A New Growth Path - EEC

A New Growth

Path

Annual Report 13/14

SWAZILAND ELECTRICITY COMPANY

Eluvatsini House, Mhlambanyatsi Road, MbabaneP.O. Box 258, Mbabane, Swaziland

Tel: +268 2409 4000, Fax: +268 2404 2335Website: www.sec.co.sz, E-mail: [email protected]

OVERVIEWVision and Mission 01The Ministry in Charge of SEC 02History 03From Power Station to Customer 04Introduction 05Highlights 08Facts and Figures 10Key Statistics 11Technical Performance 12

GOVERNANCEGovernance Structure 13Board of Directors 14Executive Management 16

BUSINESS REVIEWChairman’s Review 18Managing Director’s Report 20Directors’ Report 24Operational Report 27Sustainability Report 35Human Capital Report 37Health and Safety Report 41Rural Electrification 42

FINANCIAL STATEMENTS 44

Swaziland Electricity Company Annual Report 2013/14

CONTENTS

Designed by Sibane Icons & Printed by PrintPak

1

VISION To be a major player in

Energy Sector development,

nationally and regionally.

MISSION To meet the needs of our

customers in a sufficiently

profitable and environmentally

sound way through providing

reliable and safe power supply

of acceptable quality.

CORE VALUES Service Excellence

Honesty and Integrity

Respect Social Responsibility

Overview Governance Business Review Financial Statements


2

The Ministry in Charge of SEC

The Minister of Natural Resources and Energy Senator Jabulile Mashwama

Ministry of Natural Resources and Energy Principal Secretary Mr. Stephen Motsa

History of SEC

3

Their Majesties after officially opening Khanyisa House in Manzini SEC’s 50th Anniversary in April 2013

1920s - 1950sThe first electric bulb to light up the night in Swaziland was installed at Mlilwane with a 52.5 kVA hydro-turbine by James Weighton Reilly. Reilly later installed this plant on the Mbabane River, below where the Swazi Inn was later built, to supply Mbabane with light. He subsequently sold it to Mercer Cox, who then sold it to the Swaziland Government. Mickey Reilly also brought electricity to Bremersdorp (present-day Manzini), where he created a roaring trade selling single light points to the town, and in particular to the families Howe and Stewart whose rivalry caused them to compete with each other. This escalated not only the price of electricity, but also the number of light points sold!

8 June 1955 - The process began for the Government of Swaziland to buy the Bremersdorp Electricity Supply from the Swaziland Power Company for E50,000.

1963 - The Swaziland Electricity Board was officially launched and work com-menced on the construction of Edwaleni Hydro- Electric Power Station.

19 September 1964 - The Edwaleni Hydro-Electric Power Station was inaugurated by Mr. H. F Oppenheimer in the presence of His Majesty King Sobhuza II.

1975 - Hhelehhele 132/66kV Substation was constructed.

1980 - Work commenced on the construction of the Luphohlo Power Station.

1985 - Luphohlo Power Station was commissioned bringing the total instaled internal generation to 51MW.

1987 - Eskom III Incomer was constructed from Normandie to Kalanga.

1989 - Nhlangano II and Kalanga 132/66kV Substations were constructed. This was a great relief to the Eskom I and II 132kV Incomers which were now operating at full capacity.

1989 - Mhlosheni and Hluti 33/11kV Substations were constructed.

May 1992 - SEB signed a performance contract with the Swaziland Government.

1998 - Work commenced on the construction of Maguga Dam.

2000 - Motraco 400kV joint venture as well as the Edwaleni II 400/132kV 500MVA (2by 250MVA) Substation was commissioned. This project, combined with the commissioning of a number of other 132/66kV substations, brought a marked improvement to the quality of supply. Hhelehhele and Stonehenge Substations were brown field projects whilst Mkhinkomo II was a green field development.

2001 - Construction of the Maguga Dam was completed.

2001 - Maguga Dam won the South African Institution of Civil Engineering Award for most outstanding civil engine-ering achievement in the International Category for 2001.

2002 - Maguga Dam was commissioned.

2001- 2010 - A number of green fields as well as new 66/11kV substations were constructed resulting in improved capacity in these substations. These sub-stations included Big Bend, Bhalekane, Sihhoye, Kent Rock, Pine Valley, Lobamba, and Manzini North Substations.

December 2007 - The Swaziland Electricity Board changed its

name and became the Swaziland Electricity Company.

13 May 2011 - The Maguga Hydro-Electric Power Station was

inaugurated by His Majesty King Mswati III.

2013 - SEC turned 50 years old. Celebrations of the Golden

Jubilee began on the 5th of April 2013 with a mass gathering

blessed by His Majesty King Mswati III. In marking the passage

of the past 50 years since establishment SEC celebrated a

number of key achievements including 70% national coverage.



4

From Power Station to Customer

POWER GENERATION

Output:Total electricity generated – 239.8 GWhTotal electricity sold – 939.3 GWhThe balance of electricity is imported into the country.

CUSTOMERS

Our customer base consists of industrial, agricultural, commercial and domestic.Industrial – 352.5 GWhAgricultural – 241.2 GWhCommercial – 102.8 GWhDomestic – 338.2 GWh

Edwaleni Power Station

TRANSMISSION HIGH VOLTAGE LINES

TRANSMISSION SUBSTATIONS

TRANSFORMERS

Alternating Current (AC ) - 400kVAlternating Current (AC ) - 132kVAlternating Current (AC ) - 66kV

Substation high-voltage lines: 400/132, 132/66, 132/11, 66/11Distribution: 11kV

The voltage levels of electricity are stepped down to meet distribution requirements.(11kV stepped down to 400V)

An SEC customer’s house (domestic) Summerfield Botanical Gardens in Matsapha (commercial)

Introduction

5

The Swaziland Electricity Company (SEC) launched itself onto a path towards an Integrated Annual Report (IAR) when compiling the 2012/13 financial

results. This makes this report our second instalment on this venture towards presenting an IAR to our stakeholders; the shareholder, customers, employees, business partners and the general public. This is an important move which speaks to the long lived ethos of our Company to be a model corporate citizen of our beloved country. It is worth noting that SEC has at all times strived to be transparent and adhere to high standards of corporate governance. The venture towards an IAR followed the emergence of global standards for such a report.

The initiative is pertinent in reconfirming our vision and mission, but most importantly in aligning SEC with its peers around the globe. Throughout the world, corporate citizens are upgrading from the traditional annual reporting towards the integrated annual report approach. This is in recognition of increased demands by the public for corporate transparency, accountability, responsibility and most importantly sustainability. We, at SEC, believe that these demands are fair given the amount of power borrowed to corporations by the man in the street. The old adage holds true in this case: With great power comes great responsibility.

While our approach in compiling this IAR is guided by global standards, we seek to apply the universal principles in a manner that makes sense to our local environment. The most important driver in our case is to make our annual report accessible to all our stakeholders. We believe that we have managed to do this without dumbing down or compromising the legal requirements of this report. We were extremely careful to produce a report that can be understood by an average customer, but still pass as a serious enough document for high powered stakeholders like funders and most importantly our shareholder, the Government of Swaziland, and the Regulator.

In truth this initiative, while a leap into the future, is tied to a commitment we made to the country six years ago when we transformed from the Swaziland Electricity Board (SEB) to become a Company governed under the Swaziland Companies Act (subsequently updated in 2009). With this transformation we made a pledge to become a public organisation which is financially independent. With this independence came greater responsibilities and thus a need for oversight, which has been magnificently carried out by the Swaziland Energy Regulatory Authority (SERA),

the Swaziland Standards Authority (SWASA) and other public accountability bodies in the Kingdom.

The Government of Swaziland must be given credit for propelling the Company into this environment six years ago. The recreation of SEB into SEC was critical in enabling an entity that can be financially independent while remaining fully accountable to the people of Swaziland. It was a pivotal move which would see us face the vagaries of the market while freeing the national fiscus for other pressing needs. While we believe this balance of financial independence and public accountability to be true for all other commercial operations in our Kingdom, it is most pertinent where the supplier of a critical commodity such as electricity is concerned. Electricity is the lifeblood of any economy, hence its provision must speak to the national socio-economic development goals. We are more than happy to be held accountable on this front.

It is precisely the latter logic which has propelled us into the IAR. We recognise our critical position within the Kingdom and are, therefore, opening ourselves to be scrutinised, judged, if needs be, by all who will and in accordance with our mandate to become a sustainable commercial entity. It is important to stress that we employ the concept of commercial sustainability in its honest form and as described by a global standard. This is a standard which wants to ensure that commercial success is achieved without doing harm to the needs of the present and future generations.

We have designed the IAR to begin a process of empowering all our stakeholders to become active guardians, critics if you like, of this national asset. We are on course to achieve this by beginning a process that will in maturity deliver all material information about the operation without fear, favour or prejudice. As such, the most critical feature of this report is infusion of a method, which defines the essence of the business, its positioning as defined by opportunities, risks and the risk management thereof. It is in this formula of opportunities, risks, and management of risk that we carve a sustainable strategic direction. It is in this formula that you, dear stakeholder, can judge us optimally by pointing out holes, if any, in our risk management and/or gaps in the very definition of our risks and broader material issues. You can then see this as a beginning of a meaningful conversation, which will feed into measurable annual outcomes to be packaged inside the IARs that will flow progressively from here and into the future.



6

Introduction

METHOD This report was produced with the general guidance of emerging global standards. It is important to note that the concept of an IAR is still at its formative stages across the globe. Discussions are set to continue into the future to shape an ideal IAR.

As such we are amongst many respectable corporations across the globe to make the first step into an IAR. Through the efforts of our board, executives, a host of other professional employees and outside consultants we have captured a snapshot of what can be considered best practice at present. This was an attempt to freeze continuing discussions from various platforms and synthesise them into a best practice. Perhaps the most prominent of discussions originate from the International Integrated Report Council, the Integrated Reporting Committee of South Africa and the King III Code on Corporate Governance. We acknowledge from the many discussion papers and practice notes, the emergence of a method to materiality of issues that should go into an IAR, not as seen by us only but in consultation with our broader stakeholders.

Whereas the traditional annual report emphasised on the financial numbers, the IAR seeks to bring up to par all material issues, includ-ing the environmental and social aspects.

That is not to say these issues were entirely neglected in our previous reports, but to point out that they were not given the same treatment as financial issues in terms of

measurability of our claims. We are embarking on a journey that will deliver a sound triple bottom line accounting. This should train us to treat the three pillars, namely; financial, social and environmental issues in an integrated form on a daily basis to a stage where we do not need to take an effort to do an IAR, but merely report what we have been practicing throughout a particular year.

We are not at a stage where we can say all the material issues in this report have been audited and are measurable. Of course, some significant aspects have been audited like the financial statements. We have started processes of measuring other key indicators as you will see later in the report. With this first step it does mean that more and more information we dish out in our future IARs will be measurable and audited.

Our 2013/14 IAR is, therefore, a mix of quantitative and qualitative material issues designed to produce a comprehensive assessment of our operational context. And we have tried to bring in as much as possible views captured from our key stakeholders into this report through formal and informal engagements and intelligence gathering methods. The fact that this report was championed by a third party should give you some comfort about the objectivity of capturing material issues reflected by our stakeholders. This report is packed with what we consider material issues emerging from our operating environment. These are seamlessly spread across the report, which was the raison d’être of doing an IAR. For navigability we present them here in brief first by clearly spelling out the nature of the business, identifying key stakeholders and attendant statutory and general expectations. Secondly, we list the key material issues flowing out of stakeholder expectation.

We are embarking on a journey that will deliver a sound triple bottom line accounting. This should train us to treat the three pillars, namely; financial, social and environmental issues in an integrated form on a daily basis to a stage where we do not need to take an effort to do an IAR, but merely report what we have been practicing throughout a particular year.

Continued

7

NATURE OF BUSINESS

The Swaziland Electricity Company (SEC) is engaged in the business of generation, transmission and distribution of electricity in the country. Customers include agricultural, industrial, commercial and residential households.

SEC is governed by the four enabling legislations namely; The Electricity Company Act, 2007, The Energy Regulatory Act, 2007, The Electricity Act, 2007 as well as the Public Enterprises Unit (Control and Monitoring) Act, 1989.

KEY STAKEHOLDERS Shareholder:

The Company is wholly-owned by the Government of Swaziland, which is primarily represented by the Ministry of Natural Resources and Energy. There is regular and

formal interaction between SEC and the Ministry to discuss strategic issues.

Employees: At year end, March 31 2014, SEC had in its books 643 employees. The SEC employee body is highly unionised, with 86% subscribed to formal bargaining representation. Trade union, the Swaziland Electricity Supply Maintenance and Allied Workers Union (SESMAWU) has 511 members, representing 89% penetration within non-managerial employees. The National Electricity Supply Maintenance and Allied Staff Association (NESMASA) has 36 members, which represents 78% penetration within the junior to mid management rank.

Customers: In the year under review, SEC customer base increased by 11.3%, from to 121,090 the previous year to 134,765. The domestic sector accounts for 91% total number of customers. In revenue terms 12.1% comes from the commercial sector, 25.4% is from the domestic sector and 62.5% is from the industrial and irrigation sectors.

Business Partners: In generating close to 30% of electricity consumed in Swaziland, SEC maintains business partnerships that make up the balance. These include Eskom of South Africa and Electricidade de Mozambique (EdM) of Mozambique, who together contribute a bulk of electricity imported by SEC to the country.

SEC holds a 33% equity accounted stake in Motraco, a joint venture with a mandate of supplying energy to Mozal Aluminium Smelters in Mozambique and the wheeling of electrical energy from Eskom to SEC and EdM.

SEC runs with a number of other business partners, contracted suppliers who range from small to medium sized enterprises and major corporations who are used in various roles including construction and maintenance. They are all bound by a strict SEC code.

THE PUBLIC

SEC is a public company, accountable to Their Majesties and the people of Swaziland. This is given life through a slew of clearly defined laws (primaries mentioned above), codes and moral obligations. SEC operations are largely supported by over 85 sub-contractors who in turn provide employment to more than 800 people.

Health and Safety

Labour

Profitability

Market Conditions

Operational Quality

Legal Compliance

Environment

Page 7, 19, 23, 41–42

Page 19, 23, 37–40

Page 8 – 12, 18–23, 24–25, 36

Page 18–23, 36

Page 20–23, 28-34

Page 5–7, 24–26, 35, 41–43

Page 5–7, 19, 23, 25, 41–43



8

Highlights - Key Indicators

350

300

250

200

150

100

50

0

GW

h 21.0%

24.3%

29.5%

25.7%

22.1%

26.0%

2008/9 2009/10 2010/11 2011/12 2012/13 2013/14

35%

30%

25%

20%

15%

10%

5%

0%

Cont

ribu

tion

to S

yste

m %

Internal Generation (GWh) & Contribution System (%)

The annual rainfall for the year under review was average resulting in good internal generation as depicted in figure 2. Internal production greatly improved during the first six months of this financial year when compared to the previous year. Maguga Power Station continues to contribute a lion’s share in terms of power station generation (34.8%) followed by Edwaleni Power Station (30.7%) as indicated in figure 3. Figure 3 shows the make-up of the internal production per power station over the past three years.

Figure 1

Figure 2

Figure 3

40

35

30

25

20

15

10

5

0

GW

h

MayJu

nJu

lAug

SepOct

NovDec

Jan

FebMar

2012/13 & 2013/14 Monthly Production Profile

2013/142012/13

Apr

EzulwiniMaguga Edwaleni Maguduza

120

100

80

60

40

20

0

2011/12 2012/13 2013/14

Annual Generation Per Station 2012/13/14

GW

h

GWh

Highlights - Key Indicators

9


2013/14 Station Contribution to Internal Generation, (GWh), %)

Maguga

Ezulwini

Edwaleni

Maguduza

36.9, 12.2%

93.0, 31.0%

67.3, 22.2%

105.4, 34.8%

12,0

10,0

8,0

6,0

4,0

2,0

0

m3/

s

Monthly Average Flows into Luphohlo Dam, m3/s

MayApr

Jun

Jul

AugSep

OctNov

DecJa

nFeb

Mar

2013/14 2012/13 2011/12

Annual Unit Sales 977.1 981.9 1016.3 976.8 955.0 939,3 1 034,62008 2009 2010 2011 2012 2013 2014

Annual Unit Sales (GWh)

1 060,0

1 040,0

1 020,0

1000,0

980,0

960,0

940,0

920,0

900,0

880,0

Total Customers 70 517 79 055 88 182 99 631 109 681 121 090 134 765

2008 2009 2010 2011 2012 2013 2014

Total Customers

160 000

140 000

120 000

100 000

80 000

60 000

40 000

20 000

0

Annual Revenue (E-Million) 485,8 56,05 799,5 973,4 1 033,3 1 088,4 1 169,0

2008 2009 2010 2011 2012 2013 2014

Annual Revenue (E-Million)

1 400,0

1 200,0

1 000,0

800,0

600,0

400,0

200,0

0

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

Average Increase (Import)Approved Increase

28.0%6.4%21.3%4.3%

30.0%19.0%

25.3%16.0%

27.3% 15.3% 10.0%8.0% 8.3% 5.0%

2008 2009 2010 2011 2012 2013 2014

Applied Tariff Price Increases vs Average Market Price Increase

% In

crea

se

Figure 4

Figure 6

Figure8

Figure 5

Figure 7

Figure 9


10

Facts and Figures Year ended 31 March 2014

2014 2013 2012 2011 2010 INCOME STATEMENT

Energy Sales (GWh) 1034.6 939.3 955.1 976.8 1 018.6Revenue (E’000) 1 264 528 1 088 385 1 033 165 973 444 799 482 Other Income (excluding grant armotisation) (E’000) 18 000 13 458 10 444 16 061 9 200 1 282 528 1 101 843 1 043 609 989 505 808 682 Operating Expenses 1 087 938 915 044 816 102 682 088 613 730 Depreciation 104 458 95 192 75 304 60 091 47 073 Armotisation of Grants (10 456) (8 700) (7 303) (5 119) (6 775) Net Finance Cost/(Income) 22 921 17 377 11 666 11 869 (27 205) Other Losses 23 845 46 447 67 912 21 316 - Share of (Profit)/Loss in Joint Venture (27 318) (26 086) (34 767) (20 417) (18 330) Taxation 2 570 (6 478) 33 808 51 674 43 610 Total Costs 1 203 958 1 032 796 962 722 801 502 652 103 Profit 78 570 69 047 80 887 188 003 156 579 BALANCE SHEET Fixed Assets (Net) 1 525 748 1 331 479 1 174 927 1 028 328 882 574 Capital Work in Progress 54 654 100 929 74 295 60 804 38 571 Investment in Joint Venture 261 888 223 120 176 872 137 737 141 262 Derivative Financial Instruments 59 018 45 616 34 095 26 238 33 949 Investment in Sinking Fund 30 000 - - - -Other Assets 23 064 25 712 43 801 45 683 26 238 Retirement Benefits Assets 796 - 4 804 3 612 1 887 USL Electricity Prepayment 110 000 120 000 140 000 40 000 - Embedded Derivative Asset 2 538 - 8 868 5 988 - Current Assets 328 041 311 509 317 853 487 982 367 882 Total Assets 2 395 747 2 158 365 1 975 515 1 836 372 1 492 363 Current Liabilities (297 692) (272 555) (233 653) (254 641) (220 263) 2 098 055 1 885 810 1 741 862 1 581 731 1 272 100 Funds Employed: Long-term Loans 352 119 270 884 271 967 284 539 227 949 Embedded Derivative Liability 122 230 119 677 93 159 20 958 12 215 Deferred Income 192 687 163 475 121 977 109 788 105 978 Other Deferred Income 23 064 25 712 43 801 45 682 26 238 Unrealised Foreign Currency Hedging Losses 3 310 6 086 5 669 4 549 4 852 Employee Retirement Liability - 8 639 - - - Deferred Tax Liability 156 169 147 165 148 843 145 655 113 400 Shareholder’s Funds 1 248 476 1 144 172 1 056 446 970 550 781 468 2 098 055 1 885 810 1 741 862 1 581 721 1 272 100

11

Key Statistics


2014 2013 2012 2011 2 0 1 0

1 Revenue (E’000) 1 264 528 1 088 385 1 033 165 973 444 799 482

2 Debtors’ Collection Period (Days) 47 53 68 74 70

3 Taxation (E’000) 2 570 (6 478) 33 808 51 673 43 610

4 Capital Expenditure (E’000) 252 452 278 378 235 394 228 080 152 156

5 Imported Power (GWh) 860.0 821.9 813.44 805.50 909.40

6 Local Generation (GWh) 302.3 239.8 272.3 333.4 288.1

7 Average Price per Unit Sold (c/kW) 113.6 115.8 103.6 92.4 74.9

8 Number of Domestic Customers (000) 122.3 109.7 99.4 88.5 77.6

9 Number of Non-Domestic Customers (000) 12.5 11.4 10.2 11.1 10.7

10 System Maximum Demand (MW) 221.2 213.74 203.00 200.77 204.48

11 Units Sold - Total (GWh) 1 034.6 939.3 955.1 976.8 1 018.6

- Industrial (GWh) 352.5 318.8 338.0 360.2 389.6

- Agricultural (GWh) 241.2 218.1 231.3 211.1 218.3

- Commercial (GWh) 102.8 93.0 71.2 100.9 102.7

- Domestic (GWh) 338.2 309.4 314.6 304.6 308.0

12 Installed Capacity:

- Ezulwini Hydro Power Station (MW) 20.0 20.0 20.0 20.0 20.0

- Edwaleni Hydro Power Station (MW) 15.0 15.0 15.0 15.0 15.0

- Edwaleni Diesel Power Station (MW) 9.5 9.5 9.5 9.5 9.5

- Maguduza Hydro Power Station (MW) 5.6 5.6 5.6 5.6 5.6

- Maguga Power Station 19.5 19.5 19.5 19.5 19.5

13 Transmission Lines

- 132 kV (km) 296 296 296 296 296

- 66 kV (km) 930 930 914 869 869

14 Distribution Lines

- 11kV (km) 9 254 9 093 8 726 8 367 8 011

15 Employees (No) 652 656 587 624 620

16 Manning Levels (No) 643 640 539 571 587

17 Casual/Temporary 9 16 48 53 33

18 Fixed Assets : Turnover (Times) 0.80 0.83 0.89 0.97 0.88

19 Total Assets : Turnover (Times) 0.53 0.51 0.53 0.59 0.54

20 Return on Total Assets (%) 3 3 4 9 7


12

Technical Performance

2014 2013 2012 2011 2010

1 System Requirements (GWh) Sent Out 1 205.2 1 108.6 1 129.8 1 138.1 1 186.3 2 Units Sold (GWh) 1 034.6 939.3 955.1 976.8 1 018.6 3 System Losses (%) 14.2 15.2 15.5 14.2 14.9 4 SEC Internal Generation (GWh) 302.3 239.8 279.8 333.4 288.1 5 SEC Internal Generation (%) 25 24 24 29 24 6 System Maximum Demand (MW) 221.2 213.7 203.0 200.8 204.5

Ratios and Statistics 1 Net Income to Revenue (%) 6.2 6.6 7.8 20.8 19.3 2 Operating Income to Revenue 6.1 5.3 14.7 25.40 19.2 3 Return on Equity 6.3 6.3 7.7 19.4 20.0 4 Return on Capital Employed 3.6 3.9 4.6 11.1 10.5

5 Return on Operating Assets 3.3 3.3 4.1 12.3 12.0

Debt Management Ratios 1 Debt/Equity 0.3 0.3 0.3 0.3 0.3 2 Annual Debt Service (Times) 12.3 10.3 9.3 11.0 7.0

Liquidity Ratios 1 Current Ratio 1.1 1.1 1.4 1.9 1.7 2 Acid Test Ratio 0.9 0.9 1.1 1.6 1.3

Training 1 Training Expenditure (E’000) 8 954 7 967 3 742 3 619 3 675

Other 1 Consumer Price Index (%) 5.1 8.7 8.8 5.5 4.9 2 SEC Tariff Increase (%) 5.0 8.3 8.0 16.0 28.2

Governance Structure

13Executive Management

The Honourable Minister of Natural Resources and Energy

Senator Jabulile Mashwama


The SEC Board of Directors


14

Board of Directors

1. MR. QHAWE MAVUSO (Chairman) Masters Degree in Education - Bridgewater State College,

Massachusetts, USA

BA Degree - University of Botswana, Lesotho & Swaziland

3. PRINCE MANZOLWANDLE DLAMINI

(Non–Executive Director) Bachelor of Arts - Indiana University

Associate Degree - Johannesburg

Technical College

5. CHIEF MGEBISENI DLAMINI (Non–Executive Director) Grade 3 Electrical Technician -

Swaziland College of Technology

Certificate in Marketing and

Communications – CYTEC

2. MR. SENGIPHILE SIMELANE (Managing Director) Master of Science in Electrical Engineering -

University of Cape Town Bachelor of Science in Electrical

Engineering - University of Cape Town Executive Development Programme (INSEAD) Pr. Eng - Engineering Council of South Africa (ECSA) Member of the South African Institute of Electrical

Engineers (SAIEE)

9. MRS. MARIA DLAMINI (Non–Executive Director) BSc in Social Work - Iona College,

New York

Diploma in Personnel Management -

Swaziland Business Academy

6. MS. HLOBSILE NDZIMANDZE (Non–Executive Director) BA (Law)

Bachelor of Law (LLB) -

University of Swaziland (UNISWA)

Legislative Drafting - Ghana Law School

15

7. MRS. SIBONGILE KHUMALO (Non-Executive Director) Diploma in Business Studies -

Pitman Examination Institute

Certificate in Banking -

Institute of Bankers

10. MR. VELAPHI DLAMINI (Head of Legal Services) BA Law - UNISWA

LLB - UNISWA

Certificate in Conflict Management

Certificate in Legislative Drafting

Admitted Attorney

5. MRS. NCAMSILE MBULI (Non–Executive Director) Bachelor of Social Science Degree -

University of Cape Town

Diploma in Accounting and Business

Studies - University of Swaziland

8. MR. HENRY SHONGWE (Non–Executive Director) MSc Mechanical Engineering -

United Kingdom

BSc Honours in Energy Studies -

United Kingdom



16

Executive Management

Master of Science in Electrical Engineering – University of Cape Town

Bachelor of Science in Electrical Engineering – University of Cape Town

Executive Development Programme (INSEAD)

Pr. Eng – Engineering Council of South Africa (ECSA)

Member of the South African Institute of Electrical Engineers (SAIEE)

ResponsibilitiesCorporate Strategy & Vision Capital Allocation Team Building

B. Eng (Electrical and Electronics Engineering) – UK Electricity Distribution Management (Sweden) Executive Development Programme – (Stanford) Member of the South African Institution of Electrical Engineers (SAIEE)

Responsibilities System Performance Evaluation & Review Organisational Performance Review Co-ordination of New Projects Conducting and Monitoring Research Impementing Strategy

BA Social Science – UNISWA Diploma in Human Resource Management Bachelor of Administration in Human Resource

Management (Honours Degree) – UKZN

ResponsibilitiesCorporate Communications Legal Services Facilities ManagementHuman Capital Management & Development Employee Relations

BA (Honours) – Accounting and Finance – UK Master of Business Administration – UK Certified Chartered Accountant (FCCA) – UK Registered Accountant (SD)

ResponsibilitiesSurvey & Drawing Environment & Safety Outsourced Services Rural ElectrificationTransport Strategy Co-ordination & Revenue Diversification

MR. SENGIPHILE SIMELANE Managing Director

MR. MESHACK KUNENE Head: Research and Development

MR. MAX MKHONTA General Manager Corporate Services

MR. PATRICK MATHUNJWA Support Services Manager

B.Sc. + Concurrent Diploma in Education (CDE) – UNISWA

B.Sc. Eng. Electrical – Wits University

M. Eng. Engineering Management – University of Pretoria

Supervisory Development Programme (SDP) – Maccauvlei, SA

Middle Management Development Programme (MMDP) – University of Johannesburg

Certified Internal Auditor ISO 9001- ISO 14000

ResponsibilitiesGeneration Transmission Distribution System Operation Projects

Bachelor of Commerce in Accounting – UNISWA Registered Accountant (SD) Member of the Institute of Directors Southern Africa

ResponsibilitiesFinance Information Technology Procurement

B.Comm Accounting – UNISWA Fellow Association of Chartered Certified Accountants (FCCA) Chartered Accountant Swaziland – CA (SD) Fellow Certified Internal Auditor (FCIA) Master of Business Administration- University of Pretoria (GIBS)

ResponsibilitiesEvaluation of controls in governance and risk management processes to ensure:Achievement of strategic objectives Integrity of financial and operational informationOperational efficiency Safeguard of assets Compliance with laws and regulations

Bachelor of Commerce in Marketing – UNISWA Master of Business Administration – UNISA Chartered Marketer (SA)

ResponsibilitiesCustomer Service Key Accounts Marketing & Commercial ServicesRevenue Protection & Billing

17

MR. ERNEST MKHONTAGeneral Manager Operations

MR. RANSFORD QUAYNOR Acting GM Finance

MS. ELIZABETH Z. MABUZA Head of Audit

MR. SAM MZILENI Acting GM Customer Service



18

The world economy is yet to stage a convincing recovery from the economic stagnation experienced over the past seven years. The global markets remain highly volatile, which has kept investors highly

cautious and largely at bay from our shores. After suffering massive losses of major clients over the past few years, SEC is yet to see a convincing return that will plug this gap and grow our customer base. This is reflected in one of the company’s critical indicators; unit sales; which has almost stagnated since 2010.

