Eish Company ("Eish-com") is a South African electricity public utility established in 1923 by the South African government. Eish-com, Africa's largest producer of electricity, generates approximately 95% of electricity used in South Africa. The company has three major operating divisions, namely Generation, Transmission and Distribution. 40% of the company's electricity is sold to distributors (metros and municipalities), which in turn sell to their residents; 46% to commerce, industry and mining sectors; 7% to independent households; and another 7% to international utilities. To ensure that Eish-com meets the expected demand, it also buys up to 10% of its electricity from independent power producers (IPPs). Eish-com's electricity is mainly generated from its coal-fired power stations, although there are a few gas/liquid fuel turbine stations and one nuclear plant in Koeberg, Cape Town. Eish-com has applied to the National Energy Regulator of South Africa (NERSA) to increase its tariffs by an additional 45% over the next three years. This is an attempt to get the company out of its cash-flow insolvency position. The company's financial performance has been plagued by high levels of foreign-denominated debt, ageing infrastructure, poor debt collection processes, frequent changes to the company's board of directors and political interference. A new company CEO, Phakama Radebe, was appointed a few months ago, and she has been tasked with implementing the turn-around strategy to salvage the company. However, this appointment came at a time when there had been widespread public outcry to have the utility privatised. In an effort to curb inflation, it is highly probable that NERSA will only allow an increase in electricity tariffs of 5% per annum for the next ten years (estimate guidelines). The management of Eish-com has come under fire following huge project cost overruns at two of its power stations, Kusasa (still under construction) and Medupi (operating at 20% of full capacity). These two power stations have been cited as the major cause of current outages experienced throughout the country. The Medupi power station was only brought into operation just after Phakama Radebe's appointment as the chief executive. You are part of the task team that has been appointed by the President and the National Assembly to assess, among other factors, the viability and financial performance of Eish-com, the viability of the above two projects, the possibility of privatisation of the entity, the financing options, as well as the restructuring of the company's operations. The recent financial statements of Eish-com are presented below.

Additional information 1. Eish-com's treasury department forecasts the exchange rates of ZAR1: E for the next six years to be as follows: Year Average Closing Year 1 0,063 0,061 Year 2 0,060 0,059 Year 3 0,056 0,058 Year 4 - 6 0,054 0,058 2. The company uses the weighted average cost of capital to discount cash flows taking place in at least one year's time. 3. The South African company income tax rate is 28% per annum. 4. Eish-com operates 365 days in a year.The second loan from DFIs was obtained from Independent Development Corporation (IDC) many years ago. The capital is only repayable on 31 March 2026 (there is also an administration fee of R31 million payable at expiry of this facility). The annual interest on this second loan is fixed for the duration of the facility. Interest portion on both DFI loans is paid annually in arrears. Similar loans from DFIs are currently trading at 7,05% per annum. Other loans: Other loans (no short-term portion) are repayable in four years' time and similar loans are trading at JIBAR-1. Other loans (short-term borrowings) incurred finance cost of R43,725 million. 4. Electricity revenue for the 2022 financial year was R175 041 million (2021: R175 094 million). Other operating revenue amounted to R2 383 million for the year (2021: R2 042 million). Other operating revenue was on cash basis. 5. Primary energy is made up of the following items: Rm 2022 2021 Own generation costs 62 957 60 128 Independent power producers 22 245 22 632 Total 85 202 82 760 6. Net impairment losses are considered part of the day-to-day activities of the Eish-com business. 