have reached commercial operation as scheduled 1 7 Q3 2013/ Q4 2013/ Q1 2014/15 planned: 1852MW Q2 2014/ Q3 2014/ Q4 2014/15 MW actual megawatts operational REIPPs have consistently delivered capacity according to schedule since the end of % - 19% R/kWh BW 1 BW 2 BW 3 The REIPPPP is delivering energy at increasingly cost competitive rates REIPPPP estimated 2 price trends Energy weighted average (R/kWh) considering average technology RFP submission price (published) for each bid window and the projected annual energy contribution / share per technology type. Already reduced carbon emissions 3 as a result of energy generated from RE sources (vs national grid) towards the global climate change imperative a number that will only grow as production increases 3.3 M ton CO 2 Note IPPs have reached commercial operation date (COD) out of 38 that were planned by end 2014/15 FY. Refer Appendix A for applicable definitions and terminology. Note 2. Contracted price (at which power is sold to Eskom) per IPP was weighted with consideration of the technologies and their relative, projected annual energy contribution (P50) (in April 2013 terms). BW 3 estimated rate incorporates the peak tariff (270% of base rate) applicable to CSP. BW 3.5 is not included as it is technology specific. Note 3. For actual achievements only BW 1 and 2 data is reported BW 3 and 3.5 have not completed financial close. Carbon emission reductions reflect all energy generated Inception to date.

11 And supporting broader development objectives 10 In achieving these milestones, the IPP procurement programme (IPPPP) also contributed to important development objectives in the country. Shareholding 31% Shareholding by Black South Africans across the complete supply chain (for the 47 projects in BW 1 + 2) with 9.2% held by local communities in BW % local content achieved in construction in BW 1 and 2 local content reported as percentage of Total Project Value 1 achieved during construction 146 % of planned employment achieved during construction (BW 1 + 2) 2,3 46% more direct employment opportunities for South African citizens reported ( vs job years 1,2 ) during construction than originally projected by developers0 + 3 times more people from local communities employed by IPPs during construction than was contractually required 26% of 45 percent FDI in if only foreign equity in the REIPPPP is considered The total foreign equity and financing invested in REIPPs (BW 1, 2, 3 & 3.5) to date R40.1billion, is equivalent to 45% of the total FDI attracted into South Africa in 2013 (US8.2bn) 4 If only foreign equity in the three and a half bid windows is considered (R22.8 billion), the foreign direct investment contribution of the REIPPPP is 26% that of the total in South Africa in Note 1. Refer Appendix A for applicable definitions and terminology. Note 2. Employment / Job creation measured in job years (equivalent of a full time employment opportunity for one person for one year). Note 3. For actual achievements only BW 1 and 2 data is reported, BW 3 and 3.5 has not completed financial close (15 IPPs have reached financial close on 11 December 2014, but 4 projects still need to sign for financial close to be finalised). Note 4. UNCTAD World Investment Report 2014, UNCTAD Global Investment Trends Monitor suggests FDI into Africa fell by 3% in 2014 no specific data for South Africa reported (Exchange rate used: $1 = R10.91).

12 The REIPPPP contribution 11

13 12 National Development Plan (NDP) Making a broader contribution Outcome Primary focus IPP 1 Quality basic education n/a 2 A long and healthy life for all South Africans 3 All people in South Africa are and feel safe 4 Decent employment through inclusive economic growth 5 A skilled and capable workforce to support inclusive growth 6 An efficient, competitive and responsive economic infrastructure network 7 Vibrant, equitable, sustainable rural communities contributing towards food security for all 8 Sustainable human settlements and improved quality of household life 9 Responsive, accountable, effective and efficient developmental Local Government system 10 Protect and enhance our environmental assets and natural resource 11 Create a better South Africa, contribute to better and safe Africa in a better world 12 An efficient, effective and development orientated public service 13 An inclusive and responsive social protection system 14 Nation building and social cohesion D D = Direct, ID = Indirect, n/a = Not Applicable ID n/a D D D ID D ID D ID n/a n/a Infrastructure investment is a key priority of the National Development Plan (NDP). The NDP identifies the need for South Africa to invest in a strong network of economic infrastructure designed to support the country s mediumand long-term economic and social objectives. This chosen procurement approach has further enabled the programme to effectively target and contribute to several of the national outcomes as defined in the NDP. Across the 14 stated national outcomes, the IPP programme contributes directly and indirectly to 10 of these. The most significant contribution is however towards Outcome 6: An efficient, competitive and responsive economic infrastructure network. In terms of electricity infrastructure planning, the NDP translated the IRP 2010 long-term planning framework into prioritised, intermediate milestones as captured in the Medium Term Strategic Framework (MTSF). The key target for electricity infrastructure development is to increase the electricity generation reserve margin from 1% (2014) to 19% in 2019 to ensure the continued, uninterrupted supply of electricity in the country. The corresponding MTSF interim delivery targets for Outcome 6 therefore require the development of MWs additional electricity capacity to be commissioned by 2019 against the 2010 baseline of MWs. Outcome 6, as it relates to electricity infrastructure that supports efficient, competitive and responsive economic development, is the principal NDP-defined outcome relevant to the DOE. The procurement and support services of the DBSA/IPPPP Office, as IPP Procurement Office for the DOE, will therefore contribute directly and primarily towards this Outcome.

14 13 Outcome 6 Creating (clean) energy supply infrastructure Outcome 6 - as it relates to electricity infrastructure that supports efficient, competitive and responsive economic development - is the principal NDP-defined Outcome relevant to the DoE and the IPPPP. The NDP sets a target of MW of new generation capacity to be commissioned by 2019 to ensure the continued, uninterrupted supply of electricity in the country. The NDP further specifies that of this target, MW 2 should be from renewable energy sources, with a additional MW 3 procured (to become operational within the following year) during the same timeframe. The REIPPPP gives effect to these objectives through the procurement of IPPs for new generation capacity in accordance with determinations by the Minister of Energy. Strategic Infrastructure Projects (SIPs) are vehicles created for implementation and coordination, planning, integration and monitoring of the infrastructure development targets (sub-outcome 3). The REIPPPP constitutes a key element of the Strategic Infrastructure Programme (SIP) 8: Green energy in support of the South African economy. The REIPPPP has therefore been designed to procure renewable energy generation capacity and to contribute towards socio- Outcome 6 An efficient, competitive and responsive economic development infrastructure network, including Strategic Infrastructure Projects. Outcome 6 Impact indicators 1 Impact indicator 1 Adequate electricity generation capacity commissioned 2 Electricity generation reserve margin increased Baseline MW (Eskom) Relevant sub outcomes Sub Outcomes 2019 target MW (added) 1% 19% Sub-Outcome 2: Reliable generation, transmission and distribution of energy ensure: Electricity, liquid fuels, coal and gas Sub-Outcome 3: Coordination, planning, integration and monitoring implementation of SIPs economic and environmentally sustainable growth in South Africa. The REIPPPP aims to stimulate the local renewable energy industry, including developers, contractors and manufacturing. The Energy Supply Footprint section reports on the progress made in terms of generation capacity building, providing the required supply infrastructure in direct support of economic activity / growth. Baseline (year) 44,000 MW (Eskom) 2019 Target 10,000 MW added to the baseline of which 5,000 MW RE operational + additional 2,000 MW contracted Baseline 1 % reserve margin Target 19 % by 2019 Note 1. A selection of relevant indicators only. Note 2. Sub-outcome 2, item 26. Note 3. Sub-outcome 2, item 18.

15 Outcomes 2, 4, 5, 7, 8, 9, 10, 11 and Making a broader contribution In order to leverage the REIPPPP for purposes of economic and socio-economic development, an exemption from the Preferential Procurement Policy Framework Act, 2000 (PPPFA) and the 2011 regulations under the Act, was secured for the REIPPPP to set minimum achievement targets not ordinarily set in terms of other legislation and policy instruments and to induce competitiveness in offering higher target commitments. The exemption was granted by the Minister of Finance on 22 July 2011 and on the understanding that the DoE is aiming to maximise opportunity to still achieve certain economic development objectives that includes the following ones: Job creation, with the emphasis on jobs for South African citizens, South African citizens who are black people and South African citizens from local communities; Local content, with the view that a certain percentage of the project value would be spent in South Africa; Ownership, with the aims to advance ownership by black people and local communities; Management Control, with the aim to achieve the involvement of black people in management positions and responsibilities; Procurement, with focus on subcontracting to empowered enterprises, black enterprises and enterprises owned by women; Enterprise Development, with the aim of development of emerging enterprises, and those merging enterprises located in local communities; and Socio-economic Development, which attempts to address the socio-economic needs of local communities. Key to the design of the REIPPPP is supporting the DoE s commitment to contribute to the achievement of outcomes 4, 10, 2, 7 and 8 thereby setting in motion a virtuous cycle of development growth associated with the REIPPPP. Progress of the REIPPPP against these parameters is reported in the Economic, Social and Environmental footprint section. At a provincial and project level the REIPPPP also contributes to Outcomes 2 and 9 where IPP community development projects are relevant. Outcome 2 Improved health facility planning and infrastructure delivery. Socio economic commitments under the REIPPPP is predominantly focused on health care and education. Activities include building, upgrading and improvement of facilities for schools, hospitals and clinics, amongst others. Outcome 9 Members of society have sustainable and reliable access to basic services. A contribution towards this outcome is made through community projects that include infrastructure development such as development of roads or electrification of local communities.

16 Item Engage Report + align Alignment with Strategic Infrastructure Projects (SIPs) 15 Government adopted a framework consisting of 18 Strategic Infrastructure Projects that is intended to transform the economic landscape of South Africa, create a significant number of new jobs, strengthen the delivery of basic services to the people of South Africa and support the integration of African economies. In order to address these challenges and goals, Cabinet established the Presidential Infrastructure Coordinating Committee (PICC) to: coordinate, integrate and accelerate implementation; develop a single common National Infrastructure Plan that will be monitored and centrally driven; identify who is responsible and hold them to account; and develop a 20 year planning framework beyond one administration to avoid a stop-start pattern to the infrastructure rollout. Under their guidance, 18 strategic integrated projects (SIPs) have been developed. The SIPs can be grouped into the following broad areas: Five geographically-focused SIPs; Three energy SIPs; Three spatial SIPs; Three social infrastructure SIPs; In this context (through engagement with the PICC secretariat) the IPPP Programme has identified the SIPs that have engagement (to leverage synergy around economic and socio economic development) and reporting (for alignment and integration purposes) requirements related to the IPPP programme (subsequent table). The Green Energy Strategic Infrastructure Programme (SIP 8), that operationalises NDP Outcome 6, reinforces the RE infrastructure imperative with a target to deliver 6,725 MW RE through IPPs by 31 March 2019 (excluding 200 MW for small scale RE projects). Strategic Infrastructure Project 1 SIP 1: Unlocking the northern mineral belt with Waterberg as the catalyst Co-ordinating institution: Eskom Description: Unlock mineral resources as well as infrastructure such as rail, water pipelines, energy generation and transmission infrastructure. Urban development in Waterberg. Rail capacity to Mpumalanga and Richards Bay. Shift from road to rail in Mpumalanga. Logistics corridor to connect Mpumalanga and Gauteng. 2 SIP 3: South-Eastern node & corridor development Co-ordinating institution: Transnet Description: New dam at Mzimvubu with irrigation systems. N2-Wild Coast Highway which improves access into KwaZulu-Natal and national supply chains. Strengthen economic development in Port Elizabeth through a manganese rail capacity from Northern Cape; a manganese sinter (Northern Cape) and smelter (Eastern Cape). Possible Mthombo refinery (Coega) and trans shipment hub at Ngqura and port as well as rail upgrades to improve industrial capacity and performance of the automotive sector. 3 SIP 5: Saldanha-Northern Cape development corridor Co-ordinating institution: IDC (Industrial Development Corporation) Description: Integrated rail and port expansion. Back-of-port industrial capacity (including an IDZ). Strengthening maritime support capacity for oil and gas along African West Coast. Expansion of iron ore mining production and beneficiation. X X X X SIP target for RE 6,725 MW By 2019 IPP Quarterly Report Quarter /15 Final

