City Power Johannesburg (SOC) Ltd Business Plan 2013-2016

City Power Johannesburg (SOC) Ltd Business Plan 2013-2016 Board Approved Page 1

Sign Off: CEO/MD Name: Signature Sector ED:.... Signature of Sector MMC:... Date:.. Receipt & Review: Signature of Group Governance Representative:. Signature of EISD Representative: Company Details Company Name: City Power Johannesburg (SOC) Ltd Company Registration Number: Reg 2000/030051/30 Physical Address: 40 Heronmere Road, Reuven Postal Address: PO Box 38766, Booysens, 2016 Phone Number: (+27) 011 490 7000 Fax Number: (+27) 011 490 7590 E-mail: electricity@citypower.co.za Website: www.citypower.co.za Customer Contact Centre: (+27) 011 375 5555 Board Approved Page 2

TABLE OF CONTENTS: SECTION 1: STRATEGIC CONTEXT... 4 INTRODUCTION... 4 PROBLEM STATEMENT... 5 GROWTH AND DEVELOPMENT STRATEGY 2040 (GDS 2040)... 5 MAYORAL PRIORIES AND CITY POWER ALIGNMENT... 6 GDS IDP 5 YEAR PLAN... 13 SECTION 2: STRATEGIC ANALYSIS AND FOCUS... 16 PESTLE ENVIRONMENTAL SCAN... 16 SWOT ANALYSIS PRIORITISED... 17 KEY DRIVING FORCES IMPACTING CITY POWER S STRATEGY... 18 SECTION 3: STRATEGY AND SCORECARD... 19 STRATEGY MAP... 19 SCORECARD... 20 SECTION 4: DAY TO DAY OPERATIONS... 24 PROVIDE NETWORK INFRASTRUCTURE... 24 DISTRIBUTE ELECTRICITY... 25 NETWORK EXPANSION... 25 ELECTRIFICATION... 29 PUBLIC LIGHTING... 33 ASSET MAINTENANCE MANAGEMENT... 35 REVENUE WAR PLAN... 37 SECTION 5: HUMAN CAPITAL PLAN... 45 MANAGEMENT AND ORGANISATIONAL STRUCTURES... 45 STAFF ESTABLISHMENT... 49 HUMAN CAPITAL EXPENDITURE... 49 EMPLOYMENT EQUITY... 50 STAFF TURNOVER / MOVEMENT DURING PREVIOUS FINANCIAL YEAR... 50 SECTION 6: FINANCIAL PLAN... 51 TARIFF PLAN... 51 FINANCIAL PLAN... 56 CAPITAL EXPENDITURE: INFRASTRUCTURE & SERVICE DELIVERY CAPITAL PLAN... 61 THE TABLE BELOW SHOWS THE APPROVED LONG TERM CAPITAL BUDGET:... 63 SECTION 7: RISK ASSESSMENT... 70 BACKGROUND... 70 RISK IDENTIFICATION... 70 STRATEGIC RISKS REPORT... 73 SECTION 8: CONCLUSION... 76 SECTION 9: BUSINESS ACRONYMS AND APPENDICES... 77 BUSINESS ACRONYMS... 77 Board Approved Page 3

SECTION 1: STRATEGIC CONTEXT Introduction Following the first democratic elections that took place in 1994, and the local government election that followed in 1995, eleven local authorities were amalgamated to form the Greater Johannesburg Metropolitan Council. By mid-1997 it became apparent that the new structures were not optimally effective and the Councils of Greater Johannesburg were facing a severe financial crisis. It was then agreed that a unified, metropolitan-wide initiative was necessary to focus specifically on the critical problems facing the City. This led to the inception of the i-goli 2002 plan. i-goli 2002 was essentially a three-year strategic plan. It involved the structural transformation of Metro functions with the view to ensuring enhanced and more cost effective service delivery. It achieved this by reducing fragmentation, eliminating duplication, improving accountability, focusing on human resource development and improving performance incentives. From an organisational perspective, the i-goli 2002 Plan put in place sensible structures that delivered at greater levels of efficiency. The i-goli 2002 Plan envisaged that the City would work through a combination of new political governance structures, agencies and corporatised entities. A key element of the i-goli 2002 strategy for service delivery was the establishment of utilities, agencies and corporatised entities now called the municipal owned entities (MOEs). One of the entities established was City Power Johannesburg (SOC) Ltd, 100% owned by the City of Johannesburg, and established in terms of the Companies Act, on 30 November 2000. In line with the establishment of City Power Johannesburg (SOC) Ltd, the Council utilises an Environment and Infrastructure and Services Department (EISD) to oversee the performance and Group Governance to oversee the governance of the company, as well as to regulate it. In this regard various agreements in principle were concluded during the establishment of the companies. These included the Sale of Business Agreement (SBA) and the Service Delivery Agreement (SDA). The relationship maintained with the Greater Johannesburg Metropolitan Council is one of Service Authority and Service Provider. City Power Johannesburg (SOC) Ltd is the preferred Service Provider for the Service Authority, the Council. The Mandate of City Power Johannesburg (SOC) Ltd from its only shareholder, which is the City of Johannesburg, is to buy and sell electricity to the citizens of Johannesburg. The 2 main suppliers of electricity are Eskom at 80% and Kelvin Power at 20%. The company is regulated by the National Energy Regulator of South Africa. The chart below is a representation of the organisation s business: Board Approved Page 4

Problem Statement What business are we in? National Energy Regulator of South Africa (NERSA) Kelvin Generation Transmission Distribution We are in the business of buying electricity and selling it to customers. The problem statement for the City Power business plan is to assist the City of Johannesburg to address the South African challenge of security and quality of electricity supply i.e. enabling consumers who reside in the City of Johannesburg jurisdiction to obtain electricity at a defined quality and reliability at affordable rates and transparent prices. In parallel to this objective City Power will also be required to ensure the sustainability of the business through the achievement of certain agreed to financial, social and environmental goals. Growth and Development Strategy 2040 (GDS 2040) City Power was established in 2000 according to the principles of the i-goli 2002 Plan and it is wholly owned by the City of Johannesburg. The review of the Growth and Development Strategy 2030 was brought about by a shift in the light of climate change and natural resource scarcity. Natural resource scarcity affects both human and economic development. Without securing natural resources, cities cannot sustain human and economic development. Cities are seeking new ways of overcoming critical natural resource constraints, decoupling as a concept has emerged to assist national governments and cities to decouple economic production and consumption from resource use. The emphasis has shifted in an important way, reframing economic and human development within the context of sustainability 2040 GDS. Board Approved Page 5

GDS Outcomes There are four GDS outcomes in the GDS2040 these are outlined below: Outcome 1: Improved quality of life and development driven resilience for all Outcome 2: Provide a resilient, liveable, sustainable urban environment- underpinned by infrastructure supportive of a low-carbon economy Outcome 3: An inclusive, job-intensive, resilient and competitive economy Outcome 4: A leading metropolitan government that pro-actively contributes to and builds a sustainable, socially inclusive, locally integrated and globally competitive Global Credit Rating. GDS Principles There are six GDS principles in the GDS2040 these are outlined below: Eradicating poverty Building and growing an inclusive economy Building sustainable human settlements Ensuring resource security and environmental sustainability Achieving social inclusion Promoting good governance Mayoral Priories and City Power Alignment In this business plan the organisation ensures alignment with the City s strategic direction and aligns to the GDS 2040. City Power is part of sustainable infrastructure cluster and the cluster has identified seven flagships sub-programs which driven by different departments and MOE s. City Power is directly involved with some of the programmes while it has direct and indirect input on others. The table below shows the flagship programmes and City Power s involvement and input to these programmes: Lead and Influence Indirect Input To Indirect Input To Financial Sustainability and Resilience Agriculture and Food Security Human Capital Development and Management Resource Sustainability Safer Cities Strategic Communication and Marketing Sustainable Human Investment attraction, retention Settlement and expansion Urban Water Management Active Citizenry City where none goes hungry Smart City Green Economy SMME and Entrepreneurial Support Board Approved Page 6

The above priorities have been further broken done to a 10 STEP Programme that has ten interventions and targets for the next three to five years. City Power has a STEP programme to ensure alignment to the mayoral priorities. STEP is an acronym that stands for: S Service Delivery, T Transformation, E Excellence, P Performance The 10 STEP Programme Decade 1 Priorities City Power Response Term of Office Priorities (2012-2017) Decade One Priorities (2017-2022) Financial resilience and sustainability Sustainable Human Settlements Active engaged citizenry SMME and entrepreneur development and support Food Security Smart City Resource Sustainability Investment attraction, retention and expansion Green Economy S Service Delivery, T Transformation, E Excellence, P Performance 1. Attaining an Unqualified audit in a sustainable manner 2. Reduce losses to 10% by December 2015 3. Achieving 98% meter reading by June 2013 (100% Compliance to the by-law) 4. Achieving 100% payment level for key and LPU customer by June 2013 5. Achieving 90% data accuracy by 2015 6. Installing 110 000 SWH by December 2016 7. Achieving full compliance to NRS 047 and 048 immediately 8. Achieving 90:10 Planned: Unplanned by December 2015 9. Accelerated Visible Service Delivery (eg.100% compliance to the SLA, electrification, PL) 10. Innovative Product Pricing (Introduction of Domestic Time of Use and Green Tariffs) by 2015 City Power s alignment projects to the SDBIP The 5 year IDP is translated into one year plans which are called the Service Delivery Budget Implementation Plan (SDBIP). City Power s has four main programmes that ensure attainment of the SDBIP which are: City Power s Infrastructure Plan on COJ s Transit Oriented Development (TOD) New substation for the Park Station precinct at an estimated cost of R 100 M New substation for the Westgate precinct at an estimated cost of R 110 M Sebenza will be situated in the North-East of Johannesburg adjacent to Kelvin Power Station and Quattro in the South West of Johannesburg in the vicinity of the old Orlando Power station site. Eskom s transmission networks will also need to be extended to supply our planned 275/88kV intake points at both Quattro and Sebenza. Public lighting and electrification programme Smart Grid Energy Plan Asset Management Plan Board Approved Page 7

Below is a map that illustrates the TOD Revenue War Plan Key Priorities City Power Initiatives Status Expected Outcomes Financial Resilience and Sustainability, Smart City, Resource Sustainability Improve metering data accuracy and completeness Deployment of statistical and check metering Deployment of smart meters Deployment of prepaid meters, Remote Access Terminal system (RATS) and protective structures Conversion of LPU to AMR In progress In planning stage In planning stage In progress In progress Achieve 90% data accuracy by 2015 Attaining an unqualified audit in a sustainable manner Achieving 100% payment level for key and LPU customer by June 2013 Reduce losses to 10% by 2015 Achieving 98% meter reading by June 2013 (100% Compliance to the by-law) Board Approved Page 8

Accelerated Visible Service Delivery Key Priorities City Power Programmes Initiatives Outcomes Sustainable Human Settlements Resource Sustainability Electrification Public Lighting Customer Services Charter Bulk supply programmes in Fleurhof, Lufhereng, Elias Motsoaledi and Lehae 4500 households in Lehae Phase 2, Klipspruit Ext11 and Golden triangle 10000 public light cumulatively in Soweto, Orange Farms and Ivory Park in the next two financial years (2013/14 and 2014/15) 2 days turnaround time on public lighting maintenance Operationalisation of Customer Services Charter and the Service Level Agreement Accelerated Visible Service Delivery (eg.100% compliance to the SLA, electrification, PL) Attaining an Unqualified audit in a sustainable manner Achieving full compliance to NRS 047 and 048 immediately Energy Plan Key Priorities Resource Sustainability Green Economy City Power Energy Programme Energy efficient street lighting program Building retrofit program Building performance rating system Waste to energy programmes Low pressure solar water geyser program update What we are doing? Deployment of energy efficient technologies eg: induction lighting, CFLs, and piloting LEDs Retrofitting of Municipal owned buildings, Tender/Bid process currently underway. Assessment of privately owned buildings, at inception stage Landfill Gas Electricity Generation at Robinson Deep and Goudkoppies, PPA negotiations underway to bring 12MW into the grid Roll out underway focusing on customers consuming less the 1000kWh/ month. Board Approved Page 9

Key Priorities City Power Energy Programme Virtual Power Station Innovative Product Pricing Tariff support for distributed generation sources Tariff support for photovoltaic systems Promotion of gas cooking to replace electric stoves Natural gas electricity generation What we are doing? Up market solar water geysers program at conceptual stage Introduction of Domestic Time of Use and Green Tariffs by 2015, application has been made to NERSA to consider green and TOU tariff Use of distribution system costs, application has been made to NERSA to consider green tariff Enhancement of PV System efficiencies, application has been made to NERSA to consider green tariff Displacement of electric stove, at conceptual stage Conversion of City Power open cycle gas turbines and Establishment of Co-gen precincts, at conceptual stage City Power s Smart Grid Initiative Key Priorities Initiative What we are doing? Smart City, Green Economy Resource Sustainability Customer Centric: The advanced transmission and distribution operations inherent in a smart grid will shorten power outages and improve quality of power. Customers will also benefit by having real time billing information from smart meters better planning and no surprises. Condition Monitoring The smart grid infrastructure, such as the communication medium interconnecting network nodes, allows proactive diagnostic of potential asset failures before they result in costly outages / catastrophic system failures. Asset life-cycle will be prolonged Energy Demand Side Management: Ripple control and smart meters allow City Power to better manage peak loads. This in turn has a huge benefit to City Power s bottom line less stressed plant and reduced maximum demand penalties. Board Approved Page 10

Key Priorities Initiative What we are doing? Outage Management: Revenue Protection Accurate Data on Network Losses: Advanced Metering Infrastructure (AMI): Self-healing characteristics of a smart grid system will result in less costly power outages. Faulted circuits will be identified quicker, hence improved response times and NRS compliance. Smart grid system (communication, smart meters etc.) enables real-time and remote disconnection and reconnection of supply for non-payment of services. Smart and Power Quality meters enable the determination of technical and non-technical losses in the entire network (comparative metering). The AMI allows for real-time billing information availability to both the customer and City Power. Huge reduction in cost associated with meter reading, disconnection and reconnection of nonpaying customers. Co-Production Key Priorities City Power Programmes Initiatives Outcomes Active Engaged Citizenry SMME and Entrepreneur Development And Support Coproduction Plan Energy Plan Infrastructure plan Smart Grid Education and awareness Develop Coproduction Plan Develop 30 sustainable SMMEs over next three years Create 8 000 job over next three year Develop 10 sustainable SMMEs over next three years, through installation and maintenance process Create 500 jobs over next three year through Community Liason Officer (CLO) programmes, community ambassadors and public education Improved community engagement, Improve Customer Centricity and people development Board Approved Page 11

Key Priorities City Power Programmes Initiatives Outcomes Learning academy Partner with universities to have 100 learnerships, apprenticeship and Bursars over the next three years Asset Management Plan Key Priorities City Power Programmes Initiatives Outcomes Sustainable Human Settlements Resource Sustainability Improve Network performance and quality of supply Improve network data accuracy and completeness Implementation of Condition Monitoring system Implementation of Shift System Review and implement core and support value chains Achieve 90% data accuracy by 2015 Achieving 90:10 Planned: Unplanned by December 2015 Achieving full compliance to NRS 047 and 048 immediately Accelerated Visible Service Delivery Board Approved Page 12

GDS IDP 5 Year Plan PIP Sustainable Human Settlements Smart City Resource Sustainability Investment attraction, retention and expansion Green Economy CP IDP Programme Improve Network performance and quality of supply Refurbishment of ageing infrastructure Expansion and Strengthening of Network Demand Side Management Impact on Community Improved restoration times, reduction in unplanned Outages, improved network health More people with access to electricity, Economic growth Climate Change & Energy Diversification KPI Unit Actuals 2011/12 Plan 2012/13 SAIDI Minutes 11.37 11.7 Budget 2012/13 Plan 2013/14 Budget 2013/14 Plan 2014/15 Budget 2014/15 Plan 2015/16 SAIFI Number 3.08 3.08 4.78 4.68 4.58 CAIDI Minutes 368.67 368 237.87 221.58 204.59 CAIFI Number 0.08 1.12 5.65 Opex: 4.65 Opex: 3.65 Planned: Unplanned Maintenance % 62:38 Opex: 65:35 R1129m R810m 70:30 Capex: 293m R849m 75:25 Capex: 318m 80:20 HV Outages: NPR Number 68 70 : 78 76 74 NRS 047 Compliance NRS 048 Compliance Average age of infrastructure (HV) % 90 90 90 90 90 % 97 97 97 97 97 Years 50 39 Opex: R175m Capex: R160m 1137 39 Opex: R169m Capex: R90m 1037 38 Opex: R185m Capex: R203m 937 38 Budget 2015/16 Opex: R873m Capex: 289m Opex: R200m Capex: R208m Additional Capacity MW New 90 Opex: 90 120 120 Opex: Opex: Opex: Electrification Number 5610 3200 R295m 3400 R184 m 3600 R238m 3800 255m Capex: Provision of public Capex: Capex: Capex Number 5126 4200 R45m 4400 Lights R712m 4600 R1468m 4800 R1131m After Diversity Maximum Demand (ADMD) KvA New 0.12 Opex: Opex: Opex: R50m 114m 118m Energy Mix % New NEW 0 0.01 0.02 Capex: Capex: Capex: Solar Water R127m R18m R15m Number New 20000 30000 30000 40000 Heaters Reduction in GHG % New 5% 10% 15% 0.3 0.46 0.6 Opex: 150m Capex: R5m Board Approved Page 13

