EDI HOLDINGS ANNUAL REPORT 20056

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EDI HOLDINGS ANNUAL REPORT (2005/6)
PRESENTATION TO THE PARLIAMENTARY PORTFOLIO
COMMITTEE ON MINERALS AND ENERGY- CAPE
TOWN DOLLY MOKGATLE AND PHINDILE NZIMANDE 31
JANUARY 2007
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TABLE OF CONTENTS

• CHAIRMANS OVERVIEW
• Introduction
• Mandate of EDI Holdings
• Corporate Governance
• Performance
• Our Future
• Acknowledgements
• CEOS REPORT
• Highlights
• Revised Strategic Approach / Strategic Pillars
• Staff Establishment
• Employee Management Level / Job Level / Gender
  Classification - Graphs
• Employee Racial Classification Total / Males /
  Females - Graphs
• Employment Equity Statistics
• ANNUAL FINANCIAL STATEMENTS
• Report of the Auditor-General to Parliament
• Statement of Financial Position

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CHAIRMANS OVERVIEW

• DOLLY MOKGATLE

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CHAIRMANS OVERVIEW INTRODUCTION

• The Annual Report is presented in compliance with
  the Public Finance Management Act (Act No. 1 of
  1999)
• Fairly presents the state of affairs of the
  company,
• Its business,
• Its performance against predetermined objectives,
  and
• Its financial position at the end of the year in
  terms of Generally Recognised Accounting Practice
  (GRAP).
• The annual financial statements are the
  responsibility of the Accounting Authority, i.e.
  the Board of Directors of EDI Holdings.
• The office of the Auditor-General has audited EDI
  Holdings financial statements, and issued an
  unqualified audit report .

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CHAIRMANS OVERVIEW MANDATE OF EDI HOLDINGS

• Our mandate is guided by the White Paper on
  Energy for South Africa (1998) and the Blue Print
  on EDI Reform (2001).
• The main object of EDI Holdings is to restructure
  the electricity distribution industry and invest
  in financially viable independent REDs in South
  Africa in accordance with national Govt policy in
  order to ensure a more effective and efficient
  electricity distribution industry capable of
  providing affordable and accessible electricity
  to consumers.
• RED1 was established in accordance with the
  Presidential deadline, as outlined in the
  President State of the Nation Address of 21 May
  2004.

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CHAIRMANS OVERVIEW CORPORATE GOVERNANCE

• The Board of Directors is established as the
  Accounting Authority
• Annual Financial Statements presented in terms of
  Generally Recognised Accounting Practice
• EDI Holdings Board direct and guide the business
  in compliance with applicable legislation and has
  instituted the necessary policies and monitoring
  procedures to give effect thereto, through the
  following Board Committees
• Audit and Risk Management Committee
• Internal Audit Function - outsourced
• Risk Management Function - outsourced
• Human Capital and Remuneration Committee
• Finance and Procurement Committee
• Operations Management Committee

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CHAIRMANS OVERVIEW CORPORATE GOVERNANCE

• EDI Holdings maintains world class systems of
  corporate governance by
• subscribing to the principles of good governance
• adhering to and encouraging good governance
  practices and the highest ethical behaviour
• continuing to comply with the broad principles
  set out in the King II Report and
• assessing its systems of governance for
  improvement on an ongoing basis.
• EDI Holdings endeavours to observe all principles
  of corporate governance in all dealings with its
  stakeholders
• EDI Holdings will continue to comply with
  relevant shareholder, statutory and treasury
  requirements
• Regular compliance submissions are made to
  relevant authorities

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CHAIRMANS OVERVIEW PERFORMANCE

• EDI Holdings complied with Corporate Governance,
  Shareholder, Statutory and Treasury requirements,
  in all its dealings with Stakeholders.
• The 1st RED was launched in the City of Cape Town
  on 1 July 2005 in line with the Presidential
  deadline.
• Creation of RED 1 represents an instructive pilot
  project for the overall EDI restructuring
  process.
• In line with the Cabinet decision of 14 September
  2005 the company
• Commenced with preparatory work for establishment
  of Metro REDs,
• Established a Multi Stakeholder Forum, and
• Developed a model to determine the viability of
  establishing a National RED and or other REDs.