17 Item Engage Report + align Item Engage Report + align Strategic Infrastructure Project 4 SIP 8: Green energy in support of the South African economy Co-ordinating institution: IDC (Industrial Development Corporation) Description: Support sustainable green energy initiatives on a national scale through a diverse range of clean energy options as envisaged in the Integrated Resource Plan (IRP2010). Support bio-fuel production facilities. X X Strategic Infrastructure Project 8 SIP 17: Regional integration for African cooperation and development Co-ordinating institution: To be determined Description: Participate in mutually beneficial infrastructure projects to unlock longterm socio-economic benefits by partnering with fast-growing African economies with projected growth ranging between 3% and 10%. X 16 5 SIP 9: Electricity generation to support socio-economic development Co-ordinating institution: Eskom Description: Accelerate the construction of new electricity generation capacity in accordance with the IRP2010 to meet the needs of the economy and address historical imbalances. Monitor implementation of major projects such as new power stations: Medupi, Kusile and Ingula. X X 9 SIP 18: Water and sanitation infrastructure Co-ordinating institution: TCTA (Trans- Caledon Tunnel Authority) Description: A 10-year plan to address the estimated backlog of adequate water to supply 1.4 m households and 2.1 m households to basic sanitation. The project will involve provision of sustainable supply of water to meet social needs and support economic growth. X 6 SIP 10: Electricity transmission and distribution for all Co-ordinating institution: Eskom Description: Expand the transmission and distribution network to address historical imbalances, provide access to electricity for all and support economic development. Align the 10 year transmission plan, the services backlog, the national broadband rollout and the freight rail line development to leverage off regulatory approvals, supply chain and project development capacity. X X The DoE is conducting the monitoring and progress with regard to the implementation of the IPP projects through its IPPPP office. The DoE retains the responsibility to report on programme achievements of SIP 8 and SIP 9 to the PICC structures. With respect to SIP 9, Electricity generation to support socio-economic development that is coordinated by Eskom, the IPPPP Ofice, in providing a monitoring function, collates and supplies status information on the two OCGT peaker IPPs. 7 SIP 16: SKA & Meerkat Co-ordinating institution: SKA (Square Kilometre Array) Description: SKA is a global mega-science project, building an advanced radio-telescope facility linked to research infrastructure and high-speed ICT capacity and provides an opportunity for Africa and South Africa to contribute towards global advanced science projects. X SIPS: Addressing spatial imbalances through targeted infrastructure investment, Source: Presidential Infrastructure Coordinating Commission

18 The REIPPPP contribution: Energy supply footprint NDP, Outcome 6 17

19 18 The procured portfolio of RE capacity N1 REIPPPP capacity procured Capacity (GW) 24 percent 17.8 GW by 2030 (IRP, NDP) 7 GW procured by 2019 to be operational by 2020 (NDP) 6.9 GW determined of the 2020 target for RE is already operational (March 2015) Energy mix Share of available capacity (GW) 4.1 GW procured (BW 1, 2, 3 & 3.5) 1.7 GW commissioned (operational) Delivery on Outcome 6 targets and the REIPPPP procurement mandate The renewable energy IPP procurement programme has successfully procured 4.1 GW in bid windows (BW) 1 to 3.5. Of this, 2.5 GW (from BW 1 and 2) are at various stages of construction or has commenced with commercial operation. By end March 2015, 1.7 GW of the procured capacity had already started operations. In terms of national targets for renewable energy capacity, as defined by the IRP and National Development Plan, this represents 10% towards the 2030 target and 24% towards the 2020 target (i.e. 7 GW RE capacity to be procured by 2019 and commissioned by 2020). 2.9 GW is still to be procured to meet the 2020 procurement target. It is anticipated that bid window 4 will contribute significantly towards the remaining 2.9 GW requirement. Energy Capacity N1 Refer Appendix (interpretation notes) for a complete breakdown of targets Wind 47% CSP 6% Solar PV 47% -11 % +1 % CSP 15% Wind 48% Landfill, Hydro, Biomass, Biogas 1% Solar PV 36% Achieving the desired energy mix The energy mix of the procured RE IPP portfolio is well aligned with the IRP planned mix as targeted for IRP 2010 plan: RE (new build, excluding hydro) 21% of total capacity by % IRP 2030 IRP 2020 Determined Actual (Procured) Landfill,Hydro, Biomass, Biogas CSP Wind Solar PV The relative share from both CSP and wind is marginally higher than the original plan, with the solar PV share 11% lower in the current mix. The slight divergence from the IRP 2010 is informed by technology, price and system requirements and follows from the two ministerial determinations in 2010 and 2011.

20 Technology capacity allocation Capacity (MW) Wind PV CSP Landfill,Hydro, Biomass, Biogas In two separate ministerial determinations (2011 and 2012), the Minister of Energy determined that MW power from renewable energy be procured, drawing from the following technologies: onshore wind; solar photovoltaic; concentrated solar power (CSP); biogas; biomass; landfill gas, and small hydro. The determinations provide for the capacity contributions from the respective technologies towards the MW as shown in the figure to the left. 19 Capacity breakdown (procured) Capacity (MW) 66 IPP projects Megawatts REIPPPP estimated 3 price trends Energy weighted average (R/kWh) % % Per window (MW) 1.14 BW BW BW BW BW 1 BW 2 BW 3 Medupi I Kusile Medupi E Note: REIPPPP prices expressed in April 2013 terms 2 Per technology (MW) Other 49 Wind onshore Solar CSP 600 Solar PV N8 The determinations have been implemented in rolling bid windows with three and a half (1, 2, 3 and 3.5) bid windows successfully completed in the first three years. The number of projects, capacity contribution and technology share resulting from the procurement process towards the overall target are illustrated on the left. In terms of progress, this represents 60% of the already determined capacity. Cost effectiveness of the REIPPPP (Actual bid prices) In line with international experience, the price of renewable energy is increasingly cost competitive with conventional power sources. The REIPPPP has effectively captured this global downward trend with prices decreasing in every bid window. Energy procured by the REIPPPP is progressively more cost effective and rapidly approaching a point where the wholesale pricing for new coal- and renewable-generated energy intersects. Eskom published LCOEs 1 for Medupi and Kusile in 2012 quoted R0.54 and R0.73/kWh respectively. Cost over-runs, increases in financing and (expected) increases in operational (including coal) costs prompted industry to challenge the validity 2 of Eskom s cost projections. Industry counter estimates at the time for the LCOE of Medupi was R0.97/kWh. Considering the ongoing delays in completion, indications are that these costs may even be significantly higher. 60% of the determined capacity procured Refer Page 20 for detail of the price tends per technology and BW 3.5 Refer note N8 for detail of the portfolio average estimate where: Medupi I - industry estimate Medupi E Eskom figure Note 1. Levelised Cost Of Electricity. Note 2. MAC Consulting report (extract presented by Eskom), EIUG analysis on a levelised cost scenario of Eskom s New Build programme, NERSA media statements (2012). Latest industry estimates are about R1.05/kWh (SAWEA). Note 3. Contracted (at which power is sold to Eskom) price (in 2013 terms) per IPP was weighted with consideration of the technologies and their relative, projected annual energy contribution (P50). BW 3 estimated rate incorporates the peak tariff (270% of base rate) applicable to CSP (refer interpretation notes for additional detail).

21 Average technology tariffs 3 R/kWh Average Per bid window - 43% N8 In comparison, the estimated, average portfolio 1 cost for the REIPPPP has dropped consistently in every bid period to an average 1 of R1.14/kWh in BW 3. Cost effectiveness of RE technologies 20 R % - 7% Pricing and trends vary across the respective technologies, but have shown a similar downward trend. R % R R R Ave of base rate only The price for wind power has dropped by 43%, with the bid window 3 price directly comparable 2 with the per kwh price of new coal generation. Solar PV has dropped most significantly with a price decreases of 68% between the first and the third bid windows. CSP rates in BW 3 and 3.5 were differentiated with a base and peaking rate component, therefore indicated separately. The average rate of CSP decreased by 6% between bid window 1 and 2 and by 7% from 3 to 3.5 (average base rate) 4. R Technology capacity procured Per technology per bid window (MW) Hydro 14 BW 1 BW 2 BW 3 BW 3.5 Biomass 17 Landfill 18 Conc Solar Solar PV Wind Prices contracted under the REIPPPP for all technologies are well below the published REFIT prices. The REIPPPP has effectively translated policy and planning to deliver clean energy at very competitive prices. As such it is contributing to the national aspirations of secure, affordable energy, lower carbon intensity and a transformed green economy. Technology contributions The mix of renewable energy has varied very little between bid windows. Solar PV and wind have dominated the first three bid windows. Later bid windows have however showed some diversity. Small hydro technology was procured only in bid window 2 while biomass and landfill gas were procured in bid window 3 only. Note 1. Contracted price (at which power is sold to Eskom) per IPP was weighted with consideration of the technologies and their relative, projected annual energy contribution (P50). BW 3 estimated rate incorporates the peak tariff (270% of base rate) applicable to CSP (refer interpretation notes for additional detail). Note 2. Without considering the technical differences in availability and load factors. Note 3. Fully indexed price, inflation adjusted (2013). Note 4. The peaking rate is 270% of the base rate i.e. an average of R4,13/kWh for BW3.5.

22 Procured vs determined Capacity Per technology (MW) 21 Determined MW 60% 600 MW 100% MW 59% Procured Procured Operational Procured 600 Operational 100 Procured Operational 960 Progress in terms of the targeted capacity from the respective technologies, as per the ministerial determinations, has been made as shown on the left. To date, 60% of the targeted capacity for the total programme has been procured. The full 600 MW allocated to CSP has been procured, while total procurement of wind and solar PV technologies to date are 60% and 59% respectively. 480 MW 10% 480 Procured 49 Operational 10 Price effectiveness Bids totalling 11.7 GW has been received under the REIPPPP bidding process. From these, 4.1 GW were procured under BW This overwhelming response confirms the significant potential for renewable energy in the country, but also the significant market interest in establishing renewable energy supply capacity. The enthusiastic response has allowed selective procurement, ensuring that the strongest bids in terms of price, capacity, technology and developmental criteria could be selected. The number of qualifying and competitive bids in windows 2 onwards 1 exceeded the available allocation or cap that could be procured. This suggest that if more RE capacity could be accommodated on the system, the supply is available. This has clearly communicated the message to bidders that offering the most competitive bid possible is critical for a successful bid. This market learning is most evident in the (declining) price trends observed between bid windows issued to date. Note 1. Bid 1 submissions exceeded the available capacity cap, but a large number of bids failed to comply with all bid requirements. Non compliance was ascribed to the unfamiliar process and short submission preparation time (3 months).

