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Executive summary
  Medupi power station is advancing well
  Left: Construction of Medupi power station is advancing well. Right: Insulators in the new 132kV yard at Medupi.

Meeting escalating electricity demand with a much-diminished reserve margin has proven to be the biggest challenge in the past year. The management of plant performance became increasingly complex as the reserve margin decreased. An adequate reserve margin creates a window for maintenance and allows for unplanned outages. The organisation’s ability to sustain high levels of electricity production while ensuring adequate maintenance and sufficient fuel stocks was severely tested.

Reserve margins continued to be eroded and, since September 2007, available generating capacity was not always sufficient to meet the demand for electricity, and load losses were experienced. Power stations were stretched to their limits, resulting in high levels of unplanned maintenance. In addition, abnormally high rainfall caused coal supply problems and coal handling difficulties, which, together with coal stock levels being significantly lower than planned target levels, restricted electricity production. This showed the importance of an adequate reserve margin to provide a buffer for unplanned maintenance and other supply problems.

In response to these events, an Eskom recovery plan has been established with six focus areas to address continuity of supply.

The financial performance of the group was severely impacted by the increase in the cost of primary energy (mainly coal and diesel). The operating profit before the fair value gain/(loss) on embedded derivatives and net finance cost for the group was R3 215 million (2007: R6 452 million) before the impact of the fair value loss on embedded derivatives of R143 million (2007: a profit of R4 305 million). The profit for the year was R974 million (2007: R6 476 million). If the impact of embedded derivatives is excluded, the profit after tax was R1 076 million (2007: R3 419 million).

Over the next five years to March 2013, Eskom will spend R300 billion (R343 billion in nominal terms) on capacity expansion – significantly higher than the R150 billion reported previously for the five years to 2012.

In terms of the revised plan, Eskom will now deliver an additional 16 304MW in generating capacity by 2017. Of this, 4 644MW will come on stream within the next five years, including the completion of the three old coal-fired stations being returned to service, extensions to the two open-cycle gas turbine stations and an upgrade of Arnot power station. The first units of Medupi and Ingula come online in 2012/13.

Generation projects will take up 73% of the budget, with transmission investment accounting for another 13%. The rest of the budget will fund improvements to our distribution network.

Over the next five years to March 2013, Eskom will spend
R300 billion (R343 billion in nominal terms) on capacity expansion.
  The Gourikwa open-cycle gas turbine station and the cooling fans at Matimba power station
  Left: The Gourikwa open-cycle gas turbine station near Mossel Bay. Right: The cooling fans at Matimba power station in Lephalale.
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