There are signs of a turnaround here and there and in particular from the world’s largest economy, the United States. However, the other major trading partners to the Kingdom of Swaziland, in the European Union, still reflect mixed fortunes. That means two of the world’s most powerful economic blocs, which are the most important sources of trade for the Kingdom, are yet to be out of the woods.

Increasingly the world is also looking Eastwards for direction of economic fortunes and so is our country. While the new Asian economic giants have provided remarkable economic activity over the past few years, the integration of the global economy means that they cannot remain immune when their customers in the West are suffering. That is also the position of Swaziland.

Most recently, we have seen the signs of rising economic stress in our region. Having said that; it is worth noting that the economy

of Swaziland registered considerable growth in 2013/14 and the national fiscus has improved significantly. Sustained; this advancement will eventually yield results that will benefit SEC. We recognise the hard work by Their Majesties and the Administration that has gone into full steam to turn around the country’s economic fortunes. Hopefully, this should improve confidence on our economy and facilitate meaningful private sector investment.

Chairman’s Statement

The 2013/14 performance is courageous when judged against the persistence of harsh market conditions. A word of thanks is due to all the people and stakeholders who have contributed to not only keeping the lights on, but ensuring that SEC does so in a profitable manner.

We very well understand our pivotal role in Their Majesties’ Vision 2022. We provide electrical power not for its sake, but to stimulate economic

development.

Investing for Prosperity

19

However, SEC, being one of the largest corporations in the country, is not standing on the sidelines for private sector investment growth as if waiting for manna from heaven. We very well understand our pivotal role in Their Majesties’ Vision 2022. We provide electrical power not for its sake, but to stimulate economic development.

SEC has been hard at work over the past few years rejigging the operational structure to better navigate the economic storm and to ensure that the Company is positioned to lead economic development. In-house focused work designed to improve operational efficiencies is largely complete and the Company is ready for a new phase in its strategic repositioning. The work that has gone into reorganising our operations to be better efficient is clearly reflected in the 2013/14 financial numbers. Revenue for the period increased by 13.2% to E1.16 billion, which is partly due to the 5% tariff growth granted during the year. But then the Company’s cost of sales were significantly up (16.5%), which squeezed our gross profit margins. The Company was able to record after tax profit growth to E78.5 million up from E69 million partly due to improved efficiencies. The new phase comes with a vision of freeing up SEC from its historical challenge of depending on foreign suppliers for the significant majority of power it distributes in Swaziland. In consultation with the relevant authorities, SEC is interrogating the possibilities of increasing internally generated power.

There are a number of alternatives being interrogated to augment the current internal generation base. These include thermal power, gas and various renewable energy technologies. SEC is interrogating the renewable energy space with vigour. This is because the space brings

exciting possibilities and mainly an opportunity to expand the national electricity grid without inflicting damage to the environment and is proving to be more bankable. Advancement of technology in the renewable space, like solar power, has come with interesting business models. We have closely studied different business models across the globe, including the independent power producer arrangement. The model is interesting in delivering power to the national grid without placing much pressure on national utilities’ balance sheet. Together with the relevant authorities we will interrogate these models further and develop the best suitable arrangement for the local environment. Sustainability will be our primary guide.

Speaking of sustainability, SEC remains a sustainable concern amidst a tough trading environment. The Company’s situation has not been made easy by tariff increases that are set below the rate of growth in operational costs. Last year’s tariff increase of 5% did not help the situation. While the rationale of shielding the economy against wild inflationary pressures is understandable, we have to insist that tariff increases be cost reflective and accommodate the urgent need to expand internal generation. The costs of not doing so will be devastatingly expensive in the future.

Let me once more express gratitude to all our stakeholders, customers, employees and Their Majesties for the support they have given the Company in these difficult times. I have no doubt that we shall prevail.

MR. QHAWE MAVUSOCHAIRMAN


His Majesty King Mswati III flanked by SEC Board Chairman Qhawe Mavuso, MD Sengiphile Simelane and Taiwanese Ambassador Peter Tsai. This was during the official opening of Khanyisa House and Substations sponsored by the Taiwanese Government


20

Powering Efficiencies

We are reaping the fruits of the strategy developed and adopted in the previous financial year. We can safely say that SEC is now positioned as a leaner

and meaner machine. We will continue to wipe out inefficiency and wasteful spending until there are no more.

However, we have to caution that a corporation, even of the size of SEC, can only do so much towards efficiency gains. A cut too deep into the bone will achieve the opposite. We must be careful not to incapacitate the institution. For this reason, we have now shifted our focus more towards outward factors in an attempt to harness the market. We need to broaden and deepen our revenue base. As we drill deeper into this ambition, we are finding exciting possibilities. Make no mistake, the storm is not over. It is just that we have become more adept in navigating it.

Managing Director’s Report

The 2013/14 financial year was a period of mixed fortunes for the Swaziland Electricity Company (SEC). The trading conditions remained extremely challenging. However; we managed not only to remain profitable, but recorded some growth. This must be taken as our resolve to do everything within our powers to secure a sustainable business path. With full appreciation of the role and position of SEC within the Kingdom, we stand ready to play our part in powering economic recovery. In all we do, we have at the back of our minds His Majesty’s Vision 2022. Bayethe!

Together with all the relevant stakeholders we are in the process of overhauling

the country’s energy base. We have in mind a plan to migrate Swaziland into a

sustainable energy mix.

A New Growth Path

21

Trading Conditions

While there are signs of improvement in the economy of Swaziland, we are yet to see stabilisation in the deterioration of our customer base. Over the past three years, the Company had two of its major customers scaling down consumption from the national grid and opted for co-generation while another one shut down its manufacturing unit. This explains the decline in unit sales.

Actual energy sold during the year was 1 035 GWh up from 940 GWh, which resulted in an increase in energy sales of 10.1%. Our unit sales have in effect been stagnant over the past five years, which is an extremely worrying trend.

Amidst a squeeze on our sales volumes, we have seen a significant rise in costs of sales. During the financial year under review our costs of sales rose by about 16.5% to E800 million from E687 million. This is largely as a result of tariff increases from imports. As you will know, a significant majority (about 75%) of electricity units that run through our network is imported from neighbouring countries’ utilities; Eskom in South Africa and EdM in Mozambique. SEC’s total imports amounted to 822GWh at the cost of E621 million, which was up from E523 million in the previous financial year. Wheeling charges increased from E21 million to E27 million. Our electricity sales turnover for the period

under review improved by 13.2% to E1.16 billion compared to the previous year’s figure of E1.03 billion.

The 13.2% increase in revenue is explained by unplanned increase in electricity supply to one of the sugar mills. We have on previous occasions pointed out that this level of tariff increase, which is far lower than the rate of increases in our cost base, leaves us in a difficult situation. Our revenue growth has not been cost reflective for a while. We have since had fruitful discussions with the Swaziland Energy Regulatory Authority, which we hope will have positive outcomes for the future.

In light of these challenges, coupled with stagnant economic conditions, we applied strategic realignment on the business in order to improve efficiencies. We ended the year with an operating profit of E76.7 million, up from E58.5million achieved the previous year. Our net finance costs increased from E17.4 to about E22.9 million. This was mainly a function of further borrowing to undertake infrastructure maintenance and development projects. We concluded the year with an after tax profit figure of E78.5 million up from E69 million, which takes into account an injection of R27.3 million from the foreign joint venture operation.


His Majesty King Mswati III inspecting SEC new Regional Offices, Khanyisa House, in Manzini in April 2013


22

Repositioning SEC for Growth In the financial year under review, we produced an encouraging performance, which we hope to maintain. The challenges we face are huge, but we are determined to work hard to secure a sustainable business path. This is recognising the fact that SEC occupies a special powering role within the economy of Swaziland.

As such we are embarking on a second phase of repositioning the Company. We spent the past year focused mainly on housekeeping operations. The Company is now in a better shape after seeing through a number of critical readjustments.

We have put in place a number of initiatives designed to improve efficiencies. These will include a people-focused intervention. Our labour relations have been greatly improved through honest and fair engagements with our employees and their representatives, organised labour. As a result, we went through the 2013/14 financial year without experiencing industrial action. More work is continuing on this front to ensure that we are always on the same page with employees. We have dealt with the leave liability issue, which has been a historical drag to financial performance.

Managing Director’s Report Continued

The company is also exploring the area of renewable energy. Advancement of renewable energy technology over the past few years means that we can seek succour from natural resources and the sun. We are working towards establishing a solar power pilot project. The ultimate plan is to harness private capital into the independent power producer arrangement.

A new HR performance management system is in place and should propel our employees into higher levels of productivity. During the past year we concluded a critical adjustment around the SEC Staff Pension Fund, being the conversion from a defined benefit to a defined contribution. This is a remarkable development, which protects the Company from arbitrary future liabilities and should enhance bankability.

As we put together an internally-focused readjustment, we have established a Research and Development (R&D) unit. Reporting directly to the MD’s office, this unit fulfils a significant need in the organisation. It enhances SEC’s ability to react to the constantly changing dynamics of the electricity supply industry and market. The establishment of this unit followed the restructuring and streamlining of certain functions within the organisation in order to increase efficiency and enhance productivity. The R&D unit leaves the Operations Division entirely focused on operating and maintaining the power system whereas the new unit will take care of all new developments.

A New Growth Path

We have committed to once more update our strategic plan during the 2014/15 financial year with a focus on harnessing market factors. Such a review comes head-on with SEC’s main Achilles Heel, an insufficient internal power generation capacity. Together with all the relevant stakeholders we are in the process of overhauling the country’s energy base. We have in mind a plan to migrate Swaziland into a sustainable energy mix. The generation mix under review includes thermal power, hydro, solar and natural gas.

The immediate target is to drive up SEC’s internal generation and turnaround its reliance on imports. There are exciting and challenging possibilities on this front. We have previously pointed out that Swaziland has a potential to host thermal power generation, which can significantly turnaround the country’s reliance on imports. Working with all the stakeholders, our R&D unit will advance work on the possibilities of bringing on board a thermal power station.

The Company is also exploring the area of renewable energy. Advancement of renewable energy technology over the past few years means that we can seek succour from natural resources and the sun. We are working towards establishing a solar power pilot project. The ultimate plan is to harness private capital into the independent power producer arrangement.

Thanks To Our Precious CustomersAs we plot to migrate towards a new future, we will ensure not to lose focus on our immediate position, needs and obligations. We remain grateful to our customers and pledge to continuously improve our service. We have invested considerable amounts into customer interface systems, which should greatly improve our customer relations. Highlights include the roll-out of a new Customer Relationship Module, a system which fully integrates all customer data into one central database and thus provides a 360-degree overview. We are also continuing with customer education campaigns, which link to the market demand strategy. We remain convinced that there remains a gap of prudence in electricity consumption patterns. We have made significant gains on this front over the past few years and we will be pushing for more. Such gains do not only come to relieve the national grid, but feed into the agenda of protecting the natural environment. As a corporation we will continue to play our part in fighting back global warming. But in the end, it is behavioural changes at individual level that will win this battle. That is why we have keenly observed and promoted campaigns such as the Earth Hour every year.

Safety and Security

Safety and security in and around our operations remain of paramount importance. SEC continues to be troubled by the spectre of copper cable thefts. This does not only lead to commercial losses, but endangers people’s lives. We will continue to work with the authorities in dealing with this crime. It is with sadness that I have to announce a death in and around our operations during the year. We are working at optimum levels to maintain a cleaner record.

Appreciation

Let me, once more, thank everyone who lent us their support to ensure that we continue providing the essential service of powering the nation. At the top of the list of appreciations rest our staff members whose dedication ensures that we keep the lights on and our customers who support the business. Without the support of the country’s administration, we cannot run this operation as smoothly as we have done for the past 50 years of our existence. We look forward to taking the operation into greater heights.

MR. SENGIPHILE SIMELANE MANAGING DIRECTOR

23



24

1. NATURE OF BUSINESSThe Swaziland Electricity Company is engaged in the business of generation, transmission and distribution of electricity in the country. Customers include agricultural, industrial, commercial and residential households.

The Swaziland Electricity Company is governed by the four enabling legislations namely; The Electricity Company Act, 2007, The Energy Regulatory Act, 2007, The Electricity Act, 2007 as well as the Public Enterprises Unit (Control and Monitoring) Act, 1989.

2. BUSINESS ISSUESOver the past four years, the company has lost three of its major customers. Two opting for self-generation and the other shut down its manufacturing unit. In light of these challenges, coupled with the stagnant economy, the directors have re-structured the business operations to ensure the curtailment of costs and to improve efficiencies.

The company is also pursuing opportunities to increase its generation capacity in order to reduce cost of sales.

During the year ended 31 March 2014 the company entered into a cross-currency swap agreement with First National Bank (FNB) to establish a sinking fund to finance future full and final settlements to the European Investment Bank (EIB) for a loan amount of EUR 9.2 Million and an estimated additional liability of USD 13.7 Million arising from the EIB loan agreement both payable in 10 June 2019. As at 31 March 2014 the company made a E30 million lump sum payment to the sinking fund towards this financing arrangement. REVENUE AND EXPENDITUREElectricity sales turnover for the period under review amounted to E1 169 million representing an increase of 13.2% from the previous year’s figure of E 1 033 million. Actual energy sold during the year was 1 035 GWh (2013: 940 GWh) resulting in a decline in energy sales of 10.11%.

The 13.2 % increase in revenue for the year is as a result of the tariff increase applied during the year of 5% (2013:8.3%). Costs of sales for the year were E800 million (2013:687 million). The increased cost of sales was attributable to tariff increase for imports.

3. TECHNICAL PERFORMANCEInternal generation for the year stood at 302 GWh representing 25% of total units sent out, an increase from the previous year’s figure by 1%. The company’s imports were 860 GWh (822 GWh) and the cost of these imports were E621 million (2013: 523 million).The increased cost of imports was as a result of high tariff. Wheeling charges increased to E27 million (2013: E21 million) due to price escalation.

Total units sent out during the period were 1 205 GWh, units sold were 1 035 GWh resulting in system losses of 14.2% (2013: 15.2%). Management continues to focus on reducing system losses.

4. CAPITAL EXPENDITURECapital projects total cost incurred during the year amounted to E252 million (2013: 278 million). Most of the capital expenditure was to improve the distribution network.

5. CASHFLOW FOR THE YEARCash and cash equivalents at the end of the financial year decreased to E59 million from E60 million the previous year.

Directors’ Report

6. JOINT VENTUREDuring the year under review the joint venture company declared a fourth dividend. The company’s share was US$ 2.0 million (E17 280 000), (2013: 2.0 million (E16 758 000). As per the financing agreement related to this investment, 50% of the dividend was remitted to European Investment Bank (“EIB”) after deducting 20% withholding tax as per the Mozambican tax code.

7. CORPORATE GOVERNANCE ISSUESIn compliance with good corporate governance principles, the company has operated and maintained the following Board Committees: Audit and Risk Committee, Finance Committee, Remunerations Committee, and the Technical Committee. These Committees remained effective throughout the accounting period.

Environmental ResponsibilityIn compliance with the relevant legislation all projects undertaken by the company are carried out after full compliance with the Environmental Act of 2002. Hazardous substances are disposed-off in full compliance with safety standards and environmental requirements as stipulated by the act.

Social ResponsibilityThe company is fully committed to minimize the impact of HIV/AIDS on its staff in order to save lives and ensure long term sustainability of the company. The company has continued to support initiatives by charity and similar organisations in their quest to eliminate poverty and the HIV/AIDS impact on the Company in general.

8. SHARE CAPITALThe share capital of the company amount to E433, 493,841.00 made up of 433,493,841 shares of E1 each.

9. DIVIDENDThe Directors approved no dividend (2012:E4.0 million) in respect of the financial year ended 31 March 2013.

10. DIRECTORSThe Directors are appointed by the Minister responsible for Natural Resources and Energy. The following directors served on the board during period under review:

Non-Executive Directors

Chairperson AppointedMr. Qhawe Mavuso Appointed 1 September 2012

DirectorsMr. Henry Shongwe 11 May 2004Ms Hlobsile Ndzimandze 03 February 2011Mrs Sibongile Khumalo 01 October 2012Chief Mgebiseni Dlamini 02 July 2012Manzolwandle Dlamini 02 July 2012Mrs Maria Dlamini 02 May 2013Mrs Ncamsile Mbuli 02 May 2013

Executive Director

Managing DirectorMr. Sengiphile Simelane 01 September 2012

SecretaryMr. Mzabalazo Zwane 31 October 2009 (Resigned 31 October 2013)

Mr. Velaphi Dlamini (Appointed 1 December 2013)

25



26

Directors’ Report

11. BANKERS

The following financial institutions were the bankers of the Company during the year:

Standard Bank Swaziland Nedbank Swaziland LimitedStandard House Nedbank BuildingP O Box 667 P O Box 70Mbabane Mbabane

First National BankSales House BuildingSwazi PlazaP O Box A267Eveni

12. BUSINESS AND POSTAL ADDRESS OF THE COMPANY

Business Address Postal AddressEluvatsini House P O Box 258Mhlambanyatsi Road MBABANEMBABANE H100Swaziland Swaziland

13. AUDITORS

The auditors of the Company are:

Business Address Postal AddressPricewaterhouseCoopers PricewaterhouseCoopersMTN Office Park P O Box 569Karl Grant Street MBABANEMBABANE H100Swaziland Swaziland

Continued

27


Name Quarterly

Board

Meetings

Remco

Risk &

Audit

Comm.

Technical

Comm.

Finance

Comm.

Social

&

Ethics

Comm.

Board

Performance

Review

Induction

Program

AGM Special

Comm. GMF

Recruitment

Special

Board

Meetings

No. of Meetings 4 10 7 6 5 4 1 1 1 2 10

Mr Edgar Mavuso 4 1 1 1 2 10

Mr Henry Shongwe 4 5 4 3 0 1 1 1 5

Ms Hlob’sile Ndzimandze 3 10 7 5 1 1 1 1 8

Mr Manzolwandle Dlamini 4 7 5 4 1 1 1 2 8

Chief Mgebiseni 4 9 6 5 1 1 1 2 7

Mrs Sibongile Khumalo 4 7 6 4 1 1 1 2 7

Mrs Maria Dlamini 4 7 6 3 1 1 1 2 6

Mrs Ncamsile Mbuli 4 6 5 0 1 1 1 1 4

Mr Sengiphile Simelane 4 9 5 5 5 4 1 1 1 1 4

SCHEDULE OF BOARD MEETINGS AND SUBCOMMITTEES FOR 2013/14

Term expired in October 2013 and renewed

Term started in May 2013

SCHEDULE OF BOARD MEETINGS & SPECIAL BOARD MEETINGS FOR 2013/12

MonthNo. of Board

MeetingsBoard/Management

No. of Special Board

Meetings

No. of Meetings with the

Honourable Mininister

April

May 2

June 1

July 1

August

September 1 1

October 3

November 1 1

December

January 1

February 1

March 1

4 8 2


28

Operational ReportENGINE ROOM

Continued

The operational environment during the 2013/14 financial year remained challenging given the persistence of a harsh economic environment. The

Company has rolled out a number of initiatives to counter harsh market conditions. These initiatives are pillared by a push to optimise SEC’s operational systems.

SEC’s input base mixes internal electricity generation and imports from utilities in neighbouring countries.

SEC is also a member of the Southern African Power Pool (SAPP), a platform used to trade electricity within the region. During the year ended March 2014, SEC sent out a total of 1,212,581MWh. These were generated as follows:

• Internal generation accounted for 302,248MWh, which represented 24.9% of total units sent out;

• The Company imported about 75% of total electricity units sent out;

• Imports from Eskom totalled 741,159MWh, which represented 61.1% of the total;

• While imports from EDM were 103,113MWh, which represented 8.5% of the total;

• USL imports amounted to 44,869MWh, which represented 3.7% of the total, and

• SAPP Day Ahead Market (DAM) imports amounting to 21,192MWh, represented 1.7% of the total.

Going forward, the Company is pursuing opportunities to increase its generation capacity in order to reduce the cost of sales.

Internal Generation The annual rainfall for the year under review was average, resulting in good internal generation. Internal production greatly improved during the first six months of this financial year when compared to the previous year. Maguga Power Station continues to contribute a lion’s share (105,406MWh), which represents 34.8% of the total. Edwaleni Power Station occupies the second place with 93,002MWh (30.7% of the total). Ezulwini and Maguduza contribute 67,215.6MWh or 22.4% and 36,922MWh or 12.2%, respectively. Units consumed by ancillary services related to generation were 333.815MWh.

SEC has conducted a feasibility study for a hydro-generation plant at lower Maguduza

29


System DemandThe system maximum demand increased from 213.7MW to 221.2MW (see Table 1). This represents an increase of 3.5%. The major contributing factor was the irrigation requirement in the North Eastern part of the country.

System Performance Improvement Projects The organisation continues to improve the performance of the system. In the year under review, a number of capital projects were implemented to improve system reliability and operational effectiveness. In the South, the Nhlangano to Normandie 132kV line wood pole structures were renewed. The Matsapha 66/11kV Substation was upgraded and it now has an in-out facility which greatly enhances system flexibility. The Thompson to Matsapha 1 66kV line was upgraded from wood pole structures to steel monopoles. Protection coordination for the entire system was reviewed to ensure that fault discrimination is effective. Outage Management System (OMS): SCADA As part of the ongoing Supervisory Control and Data Acquisition (SCADA) project, the deployment of the Outage Management System (OMS) module is at an advanced stage. In line with the OMS requirements, the roll-out of dispatcher work-stations to all SEC depots has been completed. This will assist in the effective dispatch of resources to an incident, thus improving the response time to system faults.

On another note, there is also a project of integrating Pole Mounted Reclosers (PMRs) installed in the MV network with the SCADA system. Ten PMRs have already been installed in the distribution network and are being commissioned. This project stretches further downstream the boundaries to which the MV network is supervised and controlled through the SCADA system to improve system reliability. The installation of system performance enhancing equip-ment also continued at the medium voltage level during the course of the year under review. The installation of Combi Units, Firewalls, BIL and system earthing review has resulted in improved performance of the network. This improvement has also resulted in subsequent reduction of distribution transformers’ failure rate.

202.388 MW

2010 2011 2012 2013 2014

200.768 MW 203.73 MW

213.738 MW221.738 MW

System Peak Demands

Table 1. System Maximum Demand for the past 5 years.

Table 2 : Percentage contribution per supplier.

Eskom53%

EDM8,5%

SEC23%

SAPP-DAM 1,7%

USL 3,7%

2013-2014 Units sent out contribution

Table 3: Total Annual Energy Supplied.

Internal Generation (GWh) & Contribution to System (%)

Con

trib

utio

n to

Sys

tem

, %

GW

h

2008/9 2009/10 20010/11 20011/12 20012/13 20013/14

350

250

150

50

-50

35%

25%

15%

5%

-5%

21.0%24.3%

29.5%25.7%

22.1%

35.5%

2013 2014

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

2012/13 & 2013/14 Monthly Production Profile

GW

h

4540353025201510

50

Table 4: Monthly Production Profile


30

Operational ReportENGINE ROOM

Continued

Thompson – Matsapha 1 66kV line upgrade from wood poles to steel monopoles

31


Operational ReportRESEARCH AND DEVELOPMENT

The year under review saw the establishment of a new section titled Research and Development (R&D) under the office of the Managing Director. This followed a

restructuring and streamlining of certain functions within the organisation in order to increase efficiency and enhance productivity. The establishment of this section fulfills a fundamental need in the organisation; being the ability to react to the constantly changing dynamics of the electicity supply industry and market.