23 Project Distribution Number of projects OW SH BM LG CS PV Key learnings identified Closer collaboration / improved alignment with Provincial energy strategies, spatial planning and development plans are important to optimise the benefits of the REIPPPP to the province. Forums are being created to facilitate improved interaction and alignment Geographic distribution IPP project distribution has automatically aligned with the occurrence of renewable energy resources. Solar has contributed the largest number of IPPs with PV and CSP IPPs making up 40 of the 66 projects. Solar projects are concentrated in the Northern Cape where the radiation intensity in the country is the highest. As a result, the Northern Cape has received the bulk of the projects (34 of 66 in Bid windows 1, 2, 3 and 3.5) and should see the benefit from the significant associated investments and the socio economic commitments that has been secured for local communities through the procurement process. Wind projects are largely located along the coastal regions of the Eastern Cape and Western Cape provinces based on the strong wind flows along these shores. After the Northern Cape, the Eastern and Western Cape share the largest number of the remaining IPPs (13 and 9 projects respectively). 10 IPPs are distributed amongst the 5 other provinces. Mpumalanga is the only province where there currently is no project registered. Bid Window 3 included the first landfill gas and the first biomass IPPs as well as the first projects in both Gauteng and KwaZulu Natal. Generation from landfill gas and biomass power plants are less constrained by energy availability and typically offers higher load factors. Higher load factors, availability during peak demand hours, increasing energy diversity and a larger distribution footprint of generation capacity further contribute to the value of the renewable energy portfolio. 22 Refer Page 48 for provincial distribution information

24 Technology distribution The geographical distribution of projects is largely based on favourable resource conditions, in particular solar radiation and wind flows throughout the year, as illustrated below. 23 Under construction No financial close yet Operational Started operation last quarter Expected to cstart operation next quarter Solar maps for South Africa, Lesotho and Swaziland, GeoModel Solar 1 Completed not grid connection Under construction No financial close yet Operational Started operation last quarter Expected to start operation next quarter Wind Atlas of South Africa (WASA), Large Scale High Resolution Wind Resource map Completed not grid connection Mean wind speed 100m WAsP modelled, 250 m resolution Under construction No financial close yet Operational Started operation last quarter Expected to start operation next quarter Solar maps for South Africa, Lesotho and Swaziland, GeoModel Solar 1 Completed not grid connection Note 1. Developed in partnership between Centre for Renewable and Sustainable Energy Studies, University of Stellenbosch and Group for Solar Energy Thermodynamics (GSET) at UKZN (2014),

25 2013_Q4 2014_Q1 2014_Q2 2014_Q3 2014_Q4 2015_Q1 2015_Q2 2015_Q3 2015_Q4 2016_Q1 2016_Q2 24 Building capacity to power the country Operational capacity Energy 35 of the 47 projects in BW 1 and 2 have successfully completed construction (3 in last quarter). The average construction lead time for the current portfolio of projects has been 579 days (~1.6 years). Two projects have started operating early (EOP) 1 in Q4. There are currently 9 projects still in construction. Another project has completed construction, but have not reached COD because of delays with grid connection. Capacity REIPPPP status snapshot In the combined portfolio (66 projects in total for BW 1 3.5): 35 of the 47 IPPs in BW 1 and 2 have completed construction and is already in operation. There are 12 projects in BW 1 and 2 that have not reached COD yet. 9 projects are still in construction, 2 projects have started operating early, and 1 project completed construction but has not been connected to the grid due to delays, and is receiving deemed savings. The 35 operational projects contributed 1 709MW to capacity as at March 2015, and Generated GWh 2 of renewable energy since the first plant became operational. 4 of the 19 projects in Bid Window 3 and 3.5 are currently concluding financial close before they will commence with construction (15 of the 19 projects have signed on 11 December). REIPPPP operational capacity Capacity (GW) Close correlation of actual to planned (refer close up of selected period) Based on scheduled commissioning dates and progress to date, it is projected that 100% of the capacity procured in BW 1 and 2 will be operational by 15 June MW was scheduled to be operational by end of March 2015, with 1 709MW realised i.e. 92% of the scheduled capacity was achieved, with a 143MW shortfall from the expected capacity for this period. Planned Actual operational Note 1. Projects which have completed construction early, or which have completed a phase of their projects early, can enter early operations and are entitled to sell energy to the grid at 60% of their price. Once the scheduled COD as per the signed PPA passes, the projects can enter commercial operations, and the 20 year PPA period begins. Note 2. Projects in EOP have contributed 45 GWh to the grid, which means that a total of 3 270GWh has been contributed to the grid to date.

26 2013_Q4 2014_Q1 2014_Q2 2014_Q3 2014_Q4 2015_Q1 2015_Q2 2015_Q3 2015_Q4 2016_Q1 2016_Q2 Operational capacity Per technology (MW) Operational capacity (1 709 MW) is contributed by Solar PV (960 MW), Onshore Wind (639 MW), CSP (100 MW) and Hydro (10 MW) technology. 25 Landfill Hydro Biomass Conc Solar Solar PV Wind Per Technology (MW) 0MW 10MW 0MW 100MW 960MW 639MW Solar PV 960MW Wind 639MW For most of the preceding 5 quarters since the first IPP started operation, actual commercial operation dates tracked the planned or scheduled dates closely (refer extract of the tracking graph on the left). The lag of actual to planned peaked at 349 MWs during 2014, quarter 2 1. This is ascribed to the industrial action in the metals and mine industry (National Union of Metalworkers of South Africa) at the time. REIPPPP operational capacity Capacity (GW) At the end of quarter 4 (2014/15), the total shortfall between actual and planned had reduced to 143 MWs and the average time delay between actual and scheduled COD was 61 days i.e. less than 2 months. The lag is partly ascribed to: 8% Short of planned Under delivery against contracted capacity is responsible in part for actual lagging behind planned. A few IPPs that have started operation have done so below the contracted capacity. As a result there is a 13MW shortfall between contracted and delivered capacity for BW 1 and 2 at the end of March 2015.! 2013_Q4 2014_Q1 2014_Q2 2014_Q3 2014_Q4 2015_Q1 Planned Actual operational Delivery risks (significant risk) Deemed energy payments. IPPs that have completed construction, but was prevented from connecting to the grid due to network unavailability is paid for deemed energy. Deemed energy payments to date is R129 million. Engagement with the grid Access Unit remains ongoing. Monitoring of delays. Delays will be monitored and, where possible, the resolution of cross cutting implementation issues (such as grid connection delays) facilitated or escalated as appropriate. A delay due to damage caused by lightning strike (50MW). The most persistent cause of delays is ascribed to delays in grid connection causing delays to capacity starting operations. Delays range from a few days to a projected 13 months. At present 5MW from one IPP in BW 1 are impacted. Four IPPs with a combined capacity of 291 MW are expected to become operational in the next quarter. Two of which (151 MW) are currently in early operations. Note 1. Refers to calendar year quarter.

27 Average delivery lead time Years 1.6 years average lead time for delivering MW operational capacity Distribution of lead times Construction (in months) for completed projects Hydro Wind Solar PV CSP Construction duration As indicated previously, in spite of delays, the average construction lead time for the current portfolio is 579 days i.e MW operational capacity within 1.6 years. Based on the construction experience of the portfolio of technologies in the first two bid windows it is concluded that capacity (plant size) and construction duration do not have a strong correlation. When considering the distribution of lead times, the majority of completed projects (27 of 35) took between 15 and 21 months to be constructed. The cluster of projects that completed in the month timeframe, delivered MW, representing 74% of the operational capacity. To date, no projects were completed in less than 12 months and only 3 projects took longer than 2 years to complete. As expected, this confirms that significant renewable capacity can be brought online within a short timeframe. Energy supplied 26 Percentage of energy generated Percentage 43 percent of projected (P50) annual generation achieved from operational plants Energy supplied to grid Energy generated (GWh) Projected (P50) GWh/a The first IPP reached commercial operation date (COD), supplying power to the grid, in November Over the preceding 12 months, 6 projects produced energy for a full year. The average operation time for the current portfolio of operational IPPs is 249 days (approximately 8 months) of a full year. Since inception, GWh 1 of energy has been produced by renewable energy sources procured under the REIPPP of which GWh was generated in this reporting quarter. This represents an increase from 959 GWh (Q3) to GWh (Q4) i.e. a 9% increase quarter on quarter. The energy generated during the financial year (April 2014 March 2015) i.e GWh, from limited operations, represents: Total Realised GWh Q 1048 GWh 43% of the annual projected energy production (P50 2 ) from BW 1 and 2 (full portfolio). 66% of the annual projected energy production (P50 2 ) by the IPPs that are operational (P50 for the 35 operational IPPs is GWh). Note 1. Including 45 GWh produced by two projects in EOP. Note 2. Refer to explanatory notes at end of this report for the definition.

28 Based on energy produced during the limited operations period, extrapolating each project to a full year's energy (365 days), the energy generated would achieve the P50 projections. For the 6 projects that have been in operation for more than a year, the P50 projections (over a 12 month period) have been exceeded by 23%. 27 The majority of operational IPPs are solar PV plants for which energy production may be reasonably expected to be high during summer. The last quarter production does therefore not provide a definitive indication of the expected output from the portfolio, but cautiously suggests that energy production is likely to meet, and may possibly exceed, P50 projections. Reserve margin 1 contribution Hourly energy profile Q4 energy generated (GWh) % of energy produced The NDP targets an improvement in the reserve margin during the MTSF 2 planning horizon (until 2019) from 1% to 19% (Outcome 6). Even though renewable energy production does not align directly with the defined system peaks, the current operational portfolio is contributing to the percentage buffer between the available supply and projected demand on the electricity system A 24 hour profile representing the total energy produced by the complete portfolio during this quarter, also shows the contribution made during the morning and evening system peak periods 3. As the energy mix diversifies with the inclusion of CSP with storage, biomass and landfill gas, the share of energy available during peak periods should increase. Note 1. Reserve margin is the measure of available capacity over and above the capacity needed to meet normal peak demand levels. Reserve margin and reserve capacity are synonymous. Note 2. Medium Term Strategic Framework. Note 3. As defined by the Megaflex tariff: 07:00 10:00, 18:00 20:00 excluding weekends, public holidays.

29 Capacity, energy and capacity factors clarified A megawatt hour (MWh) measures or describes the amount of power produced or consumed in a certain amount of time. If a 1 MW p 1 wind turbine runs for 1 hour x = it produces a total of 1 MWh of energy 1 MW 1 MWh 1 hour Operational time for different generation technologies vary, depending largely on the availability of the energy resource. For example, wind turbines will only generate power when the wind blows and solar PV plants will only generate while the sun shines. Over a full year, different technologies are projected to be operational for an average percentage of hours. This depends on various factors including geographic location and the availability of the energy resource, but also operational efficiencies, down-time required for maintenance, etc. A capacity factor (that considers the availability of the technology and energy resource type) is typically used to project the annual energy production of a particular technology or plant. A capacity of 1MW p for one technology is therefore not necessarily equivalent in energy output to that of another technology. However, because the availability of energy resources (e.g. sun or wind) also varies in different locations and because operation and maintenance requirements may vary, the energy output from different projects using the same or a similar technology but located in different areas of the country may also have different energy outputs per year. Similarly, on the consumer side, the energy consumption differs amongst households. If a 1 kw appliance runs for 1 hour x = it uses a total of 1 kwh of energy 1 kw 1 kwh 1 hour The more appliances a household has and uses, the higher its energy consumption is likely to be. High energy use is therefore typically associated with higher LSM 2 households. The following scale represents an indicative range of energy use in different South African household types 3. Average annual energy use kwh per annum per household type Free Basic Electricity High - income To estimate an average number of homes that can be powered with a given amount of energy, the annual usage for an average South African home (indicated in the frame above as kwh), is used. Then average 1 GWh Mid - income will provide power to approximately 301 households 28 Note 1. Subscript p refers to the peak rated capacity i.e. the maximum capacity the specific generator can produce if all other variables are optimal e.g. wind blowing steadily at a suitable speed. Note 2. Living Standard Measure, most widely used market segmentation tool that considers households according to their living standards using criteria such as degree of urbanisation and ownership of e.g. cars and major appliances. Note 3. Free Basic Electricity (FBE), Average household use based on Eskom residential consumption and Amps data for number of electrified homes (2013); Mid-income usage data as published by City of Cape Town, Smart Living Handbook; High income household usage from SWH and heat pump monitoring data, Referenced against World Energy Council data for household electricity consumption in South Africa(4 389 kwh/year) in 2010.