PIP CP IDP Programme Sustainable Human Settlements Active engaged Revenue step citizenry change programme Resource Sustainability Financial resilience and sustainability Smart City Resource Sustainability Improve Customer Centricity and people development Continuous Improvement of the business Impact on Community Relief in Tariffs, Smart City, reduction in accounted for electricity Improved services Improved services KPI Payment Levels (Current consumption) Unit Actuals 2011/12 Plan 2012/13 % 92.4 93 Budget 2012/13 Opex: 403m Capex: R234m Plan 2013/14 96 Budget 2013/14 Plan 2014/15 98 Budget 2014/15 Plan 2015/16 Meter Reading % 98 96 96 Opex: 96 Opex: 98 performance 250m 247m Meter Roll Out Number New 30000 100000 150000 200000 Capex: Capex: % 19.31 15 13.5 R505m 12 R580m 10 Losses (Technical/ & Non-Technical) % of ESP customers with FBE provided % New 97 97 97 EPWP Number 2333 3000 5000 50% black owned companies 30% black woman owned company Customer Satisfaction % New 5 8 10 12 % New 2 5 8 10 % 65 65 65 65 70 Affirmative Action % 79.2 85 85 Opex: 85 Opex: 85 (all) R290m R229m Gender Equity (all) % 20.91 23 24 Capex: 25 Capex: 26 People with R108m R40m % 2.9 2 2 2 2 Disability DIFR Ratio 0.51 1 1 1 1 ISO accreditation Attainment of an unqualified audit report Audit report Audit report Unqualified Audit report Unqualified Qualified Audit report Audit Report Unqualified Audit report 5000 Unqualified Audit report 98 5000 Unqualified Audit report Budget 2015/16 Opex: 264m Capex: R535m Opex: R357m Capex: R60m Board Approved Page 14

City Power shifting the Strategic Focus (Changing the Course) Board and management of the company recently reviewed the strategic direction of the organization and it became clear that the entity is at a strategic inflection point. Ten years on, an assessment must be made as to whether the current business model is still relevant and is aligned to stakeholder expectations and to the GDS 2040. In addition, the current business model needs to be reviewed in light of the creation of the R&CRM unit at COJ. In light of the changing energy landscape City Power must consider becoming a provider of alternative sources of energy. This strategic direction will impact on how the company conducts its business going forward, requiring the need to review the business model. This will help redefine the company strategy and ensure alignment to the Growth and Development Strategy and IDP. City Power History We are at a strategic inflection point? Egoli 2002 2002 2007 Bringing the different municipalities together Moving from fire fighting to planned maintenance Developing and initiating Capex program to reduce backlog Introduction of customer segmentation Introduction of prepaid meters 2007 2012 GDS 2030 Improving network performance Perfecting time based maintenance Introducing condition monitoring maintenance Implementation and improving Capex program to reduce backlog Consolidation and centralisation of customers services Improving prepaid & smart meter technologies Piloting of DSM projects 2012 2017 GDS 2040 Improving condition monitoring maintenance Making sure we get paid for our services & improve revenue management Improve stakeholder communication, engagement and management including R&CRM Shift to low carbon infrastructure and introduction of SSM & DSM Introduction on TOU and green tariffs Board Approved Page 15

SECTION 2: STRATEGIC ANALYSIS AND FOCUS PESTLE Environmental Scan PESTLE ANALYSIS EXTERNAL FACTORS EFFECTS ON THE ORGANIZATION IMPACT SEVERITY Mayoral and CoJ Priorities Re-alignment of projects and re-allocation of funding Not always based on business case and may de-focus CP plan Political Lack of Business Alignment to Political and Service Delivery requirements. Competing Needs High Pressure from politicians prior to elections Service delivery pressures Inadequate Funding Investment ratings and policy Unable to meet expectations, limited expansion programmes Impact of new Toll roads Increase operational costs, decrease customer disposable income Economic Increasing cost of Electricity Supply Economic downturn due to Global recession: Affordability of inputs loans, people costs, fleet and bulk costs Pass through electricity costs; Customer dissatisfaction; Businesses going out of business; Decreasing consumption Impacts on Service delivery; Causes increases in costs if theft is high and insurance does not recover all the losses; Impacts on ability to deliver High Green energy Decreased consumption and revenue Tariff regulation Ability to be cost reflective Theft and Vandalism Increase Outages and non-funded expenditure Social Illegal connections and theft of energy Non-payment of services Increased cost of sales with no corresponding income Increase public fatalities Insufficient income High Impact of HIV/AIDS and chronic diseases on the workforce Increased pressure on resources to provide case management and support Community/customer activism/protests Non-payment, destruction of property, pressure to deliver Change of technology Additional training and safety requirements Technological Cost of new technology Technologically Reliable and safer designs Alternative energy solutions Smart Grid Limited available funding Important impact on City Power although there has been many initiatives regarding demand supply management and SCADA enhancements Alternative source of energy Medium Increase in Demand Additional funding required meeting the demand. Legal Social media Facebook, Twitter Corporate Governance/ MFMA/ King III/ NERSA/ Companies ACT/ OSH Act/ ISO/ By laws. Inadequate legislation to deal with cable thieves Legislative framework for smart meters Quality of service: Improve company image Customer satisfaction Qualified audit reports High focus as City Power is the provider of electricity to the greater Johannesburg and covers many legal requirements. Court cases not legalizing electricity Penalties and fines Increased theft and vandalism/illegal connection; Increase repair & maintenance costs; Loss of revenue High Environmental EIA implementation Delay in the implementation of major projects Medium ISO Accreditation Reduction in DIFR, improve quality of service Medium Pollution ISO 14001:2004 Green and Renewable Energy Disposal of waste/obsolete equipment Potential pollution due to obsolete equipment (e.g. transformers) Due to the impact of the business activities on the environmental this is an important focus area. Vulnerable to prosecution plus poor public image High Medium Shift to low carbon, monitoring and reporting Energy purchases high High Board Approved Page 16

External Internal City Power Business Plan (2013-2016) SWOT Analysis Prioritised Strengths ISO accreditation Good knowledge and understand of the business Well documented value chains Supportive stakeholder New structures based on sound business approach World class systems Opportunities Green energy/alternative energy sources Community upliftment Smart Grid Improve company image Expand Jhb footprint Carbon Funding/ CEF Provide technical training externally and increase income Raise funds through the network Weaknesses Communications Accountability Poor change management Poor contracts management When things go wrong we blame each other/team work at executive level Perceived low employee morale Operationally inefficient Inability to execute projects and follow through on benefit realisation Process leading up to decision-making is slow Threats Lack of sufficient funding to fund key company initiatives Loss of revenue Due to illegal connections, theft and vandalism Household ability to pay/reduced consumption Loss of NERSA licence Generation capacity in SA Customer activism/revolution Industrial action Board Approved Page 17

Predictability City Power Business Plan (2013-2016) Key Driving Forces Impacting City Power s Strategy Priorities Internal External Leverage for competitive advantage Higher 2 Losses 3 Metering readings low 4 Data management inaccuracies Non compliance issues 1 Clean audit Smart grid Low performance acceptance Project execution weak Change management & comms reactive Aging infrastructure 5 Revenue collection low Operationally inefficient Energy balancing Unions & Labour Issues Blame culture Aging ICT network Quality of service Quality of supply Eskom strategy 4 Alternative 3 sources of energy / green energy CoJ Strategy / GDS 2040 Smart city Cost of supply Expand footprint NERSA NRS 47/8 2 Theft and vandalism ISMO Bill 1 Non payment Legal compliance ISO accreditation Service delivery protests External image poor Plan Scenario s Impact on Strategic Agenda Board Approved Page 18

Vision To be a world-class electricity utility What Business Are We In? We are in the business of distributing electricity. City Power Business Plan (2013-2016) SECTION 3: STRATEGY AND SCORECARD Strategy Map CP Strategy Map Previous Getting the Basics Right City of Johannesburg Business of Tomorrow Strategic Perspectives 1. Financial (30%) 2. Customer / Stakeholders (30%) Aspired Values Resourceful Resilient Reliable Respectful Always with Integrity Increase financial resilience and sustainability of the business Promote Energy Improve customer centricity and ensure active citizenry Business Operating Principles Customer-centric organisation Seamless value chain driven organisation Zero tolerance for poor performance Doing business in an ethical manner, zero tolerance for fraud and corruption Business case driven investment decisions Maximum technology enablement Doing it right the first time Mission The mission of City Power Johannesburg SOC is to meet the expectations of our customers and stakeholders by: Providing a sustainable, affordable, safe and reliable electricity supply Providing prompt and efficient customer services Being the preferred equal opportunity employer by developing and incentivising our employees Undertaking our business in an environmentally acceptable manner Strategic Priorities People Service Infrastructure High Performing teams, customer centric, SHEQ Efficiency Social transformation, quality of service, SHEQ Value Propositions Improve Revenue Collection Influence Key Stakeholders CoJ, NERSA, DoE Sustainable Cash Flow Improved Customer Experience Network refurb & development, asset maintenance, DSM, alternative energy sources, infrastruc security, SHEQ Sustainable Revenue Growth Reduce Losses Quality Supply and Availability Optimise Surplus Capex Spend Low Operating Costs Expand Footprint Socio Economic Development 3. Internal Process (20%) Efficient and effective processes and enabling information systems Asset Management Data Management Manage core value chains ICT Governance, Risk, Compliance 4. Learning & Growth (20%) Maximum employee productivity whilst conducting business in an ethical manner Talent Planning Performance Management High Performing Teams Talent Development Talent Acquisition Knowledge Management The 10 STEP Programme The above priorities have been further broken done to a 10 STEP Programme that has ten interventions and targets for the next three to five years. STEP is an acronym that stands for: S Service Delivery, T Transformation, E Excellence, P Performance 1. Attaining an unqualified audit in a sustainable manner 2. Reduce losses to 10% by December 2015 3. Achieving 98% meter reading by June 2013 (100% Compliance to the by-law) 99% Meter Reading AMR LPU customers 95% Manual Meter Reading for Domestic customers 98% Meter Reading for Domestic AMR 4. Achieving 100% payment level for key and LPU customer by June 2013 5. Achieving 90% data accuracy by 2015 6. Installing 110 000 SWH by December 2016 7. Achieving full compliance to NRS 047 and 048 immediately 8. Achieving 90:10 Planned: Unplanned by December 2015 9. Accelerated Visible Service Delivery (eg.100% compliance to the SLA, electrification, PL) 10. Innovative Product Pricing (Introduction of Domestic Time of Use and Green Tariffs) by 2015 The company scorecard is aligned to the company strategy, which is illustrated below: Board Approved Page 19

Scorecard Segment Financial = 30% Overall Intent Value Proposition Optimise surplus Sustain revenue growth Sustain cash flow Improve revenue collection Reduce losses Low operating costs Capex spend Increase financial resilience and sustainability of the business Objectives Measure Units Acc Base 2011/12 FY Targets 2012/13 2013/14 2014/15 2015/16 Improve surplus Surplus Rand value Rbn MD 1.4 0.9 0.8 0.9 1.3 M 2,3,4 Increase sales revenue Sales revenue Rbn RS 12.1 12.4 13.3 14.6 15.9 A 2,3,4 Increase cash levels Net cash position Rbn Fin 2.3 2 2.1 1.5 1.5 M 2,10 Reduce outstanding debtors Meter reading performance Reduce non-technical losses Optimise bulk purchase cost Optimise maintenance expenditure Maximise return on capital spend Manage total capex spend to business plan Payment levels % RS 92.4 93 96 98 98 M 4 99% meter reading AMR LPU customer 95% manual meter reading domestic 98% meter reading domestic AMR Freq % RS 98 96 96 96 98 M N/a Non-technical loss % MD 8.2 6 4.5 3 1 M 2 Cost per kwh (n1) c/kwh RS 58.5 67 72 74 78.2 M N/a Maintenance as % of opex % EO New 3 4 5 7 M 8 Return on assets % ES 11.5 10.7 10.7 8.9 8.9 M N/a Total capital spend % ES 100 100 100 100 100 M N/a Proj Board Approved Page 20

Segment Customer / Stakeholders = 30% Overall Intent Value Proposition Promote energy efficiency Improved customer / stakeholder experience Quality supply and availability Socio economic development Improve customer centricity and ensure active citizenry Objective Measure Units Acc Base Reduce energy consumption Improve customer / stakeholder satisfaction Maintain high quality of supply levels Improve overall system reliability Increase employment opportunities Increase basic service delivery Solar water heating installations After Diversity Maximum Demand (ADMD) FY Targets 2012/13 2013/14 2014/15 2015/16 GWH ES New New 13 21 24 M SWH Freq KvA ES New 0.12 0.3 0.46 0.6 M Energy Mix % RS New New Proj 0.01 0.02 Q Proj Energy Plan Customer / stakeholder satisfaction index % RS 65 65 65 65 70 M RS Positive company image % MD 44 45 55 65 70 M N/A Meter roll out Number ES New 30000 100000 150000 200000 M NRS047 index % RS 90 90 90 90 90 M 3,7,9 NRS048 index % ES 97 97 97 97 97 M 7 CAIDI mins EO 368.67 368 237.87 221.58 204.59 M 7 CAIFI # EO 0.08 1.12 5.65 4.65 3.65 M 7 SAIDI mins EO 11.37 11.7 1137 1037 937 M 7 SAIFI # EO 3.08 3.08 4.78 4.68 4.58 M 7 Number in EPWP # ES 2333 3000 5000 5000 5000 M Co- Production Plan 50% black owned companies % Fin New 5 8 10 12 M 30% black woman owned company % Fin New 2 5 8 10 M Additional Capacity MW ES New 90 90 120 120 A Number of public lights # EO 5126 4200 4400 4600 4800 M N/a Electrification # ES 5610 3200 3400 3600 3800 M N/a Board Approved Page 21

Segment Internal Processes = 20% Overall Intent Value Proposition Manage core value chains Asset management ICT Data management Governance, risk, compliance Efficient and effective processes and enabling information systems Objective Measure Units Acc Base Manage core value chain processes to maximise business value Improve maintenance planning and execution Improve network and applications performance Achievement of data accuracy (index) Attain an unqualified audit in a sustainable manner ISO accreditation (maintained) Planned maintenance ratio IS network availability (uptime) Index RAC UA with minor Targets 2012/13 2013/14 2014/15 2015/16 Freq Proj UA with 1 major findings A N/a % EO 62 65 70 75 80 M 8 % IMS 94 97 97 97 97 M N/a Data Accuracy % RS Proj Proj Proj Proj 90 Proj 5 Qualified / unqualified / matter of emphasis AG report outcome All QA Unqualified Audit A War plan Board Approved Page 22

Learning & Growth = 20% Overall Intent Value Proposition Talent Planning Performance Management Talent Development Talent Acquisition High Performing Teams Maximum employee productivity whilst conducting business in an ethical manner Objectives Measure Units Acc Base Continuity of service delivery Consistent performance management Targeted talent development Effective talent acquisition Employee satisfaction Filled critical positions as per approved and aligned workforce planning % of individuals who have been through the PM process, and have submitted scores Targets 2012/13 2013/14 2014/15 2015/16 Freq Proj % HR 30 30 50 80 100 Q N/a % HR 80 30 80 100 100 BA N/a Aligned PDP achievement % HR 80 60 70 90 100 BA Availability of targeted skills pool actual vs. % HR 50 40 60 80 100 Q number of people trained Achievement of turnaround time for new recruits Filling of vacancies aligned to agreed Affirmative Action (AA) targets - supervisory levels and above Filling of vacancies aligned to agreed Gender Equity (GE) targets Filling of vacancies aligned to agreed People with Disabilities (PWD) targets Satisfaction Survey Results Days HR 90 90 90 90 90 Q N/a % HR 79.2 83 83 83 83 Q N/a % HR 20.9 23 24 25 26 Q N/a % HR 2.9 2 2 2 2 Q N/a Mean HR 3 2 3 4 4 A Prod KM Board Approved Page 23

