Masuga is a locally produced, uncoated paper by Sappi containing 90% bagasse fibres sourced from previously disadvantaged local suppliers and 10% virgin fibre sourced from well managed and responsible forests. The paper is unbleached with a natural shade and very smooth Reducing the Carbon Footprint
texture. Masuga is produced at Stanger Mill in KwaZulu-Natal eliminating the CO2 emissions associated with shipping. Wood fibre used is Forest Stewardship Council and Programme for the Endorsement of Forest Certification (PEFC) certified. The production of this Annual Report contributes towards a low carbon economy and local economic empowerment in South Africa.
COMPANY information
Directors
Registered Office
Auditors
Mr MB Damane
CEF House, Block C, Upper Grayston Office
Auditor-General South Africa
Dr C Cooper
Park,152 Ann Crescent, Strathavon, Sandton,
Ms N Mlonzi
2031, Johannesburg.
Mr J Marriot
Company Secretary CEF (SOC) Ltd
Mr K Nassiep
Business Address
Mr J Subramoney (Alternate director)
CEF House, Block C, Upper Grayston Office
Company Registration
Dr V Misimang
Park,152 Ann Crescent, Strathavon, Sandton,
2005/017430/07
Ms M Mathekgadi
2031, Johannesburg. Postal Address P O Box 786141, Sandton, 2146 Holding Company CEF (SOC) Ltd incorporated in South Africa
Nature of business and principal activities Country of incorporation South Africa
To undertake research and technology development in order to exploit and utilise the energy resources of the Republic of South Africa and the Southern African region.
CREATING NEW OPPORTUNITIES‌ every day
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BOARD members
Mr M Damane Chairman
Mr K Nassiep CEO
Dr C Cooper Non-executive
Ms N Mlonzi
Mr J Marriot
Mr J Subramoney
Dr V Msimang
Ms M Mathekgadi
Mr M B Damane
Dr C Cooper
Mr J Subramoney
Chairman
Non-executive
Director: Energy Planning,
SANERI (Pty) Ltd
DPHIL (Energy)
Department of Science and Technology
CIS
Other Boards:
Bachelor of Administration Degree,
Other Boards:
South African National Energy Association
Masters in Business Leadership LLB*
SFF, iGAS
*current Ms N Mlonzi
Mr K Nassiep
BProc, LLB, Business Administration and
Dr V Msimang
CEO
Management (Honours)
Chief Director: Hydrogen and Energy (DST)
SANERI (Pty) Ltd
Other Boards:
PhD Chemical Engineering,
BSc (CHB), BSc (Honours),
SA Civil Aviation Authority, WOESA, ECON
MSc Eng Environmental Engineering,
MSc Eng (Mech), MBA*
Oil, Worthytrade, Fort Cox College,
BTech Chemical Engineering
*current
Uvimba Finance
Other Boards: CEF (SOC) Ltd
Ms M Mathekgadi Mr J Marriot
Chief Director: Clean Energy (DoE)
BSc Chemical Engineering
BSc (Honours), Higher Education Diploma,
Other Boards:
MSc Eng
Energy Frontiers, International South African National Science and Technology Forum SANERI ANNUAL REPORT 2010/11
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CHAIRPERSON’S foreword
Mr M Damane
The year 2010 has been a busy year for the South African government as regards energy matters. Three such activities were prominent. The Integrated Resource Plan 10 was released for discussion by the Department of Energy and eventually approved by Cabinet during March 2011. The National Climate Change Response Green Paper was workshopped by the Department of Environmental Affairs and its follow-up White Paper is scheduled to be submitted to Cabinet mid-2011. The National Treasury addressed its paper on Carbon Taxes through a public consultation process. The common thread of these papers was the transition to a low carbon economy – an essential consideration for SANERI. The major thrusts of SANERI’s work programme include energy efficiency, green transport, working for energy, renewable energy, smart grids and carbon capture and storage, are all directed towards a low carbon energy economy whilst maintaining energy affordability and security. As such, and because of the importance of these matters to energy research and development, SANERI participated in those consultation processes. Also of importance to national and international energy activities, is the holding of the United Nations Framework Convention on Climate Change’s Conference of Parties 17 (COP 17)scheduled to be held in South Africa during November/December 2011. This is an important opportunity for South Africa to showcase its achievements and programmes towards a low carbon economy. The past achievements of SANERI are expected to feature at this gathering. The 2010/11 year is expected to be the final year in which SANERI will operate in its present form. Chapter 4 of the National Energy Act, 2008, which addresses the formation of the South African National Energy Development Institute SANEDI, was operationalised as from 1 April 2011.
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The major thrusts of SANERI’s work programme include energy efficiency, green transport, working for energy, renewable energy, smart grids and carbon capture and storage, are all directed toward a low carbon energy economy whilst maintaining energy affordability and security.
Already SANEDI has been listed as a Schedule 3A public entity. This means that SANERI and the National Energy Efficiency Agency, NEEA (a division of CEF) will be amalgamated into SANEDI. However, during the transition period from SANERI, SANEDI is expected to continue its close links to CEF (SOC) Ltd and to build on the synergies between the two organisations. SANEDI is expected to continue SANERI’s and NEEA’s vital contribution to South Africa’s energy economy. It has been a privilege for the SANERI Board to manage the establishment of SANERI and to guide its early years of research and development. It is believed that the foundations laid by SANERI will serve well the succession to SANEDI.
Mr M Damane
SANERI ANNUAL REPORT 2010/11
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CEO’s report
The Establishment of a New Public Entity It has been almost two years since the National Energy Act (Act. No. 34 of 2008) was promulgated. At the time of its promulgation, the Act was intended to legislate hitherto unlegislated areas of policy as espoused in the Energy Act of 1998. Aspects such as energy data collection, energy planning and R&D were not satisfactorily covered by existing legislation. R&D in particular has been neglected from a legal perspective, with only cabinet approved policies and strategies in existence. Even SANERI, the entity entrusted with the responsibility of coordinating public interest energy R&D, was only established through a ministerial directive in 2005. The creation of the South African National Energy Development Institute (SANEDI) provides for the coordination of applied R&D in the country, in accordance with the Cabinet-approved Management Framework for Research and Development. Under this framework agreement, the Department of Science and Technology (DST) is responsible for Type I research, which is essentially focused on basic research. Type II research, which is essentially cross-cutting and applied research, is a shared responsibility between the DST and the relevant line department. In the case of energy, the collaboration is between the DST and the Department of Energy (DoE). SANEDI, as the DoE’s implementing agency for public interest energy R&D, is therefore perfectly positioned to work with relevant governmental and non-governmental bodies in developing a national energy R&D agenda. During the course of 2010/11, significant effort was expended in formalising the business case that establishes SANEDI. The Departments of Energy, Science and Technology, National Treasury and Public Service and Administration have collaborated on the refining of the business case. As a result of this effort, it was possible for National Treasury to list the new public entity retrospectively as of 1 April 2010. The Act itself still required operationalisation – a process that was concluded in March 2011, with the State President assenting to that section of the Act that establishes SANEDI. SANEDI will therefore commence business formally as of 1 April 2011. The opportunity for SANEDI to assist in developing a technology innovation and development strategy for SA is an exciting one. It has become apparent that SA does not have a coherent strategy that defines under what conditions SA should be a technology developer or fast follower.