7. Other expenses include the following: Rm 2022 2021 Managerial, technical and other fees 709 1 351 Operating lease expenses 1 040 940 Auditors' remuneration 149 119 Net loss on disposal of PPE (operating) 148 260 Repairs, maintenance and other expenses 16 182 20 900 Non-operating income (1 372) (1 573) Total 16 856 21 997Notes to the financial statements 1. Trade and other receivables relate to the following: Rm 2022 2021 International 3 422 3 682 Local large power users - Municipalities & other 19 988 15 282 Local small power users - Soweto & other users 8 110 6 989 Impairments - Municipalities, Soweto & other (8 052) (8 684) Total 23 468 17 269 The level of total arrear debt (trade receivables) remains unacceptable high, especially for municipalities and Soweto as challenges around collection of customer debt persist. Other debtors that have a bad collection history include Maluti-A-Phofung, Matjhabeng, Emalahleni and Emfuleni municipalities. The company generates 70% of electricity revenue from customers on post-paid metering and the other 30% is generated from customers on prepaid meters. 2. The company has in excess of 100 million ordinary shares issued and it is estimated that the company's cost of equity approximates 13%. At the end of the current financial year, the price / book value multiple was estimated to be 1,8 times (2021: 4,8 times). 3. Debt securities and borrowings: Rm Capital Finance cost Eish-com bonds 190 456 14 134 Foreign bonds 48 256 3 190 Development finance institutions 121 486 7 092 Other loans (no short-term portion) 33 777 1 545 Total debt securities and borrowings 393 975 25 961 Current portion: Development finance (34 179) institutions Other loans (short-term borrowings) (8 250) Long-term debt securities and borrowings 351 546 The debt securities and borrowings, with the exception of other loans, are guaranteed by the South African government, the company's sole shareholder. The finance cost above relates to interest expense incurred during the 2022 financial year. Bonds: The market value of Eish-com bonds is approximately R205 billion, and the foreign bonds are trading at an interest yield of 6,9%. Development finance institutions: There are only two loans from the development finance institutions (DFIs). The first loan was obtained from The Development Bank of Africa at a fixed rate of 6% per annum. This five-year term loan was received from the Bank on 3 April 2019 (the current portion above relates to this loan only) and the capital portion is repaid in equal annual arrear instalments on 31 March. This loan incurred a finance cost of R6 152 million for the year.Statement of comprehensive income For the year ended 31 March 2022 2022 2021 Notes Rm Rm 177 424 177 136 Revenue (82 760) Primary energy (85 202) Employee benefit expense (29 454) (33 178) Depreciation and amortisation (23 132) (20 300) Net impairment loss (2 328) (3 400) Other expenses (net) (16 856) (21 997) Profit before net finance cost 20 452 15 501 Net finance cost (23 055) (14 342) Finance income 2 906 5 247 Finance cost (25 961) (19 589) Profit/(loss) before tax (2 603) 1 159 Income tax 266 (271) Profit/(loss) for the year (2 337) 888 Key-nonfinancial data: Number of employees 48 628 47 658 Number of customers (000) 6 258 5 977 Reported public injuries (employee and 410 302 contractor) Total electricity distributed to customers (GWh) 231 520 233 695 Electricity generated by Eish-com (GWh) 221 936 221 166 Electricity purchased from IPPs (GWh) 9 584 12 529 Coal burnt (Million tonnes - Mt) 115,5 113,7 CO2 emissions (Mt) 205,5 211, 1 Corporate social investment (CSI) spend - R'm 192,0 225,3 CSI - number of beneficiaries (000) 1 106,0 841,8 Exchange rates - Average ($1: R) 13,85 13,68 Exchange rates - Closing ($1: R) 14,26 13,80 Prime rate (%) 10,25 10,00 JIBAR (%) 7,85 7,70 1 One GWh (gigawatt hour) is equivalent to one million KWh (kilowatt hours).Statements of financial position At 31 March 2022 2022 2021 Notes Rm Rm Assets Non-current assets 658 068 622 331 Property, plant and equipment 631 020 589 231 Intangible assets 4 031 4 110 Future fuel supplies 7 157 8 190 Derivatives held for risk management 13 705 16 868 Payments made in advance 408 448 Investment in unlisted securities 1 747 3 484 Current assets 81 048 87 678 Inventories 24 515 26 498 Derivatives held for risk management 1 902 2 026 Investment in listed securities 6 839 10 541 Loans receivables 8 501 10 919 Trade and other receivables 23 468 17 269 Cash and cash equivalents 15 823 20 425 Total assets 739 116 710 009 Equity Capital and reserves to owners of the company 2 170 336 175 942 Non-current liabilities 474 353 453 777 Debt securities and borrowings 3 351 546 340 802 Derivatives held for risk management 16 570 6 767 Employee benefits 23 258 23 609 Provisions 44 370 44 021 Deferred tax 15 846 18 067 Trade and other payables 1 201 871 Payments received in advance 1 766 1 940 Deferred income 19 796 17 700 Current liabilities 94 427 80 290 Debt securities and borrowings 3 42 429 19 912 Derivatives held for risk management 6 578 5 329 Employee benefits 8 553 16 405 Trade and other payables 32 402 32 208 Provisions 4 465 6 436 Total liabilities 568 780 534 067 Total equity and liabilities 739 116 710 009