One other important objective behind the establishment of the R&D Section was to free up the Operations Division to concentrate on operating and maintaining the power system. It was felt that a new Section should be created to take care of all new developments. It will work hand in hand with the System Planning Section in the constant evaluation and review of the system performance and recommend improvements necessary to ensure that the network delivers an electricity supply of acceptable quality.

The main function of the R&D Section is to continuously monitor the performance of the organisation, especially from the technical side and advise on best cost-effective

solutions. This includes equipment specifications, work methods, designs and modifications on existing systems. The Section also handles the coordination of new projects, which are still at feasibility stages with internal and external stakeholders, assist in packaging those projects and getting them ready for implementation by the relevant departments.

Research programmes with external institutions will be coordinated by this section. It will also monitor research projects by University students and internal employees. The Section will also be positioned to monitor and report adherence to implementation of the Company strategy to the office of the Managing Director.

Presently the R&D Section is working on an expansion program for the Generation Department. Different power generation methods are being reviewed to increase the installed capacity in Swaziland. These include feasibility studies, evaluation of IPPs for appointment to develop some of the projects and the introduction of Solar PV generation projects. The generation mix under review includes thermal power, hydro, Solar (PV) and natural gas.

The Ministry of Natural Resources and Energy’s tour of the new Lawuba Substation


32

Operational Report

CUSTOMER SERVICE

Continued

1. CUSTOMER RELATIONSHIP MODULE (CRM)

The Marketing Department was heavily involved in rolling out strategic imperatives to improve service delivery to SEC clients. The CRM system rollout as one of the strategic imperatives was implemented in phases. As of the end of March 2014, two phases were completed and the last two will be implemented in the 2014/15 financial year. The system (CRM) fully integrates all customer data into one central database ranging from applications to connections to cases and every other customer service requirement. The objective was to provide a 360 degrees overview (a centralised customer data platform) of all customer information within SEC. This will ensure that customers are assisted at the first point of contact on all SEC services to prevent being passed around different departments.

2. ONE-STOP SHOP CONCEPT ROLLOUT

Following the successful introduction of the Manzini Service Centre; the division continued to roll out its one-stop shop strategy. This is to ensure that customers receive all the different service requirements under one roof in our service centres. To fulfill this, the Swazi Plaza revenue office has been moved to bigger premises at the Corporate Place. The Head Office Revenue was also consolidated into the Corporate Place Service Centre. These premises will now offer additional services, which include accounts and marketing. We are working on a plan to move the Nhlangano Regional Offices to new premises with the one-stop shop offering. Revenues in Pigg’s Peak and Matsapa shall be revamped to be in line with the one-stop shop concept. This facility is expected to align very well with the new Customer Relationship Management (CRM) system.

In the year under review, SEC’s customer base increased by 11.3% from 121,090 the previous year to 134,765. As in previous years, customer growth by tariff category was

dominated by the domestic sector, which represents 91%. Growth remained stunted in the industrial and irrigation sectors as the country’s economy remained restrained.

140,000

120,000

100,000

80,000

60,000

40,000

20,000

02008

2008Total Customers 70,517 79,055 88,182 99,631 109,681 121,090 134,765

2009 2010 2011 2012 2013 2014

2009 2010 2011 20122013

2014

TOTAL CUSTOMERS


33

3. SERVICE CHARTER

The SEC service charter was updated and also incorporates the new regulatory standards SZNSO26/27 (Quality of Service and Quality of Supply Standards). The charter shall be available in all service centres and online via the SEC website.

4. CUSTOMER EDUCATION

The Marketing Department continued to educate customers on services offered by SEC through the various media such as radio shows, road shows, billboards and adverts. The main focus for the year was on customer service, demand side management, copper theft, electricity theft, quotations process and SEC operations. This provided SEC with valuable feedback on customer needs and on the quality of its service delivery. SEC also got an excellence award during the Swaziland National Trade Fair.

5. SURVEY

A customer perception study was undertaken through a consultant to gauge how effective SEC’s service delivery was. This is necessary feedback for further improvement and gives input into the department’s strategy. An action plan was drawn afterwards to address recommendations and implement necessary interventions to ensure that customers derive value.

6. PREPAID UPDATE

The prepaid system was successfully upgraded for our customers and the division played a pivotal role. The upgrade was designed to deliver clean customer data in an effort to assure that IT is utilising data with integrity. The upgraded system will enable SEC to generate more reports with accurate customer data for purposes of improving service delivery to the SEC customers. A team from the division was also trained by ITRON on the new system and it is already being actively utilised.

7. DEBT MANAGEMENT AND WRITE-OFFS

The debtor days have now been reduced to 47 after seeing a high of 67 days during the year under review. Following the data clean-up of our systems, the division was able to proceed with bad debt write-offs amounting to E15 million of which most shall be handed over to collectors as it has been in the Company’s books for a long time. A debt recovery strategy has been put in place to manage all debt going into the future.

8. CUSTOMER FEEDBACK

Several high profile meetings were held with key customers that included the Managing Director and General Manager Customer Service, among others. These were meant to provide feedback and update customers on what SEC was doing to continuously improve quality of supply and service

Figure 2: Mbabane Service Centre One-Stop ShopFigure 1: Overview of the CRM configuration

34


Operational ReportCUSTOMER SERVICE

Continued

and future tariff migration. The meetings were also meant to ascertain customer needs, concerns and future business plans in order to correctly position SEC to satisfy their needs.One major concern from customers was the occasional request, from SEC major suppliers, to reduce load because the supply could not meet demand, especially during morning and evening peak. SEC was encouraged to speed up the generation plan to ensure self-sufficiency to stabilise supply and control tariff increases.

9. SALES UNITS

The sugar mills and mining contributed significantly to the increase in sales units compared to the budget. This was due to the unexpected consumption from one of the sugar mills that had a technical problem with their generator. This trend is expected to change in the coming year as the plant is expected to resume generation, thus resulting in lower demand from SEC.

10. SYSTEM LOSSES AND METER INSPECTION MARCH 2014 The average systems losses for the 2013/14 financial year stood at 14.12%. SEC imple-mented phase one of two phases for the power

factor correction exercise which covered critical areas in the North Eastern and the Central parts of Swaziland. The second phase will cover the rest of the country. The implementation of the exercise has seen a slight decrease in overall system losses towards the end of the financial year. Technical losses as at the end of the financial year were sitting at 8%, which implies that commercial losses were 6.1%.

Apr 1

3M

ay 13

Jun 1

3Ju

l 13

Aug

13Se

p 13

Oct 13

Nov 13

Dec 13

Jan 1

4Fe

b 14

Mar

14

18.00%

16.00%

14.00%

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%

System Losses

SYSTEM LOSSES

Sales Units 2013/2014 (kWh) Sales Units 2012/2013 (kWh)

Apr 1

3

May

13Ju

n 13

Jul 1

3

Aug

13Se

p 13

Oct 13

Nov 13

Dec 13

Jan 1

4

Feb

14

Mar

14

120 000 000

100 000 000

80 000 000

60 000 000

40 000 000

20 000 000

0

SALES UNITS

SEC Position

SEC is positioned as one of the largest corporations in the Kingdom of Swaziland, a status which comes with weighty requirements to balance out the

attendant corporate rights and responsibilities. At all times the Company seeks to exercise its business in a sustainable manner. The pursuit of sustainability begins with an honest acknowledgement of limitations, especially environmental impact, defined by SEC’s historical business development trajectory. This acknowledgement comes with honest measures designed to counter whatever damages are incurred in the course of doing business. A portion of these counter measures is made up of restorative initiatives while others come in the form of a social dividend. Alongside these counter measures stands a vision to migrate the business model towards fully sustainable techniques in the most practical pace within the Company’s operational context. All this is done in a manner consistent with the primary mandate of ensuring that SEC remains a going concern. In this regard, SEC established a Research and Development (R&D) unit which runs with a mission of interrogating the Company’s position against emerging trends and coming up with innovations that will enhance the sustainability balance.

Mandate and Accountability

SEC has a mandate to provide affordable, accessible and reliable energy services that meet economic, social and environmental needs within its broader stakeholder context.

This is reflected in the Company’s mission statement “To meet the needs of our customers in a sufficiently profitable and environmentally sound way by providing a reliable power supply of acceptable quality”.

This mandate is kept in check by a number of statutes and primarily five legislations namely; The Swaziland Companies Act, The Electricity Company Act of 2007, The Energy Regulatory Act of 2007, The Electricity Act of 2007 as well as the Public Enterprises Unit (Control and Monitoring) Act of 1989. Taken together with the SEC corporate governance code, these laws ensure that the independent board and management run the business of the Company as a going concern positioned to create sustainable value for all its stakeholders, and mainly the shareholders, customers, employees, business partners and the general people of the Kingdom of Swaziland.

The Company strives to create its sustainable value by integrating ethical behaviour in its operations. To enhance accountability and transparency in business dealings, the Company adheres to most of the requirements of the King Code on Good Corporate Governance. These include an independent Board and Executive Management. The Board operates through committees focusing on the Finance, Remuneration, Ethics, Technical as well as the Audit and Risk aspects.

Management reviews the strategy on an annual basis to ensure that the Company remains relevant to the long term objectives and is responsive to the threats and opportunities that affect the business of the Company. The results are that the Company has continued to generate profits since inception.

Sustainability ReportINTRODUCTION

35

The Company strives to create its sustainable value by integrating ethical behaviour in its operations. To enhance accountability and transparency in business dealings, the Company adheres to most of the requirements of the King Code on Good Corporate Governance. These include an independent Board and Executive Management.



36

Sustainability ReportFINANCIAL SUSTAINABILITY

The 2013/14 financial year was largely defined by the 5% tariff increase approved by the Swaziland Energy Regulatory Authority (SERA). This made for

an extremely tight financial positioning for SEC as the tariff increase was set far below the rate at which the Company’s cost base is increasing. Nevertheless, electricity sales during the period under review rose by 13.2% to E1.16 billion compared to E1.03 billion reported in the previous year. Actual energy sold during the year was 1 035 GWh (2013: 940 GWh) resulting in an increase in energy sales of 10.11%.

During the year ended March 2014, SEC sent out a total of 1,212,581MWh. Costs of sales for the year were E800 million up from E687 million. The increased costs of sales were attributable to the tariff increase for imports. SEC continues to source a significant majority of its electricity, 75% or 822MWh, from neighbouring countries’ power utilities. The 2013/14 imports were organised in the following manner:

• South Africa’s power utility Eskom accounted for 741,159MWh of the SEC imports, which represented 61.1% of the total imports.

• Imports from Mozambique’s EDM amounted to 103,113MWh, which represented 8.5% of the total imports.

• USL imports amounted to 44,869MWh, which represented 3.7% of the total, and

• SAPP DAM imports amounted to 21,192MWh, which represented 1.7% of the total.

SEC’s internal generation for the year under review stood at 302 GWh representing 25% of the total units sent out. This represented an increase of 1% when compared to the previous year’s figure. Internal generation benefited from better conditions of the Company’s hydro-power stations. The annual rainfall for the year under review was average resulting in good internal generation. The four hydro-power stations performed in the following manner:

• Maguga Power Station continued to contribute a lion’s share in terms of power station generation and yielded 105,406MWh, which represented 34.8% of the total

• Edwaleni Power Station produced 93,002MWh or 30.7% of SEC’s internally generated electricity

• Ezulwini generated 67,215.6MWh or 22.4% of the total and

• Maguduza contributed 36,922MWh or 12.2% of the total.

Units consumed by ancillary services related to generation were 333.815MWh. Despite a significant increase in cost of sales, well above our tariff increase, SEC delivered a profit growth. This was a function of a number of factors.

The total costs of capital projects during the year declined slightly to E252 million from E278 million in the previous year. SEC’s participation in the regional joint venture power operations yielded another considerable dividend. The Company’s share was US$2.0 million, which translated to E20.7 million compared to E16.7 million realised in the previous year. As per the financing agreement related to this investment, 50% of the dividend was remitted to the European Investment Bank after deducting 20% withholding tax as per the Mozambican tax code.

The other significant positive factor in the profitability of SEC was improved internal efficiencies, which yielded sizeable savings. As such, the operating profit for the period jumped from E53.8 million to E76.7 million. After tax profit came in at E78.5 million up from E69 million in the previous period. Basic earnings per share added up to 24c up from 23c. The Company declared no dividend.

The Company’s asset base improved from E2.1 billion to E2.4bn. The share capital of the Company amounts to E433, 493,841.00 made up of 433,493,841 shares of E1 each. Cash and cash equivalents stood at E59.8 million at year end compared to E60.4 million at the end of the previous financial year. A number of conclusions can be drawn from the latter financial picture. Critically, SEC remains profitable and cash positive despite the continuation of an extremely difficult trading environment. The local economy has taken pain leading to a dwindling customer base for SEC. Customers mainly in the commercial space have been cutting down operations and consuming less energy while a few have shut down. A few other commercial customers are going into self-generation. This is reflected in the decline in SEC’s unit sales experienced over the past five years.

While the revenue base is coming under pressure, costs are rising. As noted earlier, this is due to rising tariffs from imported electricity. This makes for a serious challenge for SEC, especially when seen against local tariff increases, which are sanctioned by the Swaziland Energy Regulatory Authority (SERA). The regulator approved a 5% tariff increase for the 2013/14 financial year down from 8.3% in the previous year. The regulator has approved a tariff increase of 9.5% in the 2014/15 financial year.

The Company remains a healthy going concern.

SEC’s people vision is to “win through our people”. This people vision places employees at the heart of the Company’s business and operational model. It

also underlies our commitment to continuously improving employee value proposition to make SEC an excellent environment to work in. Over the years, we have rolled out a number of initiatives designed to inculcate a high performance culture across the organisation. And yet the past year was also one of transition and challenge for the Corporate Services Division. The Division devoted much of its time, energy and resources to adapt to the operational changes as well as to ensure that headway is achieved on major transformation projects, these being;

• Improving HR Line Support - SEC proceeded with the strategic realignment and repositioning of the human resources department through the implementation of the Human Resources Business Partner (HRBP) model. This is aimed at achieving seamless collaborations within the department, as well as optimally partnering with client divisions. Through business partnering, the HR department will enable the delivery of innovative solutions and services that are not only responsive to organisational needs, but are benchmarked against human resources’ best practices.

• Finance Division Organisational Restructuring - The Finance Division undertook a comprehensive redesign process aimed at improving operational efficiencies, enhancing employee effectiveness and delivering improved services to the business. The recommendations have been tabled for authorisation. Once approved, the new organisation structure for the division will be implemented in the 2014/15 financial year. The rationale for the redesign process was to improve service levels, placement of employees in

job roles they are most suited to, identifying individual employee skills gaps and implementing an accelerated development programme and preparing the division to facilitate the ring-fencing project as required by the Regulator.

• Staff Pension Fund (SECSPF) Conversion to Defined Contribution (DC) - Together with the SEC Staff Pension Fund, HR spent many hours reviewing the options available; meeting with the actuaries and consultants to ensure that the conversion of our pension fund is implemented seamlessly. Provisional approval has been granted by the Pension Funds Regulator and the conversion process is expected to be fully implemented no later than the 31st of March 2015. The rationale for the conversion was two-fold. Firstly, it was to minimise the inherent risks of running a full Defined Benefit Fund and to transfer this risk to the employees, thus reducing SEC’s manpower costs. Secondly, to encourage active participation of employees in the management of the Fund. Whilst all active employees will transfer to the new Defined Contribution Pension Fund, pensioners will remain under the Defined Benefit underpin, which benefit will be run down through natural attrition. Effective 1st August 2013 (being the provisional approval date), no employees will be accepted onto the pensioner account but will on retirement, be required to purchase an annuity from independent service providers.

Manning Levels:

At the close of the 2013/14 financial year, the Company’s staff complement stood at 643. The following tabular presentation represents the breakdown of the staff complement by division and gender as detailed in Figure 1 below:

Sustainability Report HUMAN CAPITAL REPORT

Continued

Division Male Female Total

Corporate Services 54 17 71

Customer Service 51 57 108

Operations 341 55 396

Support Services 17 4 21

MDs Office 5 4 9

Finance 24 14 38

492 151 643

Figure 1

37



38


Continued

Human Capital & Talent:

• The upward mobility of employees is part of SEC’s Employee Value Proposition (EVP). It is, therefore, commendable that 25 employees were promoted to higher positions during the year compared to 5 employees last year.

• As at the close of the 2013/14 financial year, there were 50 Trainees in SEC’s development pipelines. The development pipelines are used as a potential pool for the recruitment of talent, subject to successful completion of their training programmes. The spread of the trainees is as follows:

a) Five (5) Technical Students currently enrolled at Waterford Kamhlaba College for their IB. Three (3) of these students are females. The Company sponsors their tuition fees from the IB stage right up to graduate level at any South African university. All five trainees were selected on the basis of their Form V results in the past two years, the criteria being:

• That they must be from public schools, preferably in the rural areas;

• That they must have done exceedingly well in mathematics and science;

• That they must be in the top ten (10) bracket in the whole of Swaziland; • That they must be interested in pursuing engineering programmes (heavy current electrical engineering and mechanical engineering) and must not fail both at the IB stage as well as at the tertiary stage.

b) Four (4) Engineers In Training, two of which are females. The Company is making concerted efforts

at recruiting female engineering candidates to address the gender balance within the technical field.

c) Twelve (12) Graduates In Training distributed to the Finance, Human Resources, Support Services and IT Departments.

d) Twenty-Nine (29) Technical Trainees, one of which is female. These trainees will form the talent pool for Electricians and Technicians.

Training & Development:• Organisation-wide training costs compared to the

previous financial period show an increase of 12.4%.

Figure 2

Period 2012/13 2013/2014

Headcount 640 643

Total Annual Costs E 7 966 950 00 E 8 954 385 27

*Average Training costs/employee E 12 448 36 E 14 057 12

At the close of the 2013/14 financial year, there were 50 trainees in SEC’s development pipeline

The past financial year saw a drastic increase in the turnover rate (as highlighted in Figure 3 above), mainly attributable to the rigid remuneration’s regulatory regime introduced by the Government of Swaziland through Circular 3 of 2010 (regulation of executive pay). Even though this was reviewed through the introduction of Circular 4 of 2013, the cascading impact of these regulations on the rest of the employees made it difficult for SEC to retain a number of critical skills. A Recruitment and Retention initiative was approved by the Board of Directors towards the end of the financial year and is now pending approval by the Standing Committee on Public Enterprises (SCOPE).

Strategic HR Initiatives

• High Performance Organisation: A number of initiatives geared towards developing a high per-formance organisation culture within the Company are being pursued and include:

a) Implementation of the Balanced Scorecard (BSC) performance management system - In September 2013 SEC adopted and implemented a new performance management system; the Balanced Score Card (BSC). This system ensures that the divisional, departmental and individual employee’s objectives are aligned to the corporate

strategy. The new performance management system was initially rolled out to management on the 1st of April 2013 and is being cascaded to allemployees in readiness for implementation from the 1st of May 2014.

b) Implementation of a New Bonus Scheme - Aligned to the new performance management system a new bonus scheme has been adopted. The bonus scheme is geared towards

rewarding employees at 3 levels i.e. corporate performance, divisional performance and individual performance. This places emphasis on not

just individual performance but also teamwork and the overall success of the organisation.

Employee Relations The Industrial Relations climate was much improved for the financial year under consideration when compared to the previous two years. The stable IR climate is an outcome of significant engagements that were started by the tripartite forum comprising Management, NESMASA and SESMAWU. This was undertaken after the tripartite forum recognised that the poor relations were not helping the Company to go forward. Some of the interventions that were implemented comprised a tripartite retreat that was facilitated by an external consultant. The consultant assisted the three social partners to engage openly and constructively on all the issues that were contributing to the poor relations. Another important strategy undertaken was comprehensive Industrial Relations training for the entire Union General Council membership to improve the understanding of their expected roles and responsibilities in creating and sustaining a stable IR climate. The organised labour Executive Committees attended an Industrial Relations Development Programme, which has improved their appreciation of the Industrial Relations dynamics at the work place. Furthermore, the old Collective Agree-ments and Recognition Agreements were reviewed with organised labour to improve their application and align them to best practice.

Finally, a new concept of a Full-time Shop Steward role was implemented on a trial basis. The main objective of the role is to promote positive and co-operative relations within the Company by continuously improving industrial harmony. The role is expected to ensure that there is pro-active and constructive engagement between Management and the Union about issues that may impact on the relationship. The role will be evaluated after twelve months and if there is no positive impact to the relationship the Company reserves the right to cancel it at its entire discretion.

Figure 3

Financial year Manning Levels /yr. Turnover # VE # Total Turnover as a % of Manpower levels

2009/10 587 20 88 18.40%

2010/11 571 9 25 5.95%

2011/12 587 17 0 2.90%

2012/13 640 22 0 3.44%

2013/14 643 32 0 4.98%

39



40


Continued

The Company continues to have two labour organisations that represent employees at shop floor and management levels as required by the Industrial Relations Act of 2000. The information below reflects the affiliation levels of the two bargaining units, including three fixed term contract employees who are members of the Staff Association.

Employee WellnessThe focus on employee wellness has improved through increasing the Peer Educators’ roles and making it more

prominent. The capacity building for Peer Educators is a continuous process through monthly meetings dedicated to wellness issues across the Company. Management has support readily available to deal with issues of wellness and employee support daily. To further ensure that the wellness issues are properly driven from within, it was resolved that the Full-time Shop Steward role be infused with that of a Wellness Officer and this has proved to be working well.

Figure 4

Total Employees Membership Non-Membership % Affiliation

NESMASA 46 36 10 78%

SESMAWU 571 511 60 89%

Snr. Mngt & Exco 26 3 23 12%

TOTAL 643 550 93 86%

Our employees in a jubilant mood during the 2013 Sibebe Charity Walk

The Swaziland Electricity Company considers environ-mental protection, occupational health and safety, risk and quality management as important as providing

quality products to our customers and the general public. These issues remain fundamental and significant in the mandate and objectives of the Company. SEC seeks to prevent incidents or accidents that might result from abnormal operating conditions and also reduce adverse effects that result from normal operating conditions.

For this purpose, the Company runs regular awareness campaigns intended to promote and encourage compliance to established environment, health and safety standards. The Company is committed to implementing safety systems in its various business activities and processes and to ensuring a culture of continuous improvement on overall safety performance. Safety talks are conducted weekly at the various workstations to emphasise on safety matters and also to reflect on and take lessons from incidents that may have occurred. Also a number of actions have been taken to reduce the Company’s environmental impact under normal operating conditions (like reducing the Company’s carbon footprint) and to prevent workers from developing work-related diseases. Risk and quality management is an integral part of the proactive approach towards our commitment.

In our strides to accommodate the holistic business of the Company, contractors have been fully put on board in SHERQ programmes and they also adhere to the same set of standards as they partner with the Company in delivering its business objectives. The main focus of our SHERQ undertakings are towards the maintenance and promotion of workers’ health and working capacity; improvement of the working environment and work to become conducive to safety & health and the development of work organisation. A great deal of effort is continually being put towards steering the working culture in a direction that supports health and safety at work, which also promotes a positive social climate, safe environment and smooth operation. The concept of a working culture is intended in this context to mean a reflection of the essential value systems adopted by the undertaking concerned. Such a culture is reflected in practice in the managerial systems, personnel policy,

principles for participation, training policies and quality management of the undertaking.

SEC regards its employees as the most valuable assets and as such healthy employees are much happier and more productive. The Company is driving various wellness programmes which seek to reinforce positive healthy living and also provide the much needed social support, including counselling structures to the employees.

SHERQ MONITORING: NOSA UPDATEThe National Occupational Safety Association (NOSA) was used to assess the SHERQ integrated system. A NOSA Five Star Integrated Audit was conducted at the Swaziland Electricity Company this year. The scope of the audits included occupational safety, health and environmental exposures, which focus particularly on the requirements of the NOSA Five Star Integrated System and relevant legislation at all the business units. During the year, the Company managed to attain a 3-Star rating, translated to 69.55% from a Disabling Injury Frequency Rate (DIFR) of 1.58.

From this year’s audit, several achievements were high-lighted. The reduction of incidents was experienced by the organisation during the past few years, which is an indication of all the work that has gone into the system. The overall improvement of the system, as seen by the outcome, was commendable. The housekeeping and overall condition of the depots and their yards was outstanding compared to the previous years. In particular, the implemented Permit to Work system was thorough, and in, areas where it was tested, the compliance was remarkable.

The Company, however, will not be complacent as a result of the positive progress already achieved, especially because there is still quite significant ground to cover. This year we experienced yet another fatality involving one of our contractors’ employees. He died in a vehicle accident while in the line of duty.

SHERQ Monitoring SHERQ performance during the period under review is reflected in the table below.

Sustainability Report SAFETY, HEALTH, ENVIRONMENT, RISK & QUALITY (SHERQ)

Continued

41



42

Sustainability Report SAFETY, HEALTH, ENVIRONMENT, RISK & QUALITY

Continued

COPPER THEFTUnfortunately, copper theft has become an all too common occurrence. This has been happening throughout the country affecting other industries hence it is not a problem unique to SEC. Copper theft is still a very real problem faced by the Company. Not only do customers get stuck while SEC has to repair or replace equipment stripped of copper, the damage often results in the loss of electricity to businesses resulting in the halting of operations until the repairs are completed. SEC continues to draw the much necessary attention to the impacts of copper theft on electricity infrastructure through various forums. These include working closely with the Royal Swaziland Police, public and employees. ENVIRONMENTAL MANAGEMENT SEC continues to ensure that its business activities remain aligned with the aspiration embodied in its mission statement - “to meet the needs of customers in a sufficiently profitable and environmentally sound way through providing

a reliable and safe power supply of acceptable quality”. This is being pursued amidst the challenging times pertaining to international prerequisites to operate companies in an environmentally sound manner, especially in the presence of numerous serious environmental calamities brought about by climate change.