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CHAIRMANS OVERVIEW OUR FUTURE

• The outcome of the modelling exercise will assist
  Cabinet in deciding the optimal end state of the
  industry to ensure the establishment of
  financially viable and sustainable REDs
• The achievements for the year have laid a
  foundation for the attainment of EDI
  restructuring objectives.
• Key Challenges to be overcome, working closely
  with our stakeholders include
• Enactment of enabling legislation,
• Development of a shared vision among
  stakeholders,
• Preparations and readiness for RED Day One

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CHAIRMANS OVERVIEW ACKNOWLEDGEMENTS

• We sincerely appreciate
• The leadership and guidance of the then Minister
  of Minerals and Energy, Ms Lindiwe Hendricks and
  Deputy Minister Ms Lulu Xingwana
• The leadership and support of the erstwhile
  Chairman of EDI Holdings and Director General of
  the DME, Advocate Sandile Nogxina
• Board of Directors of EDI Holdings
• CEO of EDI Holdings, Ms Phindile Nzimande
• The Management and staff of EDI Holdings and
• All our Stakeholders

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CEOS REPORT

• PHINDILE NZIMANDE

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CEOs REPORT HIGHLIGHTS

• ESTABLISHMENT OF RED1 1
• City of Cape Town (CCT) followed required
  legislative prescription prior to choosing the
  RED as the vehicle for electricity service
  provision
• Municipal Systems Act (MSA) Sections 78 and 80
• Municipal Finance Management Act (MFMA) Section
  84
• Registered by EDI Holdings as company 02
  November 2004
• RED established as a Municipal Entity by City of
  Cape Town 31 May 2005
• Licensed by NERSA
• Commenced Operations 01 July 2005

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CEOs REPORT HIGHLIGHTS

• ESTABLISHMENT OF RED1 2
• Various agreements concluded
• Service Delivery Agreement (SDA) between CCT and
  RED 1
• Operating and Transitional Plan for Transfer
  Agreements (OTPTAs) between
• RED 1 and CCT Electricity
• RED 1 and Eskom (Cape Town Metro Portion)
• RED 1 Board appointed
• Business Plan and Budget Approved

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CEOs REPORT HIGHLIGHTS

• Stakeholder Engagement
• EDI Holdings embarked on an intensive
  stakeholder engagement process to brief various
  stakeholders about the EDI restructuring process
  and the 14th September 2005 Cabinet, with the aim
  to
• Clarify the revised restructuring approach
• Minimise uncertainty in the industry
• Continue to debate issues relating to staff
  within the EDI

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CEOs REPORT HIGHLIGHTS

• Completion of Industry Modelling within
  stipulated time frame
• A representative Multi Stakeholder Forum (MSF)
  established
• Peer Review and Independent validation of the
  model
• Completed and submitted to DME on time within
  budget
• Preparatory Work Towards Other Metro REDs
• Developed a generic Day One definition, agreed
  with all stakeholders
• Developed of regional roadmaps for Metro RED
  creation
• Created Governance structures for Metro RED
  establishment

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CEOs REPORT Revised Strategic Approach

• EDI Holdings is a flexible learning organisation
  that is highly responsive to
• changes in the restructuring environment.
• Having been in existence for three years and
  armed with the practical experience of launching
  RED 1, it was necessary to review the companys
  strategic approach, owing to complexities brought
  about by
• a lack of enabling legislation,
• varying stakeholder interests, and
• uncertainty regarding the desired industry
  end-state
• Our organisational structure has been realigned
  to revised strategy.