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Such a strategy would define the parameters that would guide the country in terms of technology choice, green economy impact, socio-economic upliftment potential and contribution to energy security. There are a number of low-hanging opportunities in the energy sector that require further R&D activity, such as energy self-sufficient housing, alternative fuels for mobility and energy efficiency improvements in all sectors comprising energy demand. There are also a number of opportunities that will only manifest over a longer period, such as carbon capture and storage. This type of technology is a potential game-changer, as it will support the ongoing yet cleaner use of fossil fuels in processes such as pulverised fuel combustion, coal-to-liquids and gas-to-liquids conversions.
SANEDI and Industry – contributing to the New Growth Plan and Green Economy It is widely understood that the energy sector will constitute the bulk of major capital intensive infrastructure development in the country in this decade. Concomitantly, there will be a significant contribution to green jobs from these developments, which include major power plants under construction such as Medupi, Kusile and Ingula. What is somewhat lacking is the focus on smaller, decentralised systems – typically under 1 MW in capacity – that can and will result in local economic development and sustainable job creation. National Treasury and the DoE have seen the opportunity to get semi-skilled and unskilled workers employed in the area of distributed generation systems. These systems would involve the conversion of naturally occurring feedstocks as a source of energy. A variety of technology options could be utilitised to convert the feedstocks into useful energy. With this in mind, the Working for Energy Programme was established in 2009/10 and operationalised in 2010/11. This programme was conceptualised based on the success of the Working for Water Programme, in which invasive plant species are removed and replaced with indigenous ones. The invasive vegetation is considered a source of energy and would therefore fit into a programme that was intended to generate electricity or gas from waste sources. The Working for Energy Programme therefore provides a means by which invasive vegetation can be converted to energy. Over time, the scope of the programme has been extended to include other natural resources such as micro- or mini-hydro schemes, wood and pulp waste, animal dung, solar and wind energy. A number of projects have already been implemented and a further call for proposals will be issued early in the new year.
The Centres of Research and Development (CoRD) The Centres are intended to create both a platform for innovation in terms of energy R&D and promote the accelerated uptake of cleaner technologies. Significant progress has been made in the year in establishing the new Centre, the Renewable Energy Centre for Research and Development (RECORD).
SANERI ANNUAL REPORT 2010/11
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“
The Centre for Energy Systems Analysis and Research, the Energy Efficiency and DSM Hub, the SA Centre for Carbon Capture and Storage and the Green Transport Centre have continued to deliver R&D and in some cases, postgraduate energy research capacity for the country.
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This Centre is a multi-disciplinary virtual Centre that draws on the expertise of the universities that are currently active in renewable energy related research. Institutions such as Nelson Mandela Metropolitan University and Tshwane University of Technology have already indicated their interest in participating in the Centre and the activities for 2011/12 will concentrate on refining the business case for the Centre. This will take into account the requisite budget of the relevant satellite facilities that will initially make up the Centre. The Centre for Energy Systems Analysis and Research, the Energy Efficiency and DSM Hub, the SA Centre for Carbon Capture and Storage and the Green Transport Centre have continued to deliver R&D and in some cases, postgraduate energy research capacity for the country. More detailed reports on their performance are included elsewhere in the annual report.
Key Results for 2010/11 Despite the significant reduction in funding, the institute has continued to grow from strength to strength and now serves a wider community in terms of its outreach. The following achievements in 2010/11 bear mentioning as they have largely impacted on the area in which they were implemented.
Projects • The Carbon Storage Atlas has been produced and launched by the Minister of Energy in September 2010. The atlas identifies sites, both on and offshore that could be used for long term storage of CO2. The atlas identifies a preliminary estimate of some 150 Gt of storage capacity, excluding the Karoo basin. Some additional geotechnical studies were also initiated that serve to further refine the estimate in the Zululand Basin. • The development of the Wind Atlas of South Africa continued, with preliminary results providing a somewhat surprising picture of the wind climate in SA. Altogether, there are three distinct wind climates observed in the country. This implies a high probability of there being wind energy available at any given time in the country. This bodes well for the emerging wind energy market in SA. • The African Energy Efficiency Centre, essentially a collaborative partnership between SANERI, NEEA, CSIR and international partners, has been established. The Centre will focus on the development of consulting capacity to undertake energy efficiency studies in Sub Saharan Africa. In addition, there will be mutually beneficial exchange of information between parties to the establishing agreement, providing for the transfer of skills and promotion of best practice.
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CEO’S REPORT cont.
• A Smart Grids Position Paper has been developed in consultation with the DoE, Eskom and various municipal electric utility representatives. This position paper identifies the key challenges facing the expansion of the electrical network, where consumer needs and new technology impacts on the grid need to be considered. A centre of research and development that will bring together the key role players in the smart grid environment, is under consideration. • The Green Transport Centre, together with the taxi owners association, South African National Taxi Council (SANTACO), as well as Blue IQ and the Automotive Industrial Development Corporation (AIDC), have introduced liquefied petroleum gas (LPG) into about 70 minibus taxis. This pilot project has shown that LPG, in conjunction with conventional liquid fuels such as petrol, can be a cost effective and environmentally more appealing option for motorists. A larger demonstration project is now under development, based on the success of this initial pilot. • The Green Transport Centre has also been instrumental in the establishment of a Compressed Natural Gas (CNG) filling station in Langlaagte, southwest of Johannesburg. The filling station is used to fuel several metro buses that have been converted to use CNG, in addition to conventional liquid fuels. The project involves collaboration with a private sector partner, as well as Gauteng’s Department of Transport.
Human Capital Development While SANERI has handed over the responsibility of management of its Bursary Support Programme back to DST, there are several programmes still in existence that continue to produce pleasing results in terms of Masters and Doctoral students that have either completed their studies or are well on their way to doing so. In particular, SANERI continued to invest in human capital development at the University of Pretoria-based Energy Efficiency and DSM Hub. In addition, the SA Centre for Carbon Capture and Storage (for which SANERI provides the programme management unit), has also invested in the critical skills needed to develop the carbon capture and storage industry in SA. In 2010/11, SANERI has supported a total of 12 Masters and 19 Doctoral students. The table on page 10 gives the current demographics and areas of study of the SANERI-funded students.