30 Equivalent homes Based on the current REIPPPP portfolio of technologies and average contracted annual energy production, 1 MW capacity of each technology would power: Number of households per technology type (1 MW unit) (thousand) Energy that will be produced over a full year of operation 2 by those IPPs that are already operational is projected to be GWh. This power, that is already available to the system, would be adequate to supply: Total projected number of households million each associated number of homes 000 energy 1 MW GWh FBE average mid - income high This represents 1.2 million average South African households. For the solar PV and wind IPPs that have completed construction, the installed capacity is projected to generate enough energy to provide power to: Number of households per technology type (thousand) total installed MW average annual GWh number of homes For the portfolio of REIPPs in BW the average capacity factors, as contracted, per technology type, vary from 23% - 84%. Average 1 capacity factors Percentage per technology type 38 % 23 % The average annual production figures shown above consider energy production over the actual operating period; exrapolated to a full year. For the portfolio of wind power plants already operational, this suggests an actual capacity factor of ~32% and for the portfolio of solar PV plants, a capacity factor of ~28% that have been achieved. 41 % 77 % 84 % 53 % Note 1. Capacity factors weighted with the contracted P50 energy contribution per IPP to determine a weighted average per technology type. Note 2. Most IPPs have started operations during the course of 2014 and have not been operational for a full year at the time of this report.

31 The REIPPPP contribution: Economic, social and environment al footprint Outcomes 4, 5, 7, 8, 10, 11 and 14 30

32 31 Attracting significant investment into the South African economy Committed investments Bid window 1, 2, 3 and 3.5 (Rand billion) Investment attracted Rand billion of which R40.1 billion Committed (total project costs 1 ) for IPP development in BW 1, 2, 3 & 3.5 from foreign investors and financiers The REIPPPP has attracted significant investment in the development of the REIPPs into the country. The total investment (total project costs 1 ), including interest during construction, of projects under construction and projects in the process of closure (BW3 and 3.5) is R145.5 billion. An analysis of the funding sources 2 and shareholding highlights how broad the participation and benefits are that result from this investment. Foreign equity and financing share Bid window 1, 2, 3 and 3.5 (percentage) Foreign 28% ~28% Foreign share The REIPPPP has attracted R40.1 billion in foreign investment and financing in the three and a half bid windows BW 1 3.5). Foreign equity in the REIPPPP (BW 1-3.5) is R22.8 billion, equivalent to 26% of the FDI attracted into South Africa during 2013 (i.e. $8.2 billion) 3. Foreign equity and financing combined (R40.1 billion) would be 45% of FDI in Whilst retaining shareholding for South Africans is a priority, the associated influx of foreign investment and funding is also of significance to the economy. The NDP (Outcome 11) set a target of a R230 billion increase in FDI (facilitated by the dti) by Domestic 72% Financing and Investments (equity and debt), originate from a variety of countries across the globe, with Europe and the USA representing the largest sources of finance. Note 1. Total Project Costs : Total capital expenditure to be incurred up to the COD by the Seller in the design, construction, development, installation and/or commissioning of the project (inclusive of VAT and revenue). Note 2. This analysis is based on Financial Close for BW1 and 2 and RFP for BW3 and 3.5. Note this may result in minor discrepancies with reported numbers elsewhere in the report. Note 3. UNCTAD World Investment Report 2014,

33 Sources of foreign equity and debt UK, IRE + BVI 1 Debt: R - million Equity: R million EUROPE* Debt: R million Equity: R million JAPAN Debt: R million Equity: R 440 million CHINA Debt: R million Equity: R million 32 USA Debt: R million Equity: R million INDIA Debt: R - million Equity: R million MAURITIUS Debt: R - million Equity: R million SAUDI ARABIA Debt: R million Equity: R million * European countries of origin Denmark Debt: R million Equity: - Germany Debt: R million Equity: R million France Debt: R1 250 million Equity: R million Italy Debt: - Equity: R million Luxembourg Debt: R560 million Equity: - Netherlands Debt: R762 million Equity: R 459 million Norway Debt: - Equity: R million Spain Debt: - Equity: R million [Approximately R1.9 billion foreign equity not attributable to a single country of origin i.e. not shown] Investment share per bid window Bid window 1, 2, 3 and 3.5 (percentage) 100% 50% Domestic Foreign The FDI analysis identified at least 17 different countries that have participated in providing financing and/or equity to IPPs. The share of foreign investment and equity has stayed consistent and even showed an increase in the most recent bid windows, suggesting that investor confidence in the REIPPPP continues to grow over time. Financing of investment 0% Bid Window 1 Bid Window 2 Bid Window 3 Bid Window 3.5 Debt equity share of total project cost (R million) 50% 100% 50% 0% Debt Domestic Equity Foreign Equity R R Debt R R Local equity secured South African private financial institutions have financed R57.8 billion, 45% of the IPP investment. Total funding exposure of South African development finance institutions (DFIs) and State owned enterprises for the three and a half bid submission phases / windows of the REIPP Procurement Programme amounts to R 29.4 billion 2 ; 22% of the Total Project Cost. The Industrial Development Corporation (IDC) has the largest funding exposure with 25% investment of the cost of those Projects in which it has invested, the DBSA has the second largest funding exposure (16%), while the rest of the SoEs have fairly small funding exposures (GEPF / PIC 3 with 7% and CEF 3 with 13%). Note 1. UK, Ireland and British Virgin Island. Note 2. The analysis of financing includes debt, equity as well as the community trust and BEE funding. Note 3. GEPF /PIC = Government Employees Pension Fund (GEPF) managed by the Public Investment Corporation (PIC); Transnet = Transnet Retirement Fund; CEF = Central Energy Fund SOC Limited.

34 Shareholding by black South Africans 20% 15% 10% Bid window 1 & 2 5% 0% Community trusts Income and costs 1,2,3 Total project, gross income and debt costs (Rand million) R R R R R R R R R - R R R BW1 R38.5 billion R12.2 billion Gross Income Earned Debt Service Costs Community trusts Net income 1,2,3 (Rand million) BW2 Shareholding (Black people in local communities) Key learnings Black shareholding in EPC contractor R26.3 billion R million average per year Community Trusts - Nett Income Black shareholding in operating company Opportunities or alternate vehicles to be investigated that will enable a more even distribution of community trust cash flow and realising community benefits sooner. South African citizen shareholding The importance of retaining shareholding in IPPs for South Africans was recognised and incorporated into the procurement conditions, requiring at least 40% of each project be owned by South Africans with level 5 contributor status. The South African (local) equity shareholding across Bid Windows 1 to 3.5 equates to 50% (R22.4 billion) of total equity (R45.2 billion), which is substantially more than the 40% requirement. Foreign equity amounts to R22.8 billion and contributes 50% of total equity (see previous page). Shareholding by black South Africans has also been secured across the value chain, illustrated for the first two bid windows. Community shareholding and community trusts A minimum ownership by local communities in the IPP of 2.5% is required as procurement condition. In this way a substantial portion of the investments have been structured and secured as local community equity. An individual community s dividends earned will depend on the terms of each transaction corresponding with the relevant equity share. To date all shareholding for local communities have been structured through the establishment of community trusts. For projects in BW 1, 2, 3 and 3.5, qualifying communities will receive R26.3 billion net income over the life of the projects. The bulk of the money will however only start flowing into the communities from 2028 due to repayment obligations in the preceding years (repayment obligations are mostly to development funding institutions). The aggregate impact (accrued over the 20 year project operational lives) of all bid window investments and earnings, as projected for local communities associated with the IPPs, amounts to R26.3 billion (net income). If the net projected income was structured as equal payments over time, it would represent annual net income of R1 313 million. 33 Note 1. "Income and costs expressed in nominal terms. Net income in real terms equates to R 11.6 billion (as opposed to R26.3 billion) under assumption of constant inflation rate of 5.7%. Note 2. For bid windows Note 3. Over the operational project life of 20 years. May 2015

35 Technology share of investment Total Project Costs (Rand billion) R 44.6 billion 31 % R 53.3 billion 37 % R 1.1 billion R 45.5 billion 31 % R 0.7 billion 0.5 % R 0.3 billion 1 % 0.2 % The figure on the previous page shows the projected net income for the first three and a half bid windows. Income to all shareholders only starts with operations. With only a few IPPs operational for a short period of time, revenue generated has been limited to R1.5 billion. However, even with more projects operational and revenues growing, quarterly reports are unlikely to show large cash flows to communities until debt have been fully serviced. Investment by technology type N3 34 Average investment per MW for each technology group 1 Average investment cost (Rand million/mw) Wind, solar PV and solar CSP have attracted the most significant share of the investment in the first three and a half bid windows. By comparison, solar CSP project costs per MW are higher, given the relatively small number of MWs (600 MW) procured for the R53.3 billion spent (vs MW of wind and MW of PV capacity at the indicated costs). However, it should be noted that CSP technology offers inherent storage capacity, allowing energy to be fed into the grid when needed after sunset. Similarly, landfill gas and biomass are less dependent on intermittent energy source availability. At the same time, energy available during system peaks (typically early morning and early evening) have a higher value, partially justifying the seemingly higher capacity cost associated with the renewable technologies that can also supply during these periods. Tech IRP 2010 (2013) Rm/MW REIPPPP Rm/MW (Project Value) REIPPPP Rm/MW (Total project costs) The IRP (2013 update report circulated for stakeholder consultation, but not promulgated) included an indicative R/kW overnight 2 capital cost per technology type (in 2012 Rand terms) 3. The average portfolio project costs and project value 4 per MW for each technology type are relatively well aligned with the 2012 costs anticipated in the IRP 2013 update report. Please note this is not a direct comparison (refer respective definitions of Total Project Cost, Project Value and Overnight costs and the different dates of the reported values), but rather an indication of cost range magnitudes. Note 1. It should be noted that the cost per MW is a simplistic measure and not an accurate comparison of the cost of generation technologies. Comparisons for energy costs and investment decisions are best based on the levelised cost of the energy (over the life of the asset) generated, as well as the key application purpose (base-load, mid-merit or peaking) of the technology. Note 2. The capital cost of a project if it could be constructed overnight. This cost does not include the interest cost of funds used during construction. Note 3. IRP , Updated Report, Technology costs input (tables 18-20) (as at 2012, without learning curves). Note 4. Refer IA definitions in Appendix A.