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CEOs REPORT Revised Strategic Approach
Strategic Pillars
Mandate
INDUSTRY LEADERSHIP
CREATION
OVERSIGHT
ADVOCACY
EDI Holdings are the catalyst the champion of
the EDI Restructuring process Proactive and
continuous Advocacy
Provide Industry thought Leadership, guiding
influencing the restructuring process
Establishment of viable REDs
EDI Holdings plays an oversight role in the
success of the REDs through
efficiency Improvements
Vision, Mission and Values
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Staff Establishment
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Staff Establishment (continued)

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Staff Establishment (continued)

• TABLE OF TOTAL EMPLOYEES BY RACIAL COMPOSITION

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Staff Establishment (continued)

• TOTAL EMPLOYEES BY RACIAL COMPOSITION

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Staff Establishment (continued)

• MALE EMPLOYEES BY RACIAL CLASSIFICATION

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Staff Establishment (continued)

• FEMALE EMPLOYEES BY RACIAL CLASSIFICATION

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Staff Establishment (continued)

• EMPLOYMENT EQUITY
• Employment equity figures for Black, Female
  and Disabled employees
• Black employees (i.e. African, Asian and
  Coloured)
• Target 70 Actual 72 (over-target by
  2)
• Female employees
• Target 50 Actual 66 (over-target by
  16)
• Disabled employees)
• Target 10 Actual 4 (under-target by
  6)
• BASIS OF REMUNERATION
• All EDI Holdings posts have been evaluated
  according to the T.A.S.K. grading systems. This
  system has been used to update job profiles and
  benchmark salary structure.

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ANNUAL FINANCIAL STATEMENTS(ABRIDGED)

• FOR THE YEAR ENDED 31 MARCH 2006

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ANNUAL FINANCIAL STATEMENTS (abridged) STATEMENT
OF FINANCIAL POSITION AT 31 MARCH 2006
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ANNUAL FINANCIAL STATEMENTS (abridged) STATEMENT
OF FINANCIAL PERFORMANCE FOR YEAR ENDED 31 MARCH
2006
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ANNUAL FINANCIAL STATEMENTS (abridged) CASHFLOW
STATEMENT FOR THE YEAR ENDED 31 MARCH 2006
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CABINET DECISION PLANS FOR THE FUTURE1

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

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6 Wall-to-Wall RED Model
Limpopo
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CEOs REPORT PLANS FOR THE FUTURE2

• Six Wall to Wall Regional Electricity
  Distributors (REDs) geographically anchored by
  the metropolitan cities, covering the whole of
  South Africa both rural and urban areas
• Financially viable entities with a business
  strategy as well an asset investment strategy
  that will ensure sustainable and reliable quality
  of supply and revenue flow in perpetuity serving
  all South Africans
• Enabling working environment, employing empowered
  and highly skilled people with the ability to
  leave, but a strong desire to remain (retention
  of skills) contributing to the socio-economic
  development of their immediate communities
• REDs to be setup seamlessly with minimum
  disruption to service delivery for the consumers
• Consolidation of RED1 to ensure full transfer of
  distribution businesses and staff (Take steps
  required to ensure alignment with 25 October
  Cabinet Decision)
• EDI Holdings will continue to provide thought
  leadership and strategic advice on EDI
  restructuring in order to influence policy and
  strategic direction

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CEOs REPORT PLANS FOR THE FUTURE3

• Key Considerations and Implementation Enablers
• Governance of the REDs
• Promulgation of Asset Transfer Framework to
  enable effective and orderly transfer of assets
  from local government and Eskom to the REDs
• National Tariff Harmonisation Framework to ensure
  rationalisation of tariffs nationally
• Infrastructure Investment Strategy
• Salary Harmonisation Framework
• Surcharge principles
• Consolidation of RED 1 in the Western Cape to
  ensure that the pilot is a success.

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ACKNOWLEDGEMENTS

• We sincerely appreciate
• The leadership and guidance of the then Minister
  of Minerals and Energy, Ms Lindiwe Hendricks and
  Deputy Minister Ms Lulu Xingwana
• The leadership and support of the erstwhile
  Chairman of EDI Holdings and Director General of
  the DME, Advocate Sandile Nogxina
• The Chairman and Board of Directors of EDI
  Holdings
• Stakeholders, including all spheres of
  Government, Eskom, SALGA, City of Cape Town,
  Labour, Business, the Parliamentary Portfolio
  Committee and all Political formations
• The Management and staff of EDI Holdings.

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THANK YOU