SANERI ANNUAL REPORT 2010/11
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NAME
UNIVERSITY
DEGREE 2011
RESEARCH TOPIC
CCS Bursaries 2010/11 Violet Kholumo
WITS
Masters
Adsorption of Carbon Dioxide onto South African Coal Ash
Thembani Kelvin Mlambo
Pretoria
Masters
Improving geological saline reservoir integrity through applied mineral carbonation engineering
Dustin Jooste
University of Stellenbosch
Masters
Towards a South African emissions trading scheme: opportunities and challenges
CESAR Bursaries 2010/11 Richard Purser
Financial evaluation of energy from waste as a dual energy supply and waste management alternative
Vincent Lane
Using solar water heating (swh) technology to supplement conventional energy use in the food and beverage industry
Gary Fahy
The technical appropriateness and economical feasibility of large scale solar water heating (SWH) systems
Caitlin Bergh
University of Cape Town (UCT)
Masters
Industry decision making surrounding energy efficiency and climate change interventions
Oliver Johnston
Industry decision making surrounding energy efficiency and climate change interventions
Lesego Malia
Biogas assessing opportunities and costs at two sites in Cape Town
Joshua Brodrick
Energy Modelling course
Devin De Waal
Energy Modelling course
R. Inglesi Hotz
University of Pretoria
Investigating issues of electricity and efficiency
Masters
C.A Thopil
Investigating issues of energy externailities
EEDSM Hub 2010/11 Kala Konga Cedric
MEng Electrical
Quasi Z-Source rectifier modelling and control
Nkosikhona Delubom
BEng (Honours) Electrical
Optimal scheduling of charging and discharging of gridable electric vehicle
Malatji Esrom
MEng Electrical
Multi-objective optimasation of air source heat pump water heaters integrated with space cooling
Mathaba Tebello
PhD Electrical
Wind energy optimisation and resource prediction
Mwaniki Frederick
MEng Electrical
A highly efficient voltage boost for a small PV array
Olinga Zadok
MEng Electrical
Optimal scheduling of a heat pump operation to minimise energy cost and energy use
Sayyid Ahmed
MEng Electrical
Energy efficient high power LED drivers
Wang Nan
PhD Electrical
The intelligent computing and construction of multi-field optimisation model in energy management of building, humidity control in the building
Beangstrom Sheldon
University of Pretoria
BEng (Honours) Chemical
Steam system synthesis using process integration techniques: multiple steam levels Analysis, synthesis and optimisation of complex cooling water systems
Vincent Gololo
PhD Chemical
Jane Stamp
PhD Chemical
Energy efficiency in multipurpose batch plants
Molokoane Knowledge
MEng Chemical
Integrated Gasification Combined Cycle (IGCC) optimisation: gas side analysis
Molefe Tumi
BSc (Honours) Physics
The demand for high comparative gas – cooled nuclear reactors for medium sized cities
Katekani Silaule
BSc (Honours) Physics Diffussion of krypton in silicon carbide at room temperature
Zenande Mcotshana
BSc (Honours) Physics Diffussion of krypton in silicon carbide at 350k
Chemist Mabena
BSc (Honours) Physics Diffussion of krypton in silicon carbide at 350k
Mathilda du Preez
PhD Psychology
Household energy use in South Africa: a systemic study of an individual intervention
PhD Mechanical
Study of air flow patterns in spiral blast freezers on energy utilisation efficiency and freezing quality
MEng Electrical
Energy efficiency and position sensorless control of synchronous reluctance machine drive
Kalejaiye Adedayo Villet Wikus
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Tshwane University of Technology (TUT) University of Stellenbosch
CEO’S REPORT cont.
Carbon Footprint for this Annual Report In an effort to further reduce the carbon footprint of the organisation, the production of this annual report has been undertaken with various sustainability aspects taken into consideration. It supports our the company’s goals of protecting the environment and empowering South Africans. Only a minimum quantity of 250 will be printed and the balance will be copied onto USB sticks for circulation to stakeholders. Annual reports will be printed on paper which is called “Masuga”, branded as Sappi’s “sweet paper”. Its made from 90% sugar cane waste (bagasse) which is sourced from previously disadvantaged local suppliers and 10% virgin fibre from sustainable forests. The paper is 100% recyclable and is made from an unbleached mixture of pulp. Masuga is produced at Stanger Mill in KwaZulu-Natal which is ISO9001, ISO14001 and ISO18001 certified. Wood fibre used is FSC (Forest Stewardship Council) and PEFC (Programme for Endorsement of Forest Certification Schemes) certified. Local production eliminates the CO 2 emissions associated with shipping.
Audit Results Despite the rigorous requirements imposed by National Treasury and the Auditor-General in terms of auditing performance reporting and financial management, SANERI has received a positive unqualified audit report. This is indicative of the hard work on the part of staff in SANERI to ensure transparency and integrity in all aspects of SANERI’s work. This supports the institute’s values, which incorporate the elements of transparency and integrity. As a state entity it is vital that the public and government receive the best quality service, with the optimal use of state funds. I am therefore pleased that the Auditor-General concurs with the internal audit function in CEF that SANERI is indeed a responsible and well administered institute. Thank you
KM Nassiep Chief Executive Officer
SANERI ANNUAL REPORT 2010/11
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ABOUT Saneri saneri
Management and Staff Profile
Black
Female
Coloured
Male
Indian White
CEO System Administrator
Senior Manager Energy Efficiency Policy & Planning
Manager Administration & Finance
Personal Assistant
Senior Manager End Use & Infrastructure Management
Senior Manager Clean Energy Solutions
Senior Manager Advanced Fossil Fuel Use
Senior Manager Working for Energy
Project Manager Green Transport Programme
Personal Assistant
Personal Assistant REEEP Secretariat
Research Assistant
Regional Technical Coordinator
Admin Officer
Research Assistant
CCS Consultant Project Manager
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Project Awareness Officer Green Transport Programme
Project Assistant
Project Assistant
Intern
SANERI was established as a company in the CEF Group. The CEO, Mr Kadri Nassiep was appointed in August 2006 and Senior Managers were appointed in December of the same year. The organisation has since recruited the staff essential to the day-to-day functioning of the organisation. This Annual Report highlights SANERI’s activities for the 2010/11 financial year. By the end of the financial year, SANERI was operating with a staff consisting 23 members. The exciting Green Transport Technology Programme has been operating successfully within SANERI following the conclusion of an agreement between SANERI and the Department of Science and Technology, that the Green Transport Programme be housed and managed within SANERI. The aim of the programme is to showcase South Africa’s capabilities regarding the use of alternative fuels and technologies for transport. The priorities of SANERI are to: • Undertake energy research (primary function) and • Develop human capacity within this field. The above mentioned is carried out with due cognisance of SANERI’s nine thematic areas, which were identified in the 10 th order Draft National Energy R&D Strategy. The above mentioned strategy was developed by industrial experts, government and academia, under the auspices of the Department of Science and Technology.
SANERI ANNUAL REPORT 2010/11
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SANERI’S thematic areas Although the draft National Energy R&D Strategy of South Africa (2006) has not yet been approved by Cabinet, it clearly spells out objectives and priorities for SANERI to focus on. The priority areas are as follows: • Energy Infrastructure Optimisation; • Energy Efficiency and Demand Side Management; • Impact of Energy Use on the Environment; • Use of Energy to Stimulate Socio-Economic Development; • Cleaner Fossil Fuel Use (including clean coal); • Renewable Energy; • Alternative Energy Sources (including fuel cells and hydrogen); • Energy Planning and Modelling; and • Energy Policy Research. The highlights of some of the research themes are elaborated on in the pages to follow.