SECTION 4: DAY TO DAY OPERATIONS City Power Johannesburg (SOC) Ltd is the Electricity Distribution Service Provider to the Service Authority, Johannesburg Council. The core competency of the business is to purchase, distribute and sell electricity within its geographical footprint of business. The City of Johannesburg is the sole Shareowner. The Council, by means of a Service Delivery Agreement, regulates the service in respect of the following: financial issues (such as tariffs and capital expenditure), human resource issues (such as skills development), delivery targets (maintenance of assets and addressing assets), and standards of customer care. City Power Johannesburg (SOC) Ltd is accountable to provide network services to all its customers. Network services include: the purchasing and distribution and sale of electricity constructing networks connecting customers repair and maintenance of networks installation and maintenance of public lighting The City of Johannesburg provides retail customer services for all customers, i.e. processing of applications, customer queries, customer complaints, customer accounts and revenue management. Provide Network Infrastructure City Power Johannesburg (SOC) Ltd projected network infrastructure status is given in the table below: Network Infrastructure Measure Indicator Unit 2011 2010 2009 2008 Eskom Supply Points No. 42 42 39 39 High Voltage Substations (Bulk Intake Points) No. 5 5 5 5 Medium Voltage Substations (Major Substations) excl. Bulk Intake Substations No. 87 87 82 82 Low Voltage Substations (Devices) No. 18,366 17,964 14, 252 14,252 High Voltage Overhead Transmission Lines > 44kV km 811.37 811.17 811 811.00 High Voltage Transmission Cables > 44kV km 101.10 101.10 93.68 93.68 Medium Voltage Overhead Lines >20.5kV and < 44kV km 9.6 9.6 11.2 11.20 Medium Voltage Cables >20.5kV and <44kV km 118.8 118.8 123.3 123.30 Ripple Relays Installed No. 192,000 181,711 177,771 171,860 Ripple Relays In-service No. 124,800 119,435 113,141 103,700 Draft 6 Page 24

Distribute Electricity City Power Johannesburg (SOC) Ltd comprises of six independent networks. The figure below gives the schematic representation of City Power Johannesburg (SOC) Ltd. s Johannesburg transmission network and indicates the bulk power intakes from Eskom and Kelvin Power Station. DELTA 3*250MVA 88kV Transmission Circuits Westfield ESKOM 275kV Firm capacity 500 MVA MD 404 MVA 88kV Transmission Circuits Rosebank, Ridge, Fort, Parkhurst and Roosevelt Park ESKOM 275kV Firm capacity 750 MVA MD 676 MVA Marlboro Eskom Alexandra township Cydna, Gresswold, Observatory, Bellevue, Orchards, and Alexandra KELVIN PS 300 MW MD 200 MVA P roposed Sebenza 275 kv Intake from Eskom Braamfontein, John Ware, Bree, Mayfair, Selby, and Central (20kV). 88kV Transmission Circuits Eldorado, Nancefield, Nirvana, Hursthill, Industria, Eikenhof, and Soweto. FORDSBURG 4*250MVA 88kV Transmission Circuits PROSPECT 4*250MVA Pritchard, Siemert, Central, Robertsham, Mondeor, Mulbarton, Moffat, Cleveland, Kazerne, Wemmer and Van Beek. ORLANDO 88kV SWITCHYARD ESKOM P roposed Q uattro 275kV Intake Lenasia from Eskom P roposed Mondeor Bus 88 kv ESKOM 275kV Firm capacity 750 MVA MD 827 MVA Power is received from Eskom at three major bulk intake points (Prospect, Fordsburg and Delta Substations) at a voltage of 275kV. At these major Bulk intake stations the voltage is transformed down to 88kV, it is then transmitted on City Power s transmission network to over 30 step-down substations. At these step down stations the voltage is transformed down to 11kV and from here it is distributed. In addition, the 88kV transmission network is supplemented by a power input from the independently operated Kelvin Power Station. Network Expansion The electricity demand in City Power areas reached 3GW in 2010. It is predicted that the future demand, which excludes potential power-saving strategies and efficiency improvements, will reach 5.4GW in 2030. During the past few years a detailed analysis was conducted on the network infrastructure in order to ascertain the capacity to meet current and future demand. This entailed the conduct of detailed audits in order to ascertain the condition of the network infrastructure and the development of network and electrification master plans to ascertain short and medium-term capacity requirements. Board Approved Page 25

The result of the analysis indicated that extensive refurbishment, upgrades and expansion of the network were needed in order to meet the current and future demand. The average transmission infrastructure has reached 63 % of accepted useful life, the average installed infrastructure (lines / cables) is currently utilized at 31.6 % during normal operations, and substations (transformers) are utilising installed capacity at 54.6 % and firm capacity at 103.1%. In an effort to proactively plan for the energy needs of the City Power Distribution Area, a study has been done on how to develop a master plan for energy supply in the areas from Midrand in the east to Roodepoort in the west and from Randburg in the north to Lenasia in the south. The study provided City Power with a clear view and long-term plan on how to develop the electrical infrastructure required, supporting the envisaged growth in demand. The study further clearly identified where new infrastructure should be located and what components, either existing or new, will be required. This has identified and documented expansion and strengthening projects to ensure the adequate performance of the network within the shortand longer-term period. The Network Master Plan has been evaluated against a set of sustainability criteria to ensure that it is a sustainable development. Focus was placed on the following tasks: Sufficient information was gathered and reviewed to provide a solid platform on which the Network Master Plan was to be based. Geographical load forecast was developed based on regional demographic and historical load growth patterns, taking into account futuristic economic information, demographic trends, available land use data and future development initiatives. The aim of load forecast was to determine the present and future electricity requirements of electrical end-users and to develop an economic and demographic model which forecasts the expected population and economic growth in the study area. These results were then converted into a spatial load forecast applications to produce the expected electricity needs of the study area. The anticipated long-term load forecast was directly used as input to the long-term expansion plan. Review generation-, transmission- and distribution expansion plans with the Network Master Plan for the region. Define the network problems by assessing the existing network capability and analysing the shortcomings in a coordinated manner. In this way all the existing network problems were identified, along with any potential future problems, within the study area. Different networks to supply the expected load were identified and analysed and evaluated properly to ensure that each alternative network complies with required standards and guidelines. A review on the adequacy of City Power Sub-transmission network through load flow and contingency analysis was done and possible new transmission supply stations was also evaluated. The overall Strategic Environmental Assessment (SEA) approach including the use of a multi-disciplinary team of experts and specialists that assessed the environmental consequences of the proposed Network Master Plan on the environment was required. Alternative plans and strategies were formulated. Emphasis was placed on understanding the biophysical, social and economic environment and the values there-of. Opportunities, constraints and values of the study area, including the needs and wants of the relevant stakeholders, were assessed. This was formulated into a desired state of the environment that recognises appropriate development options. The Participation Process allowed for all Board Approved Page 26

relevant stakeholders i.e. local authorities, service providers and the property and business sectors to contribute meaningfully during the development of the Network Master Plan. The illustration below demonstrates the predicted longer-term demand growth based on density and location: Density Load, Density Load, To meet current and future demand, City Power has developed a detailed asset management plan which covers network expansion and the continued maintenance and refurbishment of network assets over the medium and long term. The 20 year capital expenditure plan required to ensure the sustainability of the network is estimated at R26.8bn. in respect of the following infrastructure projects: In order to support anticipated demand growth, the strengthening and expansion of the transmission and distribution networks are required. In order to reduce the failure rate and the average age of network infrastructure, refurbishment of the transmission and distribution networks are required. Board Approved Page 27

The graph below is a graphic representation of the expected capital distribution between the projects. Carbon Emissions A number of renewable energy and DSM initiatives have been developed to align the city with the international requirement to reduce carbon emissions. In 2013/14 financial year City Power will develop a comprehensive Energy Plan to reduce carbon emissions, which will incorporate all the Supply and Demand Side Management projects and how the organisation will measure the impact. Supply Side Management City Power takes the majority of its power from Eskom and a very small contribution from Kelvin Power Station. Almost 98% of this power is produced from coal which is one of the major contributors of CO2 emissions. The country has committed itself to reduce certain amount of emissions and through participation in Integrated Resource Plan 2010 (IRP2010), City Power has to come up with meaningful contribution to the goals of IRP2010. These initiatives will be confined within the useful renewable resources within the City of Johannesburg. The city has embarked on a number of solar projects i.e. solar water heaters, photovoltaic and waste to energy to reduce dependency on coal produced electricity. City Power is also investigating affordable off grid solutions for informal settlements where there are no services installed. Demand Side Management The city has also embarked on a number of energy efficiency initiatives like the replacement of incandescent lights with compact fluorescent lights. This has seen massive savings in residential dwellings and city buildings. City Power is also busy with the replacement of current induction lamps with the energy efficient and LED lights. These technologies are helping tremendously in reducing technical losses and improving the life time of those components. City Power has heavily invested in electrification projects and Demand Side Management initiatives which has seen massive job creation and visible economic activities in those targeted areas. Board Approved Page 28

Rm City Power Business Plan (2013-2016) Electrification City Power has electrified over 5610 previously-disadvantaged dwellings during the 2011/12 financial year. Electrification 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000-2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 Actual 9,057 5,029 6,901 4,369 5,610 Plan 5,800 3,000 3,000 4,000 4,000 4,000 The table below shows the areas that have been electrified during 2010/11: Project Name Number of Political Ward Stands Region Number Electrification of Pennyville (Zamimpilo) 251 D 68 Electrification of Alexandra ext. 9 Phase1 & 2 2,101 E 32,81 Electrification of Hospital Hills 1,483 G 7 Normalisation of Rabie Ridge 81 A 80 Electrification of Tsepisong West (Ebumnandini 192 C 53 Electrification of Alexandra ext. 10(32,81) 261 E 32 TOTALS 4369 These programmes have positively contributed towards poverty alleviation, as the following have emerged in the townships: Establishment of Spaza shops Back yard mechanics Informal restaurants Employment of local community during project execution (EPWP) Community Phones (Cell C, Vodacom and MTN); and Improved living standards Board Approved Page 29

Future Electrification Plans Table below shows the projects that have been identified as part the electrification master plan, which is derived from the housing plan. It is envisaged that the following townships will be proclaimed and developed in the near future. Projects included in the master plan: Financial Year Project Name Number of Stands Amount (R) Political Region Ward Numbers 2013/14 Electrification of Lehae ext 1 Phase 2 941 26,754,875.00 Region G 8 2013/14 Rand Leases x 5 1000 10,701,950.00 Region C 70 2013/14 Kliptown: Klipspruit Ext. 11 995 10,648,440.25 Region D 37 2013/14 Golden Triangle ext 35 1000 10,701,950.00 Region G 8 2013/14 Electrification of Fleurhof ext 5&7 930 9,952,813.50 Region C 70 TOTALS 4866 68,760,029.00 2014/15 Electrification of Motswaledi 1289 15,794,813.55 Region D 26 2014/15 Electrification of Lehae ext 1 Phase 3 1000 30,754,875.00 Region G 8 2014/15 Klipspruit ext 7 1000 10,701,950.00 Region D 2014/15 Transfer of service connection to an RDP TBA 15,000,000.00 All All House 2014/15 Alexandra Normalisation 5000 50,000,000.00 Region E 2014/15 South Hills 3880 105,023,594.00 Region F 2014/15 Hospital View 1132 28,017,000.00 TBA TOTALS 13301 255,292,232.60 2015/16 K60 2119 22,677,432.05 Region A TBA 2015/16 Dunusa(Matholesville Squater) 2164 23,159,019.80 Region C TBA 2015/16 Meriting 281 2,587,843.97 Region G 6 2015/16 Chris Hani 420 5,571,716.96 TBA TBA 2015/16 Transfer of service connection to an RDP TBA 5,000,000.00 All All House 2015/16 Electrification of Slovo 2989 10,000,000.00 Region G TBA 2015/16 Alexandra Normalisation 5000 50,000,000.00 Region E 2015/16 Hospital View 1140 29,907,900.00 2015/16 Electrification of Freedom chater Square 2691 28,798,947.45 Region D TBA TOTALS 16804 177,702,860.00 2016/17 Electrification of Kya Sands/Lions Park 2989 8,000,000.00 Region C 100 2016/17 Slovo Park (Nancefield) 1052 17,000,000.00 Region D 7 2016/17 Patsing /Vegiland 129/301-IQ TBA Region G 122 TOTALS 2016/17 Unaville 13/313 -IQ TBA Region G 120 2016/17 Stand TBA Region D 18 Eldorado Park 4624 2016/17 Alexandra Normalisation 5000 15,000,000.00 Region E 32 2016/17 Fun Valley Olifantsvlei TBA Region G 119 2016/17 Hospital View 1120 311,461,932.00 2016/17 Electrification of Princess Plot 2536 34,140,145.20 Region C TBA 2016/17 Electrification of Lindelani Boundary 1996 28,361,092.20 Region A TBA TOTALS 2017/18 Ennerdale Ext 6,9 Stand TBA Region G 121 Board Approved Page 30

Financial Year Project Name Number of Stands 4553-5550 Amount (R) Political Region Ward Numbers 2017/18 Klipriviersoog 31/299 TBA Region D 119 2017/18 Kapok & Hopefield Ennerdale TBA Region G 7 2017/18 Lawley Station TBA Region G 8 2017/18 Eldorado Park Ext 5 TBA Region D 18 TOTALS Electrification specification City Power has improved its electrification specification in order to cater for proper revenue collection, make provision for public lighting infrastructure, network protection and future upgrades by providing the following: Split Prepaid metering Street Lighting Concrete Poles Auto Recloses Path Finders 60Amp breakers Underground MV bulk infrastructure Due to the above specification, the cost per connection has increased to an average of R12500 per stand. Typical electrification layout Bulk Electrification Infrastructure The majority of the above mentioned townships are located on the outskirts of Johannesburg, far from serviced areas. Their locality has posed a large challenge in terms of bulk infrastructure availability. Bulk infrastructure is becoming increasingly critical in the roll out of the electrification programme. The total funding requirements to allow bulk to address the electrification are in table below. Board Approved Page 31

Total funding requirements for bulk supply Financial Year (started) BULK SUPPLY PROJECTS Description Project Benefits Cost Ward Numbers 2013/14 Lufhereng Bulk Supply Provide electricity to approximately 25 000 household in Lufhereng 2013/14 Bulk Supply to Fleurhof Provide electricity supply to Development approximately 6000 household in 2013/14 Bulk Supply to Elias Motsoaledi Development 2014/15 Bulk Supply to Lehae Township Fleurhof Development Provide electricity supply to approximately 1400 household in Elis Motsoaledi Provide electricity to approximately 25 000 household in Lehae Township 130,000,000.00 53 100,000,000.00 70 40,000,000.00 26 133,000,000.00 7 Total 403,000,000.00 Challenges The following are the challenges currently faced by City Power in rolling out the electrification projects: Lack of funding, for both internal reticulation and bulk infrastructure requirements Slow allocation of beneficiaries by housing to their respective RDP houses Slow pegging and re-location of beneficiaries to their demarcated stands Lack of coordination between departments and spheres of government e.g. Local and provincial housing Unavailability of Housing Master Plan to guide the electrification future project plans Board Approved Page 32

Public Lighting Analysis of current backlog for new streetlights has been done. Table below is the backlog of streetlights per administrative region. The streetlights backlog per administrative region: Region Current No of Streetlights per area No of Streetlights outstanding per area % Backlog Budget Required (Present day cost A 15,957 25,773 62% R 322,162 500.00 B 37,430 341 1% R 4,262,500.00 C 62,358 11,633 16% R 145,412,500.00 D 33,228 20,609 38% R 257 612 500.00 E 26,056 27,795 52% R 347,437,500.00 F 70,816 1,749 2% R 21,862,500.00 G 4,631 22,184 83% R 277,300,000.00 Eskom Areas 40,748 80,075 66% R 1,000,937,500.00 Total 291,224 190,159 40% R 2,376,987,500.00 Public lighting is one of the mayor s strategic priorities. The figure below shows the expenditure spent on implement Public Lighting Program. 60,000,000.00 50,000,000.00 40,000,000.00 30,000,000.00 20,000,000.00 10,000,000.00 Expenditure - 2003/4 2004/5 2005/6 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12 Current Public Lighting Projects Table below illustrates the areas, where the Public Lighting Projects have been approved by USDG for 2012/13 financial year and the projects are currently underway. Majority of these projects are at the design stage, others are already at construction stage Board Approved Page 33