36 35 Broader economic and socio economic impacts Total procurement spend 1 (Rand billion) planned 98.9 Rand billion actual (inception to date + Q) Planned 2 Active Q Of which construction spend 1 (Rand billion) planned 52 Rand billion actual (inception to date + Q) Planned Active Of which operations spend (Rand billion) planned 1.1 Q actual (inception to date + Q) In addition to the financial investments into the economy and favourable equity structures that had been secured, the REIPPPP is targeting broader economic and socio-economic developmental benefits. Bid obligations and minimum thresholds for preferential procurement, employment equity and socio-economic development contributions are utilised as mechanisms to capture a share of the value/prosperity from the programme for South Africans and local communities. Procurement spend Procurement spend constitutes a significant share of the total project costs for the portfolio of IPPs. The total projected procurement spend for bid windows 1, 2, 3 and 3.5 during the construction phase is R52 billion more than that of the projected operations procurement spend over the 20 years operational life (R47 billion). The combined (construction and operations) procurement value is projected as R98.9 billion of which R25.3 billion has been spent to date. For construction, of the R24.5 billion already spent to date R17.9 billion is from the 35 projects which have already been completed. These 35 projects planned to spend R18.9 billion and 95% of the planned procurement construction costs have therefore been realised. NOTE: Planned Refers to all projects procured i.e. currently BW Active Refers to all projects that have commenced construction i.e. currently BW 1 and 47 Rand billion Planned Active Q Construction procurement spend has grown steadily over time as the construction of the IPP portfolio advances. Note 1. Procurement spend and preferential procurement spend patterns are not linear, the ratios are therefore preliminary and indicative only pending the final procurement figures. It does serve to highlight possible areas of risk. Refer to Interpretation notes for the definition of procurement spend. Note 2. Planned referring to all projects procured i.e. currently BW and Active referring to all projects that have commenced construction i.e. currently BW 1 and 2.

37 Construction spend 1 Actual vs projected per quarter (Rand billion) N4 5% below projected While in previous quarters actual procurement spend lagged the projected spend, this lag has reduced significantly in this quarter. Actual procurement spend for the portfolio to date now correlates closely with the projected spend. As more projects complete construction and all spend items are captured and reflected, a more accurate final view on procurement spend should become available _Q4 2014_Q1 2014_Q2 2014_Q3 2014_Q4 2015_Q1 Planned Achieved Preferential procurement BBBEE share Reported (percentage) 40% Target 60% Committed 33% 67% Actual to date 7% 93% The share of procurement that is sourced from Broad Based Black Economic Empowered (BBBEE), Small and Medium Enterprises (SME), Qualifying Micro Enterprises (QME) and women owned vendors are tracked against commitments and targeted percentages. The IA target requirement for BBBEE is 60% of total procurement spend - with the share of procurement from BBBEE suppliers currently reported as 93%. This is significantly higher than the 67% that had been committed by IPPs. BBBEE spend 1 (Rand billion) planned 66.3 Rand billion Planned Active BBBEE spend 1 Construction only (Rand billion) planned 34.4 Rand billion actual (inception to date + Q) 1.0 Q 93% of total procured actual (inception to date + Q) Planned Active 0.8 Q 93% of total procured While this seems a positive preliminary response, the reported procurement number do not represent the final procurement spend and nor has this data been verified by the IPP Office. This achievement is therefore reported with caution. Preferential procurement commitments are expressed as share of total procurement. Should the final procurement spend be below the projected spend (refer to tracking (first) graph on the left), the monetary value associated with the targeted percentage would also be lower. However, if the high reported preferential procurement share is confirmed, the reduced value of procurement spend should have a limited, if any, tangible monetary impact. As expected, the majority of the procurement spend to date has been for construction purposes. Of the R24.5billion spent on procurement during construction, R22.7 billion has reportedly been procured from BBEEE suppliers, achieving 93% of total procured. Actual BBBEE spend during constructions for BW 1 and 2 was higher than the planned R14.1 billion.! Key learning While the preliminary view of local content spend at portfolio level is positive, it is not indicative of the final share. To be monitored. Note 1. Procurement spend and preferential procurement spend patterns are not linear, the ratios are therefore preliminary and indicative only pending the final procurement figures. It does serve to highlight possible areas of risk.

38 QME and SME share Reported (percentage) Target Committed Actual to date 10% 7% 32% Procurement from QME and SMEs exceeds commitments by 25% and is 32% of total procurement spend to date (10% target). QME and SME share of construction procurement spend totals R8 billion i.e. 3 times the targeted spend of R3 billion during this procurement phase % 93% 68% In contrast, procurement from women owned vendors is lagging, with only 3% of the targeted 5% achieved to date. SME and QME spend 1 Construction only (Rand billion) When considering only construction spend, the percentage share of women owned vendors remain 3% of procurement spend. planned 3.0 Rand billion actual (inception to date + Q) Planned Active 0.4 Q x 3 targeted spend 9 IPPs must still complete construction (excluding two projects in EOP, and one completed project that is not connected to the grid), but for both completed and active construction procurement, purchases from women owned suppliers have evidently presented a major challenge. The development of women owned businesses in the energy and construction industry is considered an opportunity for national (dti or similar) capacity building initiatives. Women owned spend 1 (Rand billion) Key learning! planned 3.1 Rand billion actual (inception to date + Q) Planned Active 3% of total procured 0.1 Q Development of women owned businesses in the energy and construction industry may benefit from capacity building initiatives. Women owned spend 1 Construction only (Rand billion) planned 1.1 Rand billion actual (inception to date + Q) Planned Active 3% of total procured 0.1 Q Note 1. Procurement spend and preferential procurement spend patterns are not linear, the ratios are therefore preliminary and indicative only pending the final procurement figures. It does however serve to highlight possible areas of risk.

39 Local content spend (Rand billion) 100% planned 45.6 Rand billion actual (inception to date + Q) Planned Active 20.0 Rand billion 0.7 Q 43% local content planned 48% local content achieved (actual) spend to date on local content 75% 50% 25% Local content tracking Actual vs target and threshold (percentage) 0% Solar PV & CSP Threshold Target Actual BW1 Wind, Hydro, Biomass & Landfill Solar PV & CSP BW2 Wind, Hydro, Biomass & Landfill Local content 1 N7 The REIPP Procurement Programme represents the country s most comprehensive strategy to date in achieving the transition to a greener economy. Local content minimum thresholds and targets were set higher for each subsequent bid window. For a programme of this magnitude, with construction procurement spend alone estimated at R52 billion, the result is a substantial stimulus for establishing local manufacturing capacity. This strategy has prompted several technology and component manufacturers to establish local manufacturing facilities. It is expected that greater certainty relating to subsequent bid windows and further determinations will continue to build on this successes. For the portfolio as a whole, the expectation would reasonably be for local content spend to fall between 25% and 65% of the total project value (considering the range of targets and minimum requirements). Local content commitments by IPPs amount to R45.6 billion, i.e. 43% of total project value (R105.6 billion for all bid windows). Actual local content spend reported for IPPs that have started construction (BW 1 and 2) amounts to R20 billion against a corresponding project value (as realised to date) of R41.6 billion. This means 48% of the project value has been locally procured, exceeding the 43% commitment from IPPs, the thresholds for BW 1 and 2 (25-35%) 2 and also the 45% target 3 of BW 1. As for procurement, it should be noted that the commitments are expressed as a percentage. With lower procurement costs, total project value is reduced and therefore the total local content spend that is realised may also be less than planned. 38 Local content Actual vs planned (BW 1 + 2) Planned Achieved To date however, the R20 billion local content spend reported by IPPs in BW 1 and 2 is 84% of the R23.6 billion local content expected with 9 projects still in construction (i.e. only 74% of the portfolio complete). For the 35 COD projects planned, local content spend was R15 billion. To date R14.1 billion has been realised, thus achieving 94% of planned spend. 2013_Q4 2014_Q1 2014_Q2 2014_Q3 2014_Q4 2015_Q1 Note 1. Local content is expressed as % of total project value and not procurement or total project costs. Note 2. Thresholds and targets are bid window specific and technology dependent.

40 Local content (BW 1 + 2) 1 Cumulative (Rand billion) BW1 & 2 BW3 & % committed As for procurement, local content spend is not necessarily a constant percentage over the construction duration and depends on the specific materials and components that are locally sourced as well as the timing of this procurement. 39 of planned (BW 1 + 2) Considering the cumulative trend of the build portfolio, local content share has tracked consistently towards the expected spend suggesting a relatively even distribution of local content share over time. Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Actual local content achieved for Bid Window 1 and 2 totals 84% of the commitment for these two bid windows. Construction vs operations Employment split (job years) % More than planned Monitoring will continue to track the final share of local content for the portfolio of projects. Concerns have been raised by industry regarding the high local content share that has reportedly been achieved. These figures are still subject to verification. Leveraging employment opportunities Construction employment Actual cumulative (Job years) (BW 1 + 2) BW 3 & 3.5 BW1 & 2 Numerous employment opportunities are being created by the IPPP programme. To date, a total of job years 2 have been created for South African citizens, of which were in construction and 628 in operations Job years Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q planned Employment opportunities have exceeded the planned numbers during the construction phase by 46%, with 9 projects still in construction and employing people. The number of employment opportunities should therefore continue to grow beyond original expectations. Construction employment Actual vs planned (BW 1 + 2) 46% More than planned Planned Achieved 2013_Q4 2014_Q1 2014_Q2 2014_Q3 2014_Q4 2015_Q1 Note 1. Actuals are reported against BW 1 and 2 commitment, because BW 3 and 3.5 have not started construction phase. Note 2. The equivalent of a full time employment opportunity for one person for one year.

41 Local citizen employment Actual vs target and threshold 100% 80% 60% 40% 20% 0% Threshold Target Actual BW1 BW2 BW1 & 2 Employment opportunities Actual (Job years) (BW 1 + 2) Employment thresholds and targets were consistently exceeded across the entire portfolio, but more so by bid window 2 IPPs. The construction phase offers a high number of opportunities over shorter durations, while the operations phase require fewer people, but over an extended operating period. Utilisation during construction typically shows a peak, then decreases as construction activities finish up. This expected trend is visible in the reported numbers per quarter. Employment numbers during construction peaked in quarter 4, and are now tapering off as more IPPs conclude construction Job years (cumulative) Construction Only 35 IPPs have started operations, with the average operating duration approximately 8 months. As expected, limited employment numbers are therefore available for the operations phase at present. Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Employment opportunities for equity categories are being tracked for the programme. Equity categories with contractual commitments include employment secured for South African citizens, black South Africans and local communities. Operations employment Actual (Job years) (BW 1 + 2) 628 Job years (cumulative) Operations Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Preliminary 2 performance of employment ratios for these categories where contractual commitments apply, show that all equity percentage targets and actual planned number of opportunities are being exceeded in the construction phase. To date, job years for SA citizens were achieved during construction therefore exceeding the planned job years. Employment equity Construction job years vs planned (BW 1 + 2) 146% 196% 313% Significantly more people from local communities were employed during construction than was initially planned. The expectation for local community participation was job years, with realised. This is 3 times the planned number. SA citizens Black SA citizens Local community Note 1. Refers to calendar quarters as shown on graphs. Note 2. These are preliminary numbers, used to give an indication of possible risks of non compliance, but remain indicative only until final numbers are available.