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SANERI ANNUAL REPORT 2010/11
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Advanced Fossil fuel use Fossil fuels remain the foundation of the world’s and South Africa’s primary energy supply. South Africa, with its well developed coal based energy economy, is likely to remain locked into this energy, as it has reserves for the next few decades and therefore is venerable to environmental concerns. In compliance with the policies of the Departments of Energy and Environmental Affairs, SANERI has embarked on a programme of clean coal technologies as a transition from fossil fuels to renewable and nuclear energies. It is intended that SANERI will eventually address all aspects of fossil fuel use – coal, oil and gas. However, for now, resource restrictions have necessitated that advanced fossil fuel usage focus on the use of coal. Such an energy resource is subject to a number of challenges, such as: • Pressure to lower environmental impacts, including global climate change and the mitigation of carbon dioxide emissions; • Uncertain quantification and quality of resources and reserves; • Diminishing research and development expertise and research funds; • Unclear ‘road map’ for coal in South Africa; and • Optimisation of a finite resource. The SANERI’s mandate is to address these challenges within its limited resources.
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SANERI ANNUAL REPORT 2010/11
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South African Coal Road Map Coal is a critical source of energy for South Africa, however its long-term contribution to the national good is contingent on a number of interacting factors. The purpose of the Coal Road Map is to address the full value chain of coal and to map a path for the long term benefits to South Africa. The Road Map was initiated by the Fossil Fuel Foundation and took time to establish in order that all stakeholders could be incorporated in the process. SANERI has partnered government departments and industry and other stakeholders to finance and develop the Road Map. In SANERI’s case, the participation has a specific purpose to determine research and development gaps in the coal-energy field. The first phase of the project commenced during the year 2010 and is scheduled to finish mid – 2011. The second phase is scheduled to follow soon thereafter.
Specific Clean Coal Projects Specific clean coal projects operational during 2010/11 were: a) High pressure spray injector to test liquid fuels:
This project entailed the purchase and operation of a high pressure spray injector for the testing of new liquid fuels and injector systems. The project was completed during the year. A total of ten students benefitted from the use of the Injector Facility, including two masters degrees. The experimental results showed a close correspondence with modelled predictions. The Injection Facility is available to other researchers on a ‘third party access’ basis.
b) Production of liquid fuels direct from coal:
With negligible oil resources in South Africa, this project was directed to the direct extraction of liquid fuels from coal, in contrast with the Fischer-Tropsch technology currently in use by the South African synthetic fuel industry. Initial results are encouraging and the project is scheduled to finish early 2012.
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c) Adsorption of carbon dioxide onto coal:
This project is being undertaken to determine the affinity of South African coal to absorb carbon dioxide as an option for carbon capture and storage. This project is scheduled to finish mid – 2011.
d) Determination of sulphur and trace elements in coal:
The aim of this project is to determine the association of mercury and other hazardous trace elements with pyrite in South African coals, and to determine the environmental costs associated with their removal relative to carbon loss during beneficiation. This project is scheduled to be completed mid – 2011.
e) Speciation of heavy metals in coal:
This project determines the trace element content in the particles released in the combustion of coal and in particular the mobility and fate of heavy metal ions. The project is scheduled to finish mid – 2011.
I Wish I Was A Lump Of Coal That’s Dug Out From My Bed And Gently Washed With Loving Care, To Make Me Clean, It’s Said. But When To Pulveriser Plant, On Belt Conveyer Led, It’s Time To Reconsider Life And Wish I’d Stayed In Bed. – Dr AD Surridge
SANERI ANNUAL REPORT 2010/11
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Carbon Capture and Storage (CCS) The focus of the clean coal technology programme during 2010/11 has been carbon capture and storage as a mitigation measure for the release of carbon dioxide into the atmosphere.
South African Centre for Carbon Capture and Storage The South African Centre for Carbon Capture and Storage was established in March 2009 and operationalised during the year 2009. The members as at March 2011 are: SANERI, Sasol, British High Commission, Norwegian Embassy, Eskom, Agence Française de Développement, Anglo Coal, Exxaro, PetroSA, Total Coal and Xstrata. The Road Map for carbon capture and storage in South Africa has a 15 year timeframe. The South African Centre for Carbon Capture and Storage has secured funding for a five year period, therefore the five year work plan is configured as an element of the longer term programme. The five phases of the Road map and their current status are:
a) Preliminary Potential Investigation (completed)
The preliminary investigation showed theoretically that South Africa had capturable emissions and potential storage sites.
b) Geological Storage Atlas (completed and The Carbon Dioxide Geological Storage Atlas was launched by the Minister of Energy published September 2010) September 2010 – see picture page 21.
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c) CO2 Injection Experiment (planned)
The Test Injection is planned as a ‘proof of concept’ for South African conditions. A scoping study for the Test Injection was started during February 2011.
d) Demonstration Plant (planned)
A demonstration plant will test an integrated operating system under local conditions and forms an essential link between feasibility trials and a full scale commercial plant.
e) Commercial Operation (planned)
If positive outcomes of the demonstration plant ensue, a full scale commercial plant is envisaged.
ADVANCED FOSSIL FUEL USAGE cont.
CENTRE CCS PHASE 1 COMMERCIAL 2025 Millions of tonnes DEMO PLANT 2020 Hundreds of thousands of tonnes
CCS POTENTIAL DONE 2004
CARBON ATLAS 2010 TEST INJECTION 2016 Tens of thousands of tonnes
Time capsule for carbon capture and storage in South Africa
As part of the local outreach for carbon capture and storage, SANERI presented the following: • NUMSA – 28 March 2010. • Carbon Capture and Storage Workshop – Gaborone 8-9 April 2010. • After Kyoto – The New Deal to Combat Climate Change – CEF – 20 April 2010. • Saudi Arabia delegation to SANERI – 25 May 2010. • Greener Gas Emissions 25-27 May 2010. • Fossil Fuel Foundation (FFF): Role of Coal 2-28 July 2010. • Wits Coal School – 29 July 2010. • Coal Energy Africa 16-17 August 2010. • Joint Workshop on Energy Technologies for a Low Carbon Future – 6-8 September 2010. • Africa Energy Week – 27-30 September 2010. • Presentation to the Fossil Fuel Foundation – 20 October 2010. • Centre for Renewable and Sustainable Energy Studies, Stellenbosch University – 12 November 2010. • FFF 15th Southern African Conference on Clean Coal to Clean Energy Research and Development to Meet
Supply and Demand for Africa 17-18 November 2010.
• National Association for Clean Air – 3 December 2010. • Carbon Cycling in the Deep Bio-Sphere – 18-21 January 2011. • Platts CCS Conference, London – 17-18 February 2011. • Eskom Kopana, Johannesburg, 8 February 2011. Six bursaries were awarded by the Centre for students to study for a post-graduate degree in carbon capture and storage.
SANERI ANNUAL REPORT 2010/11
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Carbon Dioxide Geological Storage Atlas The major achievement of the year was the completion and publication of the Atlas on the Geological Storage of Carbon Dioxide in South Africa. The Atlas was developed by the Council for Geoscience and Petroleum Agency with the support of PetroSA, Eskom, Sasol, Anglo American and SANERI. The Minister of Energy, Ms Dipuo Peters, officially launched the Atlas on 10 September 2010 and in January 2011 the full report was released. These documents are available on the South African Centre for Carbon Capture and Storage’s website www.sacccs.org.za. The Atlas identifies four possible carbon dioxide geological storage basins: • Orange basin [off-shore of the west coast]; • Outeniqua basin [off-shore of the southern coastline and partly on-shore and site of the only producing gas/petroleum wells in South Africa]; • Durban/Zululand basin [east coast on-shore and off-shore]; and • Karoo on-shore basin [near the main coal fields and the majority of the coal-based electricity generation and synfuel production]. The Karoo Basin has low porosity and permeability and dolerite intrusions and was therefore not considered in the Atlas as a potential storage area at this stage. Further work is continuing.