Period Area Region Number of New Lights Project Cost 2012/13 Soweto D 3086 41,108,185.76 2012/13 Orange Farms G 3851 35,325,874.42 2012/13 Diepsloot A 282 2,419,892.76 7219 78 853 952.94 Future Public Lighting Projects These are the projections as per public lighting master plan. Total of 23471 lights will be installed in the future years. Period Area Region Number of New Lights Project Cost 2013/14 Orlando Ekhaya D 400 5,000,000.00 2013/14 Jabulani D 400 5,000,000.00 2013/14 Nancefield/Klipspruit D 400 5,000,000.00 2013/14 Orange Farms ext 1 G 160 2,000,000.00 2013/14 Diepsloot A 400 5,715,000.00 1760 22,715,000.00 Period Area Region Number of New Lights Project Cost 2014/15 Soweto D 815 10,183,153.00 2014/15 Orange Farms G 410 2,500,000.00 2014/15 Ivory Park A 161 2,024,446.00 1386 17,307,599.00 Period Area Region Number of New Lights Project Cost 2015/16 Soweto D 415 5,183,153.00 2015/16 Orange Farms G 170 2,100,000.00 2015/16 Ivory Park A 82 1,024,446.00 667 8,307,599.00 Period Area Region Number of New Lights Project Cost 2016/17 Soweto D 156 1,953,153.00 2016/17 Orange Farms G 88 1,100,000.00 2016/17 Ivory Park A 81 1,024,446.00 325 4,077,599.00 Board Approved Page 34

Asset Maintenance Management In the medium term a five year infrastructure rolling plan to address the load growth and electrification and refurbishment needs was developed and put in place. This has been incorporated into the key focus areas of City Power. As part of the drive towards achieving a ratio of 80:20 planned vs. unplanned maintenance, City Power has developed a maintenance strategy based on condition monitoring in consultation with Singapore Power. The object of this maintenance strategy is to ensure that the organisation moves towards proactive maintenance, thereby improving the reliability of supply to the end customer. Reduction in maintenance and post failure repair costs. Extended equipment life and extension of intrusive maintenance intervals The graph below illustrates the asset maintenance management - planned vs. unplanned journey map: Restoration times In 2009 City Power engaged in a process to improve the network connectivity. This project has yielded results that now the organization has more accurate information on the connectivity of its customers, and thus can provide more accurate figures on restoration times. The targets for network restoration are as per NRS 047. Over the last couple of years, a new system to report network performance has been under development. This system will ensure that there is direct linkage between interruptions and the number of customers affected, thus enabling City Power to report supply reliability more accurately. Reporting on this new system is based on internationally recognised indices. The following indices are used: System Average Interruption Duration Index (SAIDI). This KPI measures, on average, how long a system was out System Average Interruption Frequency Index (SAIFI). This KPI measures, on average, how often a system was out. Board Approved Page 35

Customer Average Interruption Duration Index (CAIDI). This KPI measures, on average, how long a customer was out Customer Average Interruption Frequency Index (CAIFI). This KPI measures, on average, how often a customer was out. CURRENT YEAR RESULTS Measure Indicator SAIDI SAIFI CAIDI CAIFI Description of measure Availability of supply index Reliability of supply index Availability of supply index Reliability of supply index Measuring unit Minutes per annum Number of interruptions per annum Minutes per annum Number of interruptions per customer per annum Target 582 min (9.70hrs) Actual 2011/12 682.2 min (11.37hrs) Actual 2010/11 699 min (11.65hrs) Actual 2010/11 699 min (11.65hrs) Actual 2009/10 583.8 min (9.73hrs) 0.034 3.08 0.04 0.04 0.04 256 368.67 366.44 366.44 258.58 1.07 0.08 1.12 1.12 1.09 Going forward these are the KPIs that City Power will use to measure its network performance as illustrated in table below Measure Indicator Description of measure Measuring unit 2011/12 Actual 2012/13 Plan 2013/14 Plan 2014/15 Plan 20015/16 Plan SAIDI Availability of supply index Minutes per annum 682.2min (11.37hrs) 702 min (11.7hrs) 1137 min (18.95 hrs) 1037 (17.28 hrs) 937 (15.62 hrs) SAIFI CAIDI CAIFI Reliability of supply index Availability of supply index Reliability of supply index Number of interruptions per annum Minutes per annum Number of interruptions per customer per annum 3.08 3.08 4.78 4.68 4.58 368.67 368 279.7 221.58 204.59 0.08 1.12 5.65 4.65 3.65 City Power has entered into a partnership with Singapore Power which resulted in the purchase of innovative test equipment that is designed to assess the condition of the CoJ s electrical network. This will enable City Power to detect a fault on the equipment and rectify the fault before it results in an electrical failure. This will in turn improve the reliability and quality of electricity supply and limit the number of forced outages and downtime due to the occurrence of faults. Board Approved Page 36

Revenue War Plan REVENUE COLLECTION PLAN BACKGROUND The primary responsibility of the City is to deliver services through infrastructure development and efficient and effective management of resources and operations. To execute this responsibility the City must be financially sustainable and have adequate financial resources to fund infrastructure development and operations. It is to be noted that the strategy encompasses short term interventions over the next 12 months. The focus will be to collect the target cash in order to meet the budget requirements of City Power and the City of Joburg. ACTUAL PERFOMANCE Budget figures will be adjusted monthly with the actual billing figures Month Revenue Budget 95% Budget Target July 1 271 447.81 1 207 875.02 August 914 660.89 868 927.00 September 1 513 714.45 1 438 028.73 October 1 111 317.57 1 055 751.69 November 1 030 298.06 978 783.16 December 1 012 743.83 962 106.64 January 997 890.26 947 995.75 February 972 234.08 923 622.38 March 1 001 941.23 951 844.17 April 1 050 552.94 998 025.29 May 1 070 807.81 1 017 267.42 June 1 205 840.33 1 145 548.31 13 153 449.26 12 495 775.56 Table 2.1 Budget Collection vs. Actual Collection Challenges effecting collection: City Power LPU AMR readings at an average read rate of 65% for June 2013, the customers are complaining of under billing due to a lack of meter down loads. Affordability of arrangements The current economic situation has led to customers being unable to afford the 50% down payment required when making arrangements. This affects the lower recovery from disconnection values used in the target Incorrect customer data impacts on the disconnection process Board Approved Page 37

RISKS The credit control process intervention is done manually and thus there may be an error rate in the process despite all efforts to validate for queries and unusually long estimations. The interventions are going to cause a very high number of disconnections. Historically the pre-termination process when followed by a disconnection indicated a 95% reduction from the number of accounts starting the process. The result is out of 100 accounts, only 5 were disconnected. The current intervention will see that increase to over 50%. There will therefore be a lot of customer dissatisfaction reaction to this drive. The interventions will require a lot of emphasis on the arrears debt, and the success will depend on how quickly any resultant queries are then resolved. Inability to validate if cut offs were executed MITIGATIONS The time from issue of the pre-termination to the date of disconnection is 14 days, and this will allow customers to come forth to deal with any query which may be raised. Communication to customers An increased overtime effort will be made on queries which result from this process. Roll out of smart meters to effect cut offs remotely PLAN TO REDUCE UNACCOUNTABLE ELECTRICITY LOSSES Electricity Distribution Losses Technical losses Technical losses describe energy losses in the network encountered through the transmission cables and transformer, due to network design and materials of construction. In essence, technical losses result from differences in voltages and longer feeder lines from substation or transformer, to the consumption end-point at the customer s premises. Non-technical Losses Non-Technical losses define lost or uncollected revenues relating to the inadequate customer billing and poor management of metering operations in the distribution network. As a result, non-technical losses may be considered to be revenue losses due to the theft of electricity and inability to measure customer energy consumption accurately for billing. The following are common factors that contribute to non-technical losses: Illegal Connections: Energy theft such as in non-proclaimed/ informal settlement, own-connections before the meter or tampering with the meter to bypass readings dials. Illegal connections are compounded by the inherited challenge from Eskom of poor customer addresses and meter locations managed. This challenge also created a scenario where ghost prepaid vending became possible. Board Approved Page 38

Bypassed Meters: Emergency calls out after hours, often result in power restorations where a customer s meter is bypassed and the necessary meter changeout does not happen. This is caused by lack of job card data which electricians do not close, in order to enable metering operation to replace the bypassed meter. Meter Tampering: Meter tampering is often a problem with prepaid customers that do not have split meters. Customers on AMR meters are also known to tamper with the communications modules by stealing sim cards, or removing fuses on meters. The result is an online meter that can be detected, but does not transmit customers consumption data, due to communication failure. Poor management of meter installations and maintenance: Meter installations and trouble-shooting conducted by poorly skilled technicians often results in situations where a meter detected as online, but the necessary configurations, especially for AMR and Prepaid are not which leads to failure in communication to transmit meter data, or failure in vending. Poor maintenance of customer data (Addresses, account Number, etc.): Lack of customer data quality management and associated system updates leads to various challenges as follows: o Un-located addresses for manual read meters: Inability to respond swiftly to detected energy theft, and inability to fast-track maintenance of meter change out for customers who logged queries o Poor data capturing of meter readings: Meter readers often capture data that throws exception during the validation phase. Some of these errors are not resolve within the meter reading window and therefore impact on accurate billing of customers. Meter readers must face penalties for poor data capturing. o Inaccurate billing of customers: Inaccurate billing tends to promote the culture of non-payment with disgruntled customers. Inefficient management of meters or not fulfilling work orders often leads to customers been billed on estimates rather than actual consumption. There are cases where customers on prepaid are still billed and invoiced for some time after they have been converted to prepay. Inaccurate billing is a major contributor for customers having negative sentiments about the organisation. o Ghost prepaid vending: Ghost vending is a resultant of poor metering asset management and customer or meter location data management. Meter are not properly tagged and linked to the vending systems. Rightfully, a customer should be able to purchase prepaid token for particular meters, so that zero-consuming meter can be.detected more effectively Corruption and fraud on the side of utility or distributer s employees: A number of City Power employees and electricians have been in the past found to be guilty of illegally connecting customers, where employees have willfully swopped registered meters for unregistered ones. Proper processes and controls must be introduced that dictate meter handling and issues at stores Board Approved Page 39

Integrated Loss Management Approach In order to predictably deliver outcomes that yield effective results City Power has undertaken an approach that, in a re-iterative manner, allows the organisation to quantify and resolve losses through the various initiatives it has underway. The diagram below demonstrates the four-stage integrated loss management approach to leverage the strengths of existing initiatives on losses and introduce additional capabilities where required Review and Evaluate existing interventions on losses The business has conducted a review of the distribution losses through a series of initiatives as described below: Distribution Losses Data Analysis An Energy Balancing study to confirm the indicative values on losses has been completed. The main purpose of the study was to compute a viable electricity tariff for City Power s tariff submission to NERSA. In conducting the energy balancing a determination of the quantum of total losses was also established. The outcome of the energy balancing study is provided below for 2010/11 FY: Board Approved Page 40

Key Customer Engagement City Power is engaging key customers to achieve a number of outcomes to achieve the following objectives: To collect baseline customer data, to validate initial statistics on losses by area and develop loss control targets based on geographical spread on the network and key customer impact To re-establish relationships with the larger, high consumption key customer who contribute a large and significant component of the City Power revenue-base The expectation is that the target of the customer engagement effort must be the top 100 customers, who through their intervention and co-operation in reporting the advent of losses in areas close to their location can assist City Power to attend to these timely whether it is in the form of theft, meter tampering or even anomalies in metering and/or billing. Loss Determination City Power has undertaken efforts to determine the source and size of losses within the business. These have the collective objective to ensure that the business has ability to conduct sound metering from purchasing points, across the distribution network and customer delivery points. The projects are at different stages of implementation and the table below provides a summarised of each one: Board Approved Page 41

Initiative Status Key Outcomes Priority Metering Audit Data Check Meter implementation Statistical Metering Implementation February, 2013 Technical Losses Study In Progress Expected completion date December 2013 In planning phase In planning phase Completed Metering data collection and audit of metered stands Meter status information (type, condition and connection status) Reconciliation of meter data against customer data on billing and prepaid systems Installation of forty-three (43) meters at bulk intake points from Eskom and Kelvin Power stations Ability to measure losses at levels that can be ring fenced for targeted interventions An assessment of technical losses completed every three to five years High High Medium Low Execute Loss Reduction Programme In the previous sections the various initiatives that must be completed to assist in ascertaining and managing total losses have been outlined. An integrated loss management approach however requires an integrated focus with an enterprise wide view of all initiatives. This allows for proper sequencing, management of dependencies and resolution of various issues that may permeate the different projects. For this to happen effectively, City Power recognises that a detailed set of plans must be a precursor to project execution. At this point the business is working on finalising these and will be categorising the various interventions along three time horizons as described below: Short-term planning horizon (6 to 12 months time) o To achieve full capability in the metering of bulk electricity purchases and power distributed across different parts of the network Medium-term Planning Horizon (24 to 36 months time) o To develop capability in the AMI and supporting application systems such as MDMS o To achieve capacity to resolve prepaid metering fraud through advanced meter technology and protective structures Long-term (48 to 60 months and beyond) o To implement and deploy a network infrastructure upgrade to reduce technical losses. Key Interventions Stats- Metering Capability- Create Ability to monitor losses per feeder from substations Board Approved Page 42

City Power has managed losses using data received from billing and the prepaid systems. However, this data doesn t identify the root cause or location of losses. There was a need to identify the root cause of the losses per area so that we could target our reduction strategy to the specific cause of the loss. Therefore, the reason behind installation of statistical meters at strategic points are to measure inflow of electricity to an area. This information will assist in identifying areas with losses and zoom into the specifics thereof. City Power will be installing statistical meters across its distribution network to measure inflow of electricity to areas. Information received from statistical meters will be compared to data from billing and prepaid sales. There is dependence on regular and accurate sales or unit reports being made available from R & CRM for the exercise to be successful. Implement Smart Metering- Installation of smart meters for domestic consuming above 1000 kwh a month and large customers Current meters do not have bidirectional communication to report tampering or bypassing of the meter, therefore the reaction to deal with these matters is delayed by a month or so which contribute to losses. The installation of smart meters will enable City Power to identify tampering and/or bypassing immediately as it happens and it can be attended to immediately or the next day. Installing smart meters will allow City Power to conduct load management, offer customers tariff flexibility such as Time-of use (TOU) tariff options and also offer customers the choice to be either on prepaid or post pay without changing the meter. In addition City Power will achieve full compliance with the Electricity Regulation 773 of 2008 which requires all electricity distributors to install smart systems for all customers that consume in excess of 1000 kwh per month. Implementation of the Remote Access Terminals (RAT) Implementation City Power has more than 200 000 split and non-spilt prepaid meters installed. These meters are easily tampered with, therefore increasing the losses. Installation of RAT system will assist in identifying customers with consumption but without loading or buying electricity units, this will further direct where the audits should be happening. Protective structures are steel structures that are used to host meters and control access to the meters. These structures are used to proactively deter customers from bypassing or tampering with meters. Implement the Mass Prepaid Metering: Secure Prepaid Metering installations of bidirectional split prepaid meters with protective structures In the areas where customers do not use more than 1000 kwh a month, split prepaid meters will be installed with protective structures as a deterrent to tampering and bypassing. There will be a response team that will be established to monitor and timely respond to the issues related to meter tampering events, interference with protective structures and general incidents of electricity theft and fraud. Board Approved Page 43

Complete the on-going LPU AMR Conversion Industrial and Commercial customers contributes more than 60% of City Power s revenue. It is therefore necessary to put more focus on them to ensure completeness of billing, accurate metering and timely meter reading. There are currently 14 000 industrial and commercial customers, of which only 8000 are on AMR. With a view of metering accurately and timely meter reading the remaining 6000 customers will also be converted to the AMR system. Progress on interventions Initiative Status Comments Metering Data Audit In Progress The programme is expected to be completed in December 2013 Check Meter In Planning stage Installation is expected to commence in implementation April 2013 as contract with the supplier is being finalised. Statistical Metering In Planning stage Installation is expected to commence in Implementation April 2013 as contract with the supplier is being finalised. Installation of smart In planning stage Expected to start after the engagement meters for customers with the suppliers consuming average of above 1000 kwh a month Installation of Remote In progress 6 RATS are installed and 586 meters Access Terminal system are visible on the system. (RATS) and protective structures Conversion of LPU to AMR In planning stage Expected to start after the engagement with the suppliers Board Approved Page 44