The Company still strives to be part of what the United Nations Environmental Programme has dubbed ‘environ-mentally sustainable societies’. These are companies that meet their basic resource needs in a just and equit-able manner without compromising the ability of future generations to meet their needs. Such initiatives are embraced in the establishment of the Environmental Management Systems (EMS) communicated in the Company’s reviewed Environmental Policy. The signing of the revised Environmental Policy (2013) has reassured the continued commitment of top management to ensure that SEC operates within the provisions of the international and national environmental regulations and standards.

Safety Statistics for the year ended 31 March 2014

2013/14No.

2012/13No.

Lost time injuries 12 11

Non-lost time injuries 36 22

Fatalities 0 1

CONTRACTORS SAFETY

Electrical contractors’ injuries 3 3

Fatalities 1 0

PUBLIC SAFETY

Injuries 7 3

Fatalities 1 2

SEC is still faced with the real problem of copper theft The Company uses different platforms to educate the publicon the impacts of copper theft

Moreover, this action has surely geared the Company up for the proposed implementation of the EMS (ISO 14001) in 2014/15 and beyond. We have also covered a significant mileage in terms of climate change management, PCB oil management and improvement of our environmental reporting as guided by the South African Power Pool (SAPP) and other organisations.

ISO 9001: QUALITY MANAGEMENT SYSTEMS This financial year ended in an extraordinary note in terms of implementation of the ISO 9001:2008 standard. A strong quality culture has been embedded into the whole fabric of SEC. At this stage certification audits have been conducted by appointed Independent ISO 9001 certification body (TÜV Rheinland). The outcome of the audit was the ISO 9001:2008 certification of SEC.

GETTING READY FOR ISO 14001 & OHSAS 18001The ending of the 2013/14 financial year has been glossed with a vital Company commitment to roll out the ISO 14001 (EMS) and OHSAS 18001 (OHSMS) in the 2014 finacial year. The EMS will encourage the Company to continuously improve its environmental performance. Basically, the Company first commits to an environmental policy, then uses its policy as a basis for establishing a plan, which sets objectives and targets for improving environmental performance. Similarly, the OHSMS shall help SEC put in place a demonstrably sound occupational safety and health performance. Over the coming year, SEC

will seek to implement both these standards concurrently and this approach is considered to be cost-effective and that it minimises disruption.

EMERGENCY PREPAREDNESS PLANDuring the financial year, SEC codified and delivered a comprehensive Emergency Preparedness Plan intended to establish an organisational structure and procedures for response to major emergencies. The plan seeks to protect life, the environment, assets and the Company’s image and reputation. The finalised document is expected to enable employees and visitors to respond to an emergency in a coordinated manner, as well as minimising injury and loss of property and damage to the environment. The establishment of this plan will allow the business to maintain operations at levels as close as possible to normal and restore normal operations quickly and efficiently. The plan documents a purposeful and systematic approach to the handling of emergencies and crises. It also facilitates communication and mutual aid with surrounding companies and state institutions. In addition the plan outlines the specific responsibilities of all personnel involved with particular emphasis on organisational mobilisation and loss control in all sections. The Company intends making the plan effective through awareness training sessions to staff and contractors. Periodic testing of this emergency response plan shall be conducted, at least, bi-annually in order to regularly review its effectiveness.

43


Employees after training on the ISO 9001:2008 Quality Management Systems

44


44

Sustainability ReportRURAL ELECTRIFICATION

Continued

Electricity is the backbone of socio-economic development in the country and provides numerous services to the populace which directly enhances their quality of life. The Rural Electrification unit at SEC was established some years back to accelerate the pace of rural electrification in the country; a function that is fully supported by the Ministry of Natural Resources and Energy. Over the years, the rural electrification programme has offered many benefits which include, inter alia, the empowerment of rural communities in areas of education, health, lighting, modern farming,

employment creation, security enhancement, as well as the general improvement in their standard of living.

A total of 222 rural electrification group schemes were implemented by the Company during the year. These schemes were drawn from all the four regions of the country and sought to benefit about 7428 rural homesteads. The combined cost of projects implemented during the year amounted to E77.5 million and the funding was obtained from four sources as shown in the table below.

The success of the rural electrification project derives, to a large extent, from the commitment that Government has demonstrated over the years by making the necessary budget provision through various bodies. We are also

grateful to the Government of the Republic China on Taiwan for the numerous grants that it has extended to this project over the years to ensure the continued electrification of rural homesteads.

RURAL ELECTRIFICATION PROJECTS - 2013-2014

Number of Group Schemes

Number of Homesteads

Grant Amount

Republic of China on Taiwan 35 2283 30.2

Ministry of Natural Resources and Energy 8 319 4.0

Micro Projects 126 3565 35.2

Rural Development Fund 53 1261 8.1

TOTAL 222 7428 77.5

A rural electrification project underway

Technicians performing planned maintenance on a 10 MVA transformer at Stonehenge Depot in Mbabane

ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 2014

CONTENTS PageStatement of Directors’ Responsibility 47

Independent Auditor’s Report 48

Statement of Comprehensive Income 49

Statement of Financial Position 50

Statement of Changes in Equity 51

Statement of Cash Flows 52

Notes to the Annual Financial Statements 53 - 138


46

Ministry of Natural Resources and Energy’s tour of the newly-built Mayiwane Substation in the Northern Hhohho Region

47

STATEMENT OF RESPONSIBILITY BY THE BOARD OF DIRECTORSfor the year ended 31 March 2014

The directors are responsible for the preparation, integrity and fair presentation of the annual financial statements of the Swaziland Electricity Company Limited. The annual financial statements presented on pages 49 to 138 have been prepared in accordance with International Financial Reporting Standards, and include amounts based on judgements and estimates made by management. The directors also prepared the other information included in the annual report and are responsible for both its accuracy and its consistency with the annual financial statements.

The directors are also responsible for the Swaziland Electricity Company Limited’s internal financial controls. These are designed to provide reasonable, but not absolute assurance as to the reliability of the annual financial statements, and to adequately safeguard, verify and maintain accountability of the assets, and to prevent and detect misstatement and loss. Nothing has come to the attention of the directors to indicate that any material breakdown in the functioning of these controls, procedures and any system has occurred during the year under review.

The going concern basis has been adopted in preparing the annual financial statements. The directors have no reason to believe that the Swaziland Electricity Company Limited will not be a going concern in the foreseeable future based on forecasts and available cash resources. These annual financial statements support the viability of the Swaziland Electricity Company Limited.

The annual financial statements have been audited by the independent accounting firm, PricewaterhouseCoopers, which was given unrestricted access to all financial records and related data, including minutes of the directors and committees of the Company. The directors believe that all representations made to the independent auditors during their audit are valid and appropriate. PricewaterhouseCoopers’ audit report is presented on page 48.

The annual financial statements which appear on pages 49 to 138 have been approved by the Board of Directors and are signed on its behalf by:

________________________ ______________________DIRECTOR DIRECTOR

________________________ ______________________DATE DATE



48

INDEPENDENT AUDITOR’S REPORTTo the Shareholder and Board of Directors of the Swaziland Electricity Company Limited

We have audited the accompanying annual financial statements of Swaziland Electricity Company Limited, which comprise the directors’ report, the statement of financial position as of 31 March 2014, the statement of comprehensive income, the statement of changes in equity and statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes, as set out on pages 49 to 138.

Directors’ Responsibility for the Annual Financial StatementsThe Company’s directors are responsible for the preparation and fair presentation of these annual financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Swaziland Companies Act 2009. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of annual financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these annual financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the annual financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the annual financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the annual financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the annual financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the annual financial statements present fairly, in all material respects, the financial position of the company as of 31 March 2014 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Swaziland Companies Act 2009.

PricewaterhouseCoopersPartner: Paul LewisChartered Accountant (Swaziland)MbabaneDate: 2 September 2014

49

ANNUAL STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 31 March 2014

2014 2013 Note E E Revenue 5 1 264 528 508 1 088 385 196 Cost of sales 6 (799 734 393) (687 357 581)

Gross profit 464 794 115 401 027 615 Other income 7 28 455 840 22 157 954 Distribution costs (211 770 109) (168 930 366) Administrative expenses (180 891 148) (153 949 067) Other losses 13 (23 845 300) (46 446 883)

Operating profit 8 76 743 398 53 859 253 Finance costs 11 (30 078 206) (26 658 220) Finance income 12 7 156 999 9 281 472

Finance costs-net (22 921 207) (17 376 748) Share of profit of joint venture 16 27 317 762 26 086 312

Profit before income tax 81 139 953 62 568 817 Income tax (charge) / credit 10 (2 569 662) 6 477 707

Profit for the year 78 570 291 69 046 524

Other comprehensive income Gross foreign exchange gains on translationof foreign joint venture 14 32 167 252 36 919 307Tax effect on foreign translation gains (6 433 450) (7 383 861)

Other comprehensive gains for the year net of tax 25 733 802 29 535 446 Total comprehensive income for the year 104 304 093 98 581 970

Basic earnings per share (cents) 24 23



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ANNUAL STATEMENT OF FINANCIAL POSITIONAs at 31 March 2014

2014 2013 Note E E ASSETSNon current assets Property, plant and equipment 15 1 580 401 966 1 432 408 157Investment in joint venture 16 261 887 630 223 119 615Other assets 17 23 063 778 25 712 021USL electricity prepayment 20 110 000 000 120 000 000Derivative financial instruments 29 59 017 558 45 615 966Investment in sinking fund 29A 30 000 000 -Retirement benefit asset 31 796 302 -Embedded derivative asset 28 2 538 533 -

2 067 705 767 1 846 855 759

Current assetsInventories 18 46 152 282 53 162 365Trade and other receivables 19 167 449 413 147 489 441USL electricity prepayment 20 10 000 000 10 000 000Current income tax assets 33 44 624 958 40 471 682Cash and cash equivalents 21 59 814 723 60 386 020

328 041 376 311 509 508

Total assets 2 395 747 143 2 158 365 267

Equity and liabilities Equity attributable to owners of the company Ordinary shares 22 433 493 841 433 493 841Foreign exchange translation reserves 23 75 179 623 49 445 821Retained earnings 739 802 759 661 232 468

1 248 476 223 1 144 172 130

Liabilities Non current liabilities Deferred grant income 24 192 687 367 163 474 926Other deferred income 25 23 063 778 25 712 021Borrowings 27 352 119 520 270 883 661Embedded derivative liability 28 122 230 133 119 676 731Derivative financial instruments 29 3 309 817 6 085 532Retirement benefit obligation 31 - 8 639 284Deferred income tax liabilities 32 156 168 764 147 165 652

849 579 379 741 637 807

Current liabilities Borrowings 27 54 471 819 41 570 730Trade and other payables 34 158 673 528 183 014 050Provisions for other employee benefits 30 43 536 597 18 722 639Deferred revenue 26 41 009 597 29 247 911

297 691 541 272 555 330

Total liabilities 1 147 270 920 1 014 193 137

Total equity and liabilities 2 395 747 143 2 158 365 267

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ANNUAL STATEMENT OF CHANGES IN EQUITYfor the year ended 31 March 2014

Foreign exchange Share translation Retained Note capital reserves earnings Total Balance at 31 March 2014 Balance at 1 April 2013 433 493 841 49 445 821 661 232 468 1 144 172 130 Profit for the year - - 78 570 291 78 570 291Other comprehensive income for the year: Exchange differences on translating foreign operations 14 - 25 733 802 - 25 733 802

Total comprehensive income for the year 433 493 841 75 179 623 739 802 759 1 248 476 223 Dividends to equity holders of the company - - - - Total distributions to owners of the company recognised in equity - - - -

Balance at 31 March 2014 433 493 841 75 179 623 739 802 759 1 248 476 223

Balance at 31 March 2013 Balance at 1 April 2012 433 493 841 19 910 375 603 042 172 1 056 446 388Adjustment to retirement benefit asset to appropriate measurement basis and recognition as a result of retrospective application of IAS 19(R) 40.1 - - (6 811 842) (6 811 842)

Balance as at 01 April 2012 as restated 433 493 841 19 910 375 596 230 330 1 049 634 546 Profit for the year as restated - - 69 046 524 69 046 524 Other comprehensive income for the year: Exchange differences on translating foreign operations 14 - 29 535 446 - 29 535 446

Total comprehensive income for the year 433 493 841 49 445 821 665 276 854 1 148 216 516

Dividends to equity holders of the company - - (4 044 386) (4 044 386) Total distributions to owners of the company recognised in equity - - (4 044 386) (4 044 386)

Balance at 31 March 2013 433 493 841 49 445 821 661 232 468 1 144 172 130



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ANNUAL STATEMENT OF CASH FLOWS for the year ended 31 March 2014

2014 2013 Notes E E Cash flows from operating activities Cash generated by operations 35.1 166 237 521 265 656 143Tax paid 33 (4 153 276) (26 723 918)Interest received 12 7 156 999 9 281 472Interest paid 11 (16 348 705) (26 658 220)Employer contributions to plan asset 31 (11 063 683) (8 147 893)

Net cash generated by operating activities 141 828 856 213 407 584

Cash flows from investing activities Additions to property, plant and equipment to maintain operating capacity 35.2 (252 451 902) (278 377 691)Proceeds from disposal of property, plant and equipment 35.3 - 3 728 492Investment in sinking fund with FNB 29A (30 000 000) -Funds invested in sinking fund-financial asset 29A 30 000 000 -Grants received 24 37 970 163 48 629 914Dividends received from Motraco Joint Venture 17 280 000 13 406 400Share of Motraco dividends paid to EIB (8 640 000) (6 703 200)

Net cash utilised in investing activities (205 841 739) (219 316 085)

Cash flows from financing activities Borrowings raised 80 000 000 -Repayment of borrowings (16 601 213) (17 092 533)

Net cash generated / (utilised) in financing activities 63 398 787 (17 092 533)

Net decrease in cash and cash equivalents (614 096) (23 001 034)Cash and cash equivalents at beginning of the year 60 386 020 83 387 054

Cash and cash equivalents at end of the year 21 59 771 924 60 386 020

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NOTES TO THE ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 2014

1 GENERAL INFORMATION

Swaziland Electricity Company generates, purchases, transmits and distributes electricity to agricultural, industrial, commercial, mining and residential customers throughout the Kingdom of Swaziland. Swaziland Electricity Company is governed by The Electricity Company Act, 2007, The Electricity Act, 2007, The Energy Regulatory Authority Act, 2007 and The Public Enterprises (Control and Monitoring) Act, 1989. The Company comprises Swaziland Electricity Company. However, the financial statements have been prepared on an economic entity basis that includes the results of the Company as well as an equity accounted 33% share of the Company’s profits from the Motraco joint venture.

Motraco’s principal role is the supply of energy to Mozal Aluminium Smelters in Mozambique and the wheeling of electric energy to the Electricidade de Mozambique, Swaziland Electricity Company and Eskom South Africa.

Swaziland Electricity Company is a limited liability company incorporated and domiciled in Swaziland.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these annual financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Statement of compliance and basis of preparation

The annual financial statements of Swaziland Electricity Company Limited have been prepared in accordance with International Financial Reporting Standards, IFRIC Interpretations and the Swaziland Companies Act of 2009. The financial statements have been prepared under the historical cost convention, and financial assets and financial liabilities (including derivative instruments recognised at fair value through profit or loss) are recognised at fair value on initial recognition.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the annual financial statements are disclosed in note 4.12.

2.1.1 Going–concern basis

The company meets its day-to-day working capital requirements through the use of its cash reserves and bank facilities. The company’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the company should be able to operate within the level of its current resources and facilities. After making enquiries, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The company therefore continues to adopt the going concern basis in preparing its annual financial statements.



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NOTES TO THE ANNUAL FINANCIAL STATEMENTS (continued)

for the year ended 31 March 2014

2.1.2 Changes in accounting policy and disclosures

A number of new standards and amendments to standards and interpretations are effective for the first time for the SEC financial year beginning 1 April 2013 (and beyond) as outlined below:

International Financial Reporting Standards and amendments effective for the first time for 31 March 2014 year-end

Number Effective date Executive summary

Amendment to IFRS 1, ‘First time adoption’ on government loans

1 January 2013 This amendment addresses how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRS. It also adds an exception to the retrospective application of IFRS, which provides the same relief to first-time adopters granted to existing preparers of IFRS financial statements when the requirement was incorporated into IAS 20 in 2008. The company has not early adopted this international financial reporting standard.

Amendment to IFRS 7 Financial Instruments: Disclosures – Asset and Liability offsetting

1 January 2013 The IASB has published an amendment to IFRS 7, ‘Financial instruments: Disclosures’, reflecting the joint requirements with the FASB to enhance current offsetting disclosures. These new disclosures are intended to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP. The company has not early adopted this international financial reporting standard.

Amendments to IAS 1, ‘Presentation of Financial Statements’, on presentation of items of OCI

1 July 2012 The IASB has issued an amendment to IAS 1, ‘Presentation of financial statements’. The main change resulting from these amendments is a requirement for entities to group items presented in other comprehensive income (OCI) on the basis of whether they are potentially re-classifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. The company has not early adopted this international financial reporting standard.

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2.1.2 Changes in accounting policy and disclosures (continued)

A number of new standards and amendments to standards and interpretations are effective for the SEC financial year beginning 1 April 2013 (and beyond), and have not been early adopted. None of these are expected to have a significant effect on the financial statements of the company:”

International Financial Reporting Standards and amendments issued but not effective for 31 March 2014 year-end


IAS 19, “Employee benefits”

1 January 2013 The IASB has issued an amendment to IAS 19, ‘Employee benefits’, which makes significant changes to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. The company has not early adopted this international financial reporting standard.

IFRS 9 – Financial Instruments (2009)

1 January 2013 This IFRS is part of the IASB’s project to replace IAS 39. IFRS 9 addresses classification and measurement of financial assets and replaces the multiple classification and measurement models in IAS 39 with a single model that has only two classification categories: amortised cost and fair value. The company has not early adopted this international financial reporting standard.

IFRS 9 – Financial Instruments (2010)

1 January 2013 The IASB has updated IFRS 9, ‘Financial instruments’ to include guidance on financial liabilities and derecognition of financial instruments. The accounting and presentation for financial liabilities and for derecognising financial instruments has been relocated from IAS 39, ‘Financial instruments: Recognition and measurement’, without change, except for financial liabilities that are designated at fair value through profit or loss. The company has not early adopted this international financial reporting standard.

Amendments to IFRS 9 – Financial Instruments (2011)

1 January 2015 The IASB has published an amendment to IFRS 9, ‘Financial instruments’, that delays the effective date to annual periods beginning on or after 1 January 2015. The original effective date was for annual periods beginning on or after from 1 January 2013. This amendment is a result of the board extending its timeline for completing the remaining phases of its project to replace IAS 39 (for example, impairment and hedge accounting) beyond June 2011, as well as the delay in the insurance project. The amendment confirms the importance of allowing entities to apply the requirements of all the phases of the project to replace IAS 39 at the same time. The requirement to restate comparatives and the disclosures required on transition have also been modified. The company has not early adopted this international financial reporting standard.

IFRS 10 – Consolidated financial statements

1 January 2013 This standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements. The standard provides additional guidance to assist in determining control where this is difficult to assess. This new standard might impact the entities that a group consolidates as its subsidiaries. The company has not early adopted this international financial reporting standard.



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IFRS 11 – Joint arrangements

1 January 2013 This standard provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed. The company has not early adopted this international financial reporting standard.

IFRS 12 – Disclosures of interests in other entities

1 January 2013 This standard includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The company has not early adopted this international financial reporting standard.

IFRS 13 – Fair value measurement

1 January 2013 This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP. The company has not early adopted this international financial reporting standard.

IAS 27 (revised 2011) – Separate financial statements

1 January 2013 This standard includes the provisions on separate financial statements that are left after the control provisions of IAS 27 have been included in the new IFRS 10. The company has not early adopted this international accounting standard.

IAS 28 (revised 2011) – Associates and joint ventures

1 January 2013 This standard includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11. The company has not early adopted this international accounting standard.

Amendments to IAS 32 – Financial Instruments: Presentation

1 January 2014 The IASB has issued amendments to the application guidance in IAS 32, ‘Financial instruments: Presentation’, that clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. However, the clarified offsetting requirements for amounts presented in the statement of financial position continue to be different from US GAAP. The company has not early adopted this international accounting standard.

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Number Effective date Subject of amendment

Amendment to the transition requirements in IFRS 10, ‘Consolidated financial statements’, IFRS 11, ‘Joint Arrangements’, and IFRS 12, ‘Disclosure of interests in other entities’

1 January 2013 The amendment clarifies that the date of initial application is the first day of the annual period in which IFRS 10 is adopted − for example, 1 January 2013 for a calendar-year entity that adopts IFRS 10 in 2013. Entities adopting IFRS 10 should assess control at the date of initial application; the treatment of comparative figures depends on this assessment.The amendment also requires certain comparative disclosures under IFRS 12 upon transition.The company has not early adopted this international financial reporting standard.


Number Effective date Subject of amendment

Amendments to IFRS 1, ‘First time adoption of IFRS’

1 January 2013 The amendment clarifies that an entity may apply IFRS 1 more than once under certain circumstances.

The amendment clarifies that an entity can choose to adopt IAS 23, ‘Borrowing costs’, either from its date of transition or from an earlier date.

The consequential amendment (as a result of the amendment to IAS 1 discussed below) clarifies that a first-time adopter should provide the supporting notes for all statements presented.

Amendment to IAS 1, ‘Presentation of financial statements’

1 January 2013 The amendment clarifies the disclosure requirements for comparative information when an entity provides a third balance sheet either: as required by IAS 8, ‘Accounting policies, changes in accounting estimates and errors’; or voluntarily.

Amendment to IAS 16, ‘Property, plant and equipment’

1 January 2013 The amendment clarifies that spare parts and servicing equipment are classified as property, plant and equipment rather than inventory when they meet the definition of property, plant and equipment.

Amendment to IAS 32, ‘Financial instruments: Presentation’

1 January 2013 The amendment clarifies the treatment of income tax relating to distributions and transaction costs. The amendment clarifies that the treatment is in accordance with IAS 12. So, income tax related to distributions is recognised in the income statement, and income tax related to the costs of equity transactions is recognised in equity.

Amendment to IAS 34, ‘Interim financial reporting’

1 January 2013 The amendment brings IAS 34 into line with the requirements of IFRS 8, ‘Operating segments’. A measure of total assets and liabilities is required for an operating segment in interim financial statements if such information is regularly provided to the CODM and there has been a material change in those measures since the last annual financial statements.


Annual Improvements issued May 2012

Improvements to IFRSs (Issued May 2012) was issued by the IASB as part the ‘annual improvements process’ resulting in the following amendments to standards issued, but not yet effective for 31 March 2013 year-ends and the company has not early adopted any of the international financial reporting standards:


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2.2 Consolidation

Joint venture

Joint ventures are contractual arrangements whereby two or more parties undertake an economic activity that is subject to joint control.

Investments in joint ventures are accounted for using the equity method of accounting and are initially recognised at cost in the annual financial statements of the Company.

The Company’s share of its joint ventures post acquisition profits or losses are recognised in profit or loss, and its share of post-acquisition movement in reserves is recognised in reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment. When the Company’s share of losses in joint venture equals or exceeds its interest in the joint venture, including any other unsecurable receivables, the Company does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint venture.

When the financial statements of the joint venture are prepared as of a date different from that of the parent’s financial statements, adjustments shall be made for the effects of significant transactions or events that occur between that date and the date of the parent’s financial statements. However, the difference between the end of the reporting period of the joint venture and that of the parent shall be no more than three months.

Unrealised gains on transactions between the Company and its joint ventures are eliminated to the extent of the Company’s interest in the joint ventures. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Company.

2.3 Foreign currency translation

(a) Functional and presentation currencyItems included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The annual financial statements are presented in ‘Emalangeni’ (E), which is the company’s presentation currency.

(b) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.

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2.4 Property, plant and equipment

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Freehold land is not depreciated.

Buildings on freehold land, plant, equipment and motor vehicles are depreciated on a straight line basis over their current anticipated useful lives.

The rates of depreciation used are based on the following estimated current useful lives:

Canal, weirs, conduits and valves 50 yearsDam and spillway 50 yearsLuphohlo civil works 50 yearsBuildings and staff housing 40 yearsGeneration plant 40 yearsLeasehold buildings 30 yearsSubstations, transformers and switchgear 25 yearsDistribution and transmission 25 yearsRadio and communication equipment 10 yearsComputer equipment 3 yearsMotor vehicles 5 yearsOffice furniture and equipment 10 years

The costs of improvements to leasehold buildings are written off over the lesser of the periods of the leases or their useful lives.

The basis of depreciation, useful lives and residual values are assessed annually.

The costs of distribution and transmission assets are stated after deducting customer’s contributions up to 30 June 2009.

Work-in-progress on capital projects is included at cost and is not depreciated until the relevant asset is available for use. Borrowing costs incurred in financing work-in-progress on qualifying capital projects are included in the cost of the project until the project is substantially completed.

The Company recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Company and the cost of the item can be measured reliably. All other costs are recognised in profit or loss as an expense.

Profits and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in profit or loss within other income.



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2.5 Capitalisation of borrowing costs

Borrowing costs attributable to the construction of qualifying assets less all investment income on the specific borrowings are capitalised as part of the cost of those assets over the period of construction. Where active development is interrupted for extended periods, capitalisation is suspended.

2.6 Impairment of assets

(a) Assets carried at amortised cost-Non Financial Assets.

The carrying amounts of assets stated in the statement of financial position, other than inventories and deferred tax assets, are reviewed at each statement of financial position date to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated as the higher of the fair value less costs to sell and its value in use. An impairment loss is recognised in the statement of comprehensive income whenever the carrying amount exceeds the recoverable amount.

In assessing value in use, the expected future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. A cash generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses in respect of cash-generating units are allocated to assets in the cash-generating unit on a pro rata basis.

A previously recognised impairment loss is only reversed if there has been a change in the estimates used to determine the recoverable amount and if there is an indication that the impairment loss may have been reversed. The reversal is limited to an amount equal to the carrying amount that would have been determined, net of depreciation and amortisation, had no impairment loss been recognised in previous years.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the group may measure impairment on the basis of an instrument’s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.