(From left) Prof Tony Surridge, Head: South African Centre for Carbon Capture and Storage, Ms Dipuo Peters, Minister of Energy, Mr Mputumi Damane, Group CEO: CEF (SOC) Ltd and Mr Kadri Nassiep, CEO: South African National Energy Research Institute at the launch of the Carbon Storage Atlas at CEF House in Johannesburg.
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ADVANCED FOSSIL FUEL USAGE cont.
Currently, studies are being undertaken in the onshore areas of the Zululand Basin [with UK support] and the Outeniqua Basin [with Europe Aid support] to take the storage potential from a “theoretical” level to an “effective” level. The main findings of the Atlas study were, excluding the Karoo Basin: • South Africa has 150 gigatonnes of storage capacity at a ‘theoretical’ level; • 98% of that storage is off-shore; and • Four gigatonnes is required to store 40 million-tonnes per year for 100 years. These findings provide an incentive to further investigate carbon capture and storage as a greenhouse gas mitigation technology.
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END USE AND infrastructure The Solid-State Transformer Project The solid-state transformer (SST) is a power electronic based transformer capable of performing the same basic functions as the steel-core linefrequency transformer. However, due to the power electronic nature, the SST can perform many other functions such a power quality control and the provision of an integration point for renewable energy resources and storage devices. Due to the fact that it is essentially a software-controlled device, it has all the features required for a modern smart-grid device. The fundamental problem that has to be overcome when developing a medium voltage SST is the limited blocking-voltage capability of existing semiconductor switches. Although semiconductor technology improved much during the last two decades, the voltage blocking capability of power semiconductors is much lower than the required 22 kV for the high voltage side. This limitation was overcome by developing a special multi-level converter topology consisting of 15 modular converter cells per phase. Each cell is equipped with its own digital controller and communicates with a main controller through optic fibre connections. State-of-the-art digital control algorithms were developed for the cell and main controllers. Each cell also contains a high-frequency transformer which was developed specifically for this project. This modular arrangement of similar cells has many benefits such an increase in reliability by including redundant cells. The mass production of highly integrated cells should also keep the production costs low. The cell diagram is shown in Figure 1. The completed cell is shown in Figure 2. The completed cell consists of the power electronic converter as shown in the diagram, a high frequency power transformer with a high insulation capability, a dedicated cell controller implemented using an FPGA (Field Programmable Gate Arrays) and several measurement circuits. Each cell is rated to operate at 800 V and 2.5 kW. By using several of these cells, connected in cascaded-series on the input side and in parallel on the output side, these ratings can be increased. This connection of three cells is shown in Figure 3. The single phase AC-DC converter rated at 5.4 kV (AC) to 800 V (DC) and 30 kW consists of 12 cells connected in this way. A photograph of this single phase converter is shown in Figure 4.
Figure 1: Diagram of the SST cell
Figure 3: Connection diagram of the single phase stack
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Figure 2: Photograph of the SST cell
Figure 4: The completed single phase stack consisting of 12 cells
Figure 5: Input voltage and current measurement at 6.6 kV (line to line)
Figure 6: The SST prototype in the laboratory
A three-phase laboratory prototype, consisting of 36 modular cells, was developed and tested by the Power Electronics Group at the University of Stellenbosch. This prototype consists of three single phase stacks and a single three phase DC to AC inverter rated as 800 V (DC) to 400 V (AC). A number of technical problems had to be solved during the debugging phase after which the device performed to specification. The extraordinary large number of voltage levels produced an almost perfect sinusoidal voltage on the input stage of the converter. This can be seen in the measurement of the input voltage and current shown in Figure 5. It is also noteworthy that the input current is free of power harmonics and in phase with the voltage. A photograph of the completed SST, under test in the laboratory, is shown in Figure 6. While this project confirmed the technical feasibility of the SST, a number of challenges remain. The high cost compared to conventional iron and copper transformer remains the biggest challenge. Issues regarding the control, protection, start and shutdown of the device also have to be addressed. While the SANERI project formally ended in March 2011, research is continuing on the predictive control of the active rectifier input stage of the device. Methods of reducing the number of cells are also being investigated. One PhD student, four MSc students and two University of Technology diploma students completed their training on this project. Twelve conference papers and two journal papers were published.
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ENERGY DATA AND knowledge management CESAR SANERI has, through CESAR (Centre for Energy Systems Analysis and Research) funded two research projects in 2010, one focusing on provincial liquid fuel demand in South Africa, and the other on building a database of energy data and research outputs. In addition eight students received bursaries for their Masters studies.
Overview of Research Activities Open Energy Database The Open Energy Database (OPENED) project was conceived with the intention of bringing existing energy data (historical and current) in the public domain into a central repository. There was broad consensus amongst stakeholders that the concept of holding a central repository for data is a good and useful one and that the proposed structure suitably represented the spread of data and was a good approach to classifying data. The needs assessment report identified two significant events that had occurred since the original OPENED project was conceived and should be considered in the planning of the database: • The initiation of the Department of Energy (DoE) database project and • The opportunity to combine OPENED with the database developed under the CESAR Energy Research Indicators project. Modelling of Regional Liquid Fuel Demand in the Transport Sector The aim of this project is to perform a comprehensive analysis of regional transport demand in South Africa. Demand for energy is derived from demand for mobility computed at a highly disaggregated level. The project includes both passenger and freight transport demand.
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Overview of Teaching Activities Energy Modelling Course The Energy Modelling and Analysis course ran for the third year in succession in 2010 (after a two year break). This year, ten of the Energy Research Centres (ERC) 15 masters students completed the module which proved to be the most popular of the optional modules available in the ERCs masters programme. Three external students participated through the University’s programme for Continuing Professional Development (CPD). Among these CPD students were participants from other academic institutions, industry and government departments. The main themes of the course have been established as: • Understanding the importance of Energy Systems Analysis to Energy Planning; • Modelling theory and methods; • Model construction; • Interpretation of output; and • Application of modelling. Energy Efficiency Course The Energy Efficiency and Demand Side Management course (MEC5056Z) was held from 26 July 2010 to 3 September 2010 attracting a total of 11 student registrations. The course was last presented in 2003 and so much of the material needed to be reviewed and updated, this is seen to be an ongoing task. The course content covered a wide range of energy efficiency and demand side management aspects.