42 Employment equity share of persons employed in construction (% job years vs total) (BW 1 + 2) Data on priority employment categories (as identified by national objectives and the NDP e.g. youths, women, people with disabilities and rural communities) is also collected. 41 Black SA citizens 78% 0.1% 8% Disabled 42 % Local community 55% Where these were not included in bid criteria, no planned numbers were captured and hence tracking and reporting is not against commitments or targets. When considered as a percentage of the total South Africa based employees during construction, the equity share is generally good. With the two exceptions women and people with disabilities. women youths Employment equity share of persons employed in construction Actual % vs target and threshold (BW 1 + 2) 100% 80% 60% 40% 20% 0% 100% 80% 60% 40% 20% 0% Black citizens as % of SA based employees Threshold Target Actual BW1 BW2 BW1 & 2 Skilled black citizens as % of skilled employees Threshold Target Actual BW1 BW2 BW1 & 2 78% vs 50% target 63% Vs 30% target Youth, women and rural employment numbers Youth, women and rural employment numbers, previously excluded from mandatory reporting requirements, will be included, as far as possible, for subsequent BWs. The share of skilled black South Africans as share of total skilled employees, achieved 63% - three times more than the minimum threshold of 18% and more than double the target of 30%. Local community members as % of SA-based employees 100% 80% 60% 40% 20% 0% Threshold Target Actual 55% vs 20% target BW1 BW2 BW1 & 2

43 Socio-economic development (Rand billion) Committed Realised (ITD + Q) ~ 1.6% of revenue R 9.8 billion R9.8 billion ITD R52.4 million 51% In last Q Q R26.9 million Socio-economic development (SED) contributions An important focus of the REIPPPP is to ensure the RE build programme secures sustainable value for the country and enables local communities to benefit directly from the investments attracted into the area. As part of the bid obligations, IPPs have committed to contribute to community needs: from housing and infrastructure to healthcare, education and skills development. 42 Across the three and a half bid windows, a total contribution of R9.8 billion is committed (as percentage of projected revenue, accrued over the 20 year project operational life) to socio-economic development initiatives. Assuming an even, annual revenue spread, the average contribution per year would be R491 million. SED in local communities (Rand billion) The minimum compliance threshold for SED contributions is 1% of revenue with 1.5% the targeted level. A portfolio average within this range is therefore expected. For the current portfolio the average commitment level is 1.6%, i.e. 60% more than the minimum compliance threshold. R7 billion committed to local communities Of the total commitment, R7.0 billion is specifically committed directly within the local communities where the IPPs operate. As a percentage of revenue, SED obligations become effective only when operations commence and revenue is generated. Of the 47 IPPs that have started construction (BW 1 and 2) 35 are operational (3 of which became operational in this reporting quarter), and 2 have started operations early. As more IPPs begin their operations phase, contributions to SED, a percentage of revenue generated, is starting to flow. From the preceding quarter to this reporting quarter revenue paid to IPPs almost doubled. The same trend Is seen for SED spend Rand million ~ 1% of revenue (actual) contribution realised for socioeconomic development As revenue continues to grow, more IPPs become operational and more years of operation are concluded, the total contribution will grow exponentially. Already at this early stage, with a limited number of

44 IPPs operational, SED contributions amount to R52.4 million. This contribution represents only 1% of revenue generated to date i.e. below the committed 1.6% but higher than the 0.8% reported in the previous quarter. is paid into community trusts. However, this is mainly visible over the longer term since the majority of IPP nominal revenues in community trusts will peak in 10 to 15 years due to IPP debt repayments to development finance institutions (DFIs) from the beginning of an IPP s operation or revenue earnings. 43 The variation might be one of timing only, with SED activity and spend detail still to be reported, but may also relate to: Accumulation of funds to implement or support larger SED projects; Difficulties to identify suitable projects in the area; Lack of penalization for under-expenditure (no termination points and deductions effected against non-performing IPPs as yet). Challenges with the existing SED contribution framework Bid windows 1, 2, 3 and 3.5 have indicated that financing committed by IPPs for socioeconomic development could be improved. This is mainly because: Deficient coordination and alignment of IPP socio-economic development plans with other IPPs in the same localities and broader government development strategies leads to duplication, fragmentation and inefficient SED spend; Other than the provision of power and electricity access, IPPs are not in the business of community upliftment and thus often have difficulty in identifying areas that will effectively address SED in impacted communities; Sparsely populated areas have limited community absorption capacity; There is a lack of equity considerations across geographical areas (i.e. some communities benefit more than others); and IPP revenue projections and availability imply enhanced socio-economic developmental gains over the longer term, while short-term community gains are also required for increased social acceptance of IPPs. Currently, local communities get a 2.5% equity share in IPP ownership (the target is 5.0%), which As a result, the Independent Power Producers Procurement Programme Office (IPPPP Office) is currently researching alternative socioeconomic development financing mechanisms that could be considered to offer more immediate benefits to local communities while simultaneously and equitably enhancing benefits to the broader South African economy, as well as the effectiveness and practicality of the IPPPP. SED contribution categories Enterprise and socio-economic development commitments have been made in six categories i.e. education and skills development, social and welfare, management and planning, healthcare, enterprise development and infrastructure. All operational IPPs are required to report on the initiatives they have engaged in to alleviate socio-economic challenges faced by the local communities in which they operate. Existing initiatives have been distributed across six categories, shown on the next page, with the majority of spend allocated by IPPs in the education and skills development (42%) and enterprise development categories (21%). The rest of the socio economic development spend has been shared between social and welfare (14%), management and planning (6%), healthcare (4%) and infrastructure projects (5%). About 7% have not been allocated to one of the categories. The SED focal area in which IPPs spent the most is education, i.e. double the total expenditure on enterprise development (i.e. a stand alone commitment category in terms of the IA and the focal area with the second highest contribution to date). This is, in part, due to the fact that some Early Childhood Development programmes have also been incorporated in educational programmes.

45 Activity spread for ED and SED Projects spend reported (% of total) Infrastructure projects have attracted the least activity, with only two projects implemented to date. 44 education social and welfare management and planning 42% 14% 6% SED and Enterprise Development expenditure per province show the largest share was spent in the Northern Cape, with a total of R30 million (R15 million in this quarter alone). This is unsurprising because the Northern Cape boasts the highest renewable energy generation that has started operation. The Eastern Cape and Western Cape provinces follow as a second and third, respectively. Enterprise development contributions health care enterprise development infrastructure unallocated Enterprise development (Rand billion) 4% 21% 5% 7% Committed Realised (ITD + Q) ~0.4% R2.6 of revenue billion 35% In last Q Enterprise development contributions for bid windows 1, 2, 3 and 3.5 amount to R 2. 6 billion. Again, assuming an equal distribution of revenue, enterprise development contributions would be R131 million per annum. It is again noted that enterprise development commitments are made as percentage of revenue, and as such, obligations are effective only once an IPP starts operations. Until the end of this reporting period, a total of R19.4 million have been contributed to enterprise development by the 35 operating IPPs. Again, the ramp up is clearly visible as more IPPs start operations. Of the R19.4 million, R6.8 million was contributed in this quarter alone. Of the total commitment, R1.5 billion is specifically committed directly within the local communities where the IPPs operate. R2.6 billion ITD R19.4 million Q R6.8 million of which: Enterprise development in local communities (Rand billion) R1.5 billion committed to local communities

46 45 Contributing to cleaner energy Carbon emissions targets The National Climate Change Response White Paper outlines the national response to the impacts of climate change and contribution to international effort to mitigate climate change. As part of the global commitment, South Africa is targeting to an emissions trajectory that peaks at 34% below business as usual (BAU) in 2020, 42% below BAU in 2025 and from 2035 declines in absolute terms. These commitments are incorporated into the National Development Plan in Outcome 10 and Sub outcome 3. The renewable energy IPP programme contributes constructively to economic stability, energy security and climate change issues. Outcome 10 Enhance our environmental assets and natural resources. Emissions factor An indicative contribution with respect to climate change, carbon emission reduction is calculated based on a displacement of power from the national grid, using a gross Eskom equivalent emissions factor of tons CO 2 /MWh. A more comprehensive approach, with consideration of the emission factors of the respective technologies is to be done in consultation with the DEA. Outcome 10 Impact indicators 1 1 Impact indicator Reduced total emissions of CO2 (not specified, but DoE contributing to Environmental Affairs) Emission reductions achieved Using this approach, the emission reductions for the programme during the preceding 12 months is calculated as 3.1 M ton CO 2 based on the GWh 2 energy that have been produced and supplied to the grid over this period. This represents 25% of the total projected 3 annual emission reductions, achieved with only partial operations. Note: Total emission reductions (ITD) is 3.3 M ton CO 2 based on the GWh 4 energy. Carbon emission reductions Projected using P50 (Mton CO 2 ) Projected (P50) 12.2 Mton CO 2 / annum Baseline Mitigation opportunities, DEROs to be Relevant sub outcomes Sub Outcomes Realised (12 month period) 3.1 M ton CO target 34% reduction from "Business As developed, M & E Usual" by 2020 system being and 42% by 2025 developed. Sub-Outcome 3: An environmentally sustainable, low carbon economy resulting from a well-managed just transition 25% Carbon emissions Baseline EF of national grid approx ton CO 2 /MWh 2019 Target 0.65 ton CO 2 /MWh (assuming a direct translation of outcome 10 target) Note 1. Carbon accounting for South Africa, UCT, Energy Research Centre (ND). Note 2. Energy produced by projects in COD only. Note 3. Emission reductions associated with the projected, annual energy production (P50) for the total portfolio. Note 4. Energy produced by all projects in COD and EOP.

47 The REIPPPP contribution: Provincial contribution Outcomes 2 and 9 46

48 47 Provincial contribution Capacity development at a glance Provincial snapshot In the first three and a half bid windows (BW 1 3.5), IPPs were procured in 8 of the 9 provinces. In the next map a quick view of the distribution of number of projects, capacity, technology types, size of projects, project status as well as the capacity share contributed from the respective bid windows per province is provided. A per province view is provided later in this section and provincial reports are being developed with a detailed analysis of the level of participation and contribution in each province. The objective of this map is to provide a comparison of the provinces in terms of the energy capacity build portfolio. Other development at a glance The second map shows also the distribution of a selection of economic and socio economic contributions resulting from the REIPPPP commitments.

49 Provincial capacity at a glance Where: BW bid window; Pre-FC before Financial Close; COD Commercial Operating Period; EOP Early Operating Period; Construct Under construction; No GC Complete No Grid Connection Note: Capacity shown refers to contracted capacity. To date there has been a variation of 11MW in the actual operational capacity delivered to the grid on completion. The actual operational capacity achieved is shown in the detail on each province (relevant to Eastern Cape, Free State and Northern Cape). Pre-FC 1 215MW 55% Project status COD 727MW 33% COD 7MW 100% BW share BW 1 7MW 100% 7 megawatts procured Technology type Solar PV 7MW 100% 203 megawatts procured Pre-FC 75MW 37% Construct 4MW 2% Project status BW 3 75MW 37% Hydro 4MW 2% Solar PV 199MW 98% BW share COD 124MW 61% BW 1 64MW 31% BW 2 64MW 32% Technology type Pre-FC 60MW 51% 48 Project status COD 58MW 49% BW MW 9% Construct 175MW 8% Project status BW 1 682MW 31% 118 megawatts procured Solar PV 118MW 100% Technology type BW 3 60MW 51% BW share BW 1 58MW 49% BW 3 1,015MW 45% Hydro 10MW 0% Solar PV 952MW 43% Pre-FC 75MW 17% Construct 136MW 30% BW share BW 2 330MW 15% Technology type CSP 600MW 27% Wind 665MW 30% COD 146MW 32% No GC EOP 5MW 91MW 1% 20% Project status megawatts procured Northern Cape Western Cape 9 projects 453 megawatts procured 34 projects North West 1 project Free State Eastern Cape 13 4 projects megawatts procured Limpopo 3 projects Gauteng KwaZulu Natal 1 project 1 project 17 megawatts procured Biomass 17MW 100% megawatts procured Landfill 18MW 100% 18 Technology type BW 3 18MW 100% BW 3 75MW 17% BW 2 244MW 54% Solar PV 134MW 30% BW share Technology type BW 1 133MW 29% Wind 319MW 70% Construct 273MW 25% BW 3 197MW 18% BW 2 402MW 37% Pre-FC 197MW 18% EOP 60MW 6% BW share Project status BW 1 481MW 45% COD 551MW 51% Solar PV 70MW 6% Technology type Wind 1,010MW 94% BW 3 17MW 100% Pre-FC 17MW 100% Technology type BW share Project status BW share Project status Pre-FC 18MW 100%