SECTION 5: HUMAN CAPITAL PLAN Management and Organisational Structures Board of Directors City Power has a unitary board, which consists of one Executive Director and six Non- Executive Directors. The Board is chaired by a Non-Executive Director: Rev. Frank Chikane. The Board meets regularly, at least quarterly, and retains full control over the Company. The Board is accountable to the City of Johannesburg Metropolitan Municipality (the Company s sole shareholder) and its stakeholders, the Citizens of Johannesburg. A Service Delivery Agreement (SDA), concluded in accordance with the provisions of the (Municipal Systems Act) (MSA) governs the Company s relationship with the City of Johannesburg. The Board provides monthly, quarterly, bi-annual and annual reports on its performance and service delivery to its parent municipality as prescribed in the SDA, the MFMA and the MSA. Such reports are submitted within the stipulated timeframes. The Non-Executive Directors contribute an independent view to matters under consideration and add to the depth of experience of the Board. The roles of Chairperson and Managing Director of the Company are separated, with responsibilities divided between them. The Chairperson has no executive functions. Members of the Board have unlimited access to the Company Secretary, who acts as an advisor to the Board and its Committees on matters including compliance with company rules and procedures, statutory regulations and best corporate practices. The Board, or any of its Members, may, in appropriate circumstances and at the expense of the Company, obtain the advice of independent professionals. A Board evaluation is undertaken on an annual basis by the Shareholder. The Articles of Association provide that the Directors of the Company will be elected by the Shareholder and appointed by the Board of Directors. The Board membership of the Directors is reviewed at the Annual General Meeting of the Company. The Managing Director is appointed by the Board. Board Members The Board currently consists of six Non-Executive Directors and one Executive Director who is the Managing Director as indicated in the table below: TABLE BOARD MEMBERS Member Portfolio 1 Rev. F Chikane Chairperson of the Board 2 Mr N Galawe Non-Executive Director 3 Ms Z Hlatshwayo Non-Executive Director 4 Mr N Hlubi Non-Executive Director 5 Ms N Mohlala Non-Executive Director 6 Mr T Sithole Non-Executive Director 7 Mr S Xulu Executive Director (MD) Executive Directors are regarded as contract employees in terms of the Company s conditions of service. Board Approved Page 45

Board Sub-Committees The following Committees have been formed, each of which is chaired by a Non-Executive Director: Audit Committee Human Resources Committee Risk, Assurance & Compliance Committee Quarterly Review Committee Social and Ethics Committee a. Audit Committee The role of the Audit Committee is to assist the Board by performing an objective and independent review of the functioning of the Company s finance and accounting control mechanisms. It exercises its functions through close liaison and communication with senior Management and the internal and external Auditors. The Audit Committee operates in accordance with a written charter authorised by the Board, and provides assistance to the Board with regards to: Ensuring compliance with applicable legislation and the requirements of regulatory authorities; Matters relating to financial accounting, accounting policies, reporting and disclosures; Matters relating to risk management; Internal and external audit policy; Activities, scope, adequacy and effectiveness of the internal audit function and audit plans; Reviewing and recommending the approval of external audit plans, findings, reports and fees; Compliance with the Code of Corporate Practices and Conduct; and Compliance with the Code of Ethics. Recommend approval of the GRAP Demand Plan Recommend and provide input into the multi-year Business Plan b. Human Resources Committee The Human Resources Committee advises the Board on remuneration policies, remuneration packages and other terms of employment for all Directors and senior Management. Its specific terms of reference also include recommendations to the Board on matters relating to general staff policy, remuneration, performance bonuses, executive remuneration, Director Remuneration and fees and service contracts, performance compact, and compliance with relevant legislation and strategic alignment with the objectives of the Company. c. Risk, Assurance & Compliance Committee The Risk, Assurance & Compliance Committee assist the Board in fulfilling their responsibility of ensuring that there is an effective and embedded risk management process in place throughout the Company. The Committee s specific terms of reference also include recommendations to the Board on matters relating to internal control systems in compliance with the provisions of, inter alia, Sections 95 to 99 of the MFMA, the effectiveness of the system for monitoring compliance with laws and regulations and the results of Management's investigation and follow-up (including disciplinary action) of any instances of non-compliance with the MFMA, the annual Division of Revenue Act and any other applicable legislation. Board Approved Page 46

The Committee s responsibilities relating to regulatory compliance are to monitor compliance of quality of supply in terms of NRS 048 and quality of service in terms of NRS 047, oversee and monitor any other licence and/or reporting requirements of NERSA. The Committee further advises the Board and assists the Board in discharging its responsibilities for information technology (IT) governance. The Committee maintains oversight over the implementation of the Company s Supply Chain Management Policy in terms of the Local Government: Municipal Finance Management Act (56/2003): Municipal Supply Chain Management Regulations (Gazette no. 27636/ 30 May 2005), Section 6(a). In addition to the above the Board has delegated the Committee to: Monitor any sourcing strategy for Acquisition Management for all items over R10 million. Monitor any spend planned outside of the approved Business Plan/Demand Plan. Monitor implementation and progress of spend against the approved budget and Business/Demand plan. Monitor deviations and exceptions from supply chain policy and procedures. Monitor all emergency procurements. The Committee ensures that the Company has a Fraud Prevention Policy which outlines the Company s focus and commitment to the reduction and possible eradication of incidences of fraud and misconduct. It also confirms the Institution s commitment to legal and regulatory compliance. The Committee also ensures, on behalf of the Board, that the Company has an enterprise content management policy with data management controls, and advise on policies and procedures for enterprise data sharing and management. The Committee ensures that data, information and intellectual property are protected and managed effectively to ensure their confidentiality, integrity and availability, and that Management has taken steps to protect such data. d. Quarterly Review Committee The main role of the Committee is to monitor and assess the achievement of the Key Performance Areas as set out in the Company Compact, including any special projects relevant to the performance of the Company on a quarterly basis. The Committee also ensure that information is appropriately and effectively shared between the various Committees of the Board and align reporting and integration of internal and external reporting requirements. e. Social and Ethics Committee The Social and Ethics Committee was formed pursuant to the new Companies Act (no. 71 of 2008) and its regulations which require that all state-owned companies must have a Social and Ethics Committee. The Social and Ethics Committee advises the Board on the institutionalisation of ethics in the internal structures, systems and processes of the company. The Social and Ethics Committee ensures that there is strong emphasis on the responsibility of the Company towards the communities in which the company operates, social transformation within the workplace, and the protection of the safety, health and dignity of employees. Board Approved Page 47

The mandate of the Social and Ethics Committee, as per the regulations that accompany the Companies Act, is threefold: the Committee has to monitor whether the Company complies with relevant social, ethical and legal requirements and best practice codes; the Committee has to bring to the attention of the Board any relevant matters within the scope of its mandate; and the Committee has to report to shareholders on matters that fall within the scope of its mandate. Section 43(5) of the Regulations of the Companies Act set out the areas of social responsibility and standards against which the Committee should measure the Company against. The areas of responsibility and relevant standards are listed explicitly as: Social and economic development (relevant standards: United Nations Global Compact; OECD recommendations on corruption; Employment Equity Act; Broadbased Black Economic Empowerment Act). Good corporate citizenship (including promotion of equality, prevention of unfair discrimination, reduction of corruption; contribution to community development; sponsorship, donations and charitable giving; environment, health and public safety). Impact of the company's activities, products or services on communities. Consumer relationships (including advertising; public relations; compliance with consumer protection laws). Labour and employment (including employment relationships; contributions towards the educational development of employees. Relevant standards: International Labour Organization Protocol on decent work and working conditions). City Power High Level Organisational Structure Below is the City Power high level structure: Board Approved Page 48

HR Overview HR Overview Actual 09/10 Actual 10/11 Actual 11/12 Number of employees 1697 1670 1642 Affirmative Action Employment Equity 73.98% 88.38% 1642 (Supervisory and above) Affirmative Action Gender Equity (All 18.85% 20.42% 22.72% levels) People with disabilities 0.00% 2.88% 2.92% Staff Establishment STAFF ESTIMATES DESIGNATION Approved 10/11 - Number of positions on organogram ESTABLISHMENT Vacancies 10/11 Plan 11/12 Variance 11/12 Managing Director 1 1 1 0 Directors 5 1 5 0 General Managers / Senior Managers 28 4 28 0 Specialists / Managers / Professionals 444 195 444 0 Skilled Technical / Supervisors / Technicians 270 32 270 0 Artisans (All types) 473 132 473 0 Administrative 294 128 294 0 Semi-skilled 2004 1367 2004 0 Elementary positions 0 0 65** 65 TOTAL (Permanent and Contract) 3519 1860 1724 65 ** 65 Positions were planned for and advertised after 30/6/2011 Human Capital Expenditure STAFF EXPENDITURE Total Staff Expenditure Salaries and Wages Actual 08/09 Actual 09/10 Actual 10/11 Actual 11/12 Projected Percentage Growth / Decrease 536,864,358 625,016,771 649,538,360 696,754,000 6,78% TOTAL 536,864,358 625,016,771 649,538,360 696,754,000 6,78% EXPENDITURE ON CONTRACTED SERVICES Services Rendered Contracted Services (Consultancy Services) Actual Actual 09/10 10/11 Actual 08/09 Actual 11/12 Projected Percentage Growth / Decrease 200,805,854 553,146,624 554,307,796 500,876,794 (10.67%) TOTAL 200,805,854 553,146,624 554,307,796 500,876,794 (10.67%) Board Approved Page 49

STAFF EXPENDITURE VS. OPERATIONAL EXPENDITURE Ratio of Staff to Operating Expenditure Actual 08/09 Actual 09/10 Actual 10/11 Actual 11/12 Projected Percentage Growth / Decrease Staff Expenditure 536,864,358 625,016,771 649,538,360 696,754,000 6,78% Operating 1,668,251,75 765,925,549 850,691,113 955,919,000 11,01% Expenditure 8 Ratio 32,18% 81,60% 76,35% 72,89% Employment Equity EMPLOYMENT EQUITY - ACTUAL 2011/12 Categories Male Male Female Female A C I W Total A C I W Total TOTAL Top Management (Executives) 1 0 0 1 2 1 0 0 0 1 3 Senior Management 12 1 2 4 19 3 0 0 1 4 23 Professionally qualified and experienced specialists and mid-management Managers 117 6 5 68 196 99 1 1 8 109 305 and Professionals Skilled technical and academically qualified workers, junior management, supervisors 80 19 4 29 132 24 2 0 5 31 163 and Technicians Artisans (All types) 230 16 3 73 322 16 1 0 0 17 339 Administrative 39 3 0 5 47 86 6 3 27 122 169 Semi-skilled and discretionary decision making 520 9 0 5 534 38 2 0 1 41 575 Elementary positions 17 0 0 0 17 46 2 0 0 48 65 Total (Permanent and Contract) 1,016 54 14 185 1,269 313 14 4 42 373 1,642 Staff Turnover / Movement during previous financial year STAFF TURNOVER ACTUAL 11/12 Staff Movement African Coloured Indian White Male Female Male Female Male Female Male Female TOTAL Recruitment* 17 46 0 2 0 0 0 0 65 Appointments** 0 0 0 0 0 0 0 0 0 Promotion*** 1 1 0 0 0 0 0 0 2 Transfer 0 0 0 0 0 0 0 0 0 Resignation 4 0 0 0 0 0 0 0 4 Early Retirement 0 0 0 0 0 0 0 0 0 Retirement 8 0 0 0 0 0 2 0 10 Retrenchment 0 0 0 0 0 0 0 0 0 Medical Boarding 0 0 0 0 0 0 0 0 0 Dismissal 0 0 0 0 0 0 0 0 0 Demotion 0 0 0 0 0 0 0 0 0 Deceased 2 1 1 0 0 0 0 0 4 Contract Expiring 2 1 0 0 0 0 0 0 3 34 49 1 2 0 0 2 0 881 1 Explanatory Notes : Recruitment * This refers to external appointments based on external advertisements Appointments ** This refers to the absorption of bursars, learners, apprentices, technicians / engineers-in-training into our organisational structure, based on written motivations approved by the Managing Director Promotion *** This refers to internal appointments based on internal circulars Board Approved Page 50

SECTION 6: FINANCIAL PLAN Tariff Plan City Power s tariff proposal for 2013/14 Financial year was based on a drive to rationalise tariffs over a three year window. This rationalisation was necessitated by a number of issues that needed to be addressed if City Power tariffs are to be in line with the rest of the industry and regulatory benchmarks. City Power intended to implement the restructuring of tariffs over a three year period. City Power applied for a 7% tariff increase to NERSA. Embedded in this application were a number of structural changes intended to address the following: IBT implementation for the prepaid customer category Minimisation of cross-subsidisation across customer categories Implementing a steeper sloped curve for escalating prices for energy / block consumption The alignment of the Time Of Use tariffs to Demand tariffs While NERSA s approval allowed a 7% revenue increase, most of the structural changes as proposed by City Power were not approved, except for the proposed prepaid IBT implementation. Since there was no difference in estimated revenue increase between the application and the final approval by NERSA, and it became clear that NERSA did not appreciate the full tariff rationalisation strategy, City Power decided to recommend to the City that the NERSA approved tariffs be accepted for the 2013/14 financial year. However, City Power remains committed to implement the tariff rationalisation strategy over the remaining two years of the three-year window, and that a much more intensive engagement with NERSA would be followed to convince them of the merits of the proposed tariff restructuring. The engagement with NERSA during the 2013/14 financial year will be around the following key considerations and principles: Compliance to regulatory and industry benchmarks Normalisation of cross-subsidisation Introduction of new tariffs for: o Renewable and alternative energy technologies o Resellers o Non-profit organisations Simplifying City Power tariff structure Revision of Time of Use tariffs to become competitive with other Metro distributors Below are a number of detailed fundamental principles that will have a bearing on our future tariff proposals. NERSA guidelines City Power has to comply with the MFMA regulations and satisfy the requirements from the City of Johannesburg (COJ). One of the important milestones to pass is compliance to the NERSA proposed regulation. Every year NERSA provides a guideline for general tariff increases by municipalities and distributors, as well as updates to a standard set of Board Approved Page 51

benchmarks which are meant to guide the tariff structure development of licensees. The benchmarks recently proposed by NERSA are the following: Bulk purchase energy costs as percentage of total costs: 58% - 78% (expected mean of 70%) Surplus as percentage of electricity sales: 10% - 20% (expected mean of 15%) Total system losses: 5% - 12% (expected mean of 10%) Average sales price ratio to average purchase price: 1.5 2.1 (expected mean of 1.64) Cross-subsidisation between commercial and domestic consumers: 1.2 Cross-subsidisation between industrial and domestic consumers: 1.25 Time of Use tariff as percentage of the Eskom Megaflex price: 120% It is generally accepted that tariffs should reflect costs as far as possible and that crosssubsidisation of domestic consumers by commercial and industrial customers would be preferred. NERSA expects municipalities to conduct cost of sales studies, and if this cannot be done, NERSA intend to benchmark their tariffs with Eskom tariffs. Bulk Purchases The cost of bulk purchases from Eskom and Kelvin essentially consists of an energy charge, a demand charge and a variety of service charges and levies. These can be classified broadly as variable (energy) and fixed (service, levies) and hybrid (demand) costs. For the purpose of this review, the demand charges are, however, taken as fixed over the short term. This is based on the assumption that load factors and notified maximum demands are not extremely volatile but rather stagnant. In order to balance the demand and supply of electricity in City Power, the fixed/variable cost ratio of sales will be compared to that of bulk purchases. The basic assessment for the fixed/variable ratio in bulk purchases was estimated at 26/74 for the 2012/13 financial year. This ratio is not expected to vary significantly in future. NERSA has indicated in the latest consultation paper that municipalities that have customers with high demand charges are encouraged to shift a portion of the demand cost recovery from the demand charge to the energy charge. COJ Tariff Policy The COJ has a policy for tariff setting by utility distributors. The principles for electricity tariff setting are captured in the following summary: Social norms o Tariffs should be equitable and affordable; o Tariffs must allow provision of basic services to everyone; o Tariffs must provide for transparent cross-subsidisation of poor households where necessary and feasible; o The tariff structure and levying process should be simple and easy to implement. Economic norms o Tariffs should encourage local economic development in line with the GDS of the COJ; o Tariffs should have a positive influence on economic input factor costs for industrial and commercial firms; Board Approved Page 52

o Tariff setting should be aligned with economic policies of the country. Financial norms o Whenever feasible the tariffs should be cost reflective and cost effectively link into the COJ financial framework; o Tariffs should be linked to unit costing and efficiency improvements; o Tariffs should promote sustainability and extension of service provision. Current Tariff Structure The current tariff structure consists of the following categories: a) Domestic tariffs Lifeline Prepaid (5 inclining blocks) Post-paid (single-phase seasonal and non-seasonal, 5 inclining blocks) Post-paid (three-phase seasonal and non-seasonal, 5 inclining blocks) b) Agricultural tariffs 50 kva maximum demand 50 kva maximum demand c) Business tariffs All business facilities consuming 100 kva (5 inclining blocks) d) Demand tariffs All business facilities consuming > 100 kva (5 inclining blocks) e) Large power user tariffs Low voltage (400V) Medium voltage (3,3-11 kv) f) Time Of Use tariffs Customers with installed capacity exceeding 500 kva Tariffs normally consist of three types of charge, i.e. Energy reflecting direct consumption of electricity Service reflecting cost of access to the grid Demand reflecting network transmission costs All categories are subject to an energy charge. All consumption categories, except prepaid and lifeline, are subject to a service charge. Only large power users are subject to demand charges. Current Process for Tariff Structuring The tariff structuring process needs to contain the following major activities and milestones: Analyse the NERSA guidelines for the average tariff escalation rate for the next term; Consider the revenue requirements for the next term; Confirm the socio-economic goals to be achieved through the tariff structure; Consider national legislation; Consider the requirements of the COJ growth and development strategy; Consider local economic development requirements; Determine and evaluate escalations per user category and charge type; Clarify distribution of tariff increases across the various user categories and the implication of adjustments to the tariff structure; Submit the proposed new tariff structure to the COJ Council and NERSA for approval this may be done in more than one round. Board Approved Page 53