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Students receiving CESAR Bursaries Students who have completed course work and have submitted a half thesis for examination Richard Purser has handed in his thesis on the financial evaluation of Energy from Waste as a dual energy supply and waste management alternative for the City of Cape Town. His thesis compared the financial performance of the five different waste technologies which provided an excellent review of waste management in Cape Town, providing him with a rich understanding of some of the complexities of the sustainability debate relating to waste and energy. Vincent Lane’s thesis focused on the opportunity for using solar water heating technology to supplement conventional energy use in the food and beverage industry (F&BI) in the Western Cape. Using three study sites and the model RETscreen, vincent found that the systems are not currently financially viable, due mainly to the length of production periods at the three facilities and the low cost of fossil fuel energy supplies. Gary Fahy undertook research to establish whether a large scale solar water heating system was a technically appropriate and economically feasible solution for hot water production in South African hotels. It also included analysis of electricity consumption data from an additional 16 hotels to compare results and establish whether the results of the case study could be extrapolated across the entire hotel industry. Students who have completed 200 credit Masters thesis Caitlin Bergh conducted work in the area of industry decision making surrounding energy efficiency and climate change interventions focusing on refineries and she will likely start to explore energy sharing opportunities outside of the site borders, embarking on considerations of industrial symbiosis. Oliver Johnston is conducting work in the area of industry decision making surrounding energy efficiency and climate change interventions focusing on mining and minerals processing. His case study on gold mining is being conducted in collaboration with the Minerals to Metals initiative at the Department of Chemical Engineering at UCT, will serve to help identify how further energy and greenhouse gas savings can be promoted in the industry by government through policy and incentives. Students who have completed 120 credits of course work in 2010 and began their thesis in 2011 Lesego Malla (Energy and Waste in Cape Town), Joshua Brodrick and Devin De Waal received bursaries during 2010. They all completed the Energy Modelling course. R. Inglesi (PhD student) has presented two papers in one local and one international conference in 2010: • Inglesi, R. Blignaut, J.N. Estimating the demand elasticity for electricity by sector in South Africa. 2010. Putting a Price in Carbon Conference Proceedings. ISBN 978-0-7992-2357-6. Energy Research Centre, University of Cape Town: March 2010; and • Inglesi, R. Blignaut, J.N. The evolution of the sectoral electricity intensity levels in South Africa: 1992 to 2006. Presented at ATINER Conference, Athens, Greece. July 2010. Currently, two of her papers are under review in the journal Energy Policy and SAJEMS while another two are still work in progress and will be ready to be submitted within this month. She has started compiling her thesis and will be submitting the final version at the beginning of 2012: • Inglesi, R. Blignaut, J. Estimating the demand elasticity for electricity by sector in South Africa. (Under review) South African Journal of Economic and Management Sciences; and • Inglesi, R. Evolution of price elasticity demand in South Africa A Kalman filter application. (Under review) Energy Policy.
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energy data and knowledge management CONT.
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The Energy Technology Database The Energy Technology Data Exchange, commonly referred to the ETDE, is a multi-lateral energy exchange created in 1987 within the IEA “Implementing Agreements” international collaborative framework. The mission of ETDE is “to provide governments, industry and the research community in the member countries with access to the widest range of information on energy research, science and technology and to increase dissemination of this information to the developing countries”. Innovation in the energy sector results in the development of new technologies to produce, use and save energy. In the same process, strategies to mitigate the harmful effects of climate change and global warming are also addressed. It does not help if countries work in isolation to achieve breakthroughs, improve efficiencies and research greenhouse gas emissions. This is likely to duplicate research and will result in the inefficient and ineffective use of resources. The communication and sharing of energy technology information across the globe is absolutely vital, resulting in the sharing of ideas and technology across the energy sectors. The Energy Technology Data Exchange World Energy Base (ETDEWEB) makes it possible for users to search and explore over 4.3 million worldwide energy literature references. The web includes information on energy R&D, energy policy and planning, basic sciences (eg: physics, chemistry and biomedical) and materials research, the environmental impact of energy production and use, including climate change, energy conversation, nuclear (eg: isotopes, reactors, waste management), coal and fossil fuels, renewable energy technologies (eg: solar, wind, biomass, geothermal, hydro) and much more. In addition to information from member countries, ETDEWEB contains worldwide information in the nuclear, coal and global climate change areas. The benefits for South Africa participating in the ETDE Implementing Agreement are:
• • • • • • • •
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It gives the country the opportunity of staying abreast of recent developments in various research areas; Avoiding duplication of research efforts and learning from expected and unexpected results; Jump-starting research at a point further along than anticipated; Indentifying which countries and people are involved in particular research areas; Promoting international cooperation in energy research and development; Understanding how countries deal with energy related environmental and climate change; Finding approaches to energy use including policy and economic factors, alternative and renewable energy sources and conversion aspects; and Finding historical perspective on historical issues.
energy data and knowledge management CONT.
The 32nd ETDE EXCO was held in Copenhagen, Denmark from 17 to 20 May 2010. Government, industry, the research community and tertiary institutions are encouraged to access the ETDEWEB. SANERI has a URL on their website to the ETDEWEB and government, industry, the research community and tertiary institutions are encouraged to do the same, as South Africa is a member country to the EDTE implementing Agreement. Users are required to register to gain access to the resources published on the website.
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GREEN TRANSPORT programme SANERI is hosting the DST’s Green Transport Programme. We are now past the 2010 FIFA World CupTM and focusing on the targets set by Government in the longer term:
Targets In order to develop a “National Green Transport Programme” SANERI has started a process of consultation with the stakeholder National Government Departments. This will be followed by consulting Local Provincial Governments and Municipalities. During this process, state-owned entities and agencies will also be approached for information sharing and collaboration on projects. Once national guidelines and strategy have been agreed on, industrial stakeholders will be sought for the implementation of “Green Transport Projects” so we can work as a team towards achieving the targets. Although the Green Transport Centre has been established and attracted a number of visitors during the past year, a lot of work still needs to be done to make it a national asset in terms of showcasing innovative green transport technologies and being a catalyst to change that will lead to industrial, as well as human capital development in the transport and energy sectors of our economy.
Public Awareness and Education The public awareness and education programme was formed to support the Green Transport Programme in demonstrating the use of alternative fuels and propulsion systems. It is aimed at creating awareness amongst government officials, entrepreneurs, policy makers, decision makers, the youth and the general public. As a result of several public-private partnerships, a number of cars were converted to run on either Compressed Natural Gas, Liquefied Petrol Gas, Biodiesel or Electric (see the main focus areas). Amongst the partners, there is also the Gauteng Province Department of Road and Transport. This partnership has resulted in a conversion of a number of government vehicles, the G-fleet. These vehicles were branded using bright colours to make it difficult to miss them. Branding the vehicles has also helped to take the message across places where traditional media would have otherwise failed to reach. For example, the vehicles are used by government officials to attend meetings, seminars, conferences etc. Some vehicles are used for school projects and thus the message gets to schools as well.
“The Green Car at the launch of the October Transport Month”
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Considering the high volumes of traffic in and around Johannesburg one often finds oneself driving very slowly behind other vehicles and when driving behind these branded vehicles one would will but notice the brand and the website and may later go on the internet for further information. These vehicles have been taken to various exhibitions and events. To mention but a few, the launch of the October Transport Month held on October 2010 at the Church Square in Pretoria, the Nepad Transport Summit 2010 held at Gallagher Estate in Midrand and at Eskom’s first Engineering Faculty discussion, “KOPANO”. SANERI has also converted two vehicles to Compressed Natural Gas and Biodiesel, respectively. The vehicles have been branded and are now used as pool cars for going to meetings. See image A below.
