DEPT OF PUBLIC ENTERPRISES

CAPEX UPDATE

PRESENTATION TO THE PORTFOLIO COMMITTEE ON PUBLIC ENTERPRISES

16 AUGUST 2006

CONTENTS

• Progress Eskom’s Build Programme Overall spent to date

Supplier Development (SD)

Jobs created

• Progress on the Integrated National

Electrification Programme (INEP)

• Progress Transnet Build Programme

2

3

Progress on Eskom Build Programme

4

Progress on Eskom Build Programme (Cont)

5

Progress on Eskom Build Programme (Cont)

6

Progress on Eskom Build Programme (Cont)

7 7

Build Programme & SD

• Maximise SD & industry wide initiatives

• SD with major focus on Small enterprise (SE)with turnover of up to R25m

Medium enterprises (ME) with turnover between R25m & R100m

Black Women Owned Business (BWOB) including both Small & Medium enterprises

8 8

Build Programme & SD

• Opportunities are explored to contract directly with the above group Suppliers Engagement Where direct contracting is not practical, large

suppliers to subcontract a substantial amount of the contract to SE, ME & BWOBs

Include skills transfer & programme, to be audited by Eskom (including classroom content)

In service training & learnerships to students

9 9

BP & HR Capacity building

• Target 4 000 by March 2007 year-end through: Providing them with skills for either employability

or to be self employed Identifying & developing critical skills for Eskom &

the industry future requirements Engineers, artisans, technicians & graduates-in

training will be targeted Expansion & central coordination of learnership

programmes, with funding from the Energy Sector Training Authority (ESETA) grant; currently Eskom has 1127 students in the programme

10 10

Progress on INEP

• The DME is reponsible for planning, coordination, administration, monitoring & evaluation of the INEP

• The year 2012 is targeted for universal access

• 3.2 million households have been electrified since 1991

• 3.4 million households are un-electrified

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HOUSEHOLD ELECTRIFICATION - HISTORY

SOUTH AFRICACOST PER

CONNECTIONRURAL

CONNECTIONSURBAN

CONNECTIONSTOTAL

CONNECTIONS

1991 - 1994 3,176 572,441 66,853 639,294

1995 3,370 226,065 87,114 313,179

1996 3,417 261,438 45,609 307,047

1997 3,159 241,880 43,662 285,542

1998 3,008 198,197 93,155 291,352

1999 2,899 173,625 125,622 299,247

2000 2,647 133,672 122,351 256,023

2001 2,532 105,587 103,948 209,535

2002 2,614 107,718 103,910 211,628

2003 3,384 117,108 58,288 175,396

2004 4,207  126,477 43,893 170,370

2005 (March)   38,920 12,974 51,894

2005/6 4,137 119,077 16,791 135,868

GRAND TOTAL   2,422,205 924,170 3,346,375

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Progress on INEP

• Annual funding is R1.39 billion and 230 000 hhlds are connected

• In order to achieve the target annual funding should be R3.6 billion and 500 000 hhlds should be connected

• Should the above happen the programme could create 10 000 jobs per annum (according to the DME).

13 13

Transnet core businesses: 5 year investment plan

• 5 Year investment plan R64.5bn – Rail R34.1bn– Ports R24.8bn– Pipeline R4.9bn

• Major investments: To sustain and expand operations – Export lines: Iron ore and Coal lines to increase capacity and major

refurbishment costs– Port infrastructure and terminals – General freight business: Replacement of assets; major refurbishment

costs– Pipeline (Multi product) from Durban to Johannesburg to create

capacity

14 14

Corporate plan: Capex 2006/07 and 5 year plan

Total 5 year Capital Investment Plan: R64.5bn

R11.4bn R15.3bn R14.7bn R12.0bn R11.1bn

Rail

R31.5bn

Ports Pipeline Other

R24.8bn R4.9bn R3.3bn

5 year investment plan

2006/07 2007/08 2008/09 2009/10 2010/11

18% 24% 23% 18% 17%

Roll out plan

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Transnet capital projects

•To ensure effective implementation of investment plan:– Appointed new focused, centralised and experienced project team

– Centralised control over projects in excess of R 300 million

– Access to high quality skills for managing risk and delivery on

•Major projects–Transnet Capital Projects responsible for entire project value chain –

feasibility to execution

– Agreement with Hatch/Mott MacDondald/Goba (International project

management consultants with local representation)

16 16

Progress to date – July 2006

• Most of projects have commenced

• Spending to date R2.0bn vs budget of R3.1bn

– Spoornet underspending R0.8bn

– NPA underspending R0.3bn

• Spending behind schedule mainly due to:-

– Delays in the approvals of EIA’s (mainly NPA)

– Delivery of imported supplies (eg. wheel centres for Spoornet which is

the major cause of Spoornet being behind budget. This underspending

will be progressively caught up)

• Plans in place to accelerate implementation over remaining months

CORE BUSINESSES

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Transnet core businesses: Capital expenditure 2006/07

3.1

8.3

11.4

2.0

9.4

0

2

4

6

8

10

12

April to July2006

August 06 toMarch 07

Estimate2006/07

Ra

nd

Bil

lio

n

Budget Actual / Estimate

18 18

Progress on major projects – July 2006

Saldanha Port/Rail line

- Total cost of project is R3bn and the budget for 2006/07 is R1.1bn

- Spending to date R134m against budget of R325m (mainly due to revision of

engineering design)

Cape Town Container terminal

- ETC of R2.4bn with R160m budgeted for 2006/07

- EIA approval outstanding

- Project essential to create required capacity for container handling

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Progress on major projects – July 2006 (cont.)

Durban Pier 1: Resurfacing

• Total cost of R1.4bn

− Civil contracts already awarded

• Spending to date: R68m vs budget of R108m

Durban Harbour Entrance Widening

• Total cost of project is R1.7bn

• Feasibility study underway

• Detail engineering in progress which includes breakwater and

deepening of channel

• Spending to date: R16m vs budget of R25m

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Progress on major projects – July 2006 (cont.)

Port of Ngqura

• Will conclude phase 1 of the project in 2006/07 (total cost of R3.5bn)

• Feasibilities undertaken to construct a container terminal at port

• Experiencing delays in land surveys

• Spending to date 2006/07 on Nqgura is R26m vs budget of R82m

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Progress on major projects – July 2006 (cont.)

OTHER PROJECTS

Wagon fleet renewal and modernisation

• Budget 2006/07: R900m, actual spending to date R278m vs budget of

• R241m

Coal line capacity expansion from 71mtpa to 78mtpa

• Budget 2006/07 of R119m, actual spending to date R90m vs budget of

• R24m

Projects between R20m – R300m

•Specific focus and action plans to address projects behind schedule

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Major risks in roll out of investment plan

Delay in EIA approvals

Claims and other legal challenges

Delivery of imported equipment

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Projections: Capex spending

Transnet committed to roll out the 5 year plan

Core businesses confident that approved budget for 2006/07 will be

largely achieved

Resources allocated to ensure successful implementation of planned

projects