The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

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2.7 Share capital

Shares are classified as equity when there is no contractual obligation to transfer cash or other financial assets. Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds, net of tax.

2.8 Financial assets

The Company classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Company commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the statement of comprehensive income within ‘other (losses)/gains – net’ in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of other income when the Company’s right to receive payments is established.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available for sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security.

Financial assets are derecognised when the contractual right to receive cash flows from the assets has expired; or when the Company has transferred its contractual right to receive the cash flows of the financial assets, and either:– Substantially all the risks and rewards of ownership have been transferred; or– The Company has neither retained nor transferred substantially all the risks and rewards, but has not retained control.

(1) Non-financialassets

Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as non-current assets.

As at the 31 March 2014 the company has no designated hedging relationships for which hedge accounting will be applied.

Financial assets at fair value through profit or loss are financial assets held for trading. Assets in this category are classified as non-current assets.



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2.8 Financial assets (continued)

(2) Loansandreceivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the statement of financial position date. These are classified as current assets. The Company’s loans and receivables comprise ‘trade and other receivables’ and cash and cash equivalents in the statement of financial position (notes 19 and 21).

2.9 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of electricity and electricity related services such as electricity connections in the ordinary course of the Company’s activities. Revenue is shown net of estimated returns, rebates and discounts.

The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Company’s activities as described below. The amount of revenue is not considered to be reliably measured until all contingencies relating to the sale have been resolved. The Company bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

a) Electricity RevenueElectricity revenue is recognised when electricity is consumed by the customer.

Revenue from customer contributions is recognised when the customer has been fully connected to the electricity grid and the lines energised.

b) Sale of servicesSale of services is recognised in the accounting period in which the services are rendered, by reference to the completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided.

c) Other revenue/incomeOther revenue is recognised when the significant risks and rewards of ownership are transferred to the buyer and the amount of revenue can be measured reliably.

d) Deferred revenueDeferred electricity revenue comprises unearned prepaid electricity revenue from domestic and small commercial customers. The company utilizes an internally generated model to establish an estimate of unearned revenue from prepaid customers.

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2.9 Revenue recognition (continued)

Deferred contributions from customers towards infrastructure relate to fees for connection received in advance from prospective electricity customers. These fees are recognised as revenue when the connections are completed.

2.10 Finance income

Finance income comprises interest receivable on loans, advances, trade receivables and income from financial market investments. Interest is only recognised where it is probable that the economic benefits associated with the transaction will flow to the Company. Finance income is recognised on a time-proportionate basis that takes into account the effective yield on assets.

2.11 Finance cost

Finance cost comprises interest payable on borrowings calculated using the effective interest rate method as well as interest resulting from the unwinding of discount on provisions.

2.12 Dividend distributions

Dividend distribution to the company’s shareholder is recognised as a liability in the Company’s annual financial statements in the period in which the dividends are approved by the company’s shareholder.

Dividend income is recognised when the right to receive payment is established.

3 Financial risk management

(1) Financial risk factors

The Company’s activities expose it to a variety of financial risks including currency risk, credit risk, cash-flow interest rate risk (floating loans), liquidity risk, fair value interest risk, price risk. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. The Company uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by management under policies approved by the Board of Directors. Management identifies, evaluates and hedges financial risks in close co-operation with the Company operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas such as interest rate risk, credit risk and investing excess liquidity.


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3 Financial risk management (continued)

(1) Financial risk factors (continued)

(a) Market risk

(i) Foreign exchange risk

Foreign exchange risk is the risk that the value of financial instrument will fluctuate as a result of changes in foreign exchange rates.

The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with the Euro. Foreign exchange risk arises when from future long term repayments recognised as liabilities.

To manage the foreign currency exchange risk exposure arising from foreign denominated long term loans the Company uses cross currency swaps.

A change of +/-10% in exchange rates at the reporting date would have increased (decreased) profit or loss and foreign borrowings by the amounts shown below:

Borrowings 2014

E E Equity Profit or lossIncrease in exchange rate by 10% (28 724 172) (28 724 172)Decrease in exchange rate by 10% 28 724 172 28 724 172

Borrowings 2013

E E Equity Profit or lossIncrease in exchange rate by 10% (29 681 672) (29 681 672)Decrease in exchange rate by 10% 29 681 672 29 681 672

The company conducts business transactions in three major currencies: being the South African Rand, Euro and US dollar. This by implication means that there is an exposure to currency risk arising from adverse movements in foreign exchange rates.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)


(3) Fair value estimation (continued)

Foreign exchange risk (continued)

The effect of exchange rate fluctuations on the company’s income statement is analysed as follows:

Borrowings 2014

Balance inforeign

currency

Rate atyearend

+ 12% - 7% SZLequivalent

Effect of 9%increase in the income statement

Effect of 7%decrease in

theincome

statement

Euro Euro

European Investment Bank – Motraco Project Loan

4 737 000 14.5652 15.8761 13.5456 68 995 352 6 209 582 (4 829 675)

European Investment Bank – 400kV Integration Project Loan

2 058 823 14.5652 15.8761 13.5456 29 987 176 2 698 846 (2 099 102)

European Investment Bank-Motraco Project loan

6 905 633 14.5652 15.8761 13.5456 100 581 918 9 052 373 (7 040 734)

Swaziland Government Loan No.6

55 918 14.5652 15.8761 13.5456 814 453 73 301 (57 102)

13 757 374 200 378 899 18 034 102 (14 026 613)

Borrowings 2013

Balance inforeign

currency

Rate atyearend

+ 12% - 7% SZLequivalent

Effect of 12%increase in the

income statement

Effect of 7%decrease in the

income statement

Euro Euro

European Investment Bank – Motraco Project Loan

5 337 000 11.8427 13.2638 11.0317 63 204 490 7 584 539 (4 424 314)

European Investment Bank – 400kV Integration Project Loan

2 352 941 11.8427 13.2638 11.0317 27 865 174 3 434 821 (1 950 562)

European Investment Bank-Motraco Project loan

8 200 000 11.8427 13.2638 11.0317 97 110 140 7 836 356 (6 797 710)

Swaziland Government Loan No.6

93 695 11.8427 13.2638 11.0317 1 109 606 133 153 (77 672)

15 983 636 189 289 410 18 988 869 (13 250 258)


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Foreign exchange risk (continued)

The table below shows the sensitivity analysis of the value of the Motraco EIB loan embedded derivative (refer to Note 28A) due to the change in the value of Motraco which is the key input to the valuation of the embedded derivative. The other input variables are assumed to be constant.

The effect of exchange rate fluctuations on the company’s income statement is analysed as follows:

Investment in Motraco 2014

Effect of 14% Effect of 8% Balance increase on the decrease on the in foreign Rate at SZL income the income currency year end +14% -8% equivalent statement statement U$D U$D Investment in Motraco 24 785 999 10.5660 12.0452 9.7207 261 887 630 36 664 268 (20 951 010)

24 785 999 261 887 630 36 664 268 (20 951 010)

Investment in Motraco 2013

Effect of 14% Effect of 8% Balance increase on the decrease on the in foreign Rate at SZL income the income currency year end +14% -8% equivalent statement statement

U$D U$D Investment in Motraco 24 122 865 9.2493 10.5442 8.5094 223 119 615 31 236 746 (17 849 569)

24 122 865 223 119 615 31 236 746 (17 849 569)

(ii) Price risk

Price risk includes equity price risk.

Equity price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices.

The Company is currently not exposed to equity price risk because at the statement of financial position date there were no investments held by the Company and classified either as available for sale or at fair value through profit and loss.

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(a) Market risk (continued)

(iii) Cashflowandfairvalueinterestraterisk

Cash flow and interest rate risk is the risk that the value and cash flow of a financial instrument will fluctuate due to changes in market interest rates.

As the Company has significant interest-bearing assets and liabilities, as some of the Company’s income and operating cash flows are dependent of changes in the market interest rates and this has an impact on the company’s profits. The Company has swaps in place to hedge against fluctuating interest rates on borrowings.

The Company’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Company to cash flow interest rate risk. Borrowings and long-term loans issued at fixed rates expose the Company to fair value interest rate risk. Currently there are loans issued at fixed interest rate and as such the Company is exposed to both fair value and cash flow interest rate risk.

During 2013 and 2014, the Company’s borrowings at variable rates were denominated in the Swaziland Lilangeni and Euros.

The table below gives an indication of the Company’s monetary sensitivity to changes in interest rates.

2014 Cash at bank Borrowings Other Assets E E E

Base amounts 57 987 943 406 591 339 23 063 778Interest plus 1% 58 567 822 410 657 253 23 294 416Interest less 1% 57 408 064 402 525 427 22 833 140

2013 Cash at bank Borrowings Other Assets E E E

Base amounts 60 386 020 312 454 391 25 712 021Interest plus 1% 60 989 880 315 578 935 25 969 141Interest less 1% 59 782 160 309 329 847 25 454 901


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(b) Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation and cause the Company to incur a financial loss.

The Company has exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Key areas where the Company is exposed to credit risk are:

- Other assets,- Derivative financial instruments- Cash and cash equivalents- Deposits with banks and other financial institutions.

The Company structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or Company’s of counterparties. Such risks are subject to an annual or more frequent review.

The major concentration of credit risk arises from the Company’s receivables and investment securities in relation to the nature of customers and issuers. No collateral is required in respect of financial assets. Reputable financial institutions are used for investing and cash handling purposes.

Quality control and risk department makes regular reviews to assess the degree of compliance with the Company procedures on credit and the overall control environment.

The maximum exposure to credit risk is represented by the carrying value of each financial asset in the statement of financial position.

To manage the credit risk on accounts receivables the company has mechanisms in place which include credit vetting procedures, robust debt collecting methods pre-approved credit limits. As part of credit risk management the company has full converted its domestic and small commercial customers to pre-paid credit electricity metering system.

i) Credit quality of financial assets

The credit quality of financial assets that are neither past due nor impaired is assessed by reference to internal credit risk ratings. The entity’s financial assets, grouped according to internal credit risk ratings, are as follows:

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i) Credit quality of financial assets (continued)

Derivatives designated Trade and Cash and as fair value other Other cash hedging receivables assets equivalents instruments Total E E E E E

As at 31 March 2014 Counterparties without external credit ratings:- - Low Risk 147 176 528 23 063 778 59 814 723 89 017 558 319 072 587- General Credit risk 20 951 724 - - - 20 951 724- High risk 4 321 161 - - - 4 321 161

172 449 413 23 063 778 59 814 723 89 017 558 344 345 472

As at 31 March 2013 Counterparties without external credit ratings:- - Low Risk 33 555 007 25 712 021 60 386 020 45 615 966 165 269 014- General Credit risk 87 089 109 - - - 87 089 109- High risk 26 845 325 - - - 26 845 325

147 489 441 25 712 021 60 386 020 45 615 966 279 203 448

The credit risk rating of financial assets is based on the following:

Low risk - This category is utilised for fully performing accounts that are classified as current and a month due. All accounts for the Government of Swaziland are included in this category.

General risk - This category is for all customer accounts that are 60-91 days, where a moderate risk taken, exclusive of Government of Swaziland accounts.

High risk - This category is for all high risk customers and comprises all customers that are over 91 days due exclusive of Government of Swaziland accounts.

The table below shows the credit risk for the financial instruments. This table shows the short and long term rating of the counter parties:


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i) Credit quality of financial assets (continued)

Short Long Term TermCountry Correspondence Bank Currency Rating Rating Cash and Cash Equivalents Kingdom of Swaziland Standard Bank of Swaziland Lilangeni F2 BBBKingdom of Swaziland Nedbank Lilangeni F2 BBB-Kingdom of Swaziland First National Bank Lilangeni F2 BBB-Kingdom of Swaziland Stanlib Lilangeni Not rated Not ratedKingdom of Swaziland African Alliance Lilangeni Not rated Not rated Borrowings Kingdom of Swaziland Public Service Pension Fund Lilangeni Not rated Not ratedFederal Republic of Germany European Investment Bank Euro F+1 AAAThe Republic of South Africa Development Bank of Southern Africa Rands F2 A-Federal Republic of Germany Kreditanstalt Fur Wiederraufbau Euro F+1 AAA Derivatives Kingdom of Swaziland Investec and capital markets Lilangeni Not rated Not ratedKingdom of Swaziland Standard Corporate and Merchant Bank Lilangeni F2 BBB

(2) Capital risk management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns and benefits for shareholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt or enter into further financing as applicable.

The Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the statement of financial position) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the statement of financial position plus net debt.

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i) Financial risk factors (continued)

(2) Capital risk management (continued)

During 2014, the Company’s strategy was to maintain the gearing ratio (before interest accrual is taken into account) within 25%. The gearing ratios before interest accrual at 31 March 2014 and 2013 were as follows:

2014 2013 E E

Total Borrowings (note 27) 406 591 339 312 454 391Less: Cash and cash equivalents (note 21) (59 814 723) (60 386 020)

Net debt 346 776 616 252 068 371Total equity 1 248 476 223 1 144 172 130

Total capital 1 595 252 839 1 396 240 501

Gearing ratio 22% 17.9%

The deteriorated gearing ratio is primarily due to the weakening of the Lilangeni against the major foreign currencies which are the Euro and US Dollar. Furthermore, there has been a significant decrease on cash and cash equivalents as at 31 March 2014 compared to the previous year as a result of increased investment in the capital infrastructure.

(3) Fair value estimation

The fair value of financial instruments traded in active market (such as derivative instruments) is based on quoted market prices at the statement of financial position date.

The carrying value of trade receivables and payables are assumed to approximate their fair values due to the short-term nature of trade receivables. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments.

For financial assets and liabilities with maturity of less than one year, the face value less any estimated credit adjustments are assumed to approximate their fair values.

3.2 Liquidity Risk

Cash flow forecasting is performed by the company. The Company monitors rolling forecasts of the company’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the company does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the company’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and, if applicable external regulatory or legal requirements.


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3.2 Liquidity Risk (continued)

Liquidity Risk would be the inability to meet or honour obligations as they fall due. Amounts included in the table are the contractual undiscounted cash flows. The amounts included in the table are the contractual discounted cash flows. As a result, these amounts will not reconcile to the amounts disclosed on the statement of financial position except for short-term payables and receivables to be settled within 12 months where discounting is not applied.The Liquidity Risk Analysis statement as at 31 March 2014 is as follows:

Liquidity risk-Financial Assets and Liabilities

Less than Between 2 Over 1 year and 5 years 5 years Total E E E E

31 March 2014 Financial Assets: Trade receivables 111 407 240 - - 111 407 240Cash and cash equivalents 59 814 723 - - 59 814 723

171 221 963 - - 171 221 963

31 March 2013 Financial Assets: Trade receivables 103 846 853 - - 103 846 853Cash and cash equivalents 60 386 020 - - 60 386 020

164 232 873 - - 164 232 873

31 March 2014 Financial Liabilities: Trade and other payables 158 673 528 - - 158 673 528Bank overdraft 42 799 - - 42 799Shareholders loan 11 240 181 - - 11 240 181Foreign borrowings 14 570 145 59 125 449 133 988 807 207 684 401Local borrowings 23 796 164 102 513 515 56 491 749 182 801 428

208 322 817 161 638 964 190 480 556 560 442 337

31 March 2013 Financial Liabilities: Trade and other payables 183 014 050 - - 183 014 050Bank overdraft 124 - - 124Shareholders loan 11 240 181 - - 11 240 181Foreign borrowings 8 795 733 30 552 640 98 002 484 137 350 857Local borrowings 15 000 000 43 986 894 34 108 665 93 095 559

218 050 088 74 539 534 132 111 149 424 700 771

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3.2 Liquidity Risk (continued)

Liquidity risk- Derivatives


31 March 2014 Derivative financial assets - 89 017 558 - 89 017 558Embedded derivative assets - 2 538 533 - 2 538 533

- 91 556 091 - 91 556 091

31 March 2013 Derivative financial assets - 45 615 966 - 45 615 966Embedded derivative assets - - - -

- 45 615 966 - 45 615 966


31 March 2014 Derivative financial liabilities - 3 309 817 - 3 309 817Embedded derivative liability - - 122 230 133 122 230 133

- 3 309 817 122 230 133 125 539 950

31 March 2013 Derivative financial liabilities - 6 085 532 - 6 085 532Embedded derivative liability - - 119 676 731 119 676 731

- 6 085 532 119 676 731 125 762 263


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3.3 Fair value hierarchy disclosures

The table below analyses financial instruments carried at fair value by the level of fair value hierarchy. The fair value hierarchy depends on the extent to which quoted prices are used in determining the fair value of the specific instruments. The different levels are defined as follows:

Level 1: Fair value is based on quoted prices (unadjusted) in active markets for identical assets or liabilities. These are readily available in the market and are normally obtainable from multiple sources.

Level 2: Fair value is based on input other than quoted prices included in Level 1 that is observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Level 3: Fair value is based on input for the asset or liability that is not based on observable market data (i.e.unobservable inputs)

For the valuation of the company’s level 2 and 3 of its financial instruments refer to notes 4.11 and 4.12

Level 1 Level 2 Level 3 Total E E E E

2014 Financial Instruments-Assets Derivative financial instruments - 89 017 558 - 89 017 558Embedded derivative asset - 2 538 533 - 2 538 533

- 91 556 091 - 91 556 091

2013 Financial Instruments-Assets Derivative financial instruments - 45 615 966 - 45 615 966Embedded derivative asset - - - -

- 45 615 966 - 45 615 966

Level 1 Level 2 Level 3 Total E E E E 2014 Financial Instruments-Liabilities Embedded derivative liability - 5 354 016 116 876 117 122 230 133Derivative financial instruments - 3 309 817 - 3 309 817

- 8 663 833 116 876 117 125 539 950

2013 Financial Instruments-Liabilities Embedded derivative liability - 6 241 091 113 435 640 119 676 731Derivative financial instruments - 6 085 532 - 6 085 532

- 12 326 623 113 435 640 125 762 263

For the reconciliation of Level 2 and 3 financial instruments (Embedded Derivatives) refer to Note 28

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4.0 Taxation

Deferred income taxesDeferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the annual financial statements. Currently enacted tax rates are used in the determination of deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax liabilities and deferred tax assets are recognised for all temporary difference arising from the following differences:

i) The excess of book values of fixed assets over their written down values for tax purposes;ii) The excess of book values of finance leases over their written down values for tax purposes;iii) Income and expenditure in the annual financial statements of the current year dealt with in other years for tax

purposes.iv) The unrealised foreign exchange gains/or losses on Motraco which represent a potential future dividend income to

be declared by Motraco.v) A deferred tax asset will also arise from tax losses to the extent to which the company expects to utilise the tax losses

against future taxable profits.vi) The company entity also recognises deferred tax from temporary differences arising from provisions, prepayments,

retirement benefit assets, deferred income, and embedded derivatives.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Current TaxThe charge for the current tax is the amount of income taxes payable in respect of the taxable profits for the current period. It is calculated using tax rate that have been enacted or substantially enacted by the statement of financial position date.

• Taxation is recognised in profit or loss except to the extent that it relates to items recognised in Other Comprehensive Income.

• Taxation is calculated based on tax laws enacted at balance sheet date.• The policy in respect of the offsetting of deferred tax assets and liabilities

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation, and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.


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4.1 Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Cost is determined on the weighted average basis and includes expenditure incurred in acquiring inventories and bring them to their existing location and condition.

4.2 Provisions

Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Company expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

The Company recognises a provision for onerous contracts when the expected benefits to be derived from a contract are less than the unavoidable costs of meeting the obligations under the contract.

Restructuring provisions comprise lease termination penalties and employee termination payments, and are recognised in the period in which the Company becomes legally or constructively committed to payment. Costs related to the ongoing activities of the Company are not provided in advance.

4.3 Cash and cash equivalents

Cash and cash equivalents are carried in the statement of financial position at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held with banks, other short term high liquid investments with original maturities of three months or less, and bank overdrafts.

Bank overdrafts are included within borrowings in current liabilities on the statement of financial position.

Cash and cash equivalents does not include other assets which include restricted cash for rural electrification projects funded by the Government and the Chinese Government.

4.4 Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in profit or loss.

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4.5 Borrowings

Borrowings are initially recognised at fair value, which is usually evidenced by the fair value of the consideration received, net of transaction costs incurred, when they become party to the contractual provisions. Borrowings are subsequently stated at amortised cost using the effective interest rate method; any difference between the proceeds (net of transaction value) and the redemption value is recognised in profit or loss over the period of the borrowings.

For below market interest rate loans, the borrowings are initially recognised at fair value and subsequently amortised using the effective interest rate method. The difference between the below market interest rate and the effective interest rate is recognised in the statement of comprehensive income.

Borrowings are derecognised when they are extinguished, that is when the obligation is discharged, cancelled or expires.

4.6 Employee benefits

a) Short-term employee benefitsThe cost of all short-term employee benefits is recognised during the period in which the employee renders the related service. The provision for employee entitlements to salaries and annual leave represent the amount that the Company has a present obligation to pay, as a result of employees’ services provided up to the statement of financial position date. The provision has been calculated at undiscounted amounts based on current salary rates.

b) Pension obligationsA defined contribution plan is a pension plan under which the group pays fixed contributions into the plan. The Company operates a defined contribution plan. The Company pays contributions to a privately administered pension plan on a mandatory, contractual or voluntary basis. Once the contributions have been paid, the Company has no further payment obligations. The regular contributions constitute net periodic costs for the year in which they are due and as such are included in staff costs. A defined benefit plan is a pension plan that is not a defined contribution plan.

c) Defined benefit plansThe Company’s net obligation in respect of defined benefit pension plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine the present value, and the fair value of any plan assets is deducted. The discount rate is the yield at statement of financial position date on government bonds that have maturity dates approximating the terms of the Company’s obligations. The calculation is performed by a qualified actuary using the projected unit credit method. The actuarial valuations are carried out on a yearly basis.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in profit or loss.


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4.6 Employee benefits (continued)

c) Defined benefit plans (continued)Any cumulative unrecognised past service costs and actuarial gains or losses are taken into account in the computation of the net defined benefit obligation or asset.

In calculating the Company’s obligation in respect of a plan, to the extent that any cumulative unrecognised in actuarial gain or loss exceeds ten percent of the greater of the present value of the defined benefit obligation and the fair value of plan assets, it is recognised in profit or loss over the expected average remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognised.

Where the calculation results in a benefit to the Company, the recognised asset is limited to the net total of any unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or reduction in future contributions to the plan.

The company intends to convert from the current Defined Benefit plan to a Defined Contribution plan. The plan to convert has been implemented pending the approval of the Registrar of insurance and retirement funds.

d) Termination benefitsTermination benefits are payable whenever an employee’s employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Company recognises termination benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after statement of financial position date are discounted to present value.

e) Performance bonusThe bonus provision can be recognised provided the amount can be reliable measured at the balance sheet date. The company recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation to make bonus payments.

Liabilities for bonus plans are expected to be settled within 12 months and are measured at the amounts expected to be paid when they are settled.

f) Statutory obligations Provision is not made for statutory termination obligations in terms of the Employment Act, 1980. It is considered that the Company’s contribution to the Pension Fund which can be recovered against such statutory obligations, at present, exceed any such liability.

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4.7 Grants received

Grants, including non-monetary grants at fair value, are recognised when there is reasonable assurance that the Company will comply with the conditions attached to the grant and that the grant will be received.

Property, plant and equipment acquired from the proceeds of grants is depreciated in accordance with the Company’s property, plant and equipment accounting policy. Grants utilised to acquire property, plant and equipment are initially recognised as deferred income and subsequently recognised as in profit or loss on a systematic and rational basis over the useful lives of the assets.

4.7.1 Grants received –Below market interest rate

Accounting treatment for below interest market rate received from the Government;

The difference between the proceeds and the fair value of the loan on day one is recognised as deferred income.

The difference between the market interest rate at which interest is accrued at and the actual interest rate payable to the lender is recorded as deferred income. The cash saving is transferred from cash and cash equivalents to a “counterparty fund” to be used for future development projects. Capital items funded from the Counterparty fund are transferred to grants received and the relevant assets recorded at original cost.

Any interest received on the “counterparty fund” bank account is not recorded as interest income, but is deferred (in a similar manner to the interest rate subsidy) for use in future projects.

Grants received to defray operating expenditure are recognised in profit or loss when the expenditure has been incurred.

Government and donor grantsGrants received by the Company from Government and donors to acquire assets are shown as deferred income and the relevant assets are brought to account at their actual cost.

The company recognises non-monetary grants received from Government at nominal value.

Rural electrification fundFunds contributed by Government, donors and consumers to rural electricity projects are held in the Rural Electrification Fund until expended, at which time these funds are transferred to consumer contributions and netted off the cost of related distribution or transmission assets.

Counterparty fundContributions received from interest differential on the Swaziland loan No. 4 and the European Investment Bank loan and interest received on deposits are held in the Counterparty Fund until expended. Capital items funded from the Counterparty Fund are transferred to grants received and the relevant assets are brought to account at their actual cost.


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4.8 Transfers from customers

Accounting policy for transfers received before 1 July 2009

Cash contributions made by the Company’s customers to fund part of the installation equipment required to connect them to the electricity network were deducted in arriving at the carrying amount of the installation equipment. Profit or loss effect of the capital contributions is consequently recognised by way of a reduced depreciation expense.

Cash contributions made by the Company’s customers to fund part of the installation equipment required to connect them to the electricity network are recognised as revenue in profit or loss as soon as the connections are completed. Electricity connection contributions for assets not yet completed are deferred and recognised as a liability in the statement of financial position. An asset constructed or acquired for which the SEC receives a cash contribution is initially recognised at cost. A physical asset contributed by a customer is initially recognised at fair value. Contributions received after 01 July 2009 are recognised in the statement of comprehensive income as revenue (refer to IFRIC 18 below).

IFRIC 18, ‘Transfers of assets from customers’ (effective 1 July 2009). This Interpretation clarifies the accounting treatment for transfers of property, plant and equipment received from customers. This Interpretation applies to agreements with customers in which the entity receives cash from a customer when that amount of cash must be used only to construct or acquire an item of property, plant and equipment and the entity must then use the item of property, plant and equipment either to connect the customer to a network or to provide the customer with on-going access to a supply of goods and services, or to do both.