Training Training of the drivers of the converted vehicles is on-going and some data collection sheets have been put together. The training is for the drivers from the G-Fleet on how to help in filling in the information sheets for data collection purposes and on safety issues.
The Centre Visitors continue to visit the centre. The centre received more than 150 visitors in 2010. Below image B, C are few of the examples.
Image A
Image B Some of the invitees during a visit by 25 degrees editorial team
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Image C Professor John Ledger with students from UJ visiting the Green Transport Centre
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LPG Vehicle Conversions and Refuelling Infrastructure Converted Vehicles The LPG Project has been carried out in partnership with AIDC (Automobile Industry Development Corporation), GPDRT (Gauteng Province Department of Roads Transport) and Sasol. SANERI has signed collaborative MoUs (Memoranda of Understanding) with all of the abovementioned partners. The roles of each of the parties are currently as follows: • SANERI plays a technical advisory role on the 70 taxis LPG conversion project run by AIDC; • A Project Management function for the four G-Fleet LPG converted vehicles sponsored by GPDRT; and • SANERI also has a responsibility of performing emissions and performance tests of the converted vehicles and writing of the reports.
Emissions Testing Equipment at GTC • AIDC plays a Project Management Function for the 70 taxi conversion projects and reported the following progress during the writing of this report; • Emission Testing at SABS East London completed; and • Efficiency and Performance Testing currently underway at Gerotek. Training of artisans by the Liquefied Petroleum Gas Safety Association of Southern Africa (LPGSASA) to be completed before the end of the financial year. GPDRT is the sponsor of the project they sponsored four vehicles, the conversion kits and the emissions equipment. GPDRT also plays a vital role in the Project Steering Committee. The next envisaged project will be the conversion of about eight vehicles before the end of the financial year in partnership with a company in Cape Town in order to establish presence in that province.
Infrastructure Developments • A temporary filling station has been erected at Gerotek to accommodate the tests and • The Kruisfontein SASOL service station has been identified for setting up of new permanent LPG filling point for an intended number of taxis, similar to the one in Isando. LPG Facilities planned for Kruisfontein
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GREEN TRANSPORT Programme cont.
NGV Vehicle Conversions and Refuelling Infrastructure Converted Vehicles The CNG Project has been carried out in partnership with NGV (Pty) Ltd (Natural Gas Vehicles) and GPDRT (Gauteng Province Department of Roads Transport). SANERI has signed collaborative MoUs with all of the above-mentioned partners. The roles of each of the parties are currently as follows: • SANERI plays a facilitative role in terms on stakeholder management; • SANERI also has a responsibility of performing emissions and performance tests of the CNG Converted Vehicles; and • Writing of the reports. GPDRT is the sponsor of the project i.e. they sponsored four vehicles, the conversion kits and the emissions equipment. GPDRT also plays a vital role in the Project Steering Committee. NGV performs conversions, supplies gas (CNG) and also provides Refuelling Infrastructure. To date, there are 16 vehicles that are running on CNG under this project.
G-Fleet and Yellow-Fleet Vehicles from GPDRT
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Vehicle Manufacturers and Operators Commitments: • Volkswagen/MAN – provided a demonstration bus for testing during the 2010 Soccer World Cup and it is still on the road for further testing. • Four Volkswagen Caddys have been committed for testing with a courier company. • Iveco – have made a commitment to manufacture vehicle bodies and assemble CNG buses in South Africa. Iveco needs a commitment of minimum of 40 buses to do homoligations. The group has dump trucks and large trucks (right hand drive CNG vehicles) available that can be imported immediately. • Hyundai – A panel van has been committed to be converted to run on CNG. Hyundai will do tests and publish these tests and if successful will provide warranties on the vehicles. SANERI to do emission tests. • Nissan – committed an Aventis vehicle for conversion and testing. • Taxi operators – A private company that operates point to point taxis to the airport, and has under its control 36 000 vehicles has provided a vehicle for conversion and comparative CNG and petrol testing. • All major manufacturers have been approached and we are in the process of discussions to see CNG vehicles they can offer.
Filling Points to be Established in the Near Future 1. The establishment of filling points thereby allowing the G-Fleet to expand on its access to filling points and utilisation of CNG. 2. Langlaagte filling point/station (to be complete by December 2011 or EIA expires). 3. We require a commitment from Metrobus or Pik-It-Up of 40 buses or trucks to utilise the filling point by February/March 2011. 4. Taxi manufacturers to negotiate the supply of 200 taxis. 5. Isando area. 6. G-Fleet, courier and vehicle rental companies approached and the filling point to be established by approximately June 2011. 7. Sandton • Virtual Pipeline® supply; • Pretoria; • 1 x Virtual Pipeline® supply; and • 1 x Nanobox installation. 36
GREEN TRANSPORT Programme cont.
Infrastructure Developments NGV established a refuelling station in Langlaagte to refuel up 200 vehicles per day (see picture to the left, whereby, a compressor and a CNG dispenser are shown). NGV also set up a Mobile Filling Unit, which was built for utilisation in the test phase for the convenience of vehicles that are unable to travel to the Langlaagte site for refuelling (this unit is mostly based at the Green Transport Centre)
CNG Infrastructure in Langlaagte
CNG Mobile Unit
8. Midrand
If we get commitment from vehicle operators NGV can establish the filling point near the Green Transport Centre.
9. Free State Project • Set up a steering committee (including SANERI) and have held the first meeting with gas providers in the area; and • Commitment from taxi operators for 1 000 taxis for to establish the project (these operators run approximately 17 000 taxis in the Free State).
International Update • See below the latest CNG vehicle and filling point statistics as per The GVR Magazine www.ngvgroup.com in January 2011; and • See below a report on a Galileo bus filling station in Madrid servicing up to 400 buses in less than 3 hours. GPDRT is the sponsor of the project in that they sponsored four vehicles, the conversion kits and the emissions equipment. GPDRT also plays a vital role in the Project Steering Committee.
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Electric Vehicles Old Eskom EVs Some of the old Eskom electric vehicles have been scrapped due to old age and others have been cleaned and new battery packs fitted. Thanks to funding from Blue IQ we are in the process of buying advanced Li Ion battery packs and drive systems that will enable more updated conversions of current vehicles. This project will be managed for Blue IQ by AIDC and implemented by SANERI. In the process, batteries from China will be evaluated and tested. The old Eskom electric game viewing vehicle is also still in a reasonable condition and it has been decided to get this vehicle “up and running” as well. A proposal and presentation to the Kruger National Park was made for use of this vehicle on night drives as it is quiet and allows visitors to enjoy the sounds of the wild nightlife.
International Interaction At the Clean Energy Ministerial (CEM) held in Washington DC on July 19-20, 2010, China and the US jointly proposed an Electric Vehicles Initiative (EVI), which has received positive responses from International Energy Agency (IEA) and other countries including France, Germany, Japan, Spain, South Africa and Sweden and Portugal. One of the initiative’s components is to launch a pilot cities programme to promote electric vehicles demonstration in urban areas.