Current Market Segmentation The following table indicates the expected distribution of customers, typical consumption levels and the categorised contribution to overall electricity sales by City Power during 2012/13 and which is expected to remain the same for the 2013/14 financial year: Tariff category Number of customers Typical consumption Contribution to turnover Lifeline 24 023 2.2% 1.4% Domestic billed 154 327 28.8% 37.7% Domestic prepaid 248 454 4.4% 3.9% Agricultural 31 <0.1% <0.1% Business 11 106 6.6% 9.6% Large power users 4 194 43.0% 43.3% Time-of-Use 19 5.0% 4.2% Total 442 155 11.4 TWh/a R12.4bn/a From this it is evident that the domestic customers consume a higher portion of the total electricity delivered by City Power than their proportional contribution. This is to be expected since the business (commercial) and industrial customers cross-subsidise the domestic consumption according to the business principles. However, the TOU category indicates a similar case of cross-subsidisation. It is also noteworthy that the business category contributes most to turnover in ratio to their consumption levels. Current Cross-Subsidisation Levels The following table summarises the levels of cross-subsidisation that is evident in the current financial year (2013/14): Tariff category Contribution (R/kWh) Contribution (Rm/a) Lifeline (0.439) (113) Domestic billed (0.016) (143) Domestic prepaid (0.188) (102) Agricultural 0.096 0.09 Business 0.552 395 Large power users 0.030 63 Time-of-Use (0.160) (100) Total 1.169 -- Positive values indicate a positive contribution towards subsidisation, while negative numbers indicate the receipt of subsidies. It is evident that Business contributes by far the most to subsidising the domestic and TOU market categories and that the TOU category receives in total more than the prepaid domestic category. It should be noted that the above estimation of cross-subsidisation is based on a comparison between the average sales price per customer category and the overall average charge to the market in total, e.g. the domestic prepaid category is charged 18,8 c/kwh less than the overall average market price of 116,9 c/kwh. This reflection of cross-subsidisation is not ideal and should be seen as a proxy to the real values, which would be based on the cost of supply to each of the tariff categories. City Power will initiate a project during the 2013/14 financial year to determine reasonable estimates of the cost to supply each of the tariff categories, which will enable the proper estimation of cross-subsidisation. Meanwhile, the above proxy indicator will be used as the best estimate. Board Approved Page 54

Design Principles for 2014/15 and Beyond The following design principles have been compiled to direct the tariff setting required for the 2014/15 financial year. This would form the basis for the cycle of submissions to the COJ and NERSA during the first half of 2014. The following principles are considered: Determine reasonable estimates for cost of supply to each of the tariff categories; Determine TOU tariffs for industrial customers that would be competitive with Ekurhuleni and Tshwane; Cross-subsidy generation by industrial and commercial should be normalised highend consumers should generally contribute more per unit of consumption than lowend consumers; Cross-subsidy of domestic customers should be normalised lower income categories should receive more than high-income consumers; Introduce telescopic inclining block tariffs for all domestic customer categories. While the prepaid category will not be subject to any fixed charges, the billed domestic customers will have to pay a nominal service charge. Smooth transitions between tariff blocks should eliminate the current experience of significant jumps in energy charges when customers move between consumption blocks; Assume load factors of LPU/TOU customers at 60%; The Megaflex differentials between high/low demand seasons, as well as peak, standard, off-peak categories are applied to all seasonal and TOU categories where applicable; Allow a price elasticity of demand impact for high-end consumers on stepped tariffs it is assumed to be 5%; Allow reasonable targets for non-technical losses recovery. Since current inconsistencies in fixed/variable ratios and cross-subsidisation between the broad categories cannot be changed at once (it will result in exorbitant changes to tariffs in certain categories) it is proposed that the tariff changes be introduced over a three year period. Legal and Constitutional Implications By virtue of Section 28 (6) of the Local Government: Municipal Finance Management Act, 2003 (Act 56 of 2003) (MFMA), once the new tariffs have been determined in respect of the 2014/15 financial year, it may not be further increased during that financial year, except when required in terms of a financial recovery plan as contemplated in the Act. It should be noted that any increases approved by Council, are subject to final approval by the National Energy Regulator of South Africa (NERSA). Board Approved Page 55

Financial Plan Background Section 87(4) and (5)(a),(b) and (c) of the Municipal Finance Management Act requires that the Board of Directors of a municipal entity must approve the budget for a municipal entity not later than 30days before the start of the financial year. It also states that the budget must be within the limits set by the entity s parent municipality including any limits on tariffs, revenue, expenditure and borrowing. The budget covered both the Operating and Capital budget for 2013/14 financial year. The City of Johannesburg issues guidelines to all CoJ departments and MOEs on the process to be followed that is aligned with the requirements of MFMA. The guidelines or budget parameters were applied to the 2012/13 financial year s budget in order to develop the budget for the 2013/14 financial year s budget. Income Statements Details Approved budget Approved Revised Budget Variance Revised Approved Budget Budget Budget Budget 2012-2013 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 R'000 R'000 R'000 R'000 R'000 R'000 R'000 Total Operating Income 13 762 477 13 629 411 (133 066) 14 488 605 15 737 317 17 136 553 18 285 550 Turnover 12 633 515 12 381 904 (251 611) 13 276 206 14 453 158 15 834 268 16 942 667 Sales to Eskom 458 711 687 129 228 418 568 000 550 294 578 244 613 714 Other Income 116 451 107 981 (8 470) 98 289 149 800 155 976 162 409 Grants & DSM 553 800 452 397 (101 403) 546 110 584 065 568 065 566 760 Cost of Sales (9 006 929) (8 616 342) 390 587 (9 608 990) (10 444 846) (11 240 174) (12 026 986) Gross margin 4 755 548 5 013 069 257 521 4 879 615 5 292 471 5 896 379 6 258 564 Gross margin % 31.81% 34.61% 31.08% 31.07% 32.16% 35.32% Operating overheads (2 769 425) (2 937 534) (168 109) (2 683 838) (2 907 420) (3 152 097) (3 360 460) Employee Related Costs Salaries (773 680) (772 579) 1 101 (793 439) (830 909) (871 704) (914 585) Gen.exp - Other (868 483) (1 105 053) (236 570) (725 497) (797 709) (848 113) (874 015) Repairs and maintenance (405 966) (405 966) (0) (472 647) (520 553) (571 711) (625 820) Contribution bad debts (422 128) (435 000) (12 872) (433 782) (480 392) (553 979) (633 979) Depreciation and amortisation (299 168) (218 936) 80 232 (258 473) (277 857) (306 590) (312 061) Capital Expenditure Operating Profit before interest and taxes 1 986 124 2 075 535 89 411 2 195 777 2 385 051 2 744 282 2 898 104 Operating Profit % 14.43% 15.23% -67.19% 15.16% 16.01% 15.85% Net interest (257 750) (252 171) 5 580 (300 632) (320 495) (262 086) (113 939) Interest income/(expense -ve) 82 140 79 989 (2 151) 47 297 118 262 190 580 250 276 Interest on COJ shareholder loans (-ve) (109 617) (109 617) - (109 617) (109 617) (109 617) (109 617) Interest on Capex loans (-ve) (278 531) (278 531) (0) (278 388) (353 898) (366 285) (275 544) Interest on outstanding Debtors 48 257 55 988 7 731 40 077 24 758 23 236 20 946 Add Back Prior year adjustments Profit before fair value adjustments 1 728 373 1 823 364 94 991 1 895 145 2 064 556 2 482 196 2 784 165 Net Fair Value Adj Profit before tax 1 728 373 1 823 364 (94 991) 1 895 145 2 064 556 2 482 196 2 784 165 Taxation (445 561) (428 890) (16 671) (530 641) (578 076) (695 015) (779 566) Grants & DSM (553 800) (453 112) (100 688) (546 110) (584 065) (568 065) (566 760) Attributable income 729 013 941 362 212 350 818 395 902 415 1 219 116 1 437 839 Board Approved Page 56

Attributable Income The profit for the year increased by R89,4 million from R729 million in 2012/13 financial year to R818,4 million in 2013/14 financial year and to arrive at that amount, the following income statement categories were affected as follows: Turnover Turnover has increased by R643 million from R12,6 billion in the 2012/13 financial year to R13,3 billion in the 2013/14 financial year. The increase is driven mainly by the average tariff increase of 7,2% which is driven by the increases in the tariffs for Eskom of 7%, and Kelvin Power Station of 4,5%. Management has embarked on the Revenue Step Change (Revenue Generation and Protection) project and program that will see losses coming down to acceptable levels from the 2013/14 financial year actual losses that stood at 17,21%. Sales to Eskom Sales to Eskom increased by R109,3 million from R458,7 million to R568 million and the increase is based on the estimated output from Kelvin in 2013/14 financial year. Other Income Other Income decreased by R18,2 million from R116,5 million to R98,3 million and this is due to decrease in other sources like test of meters, move in fees and cut off revenues. Grants & DSM levy Grants & DSM have increased by R40,4 million from R553,8 million in the 2012/13 to R546,1million in the 2013/14 financial year. This is due to the decrease in grants expected from National Department of Energy and Urban Settlement Grant. Direct cost Computation for the 2013/14 bulk purchases budget has been done as follows as per the table B below as follows: Computation of 2013/14 bulk purchases budget Description Eskom Kelvin Total Revised 2013-2014 Budget 2012 2013 Budget Variance Variance % R Millions 8 155 8 750 595 7.30% GWh 12 553 12 553 0 0.00% R c/kwh 0.65 0.70 0.05 7.69% R Millions 822 859 37 4.50% GWh 807 807 0 0.00% R c/kwh 1.02 1.06 0.04 3.92% R Millions 8 976 9 609 633 7.05% GWh 13 360 13 360 0 0.00% R c/kwh 0.67 0.72 0.05 7.46% The computation of the 2013/14 bulk purchases budget was based on the follows assumptions: The revised budget units for bulk purchases formed the basis of the calculation of the 2013/14 budget Eskom increase of 7.3% Board Approved Page 57

Kelvin increase of 4,5% Units to be 13 360 GWh The budget for bulk purchases has increased by R633 million from the revised budget R8,9 billion in 2012/13 to R9,6 billion in 2013/14 financial year. The increase is driven tariff increase from both Eskom and Kelvin which is 7,3% for Eskom and 4,5% for Kelvin, Both average to 7,46% increase. Budget amounts indicated herein include the R360 million for the capacity charge. Operating Expenditure Operating expenditure budget for 2013/14 has increased by R85,6 million from the original budget of R2,8 billion in 2012/13 financial year to R2,7 billion in 2013/14 budget. The R85,6 million increase is due to movements on the following expenditure categories: Salaries and Allowances Salaries and allowances budget for 2013/4 financial year has increased due to: Annual increase of 2,7% which amounts to R20,9 million Repairs and maintenance Repairs and maintenance budget has increased by R81,7 million from the revised budget of R390,9 million in 2012/13 financial year to R472,6 million in 2013/14 financial year. The revised budget has been used as the base of the 2013/14 budget. The increase is due to the following: Annual increase of 8,3% amounting to R31,7 million Additional R50 million to cater for network growth as maintenance programmes for additional assets will be coming into effect General expenses General expenses budget has decreased by R202,8 million from the original budget of R868,5 million to R 725,5 million in 2013/14 financial year. The increase is due to the following: R360 million which was accounted for as an operating lease has been added back to Direct cost Additional R157,2 million has been added to the budget for the following: 1% annual increase R100 million on stores and materials for Solar Water geysers which has been allowed for in the adjustment or revised budget. R55 million is additional cost allowed for in the 2012/13 adjustment or revised budget Depreciation The budget for depreciation has decreased from R299,2 million in 2012/13 financial to R258,5 million in 2013/14 financial year and this is due to the revised useful lives of different classes of assets that has been extended. The revision of useful lives is as follows: Buildings from 50 years to 60 years Infrastructure assets from 30 years to 60 years Furniture and Office equipment from 6 years to 10 years. Board Approved Page 58

Contribution to bad debts Provision for bad debts was increased to R433,9 million in 2013/14 from an approved of R422,1 in 2012/13 financial year and the increase was based on current level of debt, collection levels and trends from the previous two financial years. Balance Sheet Details Budget Budget Budget Budget Budget Budget 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 Assets Non Current Assets Employment of Capital Fixed assets (net book values) 7 985 218 9 281 780 11 626 988 14 065 184 16 151 043 16 451 587 Land and buildings 127 568 183 560 179 760 175 929 171 873 166 614 Plant & equipment 7 490 062 8 560 773 10 897 580 13 337 322 15 444 395 15 819 475 Motor vehicles Fixtures and fittings 1 127 19 079 13 864 8 422 2 610 347 Office equipment 24 802 30 095 26 705 21 231 12 348 3 191 Other fixed assets 341 660 488 273 509 079 522 279 519 818 461 960 Intangible Assets - Goodwill Other non-current Assets 67 954 137 041 111 215 85 388 59 562 33 735 Other Long Term Assets 67 954 137 041 111 215 85 388 59 562 33 735 Derivative financial assets Employee benefit investment Current Assets 4 953 460 5 816 565 4 938 552 4 905 188 5 150 414 4 899 253 Debtors 5 084 298 6 849 374 7 315 662 7 826 507 8 410 228 9 257 035 Less :Provision for Bad Debts(-ve) (2 199 971) (3 831 188) (4 297 476) (4 808 321) (5 392 042) (6 238 849) Sundry Debtors 7 499 73 846 77 760 81 648 85 403 90 271 Stock / Projects in progress 74 733 78 694 82 865 87 008 91 010 96 198 Cash & equivalents 1 840 295 2 088 131 1 513 331 1 491 481 1 729 003 1 556 373 COJ 146 606 557 708 246 411 226 865 226 811 138 225 Total Employment of Capital 13 006 631 15 235 385 16 676 754 19 055 760 21 361 019 21 384 575 Equities and Liabilities Capital and Reserves 5 781 908 7 542 215 9 028 693 10 815 873 11 815 293 11 914 616 Share Capital and Premium 112 466 112 466 112 466 112 466 112 466 112 466 NDR on corporatisation and revaluation Retained Income 5 669 442 7 429 749 8 916 227 10 703 407 11 702 827 11 802 150 Non-Current Liabilities 2 794 523 3 257 288 2 848 794 3 133 920 3 904 110 3 733 770 Mirror Conduit External Loans 0 0 0 0 0 Shareholders Loans 624 793 624 793 624 793 624 793 624 793 624 793 Other External Loans 2 052 523 1 516 894 2 069 279 2 285 635 2 667 162 2 690 900 Other parastatal and govt Loans Deravitive financial liabilities Deferred Income 0 0 0 0 0 0 Deferred Tax Liability 117 207 1 115 601 154 722 223 492 612 155 418 077 Employee Benefit Obligations Property Mortgage Bonds Current Liabilities 4 430 200 4 435 882 4 799 268 5 105 966 5 641 616 5 736 188 Trade creditors 2 413 998 3 344 362 3 805 842 4 060 223 4 584 451 4 606 137 Accruals and provisions 148 267 158 446 169 062 179 544 191 034 201 923 Short term portion of long term liabilties 487 550 470 792 461 914 460 255 411 473 418 912 Consumer Deposits 279 448 323 616 362 450 405 944 454 657 509 216 Overdraft & other short term debt COJ Other UAC's of COJ 1 100 937 138 666 0 0 0 0 Other Current Liabilities Total Equities and Liabilities 13 006 631 15 235 385 16 676 754 19 055 760 21 361 019 21 384 575 Board Approved Page 59

