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INTEGRATED RESULTS PRESENTATION
KING III APPLICATION
 
   



Purpose, values and strategic objectives

The purpose of Eskom’s annual corporate plan is to outline the strategic and operational direction of Eskom and to capture the necessary financial, operational and resource plans to support this direction. As such, the corporate plan becomes an engagement document for discussion with Eskom’s stakeholders. The latest plan covers the four-year period from 1 April 2014 to 31 March 2018 and the focus is on Eskom’s response plan to its changing environment.

A secondary purpose of the corporate plan is to comply with the requirements of section 52 of the Public Finance Management Act (PFMA) as well as section 29 of the National Treasury regulations, and to support internal Eskom policies. The consolidated corporate plan with all its annexures is submitted to the Department of Public Enterprises (DPE) and National Treasury annually in February.

The targets reflected in the integrated report for 2013/14 are those that were approved in the five-year corporate plan that covered 2013/14 to 2017/18. The 2017/18 targets are those that are reflected in the current four-year corporate plan that was submitted to DPE and National Treasury on 28 February 2014. Eskom’s purpose, values and strategic objectives have been consistent in both the 2013/14 and 2014/15 corporate plans.

Eskom’s purpose, values and strategic objectives

Eskom’s purpose, values and strategic objectives

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Purpose

The purpose of Eskom is to provide sustainable electricity solutions to assist the economy to grow and to improve the quality of life of people in South Africa and in the region.

Strategic objectives

Eskom has aligned itself around eight strategic objectives. These objectives give Eskom direction to deliver on its purpose, vision and values. They are confirmed on an annual basis as part of the corporate plan process.

Becoming a high-performance organisation

Eskom continues its transformation into a high-performance utility focused on quality customer service; safer, effective and efficient plant operation through prudent plant maintenance; optimising key talent; and ensuring resilience measures are in place for major disruptive events. The business productivity programme is identifying and eliminating inefficiencies in the business to enable Eskom to better manage its costs and revenue.

Leading and partnering to keep the lights on

Eskom is committed to keeping the lights on whilst at the same time maintaining a sound basis for sustainable operations. This will be done by taking a leading role and actively partnering with all key stakeholders, including the people of South Africa, in a comprehensive supply-and-demand management strategy.

Reducing Eskom’s environmental footprint and pursuing low-carbon growth

Eskom is committed to reducing its environmental and carbon footprint and helping South Africa achieve its environmental targets by transitioning to a cleaner energy mix and reducing emissions and water use and ensuring full compliance with environmental legislation. In addition, Eskom has to adapt to a changing environment as a result of the negative impacts of climate change placing pressure on its resources and infrastructure.

Securing future resource requirements

Eskom must partner with suppliers and regulators to ensure that it has the resources including land, coal, liquid fuel, uranium and water it needs for its existing and new generating assets to operate.

Implementing coal haulage and the road-to-rail migration plan

Eskom will continue to reduce the number of coal trucks on the road and contribute to the security of coal supply by migrating coal transport from road to rail. The aim is to reduce the cost of transporting coal and improve the safety record of coal hauliers.

Pursuing private-sector participation

Eskom acts as a catalyst for private-sector participation in South Africa to ensure security of supply for South Africa.

Transformation (including the business productivity programme)

Eskom has initiated a transformation programme to address national and internal transformation challenges by leveraging the capacity expansion programme and Eskom’s organisational spend to reduce unemployment, improve the country’s skills pool and increase economic and workplace equity. This transformation programme is informed by the government’s developmental goals.

Eskom is addressing the overall challenges it faces through the business productivity programme, which aims to ensure a sustainable business despite the financial constraints faced.

Ensuring Eskom’s financial sustainability

Eskom remains focused on re-engineering the business to achieve sustainability and costefficiency by striking a balance between reducing costs where appropriate and the three sources of funding: equity, debt and revenue. This will inevitably involve increasing electricity prices to obtain cost-reflective tariffs in the future and to retain a supportive credit rating that retains access to funding as well as reduces the cost thereof.

Link between Eskom strategic objectives and the “six capitals”

The capitals, as defined in the integrated reporting framework are “stocks of value” that are increased, decreased or transformed through the activities and outputs of a business.

For the purpose of the integrated reporting framework, the six capitals are categorised and described as follows:

Financial capital – The pool of funds that is available to an organisation for use in the production of goods or the provision of services
Manufactured capital – Manufactured physical objects (as distinct from natural physical objects) that are available to an organisation for use in the production of goods or the provision of services. Manufactured capital is often created by other organisations, but includes assets manufactured by the reporting organisation for sale or when they are retained for its own use
Intellectual capital – Organisational, knowledge-based intangibles
Human capital – People’s competencies, capabilities and experience, and their motivations to innovate
Social and relationship capital – The institutions and the relationships within and between communities, groups of stakeholders and other networks, and the ability to share information to enhance individual and collective well-being
Natural capital – All renewable and non-renewable environmental resources and processes that provide goods or services that support the past, current or future prosperity of an organisation

The table below gives an indication of how the six capitals are impacted by Eskom’s strategic objectives. It is evident from this that Eskom’s strategic objectives are integrated and consider all aspects of its business and the value that it creates over time.

         
Six capitals
       
Financial
capital
Manufac-
tured
capital
Intellec-
tual capital
Human
capital
Social and
relation-
ship capital
Natural
capital
 
Becoming a high-performance organisation
Tick   Tick Tick Tick Tick Tick Tick
 
Leading and partnering to keep the lights on
  Tick Tick Tick Tick Tick Tick
 
Reducing Eskom’s environmental footprint and pursuing low-carbon growth
  Tick Tick Tick Tick Tick Tick
 
Securing future resource requirements
  Tick Tick     Tick Tick
 
Implementing coal haulage and the road-to-rail migration plan
  Tick Tick     Tick  
 
Pursuing private-sector participation
  Tick Tick     Tick Tick
 
Transformation (including the business productivity programme)
  Tick Tick   Tick Tick  
 
Ensuring financial sustainability
  Tick Tick Tick Tick Tick Tick

Trade-offs

An excess or shortage of any of the resources required for Eskom’s core operations or supporting services can affect all the others. Eskom is constantly monitoring and managing the costs and benefits of key trade-offs between its required resources to ensure that its operations are efficient and sustainable. The following are examples of the trade-offs Eskom currently faces:

Diesel to run the open-cycle gas turbines ensures security of supply in the short term, but negatively affects Eskom’s financial sustainability in the longer term
Eskom’s Generation sustainability strategy is crucial to improve plant health and reliability in the long term, thereby improving security of supply. In the shorter term, planned maintenance has to be balanced with the constrained power system and financial constraints. By contrast, not performing sufficient maintenance negatively affects plant reliability, which likewise increases the risk of load shedding
Requesting customers to reduce their electricity demand assists Eskom to meet demand, but has negative consequences for Eskom’s revenue due to reduced sales
Coal is a relatively inexpensive fuel to source financially, but has a high environmental cost, and contributes to an increasingly vulnerable supply chain, e.g. reliance on road transport and mining challenges coupled with extreme weather events