50 Provincial economic and socio economic development at a glance Commitments for bid windows 1, 2, 3 and R6.4 billion R313 million R557 million job years R0.2 billion R13 million R55 million 525 job years R98.2 billion R3.6 billion R284 million R992 million job years R6 465 million R million job years Northern Cape Western Cape 9 34 North West 1 Free State Eastern Cape 13 4 Limpopo 3 Gauteng KwaZulu Natal 1 1 R0.3 billion R40 million R28 million 246 job years R10.4 billion R624 million R25.3 billion R1.1 billion R78 million R55 million 336 job years R1 333 million R million job years R million job years

51 Province Eastern Cape Surface area footprint in country 14 percent GDP 1 Contribution to GDP in country 7 percent Province Free State Surface area footprint in country 11 percent GDP 1 Contribution to GDP in country 5 percent Population home to % of the country population people per km 2 Employment 4 out of five EAP is employed 5 Population 21 home to % of the country population people per km 2 Employment 3 out of five EAP is employed 13 projects 1080MW 4 projects 203MW Solar PV 70MW 6% online 5 Wind 543 MW online 5 4MW Solar PV 121 MW 2% 1 010MW 199MW 94% 1053 GWh 98% 202 GWh generated 4 generated 4 Technology type Technology type committed actual 3 (ITD + Q) committed actual 3 (ITD + Q) Hydro Realised (R8.7 billion) Realised (R1.8 billion) R25.3 billion 2 17% of total country Q (R0.7 billion) R6.4 billion 2 4% of total country Q (R0 billion) R million 2 20% of total country Realised (R7.7 million) Q (R2.8 million) R313 million 2 3% of total country Realised (R5.8 million) Q (R3.1 million) R million 2 27% of total country Not reported on a quarterly basis R557 million 2 2.1% of total country Not reported on a quarterly basis Realised (3063) Realised (1052) job years 2 17% of total country Q (316) Job years job years 2 5% of total country Q (31) Job years Note 1. All economic data = IHS Global Insight Regional explorer 744 (2.5q), 2013 Estimates. Note 2. IPP data reflects cumulative values over the construction phase and projected operational life (production phase) of the projects (i.e. 20 years). Note 3. Actuals Inception to Date (ITD) shown against total committed (BW 1, 2, 3 and 3.5). Note 4. Cumulative energy as at end of quarter. Note 5. Online in this instance refers to capacity of projects that reached COD, and is excluding projects in EOP.

52 Province Gauteng Province Surface area footprint in country 1 percent GDP 1 Contribution to GDP in country 36 percent Province KwaZulu Natal Surface area footprint in country 8 percent GDP 1 Contribution to GDP in country 16 percent Population home to % of the country population people 698 per km 2 Employment 4 out of five EAP is employed Population 20 home to % of the country population people 112 per km 2 Employment 4 out of five EAP is employed 1 project 18MW 1 project 17MW Landfill 18MW 0 MW online 5 100% Technology type Biomass 0 MW online 5 17MW 0 GWh 100% 0 GWh generated 4 generated 4 Technology type committed actual 3 (ITD + Q) committed actual 3 (ITD + Q) R0.3 billion 2 0.2% of total country Project in bid window 3 has not commenced R1.1 billion 2 1% of total country Project in bid window 3 has not commenced R40 million 2 0.4% of total country Project in bid window 3 has not commenced R78 million 2 1% of total country Project in bid window 3 has not commenced R28 million 2 0.1% of total country Project in bid window 3 has not commenced R55 million 2 0.2% of total country Project in bid window 3 has not commenced 246 job years 2 0.4% of total country Project in bid window 3 has not commenced 336 job years 2 1% of total country Project in bid window 3 has not commenced Note 1. All economic data = IHS Global Insight Regional explorer 744 (2.5q), 2013 Estimates. Note 2. IPP data reflects cumulative values over the construction phase and projected operational life (production phase) of the projects (i.e. 20 years). Note 3. Actuals Inception to Date (ITD) shown against total committed (BW 1, 2, 3 and 3.5). Note 4. Cumulative energy as at end of quarter. Note 5. Online in this instance refers to capacity of projects that reached COD, and is excluding projects in EOP.

53 Province Limpopo Surface area footprint in country 10 percent GDP 1 Contribution to GDP in country 7 percent Province North West Province Surface area footprint in country 9 percent GDP 1 Contribution to GDP in country 6 percent Population home to % of the country population people per km 2 Employment 4 out of five EAP is employed 7 Population 34 home to % of the country population people per km 2 Employment 4 out of five EAP is employed 3 projects 118MW 1 project 7MW Solar PV 118MW 100% 58 MW online 5 Technology type Solar PV 7 MW online 5 7MW 85 GWh 100% 17 GWh generated 4 generated 4 Realised (R1.2 billion) Technology type committed actual 3 (ITD + Q) committed actual 3 (ITD + Q) Realised (R0.1 billion) R3.6 billion 2 2% of total country Q (R0 billion) R0.2 billion 2 0.2% of total country Q (R0 billion) R284 million 2 3% of total country Realised (R3 million) Q (R3 million) R13 million 2 0.1% of total country Realised (R0.6 million) Q (R0.1 million) R992 million 2 4% of total country Not reported on a quarterly basis R55 million 2 0.2% of total country Not reported on a quarterly basis Realised (88) Realised (666) job years 2 5% of total country Q (15) Job years 525 job years 2 1% of total country Q (8) Job years Note 1. All economic data = IHS Global Insight Regional explorer 744 (2.5q), 2013 Estimates. Note 2. IPP data reflects cumulative values over the construction phase and projected operational life (production phase) of the projects (i.e. 20 years). Note 3. Actuals Inception to Date (ITD) shown against total committed (BW 1, 2, 3 and 3.5). Note 4. Cumulative energy as at end of quarter. Note 5. Online in this instance refers to capacity of projects that reached COD, and is excluding projects in EOP.

54 Province Northern Cape Surface area footprint in country 31 percent GDP 1 Contribution to GDP in country 2 percent Province Western Cape Surface area footprint in country 11 percent GDP 1 Contribution to GDP in country 14 percent Population home to % of the country population people per km 2 Employment 4 out of five EAP is employed 11 Population 46 home to % of the country population people per km 2 Employment 4 out of five EAP is employed 34 projects 2227MW 9 projects 453MW Hydro 10MW 0.4% Solar PV 952MW 43% Technology type CSP 600MW 27% Wind 665MW 30% Solar PV 835 MW online 5 134MW 146 MW online 5 30% Wind 1519 GWh 319MW 70% 395 GWh generated 4 generated 4 Technology type committed actual 3 (ITD + Q) committed actual 3 (ITD + Q) Realised (R4.8 billion) Realised (R25.1 billion) R98.2 billion 2 67% of total country Q (R0.8 billion) R10.4 billion 2 7% of total country Q (R0.6 billion) R6 465 million 2 66% of total country Realised (R30.2 million) Q (R15.2 million) R624 million 2 6% of total country Realised (R5.1 million) Q (R2.6 million) R million 2 62% of total country Not reported on a quarterly basis R1 333 million 2 5% of total country Not reported on a quarterly basis Realised (2059) Realised (10779) job years 2 60% of total country Q (348) Job years job years 2 11% of total country Q (109) Job years Note 1. All economic data = IHS Global Insight Regional explorer 744 (2.5q), 2013 Estimates. Note 2. IPP data reflects cumulative values over the construction phase and projected operational life (production phase) of the projects (i.e. 20 years). Note 3. Actuals Inception to Date (ITD) shown against total committed (BW 1, 2, 3 and 3.5). Note 4. Cumulative energy as at end of quarter. Note 5. Online in this instance refers to capacity of projects that reached COD, and is excluding projects in EOP.

55 A Appendix A Reference component

56 A1 Interpretation notes These notes document the reporting conventions, terms and conventions as defined and practiced by the IPPPP Office, and are important for interpreting the reported numbers and statistics. A concepts used in the report that corresponds with an interpretation note here has the following notation indicating the number of the relevant note. N# N1 e.g. would refer to Note 1: Note 1. National targets procured from renewable energy IPPs. In terms of progress towards these targets: The Ministerial determinations represent approximately 38% of the 2030 target of MW. The combined capacity procured in BW 1, 2, 3, 3.5 and 4 represents approximately 75% the 2019 target for renewable energy deals. The combined capacity of BW 1 and 2 (already commissioned or in construction phase) represents approximately 50% towards the 2019 target for capacity commissioned. N1. National targets for renewable energy has been set in the National Development Plan (NDP) as: Total renewable energy capacity developed by 2030: MW (Outcome 10, sub-outcome 2) Signed renewable energy deals for 7 000MW by 2019 (Outcome 6, Sub outcome 2, item 18) RE generation commissioned : 5 000MW by 2019 (Outcome 6, Sub outcome 2, item 26) RE generation capacity commissioned : 7 000MW by 2020 (Outcome 6, Sub outcome 2, item 26) The Green Energy Strategic Infrastructure Project (SIP), that operationalises the NDP, sets the target to deliver 6 725MW RE through IPPs by 31 March To date, the Minister of Energy has determined in two Ministerial determinations i.e and 2012 that 6 925MW are to be Note 2. Activity and reporting cycles IPPPP activity and reporting cycles are directly informed by ministerial determinations, bid windows and IPP implementation schedules. The following principles should therefore be noted with regard to reporting periods, reporting frequency and expected rate of change: - Ministerial determinations effectively translate development plans and country energy requirements into instructions for the IPPPP Office to procure. Determinations inform the procurement targets that the office aims to deliver on. Ministerial determinations and therefore procurement targets are done on an ad hoc basis and typically relevant (static) to a two or three year window period. Note 1. Notation indicates additional notes and observations available in Appendix.