4.9 Derecognition of financial assets and liabilities

Financial assets are derecognised when the contractual right to receive cash flows from the assets has expired; or when the Company has transferred its contractual right to receive the cash flows of the financial assets, and either:– Substantially all the risks and rewards of ownership have been transferred; or– The Company has neither retained nor transferred substantially all the risks and rewards, but has not retained control.

Financial liabilities are derecognised when they are extinguished, that is when the obligation is discharged, cancelled or expires.

4.10 Offsetting financial assets and financial liabilities

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

4.11 Derivative financial instruments and hedging activities

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

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4.11 Derivative financial instruments and hedging activities (continued)

The full fair value of a derivative is classified as a non-current asset or liability when the remaining hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.

As at 31 March 2014 the company has not applied any hedge accounting.

Embedded derivative

In order to determine whether the hybrid instrument meet the definition of an embedded derivative, the company considers:

a) whether a host contract exists;b) whether some of the cash flows that otherwise would be required by the host contract have been modified according

to a specified index or variable, and as a result financial risks have effectively shifted between the parties; andc) whether the portion of the hybrid instrument that causes the modification in the cash flows attached to the contract

meets the definition of a derivative.

An embedded derivative is required to be separated from the host contract and accounted for as a stand-alone derivative at fair value through profit or loss if the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract.

4.12 Critical accounting estimates and judgements

The Company makes estimates and assumptions that affect the reported amounts of assets and liabilities within the financial year. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The major area where management has used its judgment and accounting estimates are with regards to:

(a) Provision for post-employment benefits disclosed under note 31An actuary was appointed to perform the valuation to determine the Company’s obligation in this regard. The assumptions and judgments used by the actuary were considered by the Company and were deemed reasonable in light of the prevailing and anticipated future economic conditions.

(b) Valuation of embedded derivative –Motraco EIB LoanThe Company has used estimated future cash flows and market interest rates to estimate the value of the embedded derivative related to the EIB Motraco Equity Loan (Note 28A). The estimates used are management’s best estimates. The key inputs and estimates have been outlined below:

Valuation dateThe valuation date is 31 March 2014.

Maturity dateThe maturity date of the EIB loan which is 10 June 2019.

Company valueThe equity valuation of Motraco was performed for the period ended 31 October 2011. A risk-free growth rate was then applied to the equity value of Motraco values to determine the equity values as at 31 March 2014.The USD Zero swap curve was applied.


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4.12 Critical accounting estimates and judgements (continued)

Company valueDividend forecasts were used to future company values and then derive a forward dividend yield term structure. It was assumed that the dividends beyond the forecasted period (2030) would grow at a perpetuity growth rate of 2%.

VolatilityThe volatilities of the suitable proxy companies was calculated and adjusted for country specific risk by applying a factor determined by comparing the volatilities of the respective proxy country’s main stock index and the volatility of the South African main stock index (JSE ALSHARE). The historical share price data was sourced from McGregor BFA and applied equally weighted technique to calculate the volatilities.

(c) Valuation of embedded derivative –Public Service Pension Fund LoanThe Company has used estimated market interest rates to estimate the value of the embedded derivative related to the Public Service Pension Fund Loan (Note 28B). The estimates used are management’s best estimates. The key inputs and estimates have been outlined below:


Maturity dateThe maturity date of the PSPF loan is 15 September 2021.

Embedded Derivative valuationThe valuation uses a swap-curve (interest rate curve) to estimate the value of the embedded derivative liability which represents an estimate of the present value of the PSPF loan cash-flows that will be dependent on the prime rate.

(d) Valuation of embedded derivative –400kV integration project loanThe Company has used estimated market interest rates to estimate the value of the embedded derivative related to the 400kV integration Loan (Note 28C). The estimates used are management’s best estimates. The key inputs and estimates have been outlined below:


Maturity dateThe maturity date of the 400 kV integration loan is 15 October 2020.

Embedded Derivative valuationThe valuation uses a swap-curve (interest rate curve) to estimate the value of the embedded derivative liability which represents an estimate of the present value of the 400Kv integration loan cash-flows that will be dependent on the market interest rate.

83





(e) Valuation of embedded derivative –The Electricity Wheeling Agreement

The Company has used estimated US inflation forecasts and the wheeling electricity charges to estimate the value of the embedded derivative related to the Electricity Wheeling Agreement (Note 28D). The estimates used are management’s best estimates. The key inputs and estimates have been outlined below:


Maturity dateThe maturity date of the electricity wheeling agreement is 31 September 2024.

Embedded Derivative valuationThe valuation uses a swap-curve (inflation rate curve) to estimate the value of the embedded derivative liability which represents an estimate of the present value of the electricity wheeling charges cash-flows that will be dependent on the US inflation rate.

(f) Valuation of embedded derivative –Power Supply Agreement with Electricidade De Mocambique E.P.

The Company has used estimated foreign currency exchange rate between the US Dollar and Lilangeni forecasts and the electricity supply charges to estimate the value of the embedded derivative related to the Power Supply Agreement (Note 28E). The estimates used are management’s best estimates. The key inputs and estimates have been outlined below:


Maturity dateThe maturity date of the Power Supply Agreement is 31 December 2014.

Embedded Derivative valuationThe valuation uses a swap-curve (foreign currency exchange rate curve-US Dollar to Lilangeni) to estimate the value of the embedded derivative liability which represents an estimate of the present value of the electricity supply charges cash-flows that will be dependent on the foreign currency exchange rate between the US Dollar and Lilangeni.

(g) Estimated impairment of trade and receivables The Company tests annually whether trade and other receivables suffered any impairment in accordance with the accounting policy stated in 2.6. The recoverable amounts of trade and other receivables have been determined based on discount cash inflows. These calculations require the use of estimates (Note 19).


84




(h) DepreciationThe Company charges depreciation as an expense on items of property, plant and equipment (Note 15) based on the useful lives of the different items of property, plant and equipment. The useful lives are management’s best estimates. Management reviews the useful lives of assets on an annual basis.

(i) Income taxesThe Company recognises liabilities for anticipated tax based on estimates of whether additional taxes will be due. Where the final tax income of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

(j) Capital contributions revenueCapital contributions from customers are recognised as revenue to the extent the contributions have been utilised in the constructions of these assets and other related electricity connection costs have been incurred. The amounts which have not been utilised towards these new electricity connections are recognised as deferred revenue. The pre IFRIC 18 contributions were recognised net of the cost of the constructed assets and amortised over the useful lives of the these assets . Refer to g) above for the estimation of depreciation.

(k) Prepaid revenueThe assumption is that the customer buying pattern is consistent from month to month and that most sales takes place during the third and fourth weeks of the month, an assumption was also made that the percentage of active buying consumer index indicates a close to constant trend with a lowest of 74% and a highest of 78% which suggest a consistent buying behaviour of customers. Another noted pattern which was observed and used as part of the assumptions is that the combined sales for weeks 3 and 4 of every month always being higher than that of week 1 and 2 of that month. The average ratio is 55% to 45% respectively. The ratio of 55:45 is used to calculate the estimated prepaid revenue, that is, 55% of week 3 and 4 of prepaid revenue receipts is recognised as prepaid. Prepaid revenue that will not be used is negligible and therefore its impact is not included in the model.

The table below shows the sensitivity analysis of deferred revenue due to the change in the customer’s electricity consumption patterns which is the key input variable to the deferred revenue model used by the company to estimate the amount of revenue earned and deferred derived from prepaid customers. The current consumption pattern assumption is that 55% of the March 2014 revenue is deferred; therefore the sensitivity analysis shows the impact of the change in this assumed spending pattern. The other input variables are assumed to be constant.

Deferred revenue 2014

Effect of 5% Effect of 5% increase on the decrease on the Balance income statement income statement E E E

Deferred revenue 24 932 583 1 246 629 (1 246 629)

24 932 583 1 246 629 (1 246 629)

Deferred revenue 2013

Deferred revenue 22 860 153 1 143 008 (1 143 008)

22 860 153 1 143 008 (1 143 008)

85





(l) Sinking Fund 1 valuation

The fixed USD payments towards the sinking fund are discounted by the USD swap curve, as sourced from Bloomberg. The EUR amount receivable at maturity is converted to a USD amount by applying the FX Forward rate, as sourced from Bloomberg. The USD amount is then discounted by the USD swap curve. Finally, the fair value of the swap is determined as the difference between the sum of the discounted USD cash flows and the discounted EUR (after conversion to USD) amount. (Note 29A). The estimates used are management’s best estimates. The key inputs and estimates have been outlined below:

Valuation dateThe valuation date is 31 March 2014

Maturity dateThe maturity date of the sinking fund is 5 June 2019

Sinking Fund 1 valuationThe valuation uses a swap-curve (USD Swap curve) to estimate the value of the sinking fund asset which represents an estimate of the present value of the cash-flows that will be dependent on the US/ZAR exchange rate to settle the EIB loan in 10 June 2019.

(m) Sinking Fund 2 valuation

The fixed ZAR payments towards the sinking fund are discounted by the ZAR swap curve, as sourced from the Bond Exchange of South Africa, a subsidiary of the JSE. The USD amount receivable at maturity is converted to a ZAR amount by applying the FX Forward rate, as sourced from Bloomberg. The ZAR amount is then discounted by the ZAR swap curve. Finally, the fair value of the swap is determined as the difference between the sum of the discounted ZAR cash flows and the discounted USD (after conversion to ZAR) amount. (Note 29A). The estimates used are management’s best estimates. The key inputs and estimates have been outlined below:

Valuation dateThe valuation date is 31 March 2014

Maturity dateThe maturity date of the sinking fund is 5 June 2019

Sinking Fund 1 valuationThe valuation uses a swap-curve (ZAR Swap curve) to estimate the value of the sinking fund asset which represents an estimate of the present value of the cash-flows that will be dependent on the US/ZAR exchange rate to settle the EIB/Motraco embedded derivative liability in 10 June 2019.

4.13 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

4.14 Comparative Figures

Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.


86



2014 2013 E E

5 Revenue 5.1 The analysis of electricity revenue per customer categories is as follows: - Domestic and Small Commercial 444 285 674 387 351 011 - Irrigation, Industrial, and Large Commercial 724 415 461 644 495 061 - Other 784 330 1 358 111 - Contributions from customers towards infrastructure 95 043 043 55 181 013

1 264 528 508 1 088 385 196

5.2 The analysis of electricity by service revenue nature is as follows: - Revenue from sale of electricity 1 169 485 465 1 033 204 183 - Contributions from customers towards infrastructure 95 043 043 55 181 013

1 264 528 508 1 088 385 196

6 Cost of sales Cost of sales consists of electricity purchases, electricity wheeling charges and generation costs. Electricity purchases 627 251 731 523 795 785 Electricity wheeling charges 26 835 544 20 946 166 Electricity generation cost 36 532 960 33 355 942 Electricity transmission costs 99 114 158 99 259 688 Amortisation of USL electricity prepayment 10 000 000 10 000 000

799 734 393 687 357 581

7 Other income Projects revenue - 921 347 Rental income 1 776 027 1 238 115 Profit on disposal of property, plant and equipment 88 000 3 749 894 Profit on sale of scrap 404 113 373 754 Bad debt recovery 3 869 041 449 497 Reconnection fees 4 410 475 2 303 161 Other income ( equipment hire, quotation fees, etc) 6 882 759 3 948 484 Tampering charges 474 814 388 990 Tender fees 94 650 84 860 Grant amortisation (Note 7.1) 10 455 961 8 699 852

28 455 840 22 157 954

87




2014 2013 E E

7 Other income (continued) 7.1 Grant amortisation Grants realised during the year (Note 24) 8 757 722 7 131 670 Grants received to defray operating expenditure 1 698 239 1 568 182

10 455 961 8 699 852

8 Income from operation before income tax Income from operations before income tax is arrived at after taking into account the following items: Auditors remuneration - audit fees 680 450 601 880

Current year annual audit fees 320 000 380 530 Prior year annual audit fees 360 450 221 350

680 450 601 880

Depreciation on property, plant and equipment (Note 15) 104 458 092 95 191 685

Net impairment charges and other credit risk - Electricity receivable impairment (reversals)/charges (Note 19) 4 321 161 (11 776 545) - Bad debts written off (Note 19) - -

4 321 161 (11 776 545)

Director expenses 616 746 579 865

Donations 1 807 863 1 167 060

Legal fees 750 667 832 939

Depreciation expense included in cost of sales 46 476 896 54 316 739 Depreciation expense included in distribution expenses 32 708 058 24 122 776 Depreciation expense included in administration expenses 25 273 138 16 752 170 Employee expense included in cost of sales 52 387 063 38 803 152 Employee expense included in distribution expenses 46 008 876 63 290 336 Employee expense included in administration expenses 99 508 646 35 259 204


88



2014 2013 E E

8 Income from operation before income tax Amortisation expense included in cost of sales 10 000 000 10 000 000

Insurance expenses 9 022 447 8 031 265

Motor vehicle expenses 9 628 647 14 343 357

Professional fees and consultancy 5 518 181 7 349 980

Repairs and maintenance 60 845 248 76 483 318

Employee compensation and benefits (note 9) 197 904 585 153 045 616

Travelling and disbursements expense 9 128 714 5 315 849

9 Employee benefit expense Salaries and wages 130 731 660 109 449 358 Pension costs - defined benefit plan (Note 31) 1 628 097 7 463 376 Other employment benefits and costs 65 534 828 36 132 882

197 904 585 153 045 616

The average number of persons employed by the Company during the year was 636 (2013: 539).

89




2014 2013 E E

10 Income tax expense The statutory tax rate of 27.5% (2013:30%) was used to calculate the current tax charge and a statutory rate of 27.5% (2013:27.5%) was used for deferred tax liabilities calculation. - Current tax - Swaziland normal taxation (Note 33) - - - Deferred tax (Note 32) 2 569 662 (6 477 707)

Income tax (credit)/expense 2 569 662 (6 477 707)

The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the Company’s profit as follows: Profit before tax 81 139 953 62 568 817

Tax calculated at company tax rate 22 313 487 18 770 645 Tax effects of: Legal fees 206 436 249 882 Donations 497 162 350 117 Utilisation of prior year assessed losses 14 294 110 - Net income from joint venture (7 512 385) (7 825 894) Grant amortised (2 408 374) (2 139 501) Non-deductible portion of interest on EIB Motraco loan - - Fair value adjustment on embedded derivatives (4 089) 10 615 880 Fair Value adjustment on interest rate and currency swaps - - Withholding tax on Motraco unremitted earnings 1 320 152 1 865 663 Contributions from customers towards infrastructure (26 136 837) (16 554 304) Tax effects on disposal of property - (612 033) Tax rate change - (11 198 162)

Tax charge / (credit) 2 569 662 (6 477 707)

Other comprehensive income: Foreign exchange gains on translation of Motraco Investment Before tax (refer to note 14) 32 167 252 36 919 307 Deferred tax effect (refer to note 32) (6 433 450) (7 383 861)

After tax 25 733 802 29 535 446

Total tax charge on statement of comprehensive income 9 003 112 906 154

10.1 Withholding tax on Motraco unremitted earnings

The Company has recognised deferred tax on the unremitted earnings of the joint venture company (note 16) because there is a 20% withholding tax payable when these earnings are distributed by the joint venture company. The Withholding tax on Motraco’s unremitted earnings represents a reconciling item in the tax reconciliation as a reconciling item because the withholding tax liability will be due to the Mozambican tax authorities.


90



2014 2013 E E

11 Finance costs

Interest in foreign currency denominated EIB loan which contains an embedded derivative (5 089 501) (3 860 638) Interest – other foreign currency denominated loans (6 531 584) (5 010 456) Interest – local currency denominated loans (9 817 121) (11 102 185) Interest – EIB share of Motraco dividends (8 640 000) (6 684 941) (30 078 206) (26 658 220) 12 Finance income

Interest on short term bank deposits 3 107 556 3 900 638 Interest on accounts receivable 4 049 443 5 380 834 7 156 999 9 281 472 Finance costs-net (22 921 207) (17 376 748) 13 Other gains/(losses)

Fair value losses – Embedded derivative (14 869) (35 386 268) EIB embedded derivative (refer to note 28A) (14 342 328) (16 575 422) PSPF Loan embedded derivative (refer to note 28B) 4 536 039 (2 564 888) EIB 400kV loan embedded derivative (refer to note 28C) 18 397 1 003 644 Electricity wheeling agreement embedded derivative (refer to note 28D) (178 720) (968 297) EDM power supply agreement embedded derivative (refer to note 28 E) 9 951 743 (16 281 305)

Net foreign exchange (losses)/gains -foreign transactions (4 515 980) (1 674 131)

Net Fair value gains on derivatives 16 177 307 11 104 845 Foreign currency swaps (refer to note 29 a) 13 401 592 11 520 585 Interest rate swaps (refer to note 29 b) 2 775 715 (415 740)

Net Foreign Exchange losses on Foreign Loans (refer to note 27.2.1) (35 491 758) (20 491 329) Other losses-net (23 845 300) (46 446 883) 14 Foreign exchange losses on translation of foreign operation

Net foreign exchange gains/( losses) - Motraco Joint Venture (refer to Note 16) 32 167 252 36 919 307 Tax effect (6 433 450) (7 383 861)

After tax effect foreign exchange losses 25 733 802 29 535 446

91


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entity. Summarised details of these assets are as follows:

2014 2013 E E Cost 210 661 790 191 010 166 Accumulated depreciation (210 661 790) (191 010 166)

Net carrying amount - -


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96



15 Property, plant and equipment (continued)

Distribution and transmission assets are stated after deducting net customers’ contributions of E203 132 898 (2013: E214 581 644).

Land costing E 23 288 (2013: E23 288) on which buildings costing E 443 520 (2013: E 443 520) have been erected, has not yet been registered in the name of the Company.

Buildings costing E173 307 (2013: E 173 307) have been erected on land which has not yet been acquired by the Company but which the Swaziland Government has consented to transfer to the Company. The Government is in the process of transferring the land in question to the Company.

Parts of the Luphohlo-Ezulwini and Maguga Dam hydro-electric schemes are situated on land owned by the Swazi Nation. The Company has authority to use land on which the hydroelectric schemes are situated.

As a condition of a loan, the Company has undertaken to retain title to and possession of all assets acquired under the 400 kV Integration Project until the loan is fully repaid by 15 October 2020. The encumbered assets amount to E 222 606 220(2013: E222 606 220).

16 Investment in joint venture 2014 2013 E E Balance at beginning of year 223 119 615 176 871 996 Share of profit for the year (Note 16.1) 27 317 762 26 086 312 Exchange differences 32 167 253 36 919 307 Dividends received (20 717 000) (16 758 000) Balance at end of year (Note 16.1) 261 887 630 223 119 615 The carrying value of the investment comprises:

Cost of investment 90 271 236 90 271 236 Accumulated post-acquisition gains 90 339 323 83 738 561 Accumulated foreign exchange gains on translation of Company’s interest 81 277 071 49 109 818

261 887 630 223 119 615 The investment in joint venture does not include any goodwill as at 31 March 2014.

97




16 Investment in joint venture (continued) 16.1 In terms of a shareholders’ agreement signed on 20 May 2000, the Company agreed to acquire a one third interest in

a Mozambican company Motraco-Companhia de Transmissao de Mozambique S.A.R.L. (“Motraco”).

The authorised share capital of Motraco is US$39.5 million (E373.6 million). At 31 March 2014 share subscription requests totalling US$ 13 166 667 (E 97.8 million) had been made by Motraco and the subscriptions have been paid in full. The company’s 33% interest in Motraco was translated at average and closing exchange rates of E10.21 and E10.57 (2013: E8.54 and E9.24) respectively.

Company’s Company’s Aggregate 33% 33% amount Interest Interest US$ US$ E Statement of financial position – 31 December 2013

Non current assets 87 983 335 29 327 778 309 875 839 Current assets 49 207 983 16 402 661 173 309 697 Total assets 137 191 318 45 730 439 483 185 536 Non current liabilities 33 555 782 11 185 261 118 182 905 Current liabilities 29 277 538 9 759 179 103 115 001 Total liabilities 62 833 320 20 944 440 221 297 906 Net asset value 74 357 998 24 785 999 261 887 630

Statement of comprehensive income – year ended 31 December 2013

Revenue 25 284 466 8 128 155 86 077 874 Gross profit 14 382 344 4 794 114 48 962 932 Net finance costs (5 001 124) (1 667 041) (17 025 715) Tax (1 356 916) (452 305) (4 619 455) Profit for the year 8 024 304 2 674 768 27 317 762


98



16 Investment in joint venture (continued) 16.1 The Company’s share of the results of its principal joint venture, which is unlisted, and its share of the assets (including

goodwill and liabilities) are as follows: Company’s Company’s Aggregate 33% 33% amount Interest Interest US$ US$ E Statement of financial position – 31 December 2012 Non current assets 90 265 367 30 088 456 278 297 153 Current assets 52 436 329 17 478 776 161 666 446

Total assets 142 701 696 47 567 232 439 963 599

Non current liabilities 37 879 715 12 626 572 116 786 949 Current liabilities 32 453 386 10 817 795 100 057 035

Total liabilities 70 333 101 23 444 367 216 843 984

Net asset value 72 368 595 24 122 865 223 119 615

Statement of comprehensive income – year ended 31 December 2012 Revenue 25 231 408 8 410 469 71 843 140

Gross profit 14 017 022 4 672 341 39 911 631

Net finance costs (3 525 765) (1 175 255) (10 039 156) Tax (1 329 709) (443 236) (3 786 163)

Profit for the year 9 161 548 3 053 850 26 086 312

17 Other assets

Other assets comprise balances for Rural electrification and Counterparty funds at bank contributed by the Swaziland Government and the Republic of China through the Swaziland Government for the Rural Electrification Project.

2014 2013 E E

Rural electrification funds (Note 17.1) 1 488 922 6 433 767 Counterparty funds (Note 17.3) 17 189 200 16 566 879 Probec call account (Note 17.2) 3 784 815 2 711 375 National Energy Efficiency Awareness Fund (17.4) 600 841 -

23 063 778 25 712 021

Other assets comprises of restricted cash that is utilised to fund the Rural Electrification Projects

99




17 Other assets (continued) 2014 2013 E E

17.1 Rural electrification fund

The analysis of the balance on the fund at 31 March 2014 is as follows:

Cumulative contributions received from the Swaziland Government 18 453 425 18 453 425 Cumulative contributions received from consumers 18 375 18 375 Cumulative contributions received from the Republic of China through the Government of Swaziland for the Rural electrification project 136 034 411 103 320 829

154 506 211 121 792 629 Total interest received to date 8 152 619 7 840 883 Deduct costs of projects capitalised (161 169 908) (123 199 745) 1 488 922 6 433 767 The analysis of movements fund bank balances during the year is as follows:

Fund balance at beginning of year 6 433 767 26 060 165 Add interest received for the year 311 736 561 549 To finance capital expenditure (37 970 163) (48 629 914) Fund received from the Republic of China through the Government of Swaziland for the Rural electrification project 32 713 582 28 441 967 Fund balance at the end of the year 1 488 922 6 433 767

17.2 Probec call account

This relates to money received by the company from Swaziland Government to assist low income groups in the country with improved access to sustainable and affordable electricity. The balance of the account as at 31 March 2014 was E3 784 815 (2013: E2 711 375).


100




17.3 Counterparty fund The analysis of the balance on the fund at 31 March 2014 is as follows: Balance at beginning of the year 16 566 879 15 911 272 Contributions received from interest differential on loans to the Company (refer notes (i) and (ii) below) 1 698 239 1 568 182 Interest received on deposits 622 321 655 608

18 887 439 18 135 062 Funds utilised to defray operating expenditure (1 698 239) (1 568 183)

Balance at end of year 17 189 200 16 566 879

(i) Swaziland Government Loan No.4 In terms of the agreements for Swaziland Loan No.4 (from Kreditanstalt fur Wiederaufbau, Germany, and lent by the

Swaziland Government), the difference between interest calculated at 2% and interest charged at 3% on the loan is not to be paid to lenders, but is to be used by the Company for projects particularly worthy of promotions from the aspect of development policy. The balance at year end is set to be used by the Company for this purpose. The loan was settled by March 2011.

(ii) European Investment Bank – 400 KV Integration Project In terms of the agreements for European Investment Bank – 400 KV Integration Project loan, the difference between

interest calculated at 3% and interest charged at 5.57% on the loans is not to be paid to lenders, but is to be used by the Company for projects particularly worthy of promotions from the aspect of development policy.

Capital items funded from the Counterparty fund are transferred to grants received and the relevant assets are brought to account at their actual cost. The grants received are recognised in the statement of financial position. The transfer to the balance sheet is done once off when the grants are received and are released to capital projects when the assets are constructed.

101





17.4 National Energy Efficiency Awareness Fund The analysis of the balance on the fund at 31 March 2014 is as follows: -Balance at beginning of the year - - Contributions received from the Ministry of Natural Resources and Energy 600 000 - Interest received on deposits 841 -

Funds utilised towards energy efficiency awareness campaign and activities - -

Balance at end of year 600 841 -

This relates to money received by the company from Swaziland Government to assist towards funding energy efficiency

campaigns and activities which will include raising awareness on energy efficiency and conservation, improving and promoting consumer cooperation towards improving energy efficiency and promoting sustainable energy supply. Through a memorandum of understanding the company will be the implementing partner in the projects and will submit expenditure reports quarterly to the Ministry of Energy and Mineral Resources until the project is completed.

2014 2013 E E

18 Inventories Stores 48 844 802 54 454 410 Write-down for obsolete stock (2 692 520) (1 292 045)

Net realisable value 46 152 282 53 162 365

The Company sold scrapped inventory to independent retailers amounting E 404 113 (2013: E 373 754). The amount

received has been included as “other income” in profit or loss. Inventories Inventory issues which are part of the total repairs and maintenance amount to E76 483 318 (2013: E56 945 802) and

were recognised in the statement of comprehensive income as repairs and maintenance. Inventory is written-down to net realisable value as a result of technical obsolesce due to technical developments in the energy industry relating to energy equipment. Inventory written down and recognised in the income statement in the year under review amount to E1.2 million (2013: E1.4 million).