Cash flow Statement Details Budget Budget Budget Budget Budget Budget 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 Profit Before Interest and Taxes 2 075 535 2 195 777 2 385 048 2 744 282 1 470 215 776 494 add: Depreciation and amortisations 218 936 258 473 277 857 306 590 334 181 425 283 Add loss on disposal of assets Add Exceptional items Less: Interest (paid)/ received (252 170) (300 631) (320 495) (262 086) (82 133) 32 552 Less: Taxes paid/fair Value Adjustments (376 780) (530 641) (578 075) (695 015) (388 663) (226 533) Cash generated from operations 1 665 521 1 622 978 1 764 335 2 093 771 1 333 601 1 007 797 Increase/decrease in net current assets -649 780 772 891 666 599 318 213 527 945 329 859 Less : (Increase)-decrease in stock 71 4 039 (4 171) (4 143) (4 002) (5 188) ( Increase)-decrease in debtors (2 114 255) (3 184) (3 914) (3 888) (3 756) (4 868) (Increase)-decrease in other current assets 37 404 (41 134) 311 297 19 546 54 245 342 add: Increase-(decrease) in creditors 189 446 649 111 461 480 254 381 524 228 21 686 Increase- (decrease) in accruals and provisions 13 882 8 581 10 616 10 482 11 491 10 889 Increase-(decrease) in short term portion of LTL 84 035 0-8 878-1 659-48 782 7 439 Increase-(decrease) in consumer deposits 38 701 37 805 38 834 43 494 48 713 54 559 Increase-(decrease) in other current liabilities 1 100 937 117 673-138 666 0 0 0 Prior year adjustments Net cash generated / (absorbed) 1 015 741 2 395 869 2 430 934 2 411 984 1 861 546 1 337 656 from operations Cash impact from investing activities (1 097 337) (1 658 485) (2 597 239) (2 718 960) (2 394 214) (1 200 771) Increase in intangible assets Acquisition / (realisation proceeds) of fixed assets (1 097 337) (1 658 485) (2 597 239) (2 718 960) (2 394 214) (1 200 771) Proceeds on disposal of Assets Cash impact from financing activities -339 921-489 548-408 495 285 127 770 190-170 340 Increase -(decrease) in shareholder loans 0 0 0 0 0 0 Increase-(decrease) in long term liabilities () () Increase-(decrease) in Capex Loans -339 921-489 548 552 384 216 357 381 527 23 738 Increase-(decrease) in Deferred Income 0 0 0 0 0 0 Increase in Deferred Tax 0 0-960 879 68 770 388 663-194 078 Net movement in cash position (421 516) 247 836 (574 800) (21 850) 237 522 (33 455) Opening cash position 2 261 811 1 840 294 2 088 130 1 513 330 1 491 481 1 729 003 Closing net cash position 1 840 294 2 088 130 1 513 330 1 491 481 1 729 003 1 695 547 Board Approved Page 60

Capital Expenditure: Infrastructure & Service Delivery Capital Plan Background City Power is currently faced with the enormous task of addressing the following challenges: Reducing the average age of our transmission and distribution network where it is in excess of 40 years through refurbishment and replacement Obsolete and unreliable equipment for which we are no longer able to obtain spares Addressing and improving safety on the network i.e. replacement of high risk equipment A network that, due to densification, has in many areas exceeded its firm capacity and in some instances reached its installed capacity Reduction in outages and restoration times to restore power following outages Increased economic activity which will lead to increased demand on our networks Extending the transmission and distribution networks in support of new development, the electrification programme and projected 9% growth rate Dramatic increase in the cost of key resources i.e. labour and materials Meeting the Mayoral priorities i.e. Inner City, BRT Comply with the Cluster programs while trying to refurbish and extend our network Alignment with the City GDS Upgrading of the networks to ensure reliable supplies Increasing backlogs due to insufficient capital Long Term Capital Budget Indicatives Measure Indicator Unit 12/13 Plan 13/14 Plan 14/15 Plan 15/16 Plan 16/17 Plan 17/18 Plan Network Assets R m 902,900 1,939,810 4,516,315 4,425,159 2,593,680 1,344,215 Other Assets R m 50 164,660 130,000 52,000 57,000 52,000 Total R m 952,900 2,104,470 4,646,315 4,477,915 2,650,680 1,396,215 5 Year Capital Requirements City Power developed a 10 year rolling capital plan, the table below outlines the six (6) year requirements based on the projects identified from the ten year master plan. Six (6) year capital requirements Six (6) year Capital Plan Financial Year 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 R'000 RX1000 RX1000 RX1000 RX1000 RX1000 RX1000 Requirements 2,104,470 4,291,185 4,199,785 2,585,680 1,396,215 1,024,565 Board Approved Page 61

Funding Requirements 2013/14 Table below outlines the budget requirements for the 2013/14 financial based on the projects already committed and projects which are critical for sustainability of the company going forward. Funding requirements 2013/14 Contractually committed and Critical Urgent Important Total X R1000 X R1000 X R1000 X R1000 Buildings R60,000 R60,000 Bulk Infrastructure R538,500 R459,100 R196,800 R1,194,400 Bulk Infrastructure (Electrification) R163,000 R30,000 R193,000 Bulk Infrastructure (88 kv overhead lines) R100,000 R 5,000 R105,000 Demand Side Management R5,000 R103,400 R108,400 Electrification R93,120 R10,000 R103,120 Fire and Security R10,000 R10,000 Information Technology R43,000 R50,000 R93,000 Meters R635,000 R 20,000 R655,000 Network Development R32,000 R54,900 R86,900 Operating Capital R41,660 R41,660 Protection R31,399 R10,001 R41,400 Public Lighting R27,715 R5,000 R32,715 SCADA R10,000 R10,000 Service Connections R135,395 R29,300 R164,695 Support Services R5,000 R15,000 R20,000 Telecommunications R16,000 R13,300 R29,300 Township Reticulation R0,000 R30,000 R30,000 Training R10,000 R10,000 Upgrade Electrical Network R165,500 R170,550 R264,200 R600,250 Total R2,082,289 R714,550 R792,001 R 3,588,840 2013/14 Allocation of budget The following table is the comparison of the total budget requirements for 2013/14 vs the proposed indicative budget allocation. If only the indicative budget is allocated, it must be noted that a further R 1,507 M backlog will be created which will put more pressure on the 2014/15 and future financial year s budget requirements and might result in some commitments not being honoured by City Power. The approved budget for 2013/14 is R 1,727,058. 2013/14 allocations Description Budget (R'000) Total Requirements 3,588,840 Indicatives budget allocation 2,082,289 Deficit 1,506,551 Board Approved Page 62

CAPEX Fund Allocation The table below shows the approved long term capital budget: Programme 2013/14 2014/15 2015/16 Improved Network performance and quality of supply Refurbishment of ageing infrastructure Expansion and strengthening of network R 293 399 000 R 318 200 000 R 289 200 000 R 90 450 000 R 202 500 000 R 207 500 000 R 711 834 000 R 1 468 395 000 R 1 131 015 000 Demand Side Management R18 000 000 R 15 000 000 R 5 000 000 Revenue Step Change Programme Improve Customer Centricity and People Development Continuous Improvement of the business R 505 000 000 R 580 000 000 R 535 000 000 R 27 715 000 R 30 000 000 R 60 000 000 R 80 660 000 R 10 000 000 - Total R 1 727 058 000 R 2 624 095 000 R 2 227 715 000 The allocation of funding is largely driven and prioritised by the City s Capital Investment Management System (CIMS). This looks at Mayoral initiatives i.e. Inner City, Bus Rapid Transport (BRT), Gautrain, Social Projects etc. From a City Power perspective we also use the following criteria: Quality of Supply Safety Return on investment Interdependence Increasing network availability visible reduction in outages Decrease in maintenance costs Social benefits of project Revenue generation Risk CAPEX Allocation Impact Major impact on projects not funded comes from the network and bulk infrastructure related projects which, in turn, impose a significant contribution towards service delivery. Therefore, there is no doubt that this reduction will have a significant impact on service delivery and, due to the nature of these projects, natural load growth and network deterioration. Board Approved Page 63

The required investment will have to be made sooner or later. It is most likely that this reduction will put pressure on future capital budget allocations. The following are some of the areas which will see the negative impact in the near future: Impact in the reduction of unplanned outages Impact in the improvement of restoration times Provision of new service connections will be negatively impacted There will be an increase in OPEX (R&M) due to emergency repairs Stock Levels will be impacted negatively (most likely to be high) Township developments will slow down due to capacity constraints N-1 contingency will be violated, impacting negatively on network reliability Deferred budgets will place additional burden on future financial year budgets Focus Areas when compiling the budget The construction / upgrading of substations to alleviate loading problems and the elimination of non-standard voltages Upgrade of all transmission and/or distribution equipment in order to alleviate the current overloading situations Upgrade all equipment where safety of personnel is jeopardised Upgrade / replace all un-maintainable cable networks Upgrade of protection systems with modern technology equipment The expansion of the SCADA system to make it possible to monitor / operate substations remotely Roll out of DSM / Load Management Upgrade metering to improve revenue collection. Board Approved Page 64

Major Infrastructure Initiatives Major Intake Points Two new Eskom intake points are being planned to provide security of supply and to provide the capacity required to support development into the future. These are major projects, and will take approximately four years each to complete. Sebenza will be situated in the North-East of Johannesburg adjacent to Kelvin Power Station and Quattro in the South West of Johannesburg in the vicinity of the old Orlando Power Station site. The identification of funding for these two projects is now critical. The tender for Sebenza substation has been adjudicated and currently with Legal department. The estimated cost is approximately R 900 M over the four to five year construction period. This cost cannot be funded from the allocated budget only. External funds/grants will have to be sourced. A site has been identified in conjunction with Eskom for Quattro intake station. The detail design of the station as well as the two 88 kv switchyards at Mondeor and Pennyville is being done at present. The tender will be advertised during the 2014/2015 financial year. Eskom Upgrades To support immediate and future capacity upgrades our load projections have been communicated to Eskom. Eskom have indicated that to provide the capacity required they will have to upgrade their transmission networks. Initial payments have been made to Eskom for some of these upgrades. Further upgrades have to be done especially in the South. Eskom s transmission networks will also need to be extended to supply our planned 275/88kV intake points at both Quattro and Sebenza. Sustainable Services cluster Transport Orientated Development (TOD) program There are significant funds required to provide electricity for the development of the TOD precincts. At this stage we cannot fund this from our normal capital budget allocation and alternative sources of funding will be required. High level budgets are as follows: New substation for the Park station precinct New substation for the Westgate precinct R 100 M R 110 M Board Approved Page 65

Project Status This section highlights the status of payments for applications made to Eskom for the upgrade of their substation and backbone infrastructure in order to cater for additional backbone capacity requirements. Project status Eskom payments towards the Infrastructure upgrade for additional capacity Project Name Total(Budget quote) Amount Paid Outstanding Vorna Valley 7,619,439 7,619,439 0 Allandale 21,286,281 21,286,281 0 Lufhereng 24,319.667 25,000,000 680,333 Lehae and Trade Route 30,011,877 30,011,877 0 Vlei (Tshepisong) 11,613,822 11,613,822 0 Lutz 40,098,380 16,039,352 24,059,027 Klipfontein View 592 592 0 Total 134,950,058 111,571,363 23,378,695 Substations Upgrade of Existing Substations The upgrading of substations which commenced in previous financial years has been completed. Two new upgrading projects, Cydna and Observatory substations, commenced in 2012/2013 and will be completed in the course of 2013/2014. The upgrading of a further three substations will commence in 2013/2014 and three in 2014/2015. New Substations The construction of five new substations will commence in 2013/2014 and will be completed in 2014/2015. Four new substations will commence in 2014/2015. Board Approved Page 66

Project Status The table below indicates the status of upgrade and new substation projects, aimed at addressing capacity constraints and refurbishment backlog as alluded to above. No. Substation Area to Benefit Progress 1 Cydna substation Birdhaven, Melrose, Oaklands area Tender awarded 2 Sebenza 275 kv intake substation All areas Tender stage 3 Quattro 275 kv intake substation All areas Final design stage 4 Mulbarton substation Mulbarton, Glen Vista. Liefde en Vrede, Bassonia Final design stage 5 Parkhurst substation Parkhurst, Linden, Victory Park, Greenside, Final design stage 6 Sandringham substation Sandringham, Linksfield, Fairvale, Glenkale Design stage 7 Cleveland substation Cleveland, Herriotdale Design stage 8 Vlei substation Tshepisong Design stage 9 Lutz substation Alsef, Ruimsig, Honeydew Final Design stage 10 Kloofendal substation Kloofendal, Allens Nek, Little Falls, Design stage 11 Longlake substation Phase 1 Longlake, Modderfontein Execution stage 12 Fleurhof substation Fleurhof, Robertville Design stage 13 Lufhereng substation Lufhereng, Doornkop Tender award stage 14 Lehae and Traderoute Lehae, Nirvana, Lenasia Design stage 15 John Ware substation CBD Planning stage 16 Haggie Rand and PPC Haggie Rand and PPC Planning stage 17 Mondeor substation and switchyard Southern areas of Jhb Design stage 18 Westgate substation Westgate, Selby Planning stage 19 Pennyville switchyard Southern areas of Jhb Design stage 20 Pritchard Substation CBD Final design stage 21 AEL Substation Modderfontein Final design stage It should be noted that the committed budget requirements for the 2013/2014 financial year includes some of the above projects. Overhead and Underground Transmission networks We are currently experiencing transfer capacity problems on our transmission line networks and significant upgrades are required to support capacity upgrades at existing and new substations being planned. These upgrades need to be undertaken before the load reaches a critical level, when we will no longer be able to take these lines out of service to do the upgrades. Live re-conductoring with high temperature conductor is already being done in selected areas In areas where we are no longer able to get servitude corridors, underground cables are being planned. The cost of underground networks is two to three times that of overhead lines. Where new overhead lines are being planned the acquisition of land and the Board Approved Page 67

environmental process that has to be followed has proven to be a major challenge and is delaying projects. Refurbishment of the Transmission Networks The refurbishment of existing substations and replacement of high risk transformers and switchboards will continue to be implemented, in order to bring the network within the acceptable average age. In many instances these transformers are replaced as part of planned upgrades. A transformer condition model was developed to assist with the prioritization of transformer replacements. Upgrading & Refurbishment of the Medium & Low Voltage networks This still presents a major risk and is where the majority of outages occur. However, due to limited funds being made available and the need to first upgrade the transmission networks with the majority of the available funds, the backlog on refurbishment and upgrading of these networks is growing each year. As soon as the transmission networks have been upgraded the focus will change to the refurbishment and upgrading of the medium and low voltage networks. Township Establishment, Densification and New Service Provision This remains our single biggest risk, and a source of frustration for City Power staff, developers and consultants. Considering that City Power has seen an overall natural growth in maximum demand of approximately 5% over the last few years, our networks in a growing number of areas have been placed under severe strain and have become overloaded. This has been further compounded by the demand for housing which has resulted in an exponential boom in many areas due to densification and natural load growth. In many areas, particularly the Midrand, Randburg and Roodepoort areas, the growth has been in excess of 30%. As a consequence we have no capacity to support further development, and have for some time now been forced to turn down applications for densification, township establishment and the provision of new service connections. This will have to continue until these networks have been upgraded. This will ensure that our networks are not further overloaded and will protect the existing customer base Board Approved Page 68