57 - Bid windows with a specified technology mix and capacity target implement the procurement tranches and, once signed, establish the planned capacity and development delivery timelines. Bid windows have been rolled out more or less annually, increasing incrementally the planned capacity development targets. Delivery targets will only change with the closing of new bid windows (+/- annually). - Capacity delivery schedules for the respective IPPs vary depending on the size and technology type of each plant. The respective IPPs become commercially operational as they complete construction, incrementally adding capacity to the IPP portfolio in every quarter. Targets for new generation capacity to start operations are informed by the IPP construction schedules (i.e. Scheduled Commercial Operation Date (SCOD)) and increase quarterly in accordance with construction project plans. Tracking, and therefore reporting, is done against these respective targets. Note 3. Dynamic, slow-changing and static reporting parameters It should be noted that some data points and parameters will not change at all or will not change significantly from quarter to quarter. As an example, unless a subsequent bid window was finalised during the reporting quarter, procurement progress will remain static from the previous quarter. Future reporting will track slow changing parameters, but will focus on dynamic parameters that show quarter on quarter progress. Note 4. Planned vs actual data Bidders are required to indicate project details relating to costs, cost structures, equity and developmental thresholds as part of their bids. Submissions are based on projections and estimates are made for the construction period (typically 2 4 years) as well as for the 20 years operation periods. These projections are based on a range of forecasts related to technology performance, weather conditions, equipment cost trends, operational costs, performance and revenue. It is therefore referred to as planned or committed. Depending on the signed Implementation Agreement (IA) some commitments are contractually binding (bid obligations) while others are indicative only. Where relevant and required under the IA, bidders are held to specified commitments and required to provide quarterly performance reporting against these commitments. This reflects what is reported as realised (actual costs, labour requirements, energy generated, etc.) Data so collected is considered actual. Actual data is collected as part of the monitoring and evaluation function provided by the IPPPP Office. Note 5. Unaudited data Reported (actual) data will be subject to audit by independent auditors to ensure compliance with commitments and accurate reporting. Unless otherwise specified, actual data reported are as provided by IPPs and still subject to verification in the next quarter. Note 6. Construction vs operations period and spend patterns The durations of the construction and operations phases are very important for the correct interpretation and drawing of conclusions. The duration of the construction periods typically range between 2 and 4 years, while the planned operations period of the plants is 20 years. Where projected numbers are stated as cumulative over the total periods, the order of magnitude of the numbers should be considered in this context. Attention should be paid to: where numbers are stated as cumulative totals over extended periods and where annual figures are used. how the numbers will accumulate over time i.e. whether it will be a linear or average distribution or whether there will be concentrations or spikes (e.g. back- or front-loading). whether the reporting parameter will be relevant during the construction phase only and/or over the extended operations phase. A2

58 Year 1 Year 2 Year 3 Year 4 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Job years Note 6. (continued) Two important examples are highlighted for clarification: 1. Spend/income patterns. Anticipated cash flows (e.g. project costs, revenue, community trust income, development spend, etc.) are captured for an entire project, differentiating only between construction and operations periods, and stated as single values, targets or commitments as relevant. Timing of cash flows will however vary significantly over the project life. Project costs, including procurement spend, are likely to be incurred/concentrated during the initial construction phase. Project construction expenditure will therefore be characterised by short periods (2 4 years) of variable, but typically high spend that will taper off, commensurate with the coordination, delivery and completion of plant construction on site. A typical spend pattern for the construction phase is illustrated below. Typical construction spend profile numbers are reported by the IPPs in the smallest unit i.e. person months (in compliance with EDD requirements). This allows for reporting of activities of various durations including specialist or ad hoc activities, and casual labour used during construction versus permanent employment for the life of the plant. During construction there will be periods when large numbers of people are on site at a given time, but it is anticipated that employment numbers will taper off to zero by the end of the construction period. As for spending patterns, labour activity will be more intense (i.e. more people for shorter durations of time)during construction phase as illustrated by the construction employment forecast profile for bid window 1 and 2 projects in the Northern Cape below. Typical construction employment profile across portfolio (two bid windows) A3 R million 58 R million/annum Total Project Cost The spend (and labour) requirements of the operations period are expected to have a more steady pattern related to production and maintenance of the plant, sustained over 20 years. Revenue will also accumulate over 20 years as power is generated and sold. Similarly, development spend (a committed percentage of revenue) and community trust income (percentage of revenue) will accrue over time, starting only after operations have commenced. Labour requirements. Employment During the operations period it is anticipated that employment numbers will remain relatively constant, longer term employment prospects will be offered, but that job opportunities / employment will be relatively low in relation to the construction period. Reporting by the IPPPP Office is currently done in job years i.e. the equivalent of one person full time (i.e. defined in the IA as 174 hours per month for bid windows 1 and 2 and 160 hours per month for bid window 3) 1 employed for 12 months. Any interpretation of reported employment numbers in terms of jobs or number of new positions created and the sustainability of these positions over time should be done with caution. For example when comparing construction phase employment numbers (job years) with accumulated job years (translated into employment numbers) over the full 20 year operations phase. Note 1. The IA definitions differs from the definition used by the Extended Public (EPWP) i.e.: a Full Time Equivalent (FTE) as one person-year of employment where one person year is equivalent to 230 person days of work.

59 Note 7. Local content Local content percentages should also be considered in the context of the spend patterns described above. Local content is reported as a percentage of project value and is achieved by procuring from local suppliers. 3. For this bid window the average portfolio price is therefore calculated as: Price per technology weighted by the relative share of the total annual energy (R3.10 x 35%)+(R1.30 x 51%)+(R3.02 x 13%) A4 However, dependent on the procurement strategy and the components that have been earmarked to be sourced from local suppliers, the local content share need not be a constant throughout the construction period provided it constitutes the required share of project value when construction completes. Note 8. Average bid window price calculation The IPPPP Office has consistently calculated and reported on the average, indexed price per technology per bid window. This reported value is a simple average of the RFP submission price expressed in 2013 terms. In this quarterly report a portfolio average per bid window is shown as an indication / illustration of the price trends between bid windows and an indicative price comparison with new, coal fired power alternatives. Since the prices between the various technologies vary significantly, the portfolio average considers the volume of energy that is expected to be purchased from each technology type and has weighted the average price accordingly. The projected energy contribution per technology was then determined as follows: 1. Using bid window 1 as example, where the average technology pricing was reported as: PV R3.10/kWh Wind R1.30/kWh CSP R3.02/kWh (base rate only) 2. For this bid window, the projected share of the annual energy production (using the P50 projection) per technology is: PV 35% Wind 51% CSP 13% R2.15/kWh (note a small rounding error in the example) Should the entire portfolio generate power exactly as projected (P50), the average price paid for all energy generated in a year will be R2.15/kWh. 3. The CSP price in BW 3 onwards has a base rate and peak rate component. The BW 3 rate has therefore been adjusted to incorporate an estimated share of energy generated during contracted peak for which the peak rate will be payable. This remains only an estimate as: 1. Projections of annual energy production are only projections dependent on a range of variables and are by nature uncertain. 2. The technology price average is a simple average, without consideration of per IPP energy contribution. 3. The relative share of base : peak energy that will be supplied by the CSP IPPs (share to which peak rate will apply) is an estimate. Note 9. Quarter convention Quarter 1, 2, 3 and 4 are used to refer to quarters of the relevant financial year i.e.: Quarter 1 April June Quarter 2 July - September Quarter 3 October December Quarter 4 January March Where reference is made to a calendar quarter, such exceptions will be indicated as such.

60 Definitions and terminology A5 Contract definitions and terminology As per the definitions in the REIPPPP Implementation Agreements (IA) and Power Purchase Agreement (PPA): Capital Expenditure means any expenditure treated as capital expenditure under GAAP commencing at 00:00 hours on 1 April and ending at 24:00 hours on 31 March of the following year provided that: (a) the first Contract Year shall commence at 00:00 hours on the first day after the Effective Date and shall end at 24:00 hours on 31 March of the following year; and (b) the final Contract Year shall end at 24:00 hours on the Termination Date; Commercial Energy Rate means the rate per MWh applicable to Commercial Energy. Commercial Operation Date (COD) means the date specified in the Notice of Commencement of Facility i.e. it is the date on which the Independent Engineer ascertains that the Facility is completed, connected to the Grid and able to generate power Contracted Capacity means the anticipated Capacity of the Facility at the Delivery Point and expressed as AC power capacity, net of auto-consumption and the electrical losses up to the Delivery Point. Contract Quarter means the periods: (a) 1 April to 30 June; (b) 1 July to 30 September; (c) 1 October to 31 December; and (d) 1 January to 31 March, during the Term. Should the Effective Date fall within any of the periods referred to above (and not commence on 1 April, 1 July, 1 October or 1 January), then the first Contract Quarter shall commence on the Effective Date and shall be the remaining portion of the Contract Quarter in which the Effective Date falls, plus the next Contract Quarter. Contract Year means each twelve (12) Contract Month period CPI means the weighted average consumer price index(dec 2012 = 100) as published by Statistics South Africa (or its equivalent successor entity), which is referred to as "Headline CPI All urban areas" in Statistical Release P0141 from time to time (or equivalent successor index). Deemed Energy means that Energy Output that would otherwise be available to the Buyer, but for a System Event or a Compensation Event, as determined in accordance with Schedule 6 (Deemed Energy Payment). "Deemed Energy Payment" means an amount (excluding VAT) that shall be due and payable by the Buyer to the Seller for the Deemed Energy during a specified period pursuant to the provisions of clause 14 (Consequences of a System Event), which payment shall be calculated in accordance with Schedule 6 (Deemed Energy Payment) with reference to the Commercial Energy Rate, and dependent on the period in respect of which such payment is due and payable. Direct Agreement means the direct agreement entered into (or to be entered into) between the Buyer, the Seller, the Department and the Lenders (or their agent) in relation to the PPA and the Implementation Agreement. "GAAP" means generally accepted accounting practice in the Republic of South Africa as approved from time to time by the South African Accounting Practices Board.

61 Definitions and terminology A6 Implementation Agreement means the implementation agreement to be entered into between the Seller and the Department. "Local Content" means the portion of the Total Project Value that is in respect of South African Products. NERSA refers to the National Energy Regulator of South Africa, established pursuant to Section 3 of the National Energy Regulator Act, 40 of "Operating Expenditure" means any expenditure treated as operating expenditure under GAAP. "Operating Period" means the period from the later of the Commercial Operation Date and the Scheduled COD to the Termination Date Construction Period. Overnight Cost refers to the cost of a construction project if no interest was incurred during construction, as if the project was completed overnight (see also Total Project Cost, definition B). PPA means the power purchase agreement to be entered into between a Project Company, as the Seller, and the Buyer pursuant to the IPP Procurement Programme. P50 / P90 refers to probabilities for annual energy production which are expressed as P values. A P50 figure is the level of generation that is forecasted to be exceeded in 50% of years over a 10 year (or sometimes 20 year) period. Similarly, a P90 figure is the level of generation that is forecasted to be exceeded in 90% of years over a10 year period in other words, the risk that an annual energy production of P90 is not reached is 10%. Procurement spend refer to Total Amount of Procurement Spend "Total Amount of Procurement Spend" means the monetary spend on the procurement of goods and services for purposes of undertaking the Project Activities (without double counting), excluding costs of imported goods and services, taxation, salaries and wages. Total Project Cost means: (a) for the purposes of calculating the Development Fee, an amount equal to the aggregate of the total Debt and Equity which is, as at the Signature Date, forecast in the Financial Model to be contributed up to the Commercial Operation Date; and (b) for all other purposes, the total Capital Expenditure, forecast as at the Signature Date, to be incurred up to the Commercial Operation Date by the Seller in the design, construction, development, installation and/or commissioning of the Project "Total Project Value" means during the Construction Measurement Period, the capital costs and costs of services procured for the construction of the Facility, excluding Finance Charges, land costs, mobilisation fees to the Operations Contractor and the costs payable to the Distributor, Network Transmission Costs (NTC) and/or a Contractor for the Distribution Connection Works or the Transmission Connection Works (as the case may be). Other definitions and terminology used in this report Job years. Employment / Job creation is reported in job years i.e. the equivalent of a full time employment opportunity for one person for one year). Employment numbers are expressed as a percentage of the sum of StatsSA reported employed and unemployed numbers

62 A7 Glossary of icons These icons are used in the document to represent the following concepts: # percent AGRI Gross Domestic Product (percentage indicating the contribution share) 9 broad economic sectors as defined in the International Standard Industrial Classification (ISIC) and reported on by StatsSA ENERGY (P50) CAPACITY Energy (kwh, MWh or GWh) production / generation projected with a 50% probability that it will be achievable for the established capacity Generation capacity (kw, MW or GW) i.e. the rated output capability of the power plants Renewable energy source technology type: Agriculture SOLAR Solar PV (photovoltaic) MINING Solar CSP (Concentrated Solar Power) Mining WIND MANUF Wind generation Manufacturing HYDRO Small hydro ELEC Electricity BIO Biomass CONSTR WASTE Construction Landfill gas / waste to energy TRADE Trade and Performance Measures TRANS Total project costs Transport FIN Community trust (community equity / shareholding) COMM SERVICES Finance Community services Procurement spend Localisation / local content