2 November 2005Slide 1 Establishment Governance Performance Annual Financial Statements Current...

2 November 2005 Slide 1

Establishment

Governance

Performance

Annual Financial Statements

Current Status Update

Conclusion

PRESENTATION OUTLINE


ESTABLISHMENT


ESTABLISHMENT

EDI Holdings was established in March 2003

Objective:

Facilitate the restructuring of the Electricity Distribution Industry in

accordance with the requirements of the Energy White Paper of 1998,

Blueprint report of 2001 and subsequent Cabinet decisions


EDI Holdings Establishment

EDI Planning

EDI Implementation

EDI Oversee and Support

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4FY03 FY04 FY05 FY06 FY07

Refinement

Eskom Distribution 726 migration

1st RED2nd RED

Business Plan Period April 2004 to March 2007

Municipal ring fencing and preparation

ORIGINAL TIME LINE



EDI Planning

EDI Implementation



Refinement


1st RED2nd RED



PERIOD UNDER REVIEW


GOVERNANCE


GOVERNANCE

Annual Report presented in terms of the Public Finance Management

Act,1999 (Act No.1 of 1999)

The Annual Report reflects:

Financial statements of EDI Holdings (Pty) Ltd for the 2004/2005

Financial Year

Prepared in terms of Generally Accepted Accounting Practice (GAAP)

Audited by the Office of the Auditor-General

Financial position at the end of the financial year

Performance against predetermined objectives


GOVERNANCE

Board of Directors in place

Board Committees established

Audit & Risk Management

Human Capital & Remuneration

Programme Management

Finance & Procurement

Operations

Regular meetings held


GOVERNANCE

Internal Audit

Independent auditors

Annual audit plan

Risk management

Fraud prevention

Compliance

Code of Ethics

Stakeholder Communication


PERFORMANCE


PERFORMANCE

Period under review focussed on

Planning for EDI restructuring

Preparation for establishment of the first RED

Development of key positions for engagement

Stakeholder management

Communication

Concluding level 3 and below recruitment

Embedding governance and project management practices


PERFORMANCE

Performance highlightsPreparation for establishment of the first RED

Finalisation of Ringfencing framework and toolkit

Finalisation of Section 78 framework and toolkit

Request for relevant exemptions to the Public Finance Management Act / Municipal Finance Management Act to facilitate RED creation

Draft profiles for REDs Board members

Reservation of company name

Preparation of initial financial and 3 year business case

Establishment agreements:

Sale of Business, Service Delivery Agreement, Shareholder Agreement & Operating Lease Agreement

Articles and memorandum of association


PERFORMANCE

Performance highlights

Development of key positions for engagement

Valuation and compensation framework

Wholesale Energy Purchasing and Pricing Approach

Tariff Approach Framework

Embedded Generation Strategy

Asset Condition Assessment Model & Maintenance Management Framework

Industry change management strategy

Transfer, appointment, migration of employees & bargaining structures


PERFORMANCE

Performance highlights

Stakeholder management

Launch of Transitional Labour Relations Structure (October 2004)

Stakeholder management and engagement strategy

Stakeholder analysis

Stakeholder engagements programme including:

Parliamentary Committees, Ministries, Legislatures, Municipalities,

Eskom, SALGA, NEDLAC, NER, etc.

CommunicationMedia

Communities


ANNUAL FINANCIAL STATEMENTS


ANNUAL FINANCIAL STATEMENTSBalance Sheet

2005 2004R'000 R'000

ASSETSNon-current assetsCapitalised refurbishments, furniture & equipment 13 819 1 250

Current assets 31 220 62 579Trade and other receivables 1 762 1 720Cash and cash equivalents 29 458 60 859

TOTAL ASSETS 45 039 63 829

EQUITY AND LIABILITIESCapital and reserves - -Issued capital - -Current liabilities 45 039 63 829Current portion of deferred income 13 471 59 191Trade and other payables 16 410 4 503Provisions 15 158 135

TOTAL EQUITY AND LIABILITIES 45 039 63 829


ANNUAL FINANCIAL STATEMENTSIncome Statements

2005R'000

2004R'000

Income

Government grants 99 747 14 796

Interest received 3534 1 358

Operating costs 103281 16 154

Net income/(deficit) (103 281) (16 154)


ANNUAL FINANCIAL STATEMENTSCash Flow Statements

2005 2004R'000 R'000

Cash flows utilised in operating activitiesCash receipts 42 50Cash paid to suppliers and employees (75 053) (11 453)