102



2014 2013 E E

19 Trade and other receivables Electricity receivables 129 623 664 132 828 191 Provision for impairment of electricity receivables (18 216 424) (28 981 338)

Net electricity receivable 111 407 240 103 846 853 Other receivables (refer to 19.1) 60 543 850 47 250 041 Provision for impairment of other receivables (6 688 551) (6 688 551)

Net other receivables 53 855 299 40 561 490 Prepayments 2 186 874 3 081 098

56 042 173 43 642 588

167 449 413 147 489 441

19.1 Other receivables include the following: Capital contribution debtors 45 502 690 33 126 285 Staff debtors 444 846 624 102 Projects prepayments 5 238 857 9 845 Other sundry debtors 9 357 457 13 489 809

60 543 850 47 250 041

The fair values of trade and other receivables are as follows: Net electricity receivable 111 407 240 103 846 853 Net other receivable 53 855 299 40 561 490 Prepayments 2 186 874 3 081 098

167 449 413 147 489 441

The carrying amounts of the above trade and other receivables approximate fair value due to the short term thereof. There is no concentration of credit risk with respect to trade and other receivables, as the Company has a large number of customers that are industry dispersed. The Company’s historical experience in collection of trade and other receivables falls within the recorded allowances. Due to these factors, management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Company’s trade and other receivables. The maximum exposure to credit risk at the reporting date is the fair value of each class of trade and other receivables mentioned above.

103




19 Trade and other receivables (continued)

Electricity receivables and other receivables that are less than three months past due are not considered impaired. As of 31 March 2014, Electricity and other receivables of E20 364 380 and E23 443 741 (2013: E24 364 380 and E27 053 541) respectively were past due but not impaired. These relate to a number of independent clients for whom there is no recent history of default and though delay, they eventually settle their debts.

The ageing analysis of these trade and other receivables that are past due but not impaired is as follows:

Electricity receivables Other trade receivables 2014 2013 2014 2013 E E E E

1 - 2 months 11 793 425 17 851 291 - - 3 months 9 157 724 6 513 089 23 443 714 27 053 541

20 951 149 24 364 380 23 443 714 27 053 541

As of 31 March 2014, Electricity receivables and other receivables of E 18 216 424 and E 6 688 551 (2013: E 28 981 334 and E 6 688 551) were impaired and provided for. The amount of the provision for electricity receivable and other receivables was E28 981 338 and E 6 688 551 (2013: E40 757 883 and E 6 688 551) respectively. The individually impaired trade and other receivables were mainly relating to domestic, industrial, commercial and irrigation customers which are in unexpectedly difficult economic situations. The ageing of these receivables is as follows:

The ageing analysis of these trade and other receivables is as follows:


0 -3 months - - - - Over 3 months 18 216 424 28 981 338 6 688 551 6 688 551

18 216 424 28 981 338 6 688 551 6 688 551

The carrying amounts of the Company’s trade and other receivables are denominated in the following currencies: Emalangeni (SZL) 167 449 413 147 489 441


104



19 Trade and other receivables (continued)

Movements on the Company’s provision for impairment of electricity receivables and other receivables are as follows:


At 1 April 2013 28 981 338 40 757 883 6 688 551 6 688 551 Provision for trade and other receivables impairment - - - - Trade and other receivables written off during the year as uncollectible (15 086 075) - - - Unused amounts reversed 4 321 161 (11 776 545) - -

At 31 March 2014 18 216 424 28 981 338 6 688 551 6 688 551

Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash. The other classes within trade and other receivables do not contain impaired assets.

20 USL electricity prepayment 2014 2013 E E

Ubombo Sugar Limited Power Purchase Agreement Prepayment 120 000 000 130 000 000

Current 10 000 000 10 000 000 Non-Current 110 000 000 120 000 000

Total prepayment 120 000 000 130 000 000

Opening balance 130 000 000 140 000 000 Addition - - Amortisation (10 000 000) (10 000 000)

Closing balance 120 000 000 130 000 000

Swaziland Electricity Company Limited has purchased an exclusive right to buy surplus electricity from Ubombo Sugar Limited (USL). The total cost of that exclusive right will amount to E150 000 000. As at 31 March 2014 the entity had paid E150 000 000(2013:E150 000 000) to Ubombo Sugar Limited. The contract period is 15 years, that is, up to 30 April 2026. However, either party can elect to terminate the contract early after 8 years with a portion of E150 000 000 being refunded based on the number of years of the 15 that were not taken up. USL has issued a guarantee provided by its parent company, Illovo Sugar Limited for an amount of E150 000 000.

105




20 USL electricity prepayment (continued)

USL has lodged a performance security in favour of SEC to the value of E150 000 000. This was achieved by issuing mortgage bond sureties over USL Property up to the total value of the payment received. For every year that elapses the performance security can be reduced to the unamortised portion of the E150 000 000.

21 Cash and cash equivalents 2014 2013 E E Cash at bank 20 742 590 18 232 907 Short-term bank deposits 38 945 883 42 044 863 Petty cash 126 250 108 250

59 814 723 60 386 020

Cash, cash equivalents and bank overdrafts include the following for the purposes of the cash flow statement: Cash and cash equivalents 59 814 723 60 386 020 Bank overdrafts (Note 27) (42 799) (124)

59 771 924 60 385 896

Available cash is invested in interest bearing bank accounts.

22 Share capital The share capital of the Company consists of the following: Authorised 433 493 841 ordinary shares at E1 each 433 493 841 433 493 841

Issued 433 493 841 ordinary shares at E1 each 433 493 841 433 493 841

There were no authorised and unissued shares at year end.


106



22.1 Dividends 2014 2013 E E

The following dividends were approved by a directors resolution during the year: Authorised Dividends - 4 044 386

No dividend has been declared and paid for the year ended 31 March 2014.The dividend payable amounting to E4 044 386 for the year ended 31 March 2013 has not been paid and is classified under accounts payable under note 31.

23 Foreign exchange translation reserve Opening balance 49 445 821 19 910 375 Forex gains charge (refer to Note 14) 32 167 252 36 919 307 Tax effect (refer to Note 10) (6 433 450) (7 383 861)

Closing balance 75 179 623 49 445 821

Foreign exchange translation reserve-Gross Opening accumulated post-acquisition gains 106 278 703 86 600 760 Forex gains movement (refer to Note 16) 65 337 690 46 247 619

Accumulated forex gains 171 616 393 132 848 379 Accumulated Tax effect (refer to Note 32) (34 323 279) (26 569 676)

Closing balance-Net 137 293 114 106 278 703

The foreign exchange translation reserve arises from the translation of Motraco, a Joint Venture Company, which is a Mozambican registered company that uses the US Dollar as its reporting currency.

107




24 Deferred grant incom 2014 2013 E E Deferred income comprises unutilised balances of Rural electrification contributed by Swaziland Government and Republic of China through the Government of Swaziland for the Rural Electrification Project. Balance at beginning of year 163 474 926 121 976 682 Grants realised in statement of comprehensive income (Note 7.1) (8 757 722) (7 131 670) Rural electrification grant received 37 970 163 48 629 914

192 687 367 163 474 926

25 Other deferred income Other deferred income comprises unutilised balances of Rural electrification and Counterparty funds at bank contributed by Swaziland Government and Republic of China through the Government of Swaziland for the Rural Electrification Project. Rural Electrification funds (Note 17) 1 488 922 6 433 767 Counterparty funds (Note 17) 17 189 200 16 566 879 Probec call account (Note 17) 3 784 815 2 711 375 National Energy Efficiency Awareness Fund (Note 17) 600 841 -

23 063 778 25 712 021


108



2014 2013 E E

26 Deferred revenue Deferred electricity revenue (refer to notes 26.1) 24 932 583 22 860 153 Deferred contributions from customers towards infrastructure (refer to notes 26.2) 16 077 014 6 387 758

41 009 597 29 247 911 26.1 Deferredelectricityrevenue Deferred electricity revenue comprises unearned prepaid electricity

revenue from domestic and small commercial customers. The company utilises an internally generated model to establish an estimate of unearned revenue from prepaid customers.

26.2 Deferredcontributionsfromcustomerstowardsinfrastructure

Deferred contributions from customers towards infrastructure relate to fees for connection received in advance from prospective electricity customers. These fees are recognised as revenue when the connections are completed.

27 Borrowings Current Bank overdrafts (Note 21) 42 799 124 Shareholder’s loan (Note 27.1) 11 240 181 11 240 181 Current portion of long term borrowings (Note 27.2) 43 188 839 30 330 425

54 471 819 41 570 730 Non current Long term borrowings (Note 27.2) 352 119 520 270 883 661

Total borrowings 406 591 339 312 454 391

109




27 Borrowings (continued) 2014 2013 E E 27.1 Shareholder’s loan

Liability for the civil works component of the Maguga Dam Hydroelectric Project. 11 240 181 11 240 181 The E 11.2 million above was paid by the Government of Swaziland

during the construction of the Maguga Dam Hydroelectric Project. The amount is currently disclosed as borrowings and is payable to the Government of Swaziland. It is not certain what precise charge, if any, will be levied on the Company by the Government of Swaziland as there are no specified terms regarding the amount. The loan is classified as current as it is payable on demand.

27.2 Long term borrowings Current portion 43 188 839 30 330 425 Non current portion 352 119 520 270 883 661

Total long term loans (Note 27) 395 308 359 301 214 086


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112



27 Borrowings (continued)

27.2.2 Long term borrowings descriptions

(a) Swaziland Government Loan No.6

This loan was secured with assistance of the Government of Swaziland for the rehabilitation of the national electricity network after Cyclone Demonia. The amount received for this loan was DM 1 500 000. The term of the loan is 20 years. Final redemption of this loan is 30 June 2015.

Interest which is at a rate of 8% per annum, is payable half yearly. The loan is repayable in 40 equal half yearly instalments.

The spot rate when the loan was secured was E1 = DM 1.6376. The Company had an agreement with the Government of Swaziland that if the Lilangeni appreciates against the Deutsche Mark, the amount payable by the Company would remain fixed at the exchange rate of E1 = DM 1.6376. This agreement further stated that should the Lilangeni depreciate against the Deutsche Mark, the foreign additional foreign exchange losses incurred by the Government of Swaziland would be converted into a loan to the Company at an annual interest rate of 8%.

The Company accounts for this loan at amortised cost

(b) European Investment Bank – Motraco Project Loan

On 15 July 1999, the Company signed an €8 200 000 loan agreement with the European Investment Bank (EIB). The purpose of this loan was to enable the Company to finance a significant part of its investment in the shares of Companhia de Transmissão de Moçambique, S.A.R.L. (Motraco). Motraco is a joint venture between Electricidade de Moçambique (EDM), Swaziland Electricity Company (SEC) and Eskom of South Africa. The principal objective of the joint venture is the transmission of electricity via its power transmission system from South Africa to the Mozal Alumunium Smelter.

The Company’s original subscription in the shares of Motraco is €8 200 000.

EIB’s return on the loan was not structured like a normal loan where a stated rate of interest would be payable by the Company on a periodic basis until the full settlement of the loan. Instead EIB described this loan as a Conditional Loan on Risk Capital Resources with the following key terms:

• If the Company sells the shares in Motraco before 10 June 2019, the Company will repay EIB an amount in Euros equal to the Company’s original subscription in Motraco equity plus 50% of any gain arising from the proceeds of the sale of the Company’s shares in Motraco.

• If the Company holds the shares in Motraco until 10 June 2019, the Company will repay EIB an amount in Euros equal to the lesser of the current value of Company’s shares in Motraco and an amount equal to the Company’s original drawdown in EIB plus 50% of any notional gain arising from the valuation of Company’s shares in Motraco. On an annual basis, the Company will remit to EIB 50% of any dividends received from Motraco. This will happen until 10 June 2019 or until sale of the shares in Motraco or until voluntary early settlement of the loan.

• If the Company decides to voluntarily settle the loan early without disposing the shares in Motraco, the amount payable by the Company would be the higher of the outstanding balance and an amount equal to the Company’s original subscription in Motraco equity plus 50% of any notional gain arising from the valuation of Company’s shares in Motraco.

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27.2.2 Long term borrowings descriptions (continued)

(b) European Investment Bank – Motraco Project Loan (continued)

• If Motraco becomes insolvent, is liquidated or wound up, no further remuneration will accrue to EIB and the Company will make no further repayments of the principal on the loan. However, the Company will have to remit to EIB any final distributions arising from the liquidation or winding of Motraco.

The Company received the loan in two instalments: a €5 400 000 instalment received on 30 November 1999 and a €2 800 000 instalment received on 20 August 2002.

The Company intends to hold the investment in Motraco shares until at least 10 June 2019, the maturity date of the EIB loan.

The Company has adopted the following accounting treatment in terms of International Accounting Standard 39 - “Financial Instruments: Recognition and Measurement” (IAS 39) regarding the EIB loan:

• To account for the original subscription of €8 200 000 which is at least repayable on 10 June 2019 as a borrowing accounted for at amortised cost. The €1 000 000 difference between the €8 200 000 disbursements received and the €9 200 000 repayable, would be considered to constitute a nominal interest equivalent on the €8 200 000 principal. On initial recognition, the Company discounted the two loan disbursements at market related rates on the dates they were received. Applying amortised cost, the Company is accruing interest on these discounted values until 10 June 2019, at which point in time the discounted loan values plus the accumulated interest will equal €9 200 000. The loan amount payable on 10 June 2019 is €9 200 000.The Company is charging the interest to profit or loss on an annual basis and crediting it to the loan. The loan amount repayable on 10 June 2019 is €9 200 000.

• To separate the cash outflows related to the loan that are dependent on the company value of Motraco on 10 June 2019 when the loan is settled, because they meet the definition of an embedded derivative and is not considered to be closely related to the host loan contract. Refer to note 50A for the values attached to this embedded derivative and how it has been determined and accounted for.

• In the year under review the Company paid European Investment Bank E 8.6 million (2013:E 6.7 million) in terms of article 3.01 of the agreement which requires Swaziland Electricity Company Limited to pay 50% of any dividends received from the investment in Motraco.

(c) European Investment Bank – 400kV Integration Project Loan

This loan was secured for the purposes of funding the Company’s Transmission Project. The amount received for this loan was €10 000 000. The term of the loan is 20 years. Final redemption of this loan is on 15 October 2020.

Interest is payable on 15 April and 15 October each year. The agreement states that the interest rate should be the greater of 3% and a rate determined by subtracting the 3.06% interest rate subsidy from the standard rate of interest applicable at the date the loan was issued. The loan is repayable in semi-annual instalments payable on 15 April and 15 October each year.

The Company has to maintain a ratio of at least 1:3 for its own funds to borrowings and a ratio of at least 1.5:1 for its annual debt service coverage.

The Government of Swaziland guarantees the Company’s performance of its obligation in relation to this loan and indemnifies the European Investment Bank against all losses.


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(c) European Investment Bank – 400kV Integration Project Loan (continued)

The loan is accounted for as follows:

• The loan was measured at fair value at inception of the loan. • The difference between the proceeds received and the initial fair value was recorded as deferred income.• In addition, and embedded interest rate floor existed in the loan which was required to be separately accounted for. • Interest is accrued on the loan at an effective interest rate of 5.57%.

The company accounts for this loan at amortised cost.

(d) European Investment Bank – 400KV Integration Project Loan Phase 1

This loan was secured for the purposes of funding the 400KV Integration Project. The amount received for this loan was €5 000 000. The term of the loan is 17 years commencing on 02 July 2001. Final redemption of this loan is on 16 November 2020.

Interest which is at a rate of 3% per annum, is payable on 15 November each year. The loan is repayable in 17 equal instalments payable on 15 November each year.

The Company has to maintain a ratio of at least 1:3 for its own funds to borrowings and a ratio of at least 1.5:1 for its annual debt service coverage.

The Government of Swaziland guarantees the Company’s performance of its obligation in relation to this loan and indemnifies the European Investment Bank against all losses.


(e) Swazi Bank Capital Projects Loan

This loan was secured for the purposes of funding infrastructure capital projects. The amount received for this loan was E80 000 000. The term of the loan is 7 years.

Interest which is at a rate of prime minus 1% per annum, is payable quarterly. The loan is repayable in 28 equal instalments of E2 857 143 payable each quarter commencing 31 March 2014 and ending not later than 30 October 2020. The loan is secured by a Swaziland Government Guarantee.


(f) Development Bank of Southern Africa (DBSA) Loan

This loan was secured for the purposes of funding the 400kV Integration Phase II Project. The amount received for this loan was E97 135 000. The term of the loan is 20 years commencing from 05 March 2003 with a two years grace period.

115






Interest which is at a rate of 6 months ZAR-JIBAR-SAFEX plus 135 basis points for the risk margin, is payable on 01 April and 01 October each year. The Company has an option to convert the rate from the floating rate to fixed rate of interest. The fixed rate of interest is determined at the DBSA base rate plus 135 basis points. The DBSA base rate is market related rate.

The loan is repayable in 36 equal half yearly instalments payable on 01 April and 01 October each year.


(g) The Public Service Pension Fund loan

This loan was secured for the purposes of funding capital projects which will promote and facilitate economic growth and development in Swaziland.

The loan bears interest at a floating rate; at the prime rate then prevailing from time to time minus 2.8% per annum; such said floating rate being subject to a fixed interest range with a floor of 8% per annum and a cap of 12% per annum. The loan is repayable in 10 equal instalments of E15 million starting 31 December 2011.

The loan was drawn down as follows;-E75 000 000 on the 18th of September 2009.-E75 000 000 on the 17th of December 2010.

27.3 Maturity of borrowings The maturity of the borrowing is as follows: Within 1 year 2 to 5 years Over 5 yrs Total E E E E

At 31 March 2014 Bank overdraft 42 799 - - 42 799 Shareholders loan 11 240 181 - - 11 240 181 Foreign borrowings 14 570 145 59 125 449 133 988 807 207 684 401 Local borrowings 23 796 164 102 513 515 56 491 749 182 801 428

Total borrowings 49 649 289 161 638 964 190 480 556 401 768 809

At 31 March 2013 Bank overdraft 124 - - 124 Shareholders loan 11 240 181 - - 11 240 181 Foreign borrowings 11 963 302 48 147 104 118 736 557 178 846 963 Local borrowings 17 367 123 60 000 000 45 000 000 122 367 123

Total borrowings 40 570 730 108 147 104 163 736 557 312 454 391

Foreign borrowings totalling E92 179 272 (2013: E 88 078 129) are guaranteed by the Swaziland Government.


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28 Embedded Derivatives

Embedded Derivative Asset 2014 2013 E E

Embedded derivative asset – Power Supply Agreement with Electricidade De Mocambique E.P. (28E) 2 538 533 -

2 538 533 -

Embedded Derivative liabilities Embedded derivative liability - EIB loan (28A) 116 876 117 102 533 789 Embedded derivative liability – Public Service Pension Fund Loan (28B) 1 619 359 6 155 398 Embedded derivative liability – Power Supply Agreement with Electricidade De Mocambique E.P. (28E) - 7 413 210 Embedded derivative liability – 400 kV integration project EIB Loan (28C) 67 296 85 693 Embedded derivative liability – The Electricity Wheeling agreement (28D) 3 667 361 3 488 641

122 230 133 119 676 731

Fair value at beginning of the year 119 676 731 84 290 463 Fair value movements for the year (refer to note 13) 14 869 35 386 268

Fair value at end of the year-net 119 691 600 119 676 731

28A. Embedded derivative liability - EIB loan

Management has confirmed that the Company has the intention and ability to hold the investment in the Motraco shares until 10 June 2019, which is the maturity of the EIB Project loan. Based on this representation from management, the Company has determined the value of the embedded derivative as presented below:

Fair value at beginning of the year 102 533 789 85 958 366 Fair value movements for the year (refer to note 13) 14 342 328 16 575 423

Fair value at end of the year 116 876 117 102 533 789

The expected dividend payments from Motraco payable to EIB as part of the agreement is incorporated into the value of the embedded derivatives, the physical payment of dividends by the SEC to EIB are reflected as a partial settlement against the embedded derivative. As a result the value of the embedded derivative liability has taken into account EIB’s 50% share of the dividend paid to EIB during the year amounting to E8 640 000 (2013: E6 684 941). (refer to Note 11).

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28A. Embedded derivative liability - EIB loan (continued)

The value of the embedded derivative liability represents an estimate of the present value of the EIB loan cash outflows that will be dependent on the market value of Motraco when the Company settles the EIB loan on 10 June 2019. To estimate the market value of Motraco on 10 June 2019 for purposes of determining the embedded derivative, the Company has applied the discounted cash flow method. Discount rates used were market related rates. The value of the embedded derivative will be reassessed at each statement of financial position date until 10 June 2019. Changes in the fair value of the embedded derivative liability are recognised in profit or loss.

28B. Embedded derivative liability – Public Service Pension Fund Loan

Interest is accrued on the loan at the rate at which the interest is payable, being at prime less 2.8% should this fall within the range of 8% to 12%. Where the floating interest rate is outside of the collar, interest is accrued at a rate of 8% or 12% as is applicable. On 11 September 2009, when the loan was obtained the prime interest rate was 10% and hence the applicable floating interest rate on the PSPF loan was 7.2%. Since the applicable floating interest rate was outside of the collar range of 8% and 12% at inception, the embedded interest rate collar is considered to be in-the-money at inception thereby resulting in an embedded derivative that is not closely related to the host loan contract.

The value of the embedded derivative as presented below:

2014 2013 E E

Fair value at beginning of the year 6 155 398 3 590 510 Fair value movements for the year (refer to note 13) (4 536 039) 2 564 888


The value of the embedded derivative liability represents an estimate of the present value of the PSPF loan cash outflows that will be dependent on the prime rate. Changes in the value of the embedded derivative liability are recognised in profit or loss.

28C. Embedded derivative liability – 400 kV integration project EIB Loan

On 2 July 2001, the Kingdom of Swaziland entered into a Finance Contract with European Investment Bank (EIB) in connection with funding in respect of a project consisting of the study, engineering, construction and operation of overhead transmission lines as well as the reinforcement of part of the national power transmission grid in Swaziland (the “Project”). The Project is to be funded from a number of sources, including a conditional loan from the EIB (“the EIB Loan”) to the value of EUR5 million.


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28 Embedded Derivatives (continued)

28C. Embedded derivative liability – 400 kV integration project EIB Loan (continued)

The loan was granted in accordance with the provisions of the Second Financial Protocol to the Fourth APC-EC Convention of Lome, signed between certain states in Africa, the Caribbean and the Pacific, and the Member States of the European Community. Interest is payable by the Kingdom of Swaziland semi-annually in arrears on 15 November at a rate of 3% per annum. The Finance Contract specifies that interest on the loan is payable at a rate that is the greater of:

• 3% per annum; or• the standard interest rate applicable at the date the loan was issued less an interest rate subsidy of 3.06.At the time

of draw down on the loan, the standard interest rate was 5.57%. After having deducted the subsidy of 3.06%, this will result in interest being payable at a rate of 2.51%.

The interest rate floor embedded in the funding agreement ensures that the interest rate that will ultimately be fixed on draw down of the loan (determined as the EIB standard rate less 3.06%) does not fall below 3%. In situations where the EIB standard interest rate decreases below 6.06%, the interest rate floor will be triggered, resulting in a modification of the cash flows on the loan compared to those that would have been payable had the interest rate been fixed based on the EIB standard interest rate thereby resulting in an embedded derivative.


2014 2013 E E

Fair value at beginning of the year 85 693 1 089 337 Fair value movements for the year (refer to note 13) (18 397) (1 003 644)

Fair value at end of the year 67 296 85 693

The value of the embedded derivative liability represents an estimate of the present value of the EIB loan cash outflows that will be dependent on the changes in the interest rate payable on the loan Changes in the value of the embedded derivative liability are recognised in profit or loss.

28D. Embedded derivative liability – The Electricity Wheeling agreement

On 1 September 1999, the Swaziland Electricity Company Limited (“the SEC”) entered into an Electricity Wheeling Agreement with the Motraco-Mozambique Transmission Company (“Motraco”) in connection with the wheeling of electricity by Motraco to the SEC at a new substation called Edwaleni II. The duration of the agreement is 25 years commencing from the end of the month when the Commercial Operation Date of the last asset required for the supply of wheeling services to the SEC occurs, that is, was 1 September 1999.

The prices to be charged by Motraco and to be paid by the SEC for electricity wheeled consists of fixed and variable charge for wheeling, variable charge for emergency wheeling ,surcharge and reactive power rates.

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28D. Embedded derivative liability – The Electricity Wheeling agreement (continued)

The annual escalation of the wheeling charges by US inflation will result in a variation of cash flows over the life of the contract, since the fixed charges payable will change depending on movements in the US inflation index. This result in a shifting of the risk associated with increases in prices from Motraco to the SEC thereby resulting in a embedded derivative.


2014 2013 E E

Fair value at beginning of the year 3 488 641 2 520 344 Fair value movements for the year (refer to note 13) 178 720 968 297


The value of the embedded derivative liability represents an estimate of the present value of the Wheeling purchases future cash outflows that will be dependent on the changes in the US PPI. Changes in the value of the embedded derivative liability are recognised in profit or loss.

28E. Embedded derivative liability – Power Supply Agreement with Electricidade De Mocambique E.P.

On 23 December 2009, the Swaziland Electricity Company Limited (“the SEC”) entered into an Power Supply Agreement with Electricidade De Mocambique E.P. (EDM) in connection the sale of surplus power from EDM to the SEC. The contract is for the period 1 January 2014 to 31 December 2014, and is renewable annually. All Electricity charges are denominated in USc per kWh, and vary depending on whether the electricity is supplied at peak or at off-peak times.

The foreign exchange element of the transaction causes some or all of the cash flows that otherwise would be required by the electricity supply contract to be modified according to prevailing foreign exchange rates. This exposure arises from the date of committing to the supply contract to the date of invoice of the related electricity charges. As such, financial risk in the form of currency risk is effectively shifted between the SEC and EDM depending on the direction in which the USD/ZAR exchange rate moves thereby resulting in an embedded derivative.


2014 2013 E E

Fair value at beginning of the year 7 413 210 (8 868 095) Fair value movements for the year (refer to note 13) (9 951 743) 16 281 305

Fair value at end of the year (2 538 533) 7 413 210


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28E. Embedded derivative (asset)/liability – Power Supply Agreement with Electricidade De Mocambique E.P. (continued)

The value of the embedded derivative liability represents an estimate of the present value of the Electricity purchases cash outflows that will be dependent on the changes in the foreign exchange rates between the USD/ZAR. Changes in the value of the embedded derivative liability are recognised in profit or loss.

