Latest Developments on REDs Presentation to Middle Management
Background Early 1990s 1997 1999 end 1999 April 2000 August 2000 Considerable Debate over EDI RED s Approach Endorsed ERIC Report Cabinet Approves Start of Restructurin g Process EDIRC Established Appointment of PWC Blueprint Submitted to EDIRC BLUE PRINT APPROVED BY CABINET: MAY 2001
Background: Blue print key recommendations RED definition Ownership, governance and legal status Asset valuation and transfer Regulation and commercial arrangements Tariffs and financial transition Organisation and human resources
RED 6 Customers (000 s) 1008 Load (TWh) 28 Electrified (%) 60 6 Pretoria 6 East Rand RED 4 Customers (000 s) 720 Load (TWh) 31 Electrified (%) 70 Rustenburg Pretoria Pietersburg Lydenburg Nelspruit 4 Johannesburg Gauteng area enlarged 2 5 Vryburg 4 Lichtenberg Kroonstad Johannesburg East Rand Witbank Newcastle 5 Ulundi Upington Prieska 2 Kimberley RED 2 Customers (000 s) 1006 Load (TWh) 29 Electrified (%) 73 Bloemfontein Harrismith Bergville Pietermaritzburg Durban Richards Bay Household income less than R15,000 per year District Management Areas (few customers) Large Industrial Customers Calvinia 1 RED 1 Customers (000 s) 857 Load (TWh) 14 Electrified (%) 81 Victoria West De Aar Graaf Reinet 3 Umtata East London RED 5 Customers (000 s) 683 Load (TWh) 37 Electrified (%) 60 RED 3 Customers (000 s) 1400 Load (TWh) 29 Electrified (%) 56 Cape Town Port Elizabeth
Transitional Structure Diagram National Government 100% FULL OWNERSHIP & FULL VOTING SHARES ESKOM Municipalities EDI Holding Company FULL OWNERSHIP SHARES IN RED BUT LIMITED VOTING RIGHTS FULL OWNERSHIP SHARES IN RED BUT LIMITED VOTING RIGHTS RED RED 6 RED 5 RED 4 RED 3 RED 2 1 Subsidiary Companies HOLDER OF SPECIAL VOTING SHARE IN EACH RED BUT NO OWNERSHIP
Progress (Contd) Co-operative agreement between SALGA, DME, ESKOM & NER enabling ring fencing to progress while enabling legislation is being approved is complete and approved by SALGA Mancom Section 78 of Municipal systems Act to be amended to enable Municipalities to sign accession to agreement
Preparation Work for Municipalities Action Co-Operative Agreement (guidelines under preparation) Electricity undertakings to be ring fenced (Staff, Finances, Operations, Assets & Liabilities) Asset & Liabilities to be identified & valued Investigate requirements for Service Delivery Agreements Between Municipality and Service Provider (RED, Utility Co, MMSD, Eskom)
Preparation Work for Municipalities (Contd.) Determination,quantification & mitigation of impact on your Municipality with respect to:- Loss of Cash flow from Electricity Sales Avoiding Stranded Assets & resources Restructuring cost (once off) Contribution to Rates from Electricity
Preparation Work for Municipalities (Contd.) Determination,quantification & mitigation of impact on your Municipality with respect to:- Retention or loss of ability to disconnect electricity for non- payment of other Municipal services (Subject of Service Delivery Agreement) Services not core to RED such as Public lighting, traffic signals, electrical maintenance of Municipal installations, etc (Subject of Service Delivery Agreement) Credit rating
Preparation Work for Municipalities (Contd.) Co-operative governance with ESKOM to avoid fruitless expenditure Restructuring to be taken into account in IDP Municipal transitional and structural changes should not conflict with EDI transformation EDI restructuring project office requires support and input into task teams. Traveling and subsistence will be funded by project office (DME)
Latest Proposals of the EDIR Project Office
Eskom Three Model Comparison PwC Blueprint Eskom Regions Metro REDs
New RED Models Bloemfontein Pietermaritzburg Durban Durban Port Elizabeth Port Elizabeth Cape Town Cape Town East London 2 5 1 3 6 4 PwC Blueprint Pretoria Pretoria Johannesburg Johannesburg East Ran d East Ran d Bloemfontein Durban Durban Port Elizabeth Port Elizabeth Cape Town Cape Town East London 1 2 3 4 5 6 Eskom Regions Pietermaritzburg Johannesburg Johannesburg Pretoria Pretoria East Rand East Rand East Rand East Rand Bloemfontein Pietermaritzburg Durban Durban Port Elizabeth Port Elizabeth Cape Town Cape Town Pretoria Pretoria East London 2 1 2 3 4 5 6 Metro REDs Johannes -burg Johannes -burg
RED Boundaries MODEL Blueprint Eskom Region Metro Customer Balance 1 3 2 Implementation 3 1 2 Stakeholder Impact 3 1 2 Creation Cost R512m R56m R151m Ave Tariff (Y1) 13.4% 11.3% 9.6% Ave Tariff(Y1- Y10) 11.2% 10.83% 10.51%
EDIR Project Office New Suggested Timeline
RED EXEC Shareholders Eskom & Metro s into REDs New Proposed Start Time for REDs EDI Holdings Pty Ltd Physical Establishment Phase 5: Review & phaseout of EDI Holdings EDIRPO Phase 1 Establish EDI Holdings Phase 2: Ringfence EDBs Operational Ringfencing Financial Ringfencing Planning RED Establishment Phase 3: Establish REDs Phase4: Oversee and Support REDs Monitor RED Establishment Golden Share Voting Shares Limited Voting Special Voting Shares + 5 Years Normal Voting as per Share Holding Appointed and involved in planning of REDs RED Set-up SOE Absorption RED Integration and Business Improvement Independent REDs Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
SALGA Workshop on 2&3 October 2002 Issues discussed around REDs Labour Relations Issues Credit Worthiness Amendments to MSA Determination of Assets and Liabilities Outstanding Problems Way Forward
Outstanding Problems Impact on Municipal Finance not yet quantified Legislation to levy electricity sales of utilities to be written SALGA feels only municipalities should hold shares in REDs RED boundaries to be finalised
Way Forward Study to be undertaken to fully understand impact of REDs on finances of municipality Impact of REDs on revenue-raising measures by municipalities to be highlighted Legal clarity to be sought if MSA is not amended