5.1 Nature of the Business

City Power Johannesburg (Propriety) Limited which is 100% owned by the City of Johannesburg, was established on 1 November 2000. The company is responsible for the distribution of electricity in certain geographic areas of the Greater Johannesburg Metropolitan Council, its four Metropolitan Local Councils and the Local Councils of Midrand, Modderfontein and Edenvale.

The core competency of the business is to distribute and sell electricity to its customers within its geographical footprint of distribution. City Power's customer base is estimated at 250 000 customers with an annual sales of 7 832 Gwh, growing by 2% per annum. Revenue generated from electricity sales in 2001 is estimated at R 2,04 billion.

The strategic intent is to position City Power Johannesburg (Pty) Ltd as RED 4. This position is based on the following considerations:

• That the electricity departments of six municipalities have already been merged into one utility, namely City Power
• That City Power has the leadership competencies to manage a RED
• That City Power is deploying the systems and processes to manage a customer base of a RED
• That City Power is already servicing the greater part of the proposed geographic boundary for RED 4

Quality of supply is a major indicator for measuring the standard of electricity supply to customers. The National Electricity Regulator has set standards for quality of supply and quality of service. Our customers rate the reliability of electricity supply as poor. The current average age of City Power's network is 33 years (expected life of electricity infrastructure is 40 years), indicating that there is a backlog in asset refurbishment that must be addressed. The total current replacement value of City Power's network is R 4 billion and standard asset replacement guidelines suggest R100 million per annum should be spent on refurbishment, to sustain current network.

5.2 Shareholder Imperatives

5.2.1 Meeting The Social Imperatives
The Service Level Agreement provides for a commitment from City Power to fulfil its social responsibility, which the company intends doing. The Company's commitment to fulfil its social responsibility is vested in two goals: "To meet our stakeholder's expectations" and "To provide access to electricity for everyone". The strategic objectives and action plans to attain the above goals are given in section 10 of this plan. In brief City Power will:

• Deliver electricity in such a manner that it is used safely by our customers
• Establishment and grow a black economic empowered supplier capability
• Promote affirmative action
• Promote gender equity
• Increase its interaction with communities and customers
• Increase community education

5.2.2 Meeting Financial Imperatives
The Company's commitment to fulfil its financial responsibility is vested in three goals: "To maximise the utilisation of assets", "To be the most profitable electricity distribution utility in South Africa", "To sustain and grow our revenue base" and "To meet our stakeholder's expectations". The strategic objectives and action plans to attain the above goals are given in section 10 of this plan. In brief City Power will:

• Reduce its operating costs
• Improve customer account operations
• Improve revenue management practices
• Deploy customer friendly contact centres
• Improve quality of services rendered
• Improve financial processes
• Minimise non-technical losses
• Cultivate a completive culture
• Develop its employees
• Become competitive

5.2.3 Meeting the Economic Imperatives
The Company's commitment to fulfil its economic responsibility is vested in two goals: "To provide electricity for everyone" and "To exceed customer expectations". The strategic objectives and action plans to attain the above goals are given in section 10 of this plan. In brief City Power will:

• Develop an electrification policy and plan
• Develop a long-term capital expenditure plan
• Develop cost reflective tariffs

5.3 The Executive Team

The business has two core business functions being Customer Service and Operations. The support functions, i.e. robust specialist service providers to the core business functions, are Finance, Corporate Services and Commercial Operational (technical) and Customer Service competencies are well represented within the executive team. The team is well balanced between people with utilities experience and commercial experience and reflects the diversity of the country's population.

The high-level organogram of the Company is shown below:

5.4 Key Statistics

The following key statistics relates to City Power:

5.5 Income

The projected income for City Power over the planning period is given below and is based on a 2% per annum sales increase, a 5.5% per annum increase in tariffs and a reduction of non-technical losses.

5.6 Dividends Payable

The expected dividends payable to our shareholder is given below and meets the targets set by the Shareholder.

5.7 Capital Expenditure

The capital expenditure for City Power over the planning period is given in below:

Capital expenditure decreases in real terms over the six-year forecast term. The capital forecast as alluded, to is a reflection of the capital requirements for the short to medium term as to ensure continuing and improved service delivery standards.

5.8 Relationships

The successes of City Power will to a large extend depend on the Company governance structure and the relation it maintains within this structure. A Contract Management Unit has been established to regulate the activities of the Company. The finalisation of agreements and the establishment of good working relationships with the Contract Management Unit will remain a priority.