Sources of Funding TABLE BELOW GIVES THE BREAKDOWN OF THE ANTICIPATED SOURCES OF FUNDING: Description 2013/2014 Cash CRR Loans National Grant USDG Other X 1000 X 1000 X 1000 X 1000 X 1000 X 1000 Buildings 50,000 50,000 Bulk Infrastructure 488,091 311,851 43,500 9,620 88000 35,120 Demand Side Management 5,400 5,400 Electrification 61,380 18,000 28,380 15,000 0 Fire and Security 20,000 20,000 Information Technology 41,000 41,000 Meters 675,000 455,855 219,145 Network Development 6,000 0 6,000 Operating Capital 41,660 41,660 Protection 28,221 20,894 7,327 Public Lighting 27,715 22,715 5,000 SCADA 0 0 Service Connections 120,730 120,730 Support Services 0 SCADA 10,000 10,000 Telecommunications 15,000 15,000 Township Reticulation 0 Training 8,000 8,000 Upgrade Electrical Network 128,861 128,789 72,000 Total 1,727,058 1,121,049 56,899 38,000 125,715 467,695 Board Approved Page 69

SECTION 7: RISK ASSESSMENT Background City Power is a Municipal Owned Enterprise (MOE), owned by the City of Johannesburg (COJ) and as such City Power is continuously ensuring alignment and compliance to COJ requirements. City Power s Risk Management process is aligned and has adopted the COJ Risk Management Framework. Risk is defined as an event that may have an impact on the ability of the company to achieve its business objectives. Risk Management Process City Power's Risk Management process has four broad steps: Risk identification Risk Assessment and treatment Monitoring and Reporting Auditing RISK MANAGEMENT PROCESS Risk Identification Risk Assessment and treatment Auditing Monitoring and reporting Risk Identification The City Power risk identification process is aligned to the COJ framework. The company risks are identified annually and they form part of the risk register. These risks are influenced by the executive committee, taken for the Audit Committee of the board and then approved by the board. The approved risks are then incorporate in the business plan. Risk Assessment and Treatment Once risks have been identified, they must then be subjected to a consistent assessment process to ensure that City Power achieves an objective and holistic result that can inform its risk profile. Board Approved Page 70

Catastrophic Major Moderate Minor Not significant City Power Business Plan (2013-2016) Risk is measured in two ways: By the likelihood or frequency of the risk occurring By the severity / impact on City Power of the risk occurring The City of Johannesburg has developed a two-stage assessment process to assess and quantify the identified risks. Stage One Impact and likelihood The first stage involves an assessment of the potential impact (or severity) of each risk, and then the likelihood of the event actually occurring. Each risk is scored on a scale of one to five. Table below: shows the criteria used to assess the potential Impact / Severity of each risk occurring THE CRITERIA USED TO ASSESS THE POTENTIAL IMPACT / SEVERITY OF EACH RISK OCCURRING Assessment of impact / severity Financial Reputation Stakeholders Customers Employees may 1 have suffered minor Event would have Contained within individual service first aid injuries. little financial area. From a regulatory perspective, Event may have impact on either minor fines or penalties may have resulted in localised income or budget been suffered. staff morale problems. 2 3 4 5 6 7 8 9 Event would have moderate financial impact (>2% on budget/income or >2%) on either income or budget. Event would have serious financial impact (>4-6% on budget/income or >4%) on either income or budget. Event would have very serious financial impact (>8% on budget/ income or >8%) on either income or budget. Event would have catastrophic financial impact (>15-25% on budget/income or >15%) on either income or budget. Affects significant number of service areas but with likely short-term impact on public memory. From a regulatory perspective, fines or penalties >R50k may have been suffered. Customers may have been impacted resulting in complaints with media coverage (suburban newspaper). Regulator inquiry with medium-term impact on public memory. From a regulatory perspective, fines or penalties >R100k may have been suffered. Customers may have been impacted resulting in complaints with media coverage (local newspaper not front page). Medium-term public impact with minor political implications. From a regulatory perspective, fines or penalties >R150k may have been suffered. Customers may have been impacted resulting in complaints with media coverage (national TV headlines) and loss of service >1 month. Long-term impact on public memory and major political implications. From a regulatory perspective, fines or penalties >R500k may have been suffered. Customers may have been impacted resulting in complaints with media coverage (national TV headlines) and loss of service >6 months. Employees may have suffered temporary disabling injuries. Event may have resulted in staff loss causing minor to moderate consequences. Employees may have suffered multiple temporary disabling injuries. Event may have resulted in staff loss, causing serious consequences. Employees may have suffered multiple permanent disabling injuries. Event may have resulted in staff loss, causing very serious consequences. Employees may have suffered fatalities. Event may have resulted in staff loss, causing catastrophic consequences. Customers may have been minimally impacted. Event may impact minimally on achieving a performance target. Event may impact on achieving a performance target where a major milestone was missed by more than 1 month, impacting on a client segment. Event may impact on achieving a performance target where a major milestone was missed by more than 3 months and subsequent interruption over several days to customers. Event may impact on achieving a performance target where a major milestone was missed by more than 6 months, resulting in a major customer impact. Event may impact on a performance target, where a major milestone was missed by more than 8 months to over 1 year. Board Approved Page 71

Table below shows the criteria used to assess the likelihood of the risk occurring: Likelihood Descriptor Almost Certain 8-9 Likely 6-7 Possible 4-5 Unlikely 2-3 Rare - 1 Description Event has occurred within the last year repeatedly. Event has occurred within the last financial year. The event has a probability of occurring at some time, in the next year. Very few recorded or known incidents. Reasonable opportunity to occur or has occurred within other organizations within sector. Event may occur in exceptional circumstances. No recorded incidents or little opportunity for occurrence. The product of this stage one assessment of impact and likelihood is an "Inherent Risk Score", which can range from a minimum of 1 to a maximum of 25, by multiplying the frequency and impact scores. Stage two Development of Risk Drivers and Risk Casual Model Risk drivers are those elements which tend to be the cause of the risk occurring. Risk drivers are a key process in risk management as they provide an in-depth understanding of the risk. Analysis of the drivers lead to the effective monitoring of the risk as well as the development of control measures to mitigate or manage the risk. These will be measured and monitored as per the next phase of this project. The formulation of risk drivers is to assist with the understanding of the risk (i.e. make the risk more tangible) and in the formulation of controls, both pre- and post and to manage / minimise the risk drivers, which in turn reduces the overall headline risk. If the drivers are not identified, then the process only provides a snapshot of the risks at a point in time. Monitoring and Reporting Monthly, quarterly and annual reporting on progress with status of action items. Auditing This process will be audited continuously. Probability The event is certain to occur within this financial year. The event is likely to occur within this financial year. Event has been recorded within organization as well as within the sector in the last 2 years. The event may occur at some time, within the next 2 years. No event recorded in the last 3 years. Board Approved Page 72

Strategic Risks Report TOP 13 STRATEGIC RISKS STATUS REPORT Objectives 1 Energy Management 2 Improve Asset management 3 Business Model Review 4 Energy Management 5 Energy Management Risk Category Financial / Process / Governance External Environmen t / Financial / Network Integrity / Financial / Process Financial Financial Risk Description Poor Revenue Collection Cable theft Customer dissatisfaction. High primary energy pass through costs.(ocgt & KPS) Business's inability to fund high Background to the risk 1. Inadequate credit control measures 2. Billing not correct/ complete Increase in copper price led to increase in network tempering and vandalism Causes include: outages, capacity demand, billing, etc. *Low level of positive public opinion (company image) Poor performing Call Centre Inadequate capacity nationally will result in the starting up of the gas turbines and increase in Kelvin dispatch resulting in high pass through energy costs. Lack of funding. Company not able to obtain own funding. Risk Consequence Impact Likelihoo d Poor cash flow and liquidity problems. 1. Power interruptions. 2. Company image. 3. High insurance claims. 4. Loss of revenue. 5. Increase in operational expenditure. 1. Low payment level. 2. Poor company image. 3. Loss of NERSA License 4. Loss of Customer Satisfaction Increased cost of bulk purchases. 1. Unable to meet the GDS, IDP, and Business Plan Major Major Major Almost Certain Almost Certain Almost Certain Inheren t Risk Red Red Red Current controls Risk Owner Actions to improve management of the risk 1. Conversion from conventional to pre- paid 2. Manage the Service Level Agreement with the City. 3. Advised the City to segment customer as required by accounting standards and NERSA. 4. Advised the City to reintroduce key customer executives. 1. Improved security in hot spot areas. 2. Implemented Crime Intelligence systems. 3. Crime prevention strategy in place. 4. Implementation of crime prevention technologies. 1. Manage SLA with the City. 2. Working with City to improve processes. 3. Internet faults logging system. 4. SMS messaging system for planned outages. 5. BC Forums. Major Likely Red 1. Strict control over PPA and penalties on poor delivery. 2. Hold monthly meeting with Kelvin Management. 3. Limited provision for the gas turbines in the current budget. Major Likely Red 1. Revenue Generating projects 2. PPP initiatives Director : Retail Services & Director Finance Director RAC Director : Retail Services Director: Engineering Operations Director : Finance Director : 1. Continuous management of the SLA. 2. Conversion from Conventional to Pre-Paid Meters. 3. Need to segment customers and reintroduce the key customer exec. Review additional prevention strategies. Reviewing value chains. 1. Explore additional funding for the gas turbines. (e.g. Off-takers) 2. Engage with 3rd parties to buy power at the cost of generation. 1. Exploring the off Balance Sheet Arrangements Time scale 1. Monthly 2. Monthly as per project plan. 3. Discussed with the City on a monthly basis. Review annually within 1st quarter of financial year. Review Quarterly Monthly review Quarterly review Board Approved Page 73

Objectives 6 Business Model Review 7 Human Capital Investment 8 Obtain Unqualified Audit Opinion. 9 Energy Management Risk Category Technology / Governance / Process Human Capital / Process / Governance Financial / Governance Technology / Financial / Process Risk Description capital and operational requirements out of current cash flows nor future tariff applications Non availability and reliability of Information & communicatio n technology (ICT). Fraud & Corruption Qualified audit report. Increase in non-technical losses Background to the risk 1. Extensive reliance on ICT 2. Lack of investment in ICT due to competing business priorities Any form of Fraud & Corruption taken place, including financial, asset, gift, collusion, etc. Conflict of interest Inadequate internal controls. Insufficient Financial Staff. Non-compliance to GRAP standards. 1. Meter tampering. Illegal Connections. 2. Faulty Meters and no-access unable to bill customers Risk Consequence Impact Likelihoo d targets including electrification, innercity project, public light, SHEQ etc. 2. Unable to refurbish the aging network at an acceptable rate *Not enough funds to upgrade the network e.g. 4th and 5th intake points 3. Compliance to MFMA requirements. 1. Low productivity 2. Negative company image 3. Poor business performance Loss of assets and funds. Entity image is tarnished. Weak Internal Controls. Non Compliance to GRAP Noncompliance to MFMA Improper Reporting Loss of revenue and or cash NERSA Licence Inheren t Risk Current controls Risk Owner Actions to improve management of the risk 3.Sourcing additional Grant Funding Major Likely Red Currently reviewing and updating the Information security policies and the Disaster recovery strategy Major Possible Red 1. A fraud Policy has been introduced. 2. A fraud & corruption prevention plan is in place. 3. An illustrative list of strategic fraud risks is in place. Major Possible Red 1. Practicing good governance 2. Actively addressing all issues raised in the previous year's Management Report. Major Almost Certain Red 1. Installation of semi AMR, Tamper proof meters and pre-paid meters with protective structures; Engineering Services Director: Engineering Services Director RAC Managing Director Director : Retail & Director: Engineering Services with Funding institutions. 2. See additional grants from National Treasury and other departments. 1. Programme to align to King III recommendation s. 2. Review and strengthen the current controls. 3. Modernising and upgrading infrastructure. 1. Awareness campaigns on anti-fraud and corruption. 1. Alignment with King III requirements. 2. Continue to comply with legislation. 3. Implementation of GRAP 4. Integrated Reporting 5. Staff Development Continue with present controls and monitor the effectiveness. Time scale Quarterly Quarterly Quarterly Monthly as per project plans Board Approved Page 74

Objectives 10 Improve Asset management 11 Improve Asset management 12 Human Capital Investment 13 Human Capital Investment Risk Category Process / Network Process / Financial Human Capital Human Capital/ Financial Risk Description Network interruptions Inadequate capacity to meet the demand. (Eskom & Kelvin) Impact of HIV/AIDS and other sicknesses on productivity in the company Insufficient Skills capacity to support the business Background to the risk Risk Consequence Impact Likelihoo d Inheren t Risk 3. No meters at all 2. Removal of illegal Connections and replaced with tamper proof meters with protective structures. 3. Currently utilising JMPD & SAPS to enforce by-laws. 4. Continuous installation audits;5. Customer education programs; 1. Age of the network 2. Uncontrollable events such as insufficient capital for upgrading and refurbishment of MV and LV network. 3. Theft & vandalism of infrastructure. 1. Eskom's failure to supply (generation and transmission) 2. Ability of the Eskom network to sustain the new capacity demand. Inability of Kelvin Power Station to supply at the required level in terms of the PPA. Increased absenteeism due to sick leave, impacting on overall performance. Loss of skills. Ineffective talent management. Vacant positions Low productivity Negative company image Poor business performance Major Almost Certain Red Current controls Risk Owner Actions to improve management of the risk 1. Maintenance & Capital Investment program in place. 2. Asset Management system in place. 3. Crime prevention strategy in place. Load Shedding. Major Likely Red 1. City Power has applied for increased capacity from Eskom. 2. Investigating distributed generation options. Implementing DSM Program. Resuscitate Gas Turbines. Reduced productivity. Moderat e Possible Amber 1. Reinforcing partnership with CoJ and other stakeholders. 2. Provision of immune boosters and nutrition. Dispense and administer ARV's. 3. Staging of wellness days. 4. Voluntary testing Low productivity. Minor Likely Amber Retention strategy implemented. Remuneration strategy partly implemented. Training and development of staff. Director: Engineering Operation Director: Engineering Operations Director: RAC Director:HR Introduction of condition monitoring project and continue to review additional crime prevention strategies 1. Investigating alternative sources of energy e.g. 2. Piloting Solar Powered Streetlights. Continue to improve the awareness campaign. 1. Monitor the effectiveness of current controls. 2. Training Time scale Annual review Quarterly Monthly newsletter and annual campaign Quarterly review Board Approved Page 75

SECTION 8: CONCLUSION City Power is a wholly owned Company of the City of Johannesburg thus its Business Plan is aligned to the GDS and IDP of the City Of Johannesburg. The City Power Business Plan is being submitted to the Board and Council in compliance with Sections 16(2) and 87(2) & (3) of the Municipal Finance Management Act, 56 of 2003 (MFMA) for consideration and comment prior to the final approval of the business plans and budgets (during May 2012) as is required by the MFMA and the Municipal Budget and Reporting Regulations to the MFMA. In the ten years of the City Power s existence it has faced challenges and had great achievement. Going forward the organisation will spend a significant amount of effort to ensure that structures and processes are put in place to address the concerns raised in the audit report. City Power identified and is implementing interventions as part of the Revenue Step Change (Revenue Generation and Protection) project working with all its stakeholders to reduce nontechnical losses. City Power is committed to continually improving its performance and the company is confident that it will meet and exceed the expectation of all our stakeholders thus attaining its vision of being a world class electricity distributor. Board Approved Page 76

SECTION 9: BUSINESS ACRONYMS AND APPENDICES Business Acronyms AA Affirmative Action AMR Automated Meter Reader AMP Amperes BBBEE Broad Based Black Economic Empowerment BSC Balanced Score Card CAIDI Customer Average Interruption Duration Index CAIFI Customer Average Interruption Frequency Index CAPEX Capital Expenditure CFL Compact Fluorescent Light COJ City of Johannesburg DIFR Disabling Injury Frequency Ratio DOE Department of Energy DSM Demand Side Management EDI Electricity Delivery Industry EE Energy Efficiency EISD Environment, Infrastructure and Services Department EPWP Expanded Public Works Programme GDS Growth Development Strategy GE Gender Equity HV High Voltage JMPD Johannesburg Metro Police Department KPI Key Performance Indicator KWH KiloWatt Hour LPU Large Power Users LV Low Voltage MD Managing Director MFMA Municipal Finance Management Act MOE Municipal Owned Entity MSA Municipal Systems Act MV Medium Voltage MVA Mega Volt Amperes NERSA National Energy Regulator of South Africa NPR Network Performance Related OPEX Operating Expenditure RDP Reconstruction and Development Programme R&CRM Revenue and Customer Relationship Management RED Restructured Electricity Distributor R & D Research and Development SAIDI System Average Interruption Duration Index SAIFI System Average Interruption Frequency Index SBA Sale of Business Agreement SCADA Supervisory Control and Data Acquisition SDA Service Delivery Agreement SHEQ Safety, Health, Environmental and Quality SOC State Owned Company SPU Small Power Users TBA To Be Announced IDP Integrated Development Plan Board Approved Page 77