(75 011) (11 403)Interest received 3 534 1 358Net cash outflow (71 477) (10 045)Cash flow from financing activities (13 951) (1 313)Share capital issued - -Capital refurbishments, furniture and equipment acquisitions (13 951) (1 313)

(85 428) (11 358)Cash flows from investing activities 54 027 72 217Government grant capital amount 54 027 72 217Increase/(decrease) in cash and cash equivalents (31 401) 60 859Cash and cash equivalents at beginning of the year 60 859 -Cash and cash equivalents at end of the year 29 458 60 859

Cash at bank 2 679 60 859Cash on call 26 773 -Petty cash 6 -

29 458 60 859


CURRENT STATUS

UPDATE



EDI Planning

EDI Implementation



Refinement


1st RED2nd RED



CURRENT STATUS – NOVEMBER 2005

In Progress

In Progress


RED ONE

First RED:

RED ONE Commenced operations on 1 July 2005, in line with Presidential

deadline

Initial area of supply consists of the area of jurisdiction of the City of Cape

Town

SDA signed between the RED & CCT

Operating agreements in place between the RED, City of Cape Town and

Eskom whilst finalising transfer of business arrangements

Issued with a license by the NER

6 Independent Board Members, CEO & COO appointed


RED ONE

Progress update:

Induction of the Board of Directors

Operational strategy development

Population of macro structure

Preparation for transfer of business of City of Cape Town and Eskom

Distribution in the area of jurisdiction of the City of Cape Town

Stakeholder engagements



EDI Planning

EDI Implementation



Refinement


1st RED2nd RED



CURRENT STATUS – NOVEMBER 2005

In Progress

In Progress

Revised

Restructuring

Approach


REVISED RESTRUCTURING APPROACH

Key concerns raised over original boundaries/approach:

Fiscal and financial risks of transferring Eskom and Municipalities electricity

businesses to the REDs

Financial impact on municipalities and Eskom

Credit rating impact

Credit control implications

Cost and liabilities implications of transferring Eskom and Municipalities

staff to the REDs

Impact on personnel benefits – Pensions, medical aid, etc.

Salary harmonisation

Definition of reticulation to eliminate possibility of constitutional challenge



Restructuring approach

Create 6 Metro REDs after Local Government Elections

Conduct modelling, within 6 months, to determine feasibility of creating a

National RED, its viability and sustainability, organisational structure and

governance arrangements

Based on modelling results, make recommendations on the best model to

achieve the objectives of restructuring and to optimise service delivery

Introduction of restructuring legislation to provide the legislative framework for

RED formation and to remove the risk of the currently open-ended process



National RED(s)

Structure of National RED(s) subject to

modelling exercise



Implementation principles

Restructuring must be in accordance with the Constitution, taking into account

that the responsibility of electricity reticulation is a municipal function

Financial state of municipalities currently performing the electricity function

must not be adversely affected

Aggregate personnel costs must not increase in a way that undermines the

objective of a single public service

No additional funds or taxes (fiscus and/or local government) without the

approval of Cabinet



Key Policy Assumptions

National cross subsidy framework

Constitutional powers of municipalities regarding “reticulation”

Regulation of municipal surcharges

Impact on Eskom

Role of Eskom in National RED

Contestable customers

Transfer of assets

Competition



Progress thus far:

Ministerial Committee in place

Minerals & Energy, Provincial & Local Government, Public Enterprises and Finance

Inter-governmental Forum established

DDG’s: Minerals & Energy, Provincial & Local Government, Public Enterprises and

Finance

Modelling technical team established

Commencement meetings held

Agreed on approach, process and timeline to modelling

Participation of all stakeholders critical


CONCLUSION


CONCLUSION

Way Forward

Consolidate the gains made

Complete modelling and agree final REDs boundaries

Ensure the creation of an enabling legislative environment for the

establishment of the REDs

Establish financially viable and sustainable REDs within the set timelines


CONCLUSION

AcknowledgementsMs Phumzile Mlambo Ngcuka, Minister of Minerals and Energy for period under review

Ms Lulu Xingwana, Deputy Minister of Minerals and Energy

Advocate Sandile Nogxina, Director General – DME, Chairman of the Board for period under review

Board of Directors of EDI Holdings

Stakeholders:

Parliamentary Committees, Ministries, Legislatures, Municipalities, Eskom, SALGA, NEDLAC, NER

Management & Staff of EDI Holdings (Pty) Ltd

WelcomeMrs Lindiwe Hendricks, Minister of Minerals and Energy


THANK YOU

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