29 Derivative financial instruments

At 31 March 2014, Borrowings included an amount of E99 151 693 (2013: E 96 894 686 ) in respect of a long term loan due in foreign currency, which has been hedged using the cross currency and interest rate swap as stipulated above.

The Company entered into a range of derivative instruments, foreign currency swaps and interest rate swaps, arrangement

with Standard Corporate and Merchant Bank and Investec Capital Market to hedge against foreign exchange risk on its foreign currency based commitment with the European Investment Bank and Kreditanstalt fur Wiederaufbau.

29A Investment in sinking fund

During the year ended 31 March 2014 the company entered into a cross-currency swap agreement with First National Bank (FNB) to establish a sinking fund to finance future full and final settlements to the European Investment Bank (EIB) for a loan amount of EUR 9.2 Million and an estimated additional liability of USD 13.7 Million arising from the EIB loan agreement both payable in 10 June 2019. As at 31 March 2014 the company made a E30 million lump sum payment to the sinking fund towards this financing arrangement.

As part of the agreement with FNB to fund the EUR 9.2 Million loan and the additional estimated liability of USD 13.7 Million the company will also make annual payments to the sinking fund of USD 1.6 Million beginning 30 June 2014 (6 equal annual instalments) and semi-annual payments of E13.652 Million beginning 30 May 2014 (11 equal semi-annual instalments) respectively.

The fair value is adjusted to defer the difference between the fair value at initial recognition and the transaction price. After initial recognition, the entity shall recognise the deferred difference as a gain or loss only to the extent that it arises from a change in a factor that market participants would take into account when pricing the asset or liability. The cross currency swap was taken for the European Investment bank – Motraco project loan and an additional estimated liability as a result of the EIB loan both payable 10/06/2015.

Financial assets Financial liabilities 2014 2013 2014 2013 E E E E

Cross currency interest rate swaps:- Foreign currency swaps 59 017 558 45 615 966 260 927 223 744 Interest rate swaps – fair value hedges - - 3 048 890 5 861 788 Cross-Currency swaps-fair value (29A) 30 000 000 - - -

89 017 558 45 615 966 3 309 817 6 085 532

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29 Derivative financial instruments(continued) a) Foreign currency swaps – fair value hedge Gains and losses on the foreign currency swaps are recognized in profit or loss since the swaps are used as a fair

value hedge. The foreign currency swap was taken of the European Investment bank -400kV Integration Project Loan (Phase 1) (Note 24.3.2(c)) and the European Investment bank -400kV currency swaps are ZAR 15 118 004 (2013: ZAR 7 89 941) and ZAR 277 423 (2013 ZAR 233 744) with a maturity date of 30/06/2015 The company has not applied hedge accounting in respect of the transactions. Integration Project Loan (Note 24.3.2(d)). The loans are at a fixed rate. The nominal values of the cross.

b) Interest rate swaps – fair value At 31 March 2014, the main floating rates are at 6 months ZAR – JIBAR-SAFEX minus 315 basis points. Gains and

losses are recognised in profit or loss since the swaps are used as a fair value hedge. The interest rate swap was taken for the Development Bank of Southern Africa 400kV integration project loan (Note 24 .3.2(i)). The interest rate swap exchanges fixed interest cash-flows for floating rate. The nominal value of the interest rate swap is ZAR 38 159 550 (2013: ZAR 69 869 800) with a maturity date 15/10/2020. The company has not applied hedge accounting in respect of the transactions.

Movements and analysis of gains or losses arising from fair value hedges is as follows:

Financial assets Financial liabilities 2014 2013 2014 2013 E E E E

Fair value at the beginning of the year 45 615 966 34 095 381 6 085 532 5 669 792 Utilised or terminated fair value hedging instruments- - - - -

Additions to fair value hedge instruments (29A) 30 000 000 - - - Fair value gains or (losses) on fair value hedges 13 401 592 11 520 585 ( 2 775 715) 415 740

Fair value at the end of the year 89 017 558 45 615 966 3 309 817 6 085 532

The maximum exposure to credit risk at reporting date is the fair value of the derivative asset in the statement of financial position.

30 Provisions for other employee benefits 2014 2013 E E

Leave pay provision (30.1) 4 675 936 4 688 975 Gratuity provision (30.2) 6 465 000 6 656 018 Performance bonus provision (30.3) 12 345 386 6 934 655 Long term service awards provision (30.5) 207 209 442 991 Other employee benefits (30.6) 19 843 066 -

43 536 597 18 722 639


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30 Provisions for other employee benefits (contiuned)

30.1 Leave pay provision The leave pay provision relates to vested leave pay to which employees are entitled. The provision arises as

employees render services that increase their entitlement to future compensated leave. The provision is utilised when employees, who are entitled to leave pay, leave the employment of the Company or when accrued entitlement is utilised, by taking day(s) off.

2014 2013 E E Opening balance 4 688 975 10 979 664 Provisions used (501 029) (332 935) Unused amounts reversed 487 990 (5 957 754)

Closing balance 4 675 936 4 688 975

30.2 Gratuity provision Provision is made for payments in accordance with an Executive and

Senior Management employee contracts for the year ended 31 March 2014. The gratuity provision is determined by reference to the contractual agreements and is calculated at 20%-25% of annual basic pay and is payable at the end of the employment contract.

Opening balance 6 656 018 6 190 086 Provisions used (2 961 893) (2 981 238) Current year provision 2 770 875 3 447 170

Closing balance 6 465 000 6 656 018 30.3 Performance bonus provision The bonus provision consists of performance-based bonuses, which are

determined with reference to the overall company performance with regard to a set of pre-determined key measures. Bonuses are payable annually.

Opening balance 6 934 655 7 795 705 Provisions used (6 885 407) (6 510 227) Unused amounts reversed - (1 285 478) Current year provision 12 296 138 6 934 655

Closing balance 12 345 386 6 934 655

30.4 Voluntary Exit Package provision Provision is made for payments in accordance with the entity’s policy

on voluntary exit scheme. The cash flow is expected to occur within the next 12 months from year end.

Opening balance - 2 751 899 Provisions used - (2 751 899) Additional provision - -

Closing balance - -

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30 Provisions for other employee benefits (continued) 2014 2013 E E 30.5 Long term service awards provision

Provision is made for payments in accordance with the entity’s policy on

long term service awards. The long term service awards provision consists of one month basic salary or a portion thereof, which is determined by reference to the number of years of service. The cash flow is expected to occur within the next 12 months from year end.

Opening balance 442 991 635 651 Provisions used (397 101) (429 713) Unused amounts reversed (45 890) (205 938) Additional provision 207 209 442 991

Closing balance 207 209 442 991 30.6 Other employee provisions

Provision is made for payments in respect of conversion costs relating to

moving the union bargaining unit to total cost to company (TCTC”) pay scheme like the rest of the staff. The cash flow was incurred in April 2014.

Opening balance - - Provisions used - - Unused amounts reversed - - Additional provision 19 843 066 -

Closing balance 19 843 066 -


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31 Employee retirement benefits obligation 2014 2013 E E

Retirement benefit (asset)/obligation (796 302) 8 639 284

The amount of employee retirement benefit obligation recognised in the statement of financial position is determined as follows: Present value of plan obligations 187 778 541 177 871 333 Fair value of plan assets (188 574 843) (169 232 049)

Present value of (overfunded) / unfunded obligations (796 302) 8 639 284 Unrecognised actuarial loss (7 190 470) (14 128 224) Accelerated recognition of unrealised actuarial gains to eliminate the application of the “corridor approach-re-statement/impact on 1 April 2012 (refer to Note 40.1) - 9 395 644 Accumulated accelerated recognition of unrealised actuarial gains to eliminate the application of the “corridor approach” 14 128 224 - Accelerated recognition of unrealised actuarial gains to eliminate the application of the “corridor approach” (6 937 754) 4 732 580

(Asset)/obligation in the statement of financial position (796 302) 8 639 284

The Company makes contributions to a defined benefit plan that provides pension benefits for permanent employees upon retirement. The movements in asset recognised in the statement of financial position are as follows: Asset at beginning of year 8 639 284 (4 804 424) Accelerated recognition of unrealised actuarial gains to eliminate the application of the “corridor approach-re-statement/impact on 1 April 2012” (refer to Note 40.1) - 9 395 644 Accelerated recognition of unrealised actuarial gains to eliminate the application of the “corridor approach” - 4 732 582 Contributions to the fund (11 073 683) (8 147 894) Expense recognised in profit or loss (Note 9) 1 638 097 7 463 376 (Asset)/obligation in the statement of financial position (796 302) 8 639 284

The defined benefit expense of E1 628 097 (2013:E7 463 377) has been recognised under administrative expenses in the statement of comprehensive income.

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31 Employee retirement benefits obligation (continued) 2014 2013 E E

Movement in the defined benefit obligation over the year is as follows:

Beginning of year 177 871 333 154 703 001 Current service cost 8 408 500 7 530 423 Interest cost 15 740 768 13 787 525 Contributions by plan participants 3 064 181 2 745 247 Benefits paid (10 009 625) (6 525 535) Actuarial (gains)/losses (7 296 616) 5 630 672

End of year 187 778 541 177 871 333

The movement in the fair value of plan assets of the year is as follows: Beginning of year 169 232 049 150 111 780 Expected return on assets 15 583 417 13 854 572 Employer contributions 11 063 683 8 147 892 Employee contributions 3 064 181 2 745 247 Benefits paid (10 009 625) (6 525 535) Actuarial (losses)/gains (358 862) 898 093

End of the year 188 574 843 169 232 049

There were no actuarial losses recognised during the year due to the fact that the cumulative unrecognised actuarial losses were within the corridor limits. The amounts recognised in profit or loss areas follows: Current service costs 8 408 500 7 530 423 Interest on obligation 15 740 768 13 787 525 Expected return on plan assets (15 583 417) (13 854 572) Actuarial gains* (6 927 754) - Total, included in employee costs (Note 9) 1 638 097 7 463 376

*Accelerated recognition of changes in defined benefit asset to eliminate the application of the “corridor approach” as a result of the revised IAS 19 The actual return from the plan assets 15 583 417 8 223 900 Expected return on assets 15 583 417 13 854 572 Actuarial (losses)/gains - (5 630 672)


126



31 Employee retirement benefits obligation (continued) 2014 2013 E E The principal actuarial assumptions for defined benefit obligations as at statement of financial position date (expressed as weighted averages):

Discount rate at 31 March 8.14% 9.1% Expected return on plan assets at 31 March 8.14% 9.1% Future salary increases 6.0% 7.0% Future pension increases 2.0% 2.1% Inflation 6.0% 8.9% Plan assets are comprised as follows:

2014 % 2013 % E E

Managed funds 188 752 538 101 169 877 521 101 Net current liabilities (177 695) (1) (645 472) (1) 188 574 843 100 169 232 049 100

2014 2013 E E

The managed funds comprises of the following; African Alliance- High Income Fund 22 980 667 - African Alliance- Equity Fund 88 613 156 - FINCORP 5 500 000 - African Alliance- Portfolio Fund - 67 581 551 African Alliance- Lilangeni Fund - 11 483 900 African Alliance- Managed Fund - 78 046 933 Inyatsi Bond - - Greystone Private Equity 5 539 000 6 750 000 SBC Shares - 5 000 000 Standard Bank 65 942 020 1 015 137

188 574 843 169 877 521

The expected return on plan assets is determined by considering the expected returns available on the assets underlying the current investments. Expected yields on fixed interest investments are based on gross redemption yields as at the statement of financial position date.

The actuarial position of the fund as at year end was as follows: Present value of defined benefit obligation 187 778 541 177 871 333 Fair value of plan assets (188 574 843) (169 232 049) (Surplus)/Deficit (796 302) 8 639 284

127




31 Employee retirement benefits obligation (continued) The actuarial position of the defined obligation for the past three financial periods before the earliest comparative

as disclosed above as required by IAS 19 par 120A are as follows:

2012 2011 2010 E E E Present value of defined benefit obligation 154 703 001 156 236 977 152 553 397 Fair value of plan assets (150 111 780) (146 396 046) (144 790 772)

4 591 221 9 840 931 7 762 625

Deficit

The expected employer contributions to the fund for the 2015 financial year are based on the expected annual percentage pension increment of 2.0% which amounts to E11 284 957.

32 Deferred income tax

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:

2014 2013 E E

Deferred tax assets: - Deferred tax asset to be recovered after more than 12 months (64 246 377) (42 796 470)

(64 246 377) (42 796 470)

Deferred tax liabilities: - Deferred tax liability to be recovered after more than 12 months 220 415 141 189 962 122

220 415 141 189 962 122

Deferred tax liabilities (net) 156 168 764 147 165 652

The gross movement on the deferred income tax account is as follows: Beginning of year 147 165 652 148 843 300 Profit or loss charge (note 10) 2 569 662 (6 477 707) Retrospective application of IAS 19 Revised- deferred tax impact on accelerated recognition of unrecognised actuarial gains (refer to note 40.1) - (2 583 802) Other comprehensive income charge (note 10) 6 433 450 7 383 861

End of year 156 168 764 147 165 652


128



32 Deferred income tax 2014 2013 E E

Non current tax (asset)/liability Accelerated tax depreciation 180 822 729 162 714 417 Prepayments 601 391 - Retirement benefit asset/(liability) 218 983 (2 375 803) Unrealised fair value adjustments on derivative financial instruments 4 448 759 3 053 832 Withholding tax on Motraco unremitted earnings 34 323 279 26 569 676

220 415 141 189 962 122

Assessed loss (27 185 505) (14 294 110) Provisions for other employee benefits (11 972 565) (5 148 726) Doubtful debt allowance (6 848 857) (9 809 220) Interest on EIB loan (1 622 757) (1 622 757) Unrealised forex gains on translation of foreign loans (9 760 233) (5 635 115) Deferred revenue (6 856 460) (6 286 542)

(64 246 377) (42 796 470)

Deferred tax liabilities (net) 156 168 764 147 165 652

129

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130



33 Income tax (asset)/liability 2014 2013 E E

Opening balance (40 471 682) (13 747 764) Income tax charge (refer to note 10) - - Tax paid (4 153 276) (26 723 918)

(44 624 958) (40 471 682)

34 Trade and other payables Trade payables and accrued expenses 103 900 599 140 973 756 Project payables - 837 140 Electricity connections contributions deposit 50 728 543 37 158 768 Dividends payable (Note 22.1) 4 044 386 4 044 386 158 673 528 183 014 050

35 Notes to the cash flow statement 35.1 Reconciliation of cash generated by operations to net income:- Profit before income tax 81 139 953 62 568 817 Adjustment for non-cash items and separately discloseable items:

Notes

Grant amortisation 24 (8 757 722) (7 131 670) Share of profits of joint venture company (27 317 762) (26 086 312) Defined benefit plan expense 31 1 628 097 12 195 956 Depreciation 15 104 458 092 95 191 685 Amortisation 10 000 000 10 000 000 Fair value gains on derivative financial instruments 29 (16 177 306) (11 104 845) Fair value adjustment – embedded derivatives 28 14 869 35 386 267 Non cash interest on EIB loan 27 5 089 502 3 860 639 Unrealised foreign exchange gains - loans and transactions 7 682 864 19 269 635 Finance cost on local and foreign denominated loans 16 348 705 16 112 641 Interest income (7 156 999) (9 281 472) Profit on disposal of property, plant and equipment 35.3 - (3 728 493) 166 952 293 197 252 848 Changes in working capital: (714 772) 68 403 295 (Increase)/decrease in trade and other receivables (19 959 972) 24 856 585 Decrease in inventories 7 010 084 5 754 968 Increase/(decrease) in provisions for other employee benefits 24 813 957 (10 073 357) Increase in deferred revenue 11 761 686 5 245 332 (Decrease)/Increase in trade and other payables (24 340 527) 42 619 767 Net cash outflows from operating activities 166 237 521 265 656 143

131




35 Notes to the cash flow statement (continued) 2014 2013 E E

35.2 Additions to property, plant and equipment Total additions – per note 15 252 451 902 278 377 691

252 451 902 278 377 691

35.3 Proceeds from disposal of property, plant and equipment In the cash flow statement, proceeds from sale of property, plant and equipment comprise: Net carrying amount (note 15) - - Profit on disposal of property, plant and equipment - 3 728 492

Proceeds on disposal - 3 728 492


132



36A Analysis of financial assets and liabilities by measurement

Financial assets and financial liabilities are measured on an ongoing basis either at fair value or at amortised cost. The summary of significant accounting policies describes how the classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the carrying amounts of the financial assets and liabilities by category as defined in IAS 39 and by statement of financial position heading.

Financial assets Financial assets and liabilities at and liabilities at Loans and armotised fair value through

receivables cost profit loss Total E E E E

As at 31 March 2014 Financial assets Cash and cash equivalents 59 814 723 - - 59 814 723Derivative financial instruments – swaps - - 89 017 558 89 017 558 Trade and other receivables 111 407 240 - - 111 407 240Embedded derivative asset - - 2 538 533 2 538 533

171 221 963 - 91 556 091 262 778 054

Financial liabilities Borrowings - 406 591 339 - 406 591 339Embedded derivative liability - - 122 230 133 122 230 133Derivative financial instruments – swaps - - 3 309 817 3 309 817Trade and other payables - 158 673 528 - 158 972 528

- 565 563 867 125 539 950 691 103 817

133




36A Analysis of financial assets and liabilities by measurement (continued)

Financial assets Financial assets and liabilities at and liabilities at Loans and armotised fair value through

receivables cost profit/loss Total E E E E

As at 31 March 2013 Financial assets Cash and cash equivalents 60 386 020 - - 60 386 020Derivative financial instruments – swaps - - 45 615 966 45 615 966Trade and other receivables 103 846 853 - - 103 846 853

164 232 873 - 45 615 966 209 848 839

Financial liabilities Borrowings - 312 454 391 - 312 454 391Embedded derivative liability - - 119 676 731 119 676 731Derivative financial instruments – swaps - - 6 085 532 6 085 532Trade and other payables - 183 050 914 - 183 050 914

- 495 505 305 125 762 263 621 267 568


134



37 Commitments 2014 2013 E E

37.1 Capital Commitments Capital expenditure approved at statement of financial position date but not yet incurred is as follows: Approved capital expenditure (Note 34.1.1) 232 143 011 271 243 722

This expenditure will be financed from debt and internally generated funds and is expected to be incurred and due for completion within the next three years.

Details of capital commitments are as follows:- 37.1.1Networkupgrades The Company has an approved capital expenditure budget of E 232 million (2013: E 271 million) to cater for routine

additions to the network during the 2013/2014 financial year. E31.7 million of the capital expenditure have been contracted for at year end and all this capital expenditure will be financed from current resources and external borrowings.

37.2 Right of use for electricity wheeling on 400kV line For the next 5 years, the Company has committed to a fixed monthly charge of US $ 121 184 (2013: US$ 121 781)

for right of use of the 400kV line. These monthly charges are being funded from internal resources. The right of use for electricity escalates annually by US inflation.

37.3 Motraco wheeling agreement In terms of an electricity wheeling agreement between Motraco and Swaziland Electricity Company, the Company

pledged shares to the value of US$ 2 million to Motraco as security that the electricity wheeling service at Edwaleni II will not discontinue. On the fourth anniversary date of Swaziland Electricity Company taking supply at Edwaleni II and every year thereafter, the amount of such secured shares shall be reduced by US$ 200 000.

37.4 Power Purchase Agreement In terms of the power purchase agreement with Ubombo Sugar Limited, the company paid E 150 million for an

exclusive right to purchase all excess power guaranteed by USL up to 2026 at a base price agreed to from 2011. This commitment will be funded from internally generated resources.

135




37 Commitments (continued) 37.4 Supply of energy Swaziland Electricity Company entered into long-term agreements with, ESKOM, a supplier for electricity purchases.

In January 2011 the company signed a Power Purchase Agreement with USL until 2026. The agreement was an exclusive right to the company to purchase excess electricity from USL. The company is obliged to take excess electricity from USL.

37.5 Facilities with bankers

Swaziland Electricity Company has an overdraft facility of E1Million at a rate of Prime less 1% with the First National Bank.

Swaziland Electricity Company has a GST banking facility/letters of credit amounting to E15 million and FEC facilities amounting to E 1 864 000 with Standard Bank of Swaziland which are due for review on 30th October 2014.

Swaziland Electricity Company has a guarantee with Nedbank in favour of T&T Marine for an amount of E3 553 843.93. The Company has an overdraft facility with Nedbank for an amount of E30 Million

2014 2013 E E

38 Contingencies

38.1 Litigations

Legal cases pending with potential liability for claims were in process against the Company at year end. The Company is disputing these claims and has indicated that it intends to defend any legal action which may be instituted. On the basis of the evidence available it appears that no obligation is present and the claims are therefore disclosed as a contingent liability.

2.0 million 2.5 million

39 Related party transactions The Company is wholly owned and controlled by the Swaziland Government, which own 100% of its shares.

The related party disclosure is required in terms of IAS 24, Related Parties Disclosures.

The related parties of Swaziland Electricity Company Limited consist mainly of government departments, state-owned enterprises, subsidiaries of Swaziland Electricity Company Limited, as well as key management personnel and members of board of directors of Swaziland Electricity Company Limited or its shareholder and close family members of these related parties.

In addition, related parties comprise a joint venture company, Motraco, and post-retirement benefit plans for the benefit of employees.


136



39 Related party transactions (continued) 2014 2013 E E

The following transactions were carried out with related parties:- 39.1 Government grant funding for electrification Cumulative contributions received for Rural Electrification Projects (Note 24) 37 970 163 48 629 914

39.2 Purchases of goods and services Joint venture, Motraco, wheeling charges (Note 6) 26 835 544 20 946 166 Employee pension fund costs (Note 9) 1 628 097 7 463 376

28 473 641 28 409 542

Goods and services are bought from related parties on an arm’s length basis at market-related prices. 39.3 Interest expenses Shareholder, Government of Swaziland - -

39.4 Year-end balances arising from transactions (i)Receivablesfromrelatedparties Government Departments 43 501 940 27 274 048

The Government departments include government ministries and parastatals. Joint venture, Motraco - Costs incurred on behalf of Motraco - -

Interest receivable on financial market instruments is in accordance with normal market practice. (ii)Provisionfordoubtfuldebtsforrelatedparties There is no provision for doubtful debt, nor bad debts written off during the year that relates to related parties.

137




39 Notes to the cash flow statement (continued) 2014 2013 E E (iii)Payablestorelatedparties: Shareholder, including Government Departments -PEU Management Fees 1 979 595 1 878 837

- Long term loans - -

- Shareholders loan 11 240 181 11 240 181

Joint venture, Motraco - Electricity wheeling charges 2 210 715 18 942 382

Employee Pension Fund (contributions) 11 063 683 8 147 892

Energy Efficiency Awareness Campaign Fund 600 840 -

The provision of funds to the Swaziland Electricity Company Limited by the Government of Swaziland is based on long term agreement that enable the Company to obtain financing below the normal market interest rate (prime lending rate). The Swaziland Government offer financing with interest rate ranging between 2% and 8%, which is below the prime lending rate of 8.5% (2013:8.5%).

39.5 Transactions with key management personnel Key management are those charged with planning, directing and

controlling the activities of the company, directly or indirectly. Transactions with key management personnel include salaries, bonuses, gratuities and director’s fees. Compensation paid to key management is shown below:

Board and related fees 530 350 537 477

Executive Management: Short term employee benefits 4 378 194 5 392 907 Gratuity-net (Provision) (815 762) (1 630 292)

3 562 432 3 762 615

40. Change in accounting policy due to the retrospective application of IAS 19 - Revised In the current year, the company has applied IAS 19 (as revised June 2011) Employee Benefits and the related

consequential amendments for the first time. The company has applied IAS 19 retrospectively and in accordance with the transitional provisions set out in IAS 19. The transitional provisions do not have an impact on the future periods. The opening statement of financial position of the earliest comparative period (1 April 2012) has been restated.


138



40. Change in accounting policy due to the retrospective application of IAS 19 - Revised (continued)

The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the “corridor approach” permitted under the previous version of IAS 19 and accelerate the recognition of past service costs.

All actuarial gains and losses are recognised immediately through the other comprehensive income in order for the net pension asset or liability recognised in the statement of financial position to reflect the full value of the plan deficit or surplus. Furthermore the interest cost and the expected return on plan assets used in the previous IAS 19 are replaced with “net-interest” amount under the revised IAS 19, which is calculated by applying the discount rate to the net defined liability or asset.

40.1 Impact of retrospective adoption of IAS 19 (Revised) The 2013 financial statements are the first financial statements in which the company has retrospectively adopted the

revised IAS 19. IAS 19 has been adopted retrospectively in accordance with IAS 8. Consequently, the company has adjusted the opening equity as of 1April 2012 and the figures for 2012 have been restated as if IAS 19 had always been applied.

E E 2013 2012

Effect on years presented Statement of financial position Decrease in defined benefit asset (4 732 580) (9 395 644)

Decrease in deferred tax liability (1 301 460) (2 583 802)

Decrease in retained earnings 3 431 120 6 811 842

Statement of comprehensive income Accelerated recognition of changes in defined benefit asset to eliminate the “corridor approach” 4 732 580 - Increase in income tax expense (1 301 460) -

Decrease in profit for the year 3 431 120 -

41. Post statement of financial position events There are no events which have occurred between the statement of financial position date and the date of the audit

report which have a material impact on the financial statements.

139


NOTES


140

NOTES

OVERVIEWVision and Mission 01The Ministry in Charge of SEC 02History 03From Power Station to Customer 04Introduction 05Highlights 08Facts and Figures 10Key Statistics 11Technical Performance 12

GOVERNANCEGovernance Structure 13Board of Directors 14Executive Management 16

BUSINESS REVIEWChairman’s Review 18Managing Director’s Report 20Directors’ Report 24Operational Report 27Sustainability Report 35Human Capital Report 37Health and Safety Report 41Rural Electrification 42

FINANCIAL STATEMENTS 44


CONTENTS

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SWAZILAND ELECTRICITY COMPANY

Eluvatsini House, Mhlambanyatsi Road, MbabaneP.O. Box 258, Mbabane, Swaziland

Tel: +268 2409 4000, Fax: +268 2404 2335Website: www.sec.co.sz, E-mail: [email protected]

Documents

A New Growth Path - EEC