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GREEN TRANSPORT Programme cont.
SANERI has been requested by the Minister to participate and has been involved in meetings and discussions in this initiative. SANERI will engage with city representatives in South Africa to promote the initiative and identify potential projects. SANERI has also maintained contact and observer status with the IEAs Implementing Agreement on Hybrid and Electric Vehicles. SANERI will approach government on official membership going forward.
Measuring battery positions in the Nissan NP200
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NATIONAL WORKING FOR energy programme With the programme becoming operational in October 2010, immense effort was deployed to ensure traction as quickly as possible so that project execution would begin without delay if results were to be available by the financial year end. Projects selected for the initial programme start-up were selected on the basis of implementation readiness in thematic areas where results and programme objectives were demonstrable. The initiation capital allocated to the programme by the Department of Energy was R20 million and this allowed for three active projects, various studies and project preparation work to commence, demonstrating activity fit within the programme as well as that the goals and objectives of WORKING FOR ENERGY could be achieved.
Energy Islands The intended flagship project was the retro-fitting of energy efficient equipment and renewable energy generating capacity on Robben Island. The objectives were to illustrate the “Energy Island” concept, and have an operational test bed to show that hybrid renewable energy solutions were not only possible from an engineering perspective, but also from an economic premise. Unfortunately this project, with an estimated capital cost of R37 million, has been delayed, and concerted efforts are being employed to resolve the challenges in order to bring this project back on stream. However, the design and hybrid synergy used to combine different distributed energy types into a smart grid philosophy gives birth to the application concept of “Energy Islands” which will become a focal point of the off-grid energy methodology to be deployed in rural areas so as to provide a stable platform for controlled distributed generation and end user take-off.
Agri-waste to Energy The second project initiated this year was the Agri-waste to energy project at Humphries Boerdery north of the town of Bela Bela in Limpopo. This initiative demonstrates the conversion of Agriwaste, in this case pig manure, to both gas and electrical energy. The economic rationale is that instead of the farmer incurring costs in spilling the manure on his lands and gaining little return for this labour activity, the Agri-waste is used as feedstock in a biodigester and the gas is harvested.
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The project design is a twofold energy output, whereby the gas that is harvested is collected and stored in a pressure vessel and then drawn off to the gas turbine to produce electrical energy for the farmer as a replacement feed to the conventional Eskom supply. Secondly, the gas is decanted into specially designed bladders at low pressure and distributed to the community for space heating and cooking in specially developed multipurpose cooker/water heater appliances developed under this project. The gas distribution to the adjacent community, and in time a wider network of communities in the area, will enable cost effective cooking and water heating. This initiative is set to be undertaken by the local community as a SMME cooperative which is not only a job creation opportunity but a wealth creator for those involved. Thus far, Phase 1 of the project is complete and the gas turbine is operational and supplying the farmer with sustainable power off grid. Negotiations are underway with NERSA and Eskom for an Independent Power Producer (IPP) agreement in order for the project to grid-tie and wheel surplus power to other off-take points. Phase 2 of the project – the gas distribution, is intended to commence in the coming financial year and be operational shortly thereafter. The project demonstrated the benefits of utilising Agri-waste to energy. Its principles can be replicated to many of the other pig farming operations in Africa, not to mention the cattle feed lots, chicken farms and other agricultural operations where waste is an adequate feedstock for energy generation. The Working for Energy Programme anticipates that through the undertaking of such activities, many rural communities can be provided with cooking gas to improve their quality of life, not only from ease of operation, but to drastically reduce the health issues around respiratory disease as well as the fire risk from using open paraffin stoves.
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In the same thematic area of Agri-Waste to Energy, four similar biodigesters were developed in the Western and Eastern Cape using biowaste, animal waste and organic vegetable waste as the prime feedstock. The first of these sites was in Phillippi on the Cape Flats where a company called Silver Solutions T/A African Green Energy and The Muslim Judicial Council (MJC) Poverty Eradication Project (Western Cape) partnered with WfE to develop a renewable energy solution to be used by these SMME farmers. The primary output from the biodigester is gas which will be used similarly to the Bela Bela project in low pressure bags to supply the cooking and water heating needs of the community, reducing their dependency on costly and heath risk fuels such as paraffin, wood and coal. Biogas is a safer, more economically viable and environmentally friendly source of energy. The secondary beneficiation to the farming community is derived from the organic fertiliser which will be a commercial product that will be sold to create wealth and local economic development. Similar project sites are being developed under this programme in Fort Cox, Middledrift and Alice where replications of the Phillippi concept is underway.
Biomass Study WfE As the Working for Energy programme has synergy with the sister programme Working for Water, operated through the Department of Water Affairs, a special study was commissioned to assess where the overlaps in energy poverty alleviation, biomass feedstock and activities of WfE could be dovetailed. The identified areas would form nodes where energy generation from Biomass would have the greatest impact. In this regard, various synopsis and implementation options are being considered and the use of appropriate technology sought. Research is to commence shortly on the feasibility of a mobile biomass gasification plant which can be transported to the feedstock locality and the gas harvested into vehicles for transport to distribution centres located in communities, rather than the expensive transport costs of removing the cut feedstock from site to static gasification. Part of this process also entailed the commissioning of an energy poverty study, conducted by the Faculty of Economics at the University of KwaZulu-Natal. The results of this study will inform the large effort of identifying and addressing areas of abject energy poverty in South Africa, both through the WfE programme and other initiatives so as to improve the quality of life for all.
Alternate Cooking Fuel WfE also has project concepts in the design phase to build both the business case and a small scale demonstration plant to do a proof of concept and test market reaction and acceptability. One such project is an alternate energy source for rural and low cost residential cooking using a fuel tablet derived from low grade waste coal, sourced for mine dump reclamation.
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NATIONAL WORKING FOR ENERGY PROGRAMME cont.
This process entails a micro-emulsion technology incorporated into the compression process which allows the fuel tablet to burn at a consistent heat for a specified duration, giving the household user a stable and greatly reduced emission heat source, which is cost comparable with paraffin and other gel type products.
Future Initiatives and Project Pipeline The Working for Energy programme is gaining the desired traction, project concepts are being identified on an ongoing basis, and the interest from business and SMME development is growing steadily. In order to build-up the required project pipeline, a national call for project proposals will be released early in the new financial year. These will oversubscribe the budgetary allocation, but demonstrate the interest in local distributed generation in South Africa which needs to be assisted. This call will create a project pipeline that can be implemented over an medium term expenditure framework (MTEF) cycle in either a phased approach or used as leverage for other financial assistance or commercial uptake. Some of the latest technologies to be investigated include waste to energy from municipal solid waste (MSW), sewage waste (WWT) using a plasma arc process to generate high pressure high temperature (HPHT) gases. These technologies not only provide an energy source from waste but will also assist the environmental impacts by reducing sewage outfall contamination as well as oversubscribed landfills and water contamination. Of major significance is “Project Ilembe� which is intended to provide a holistic renewable energy solution to District Council 27 in KwaZuluNatal and bring the District municipality to a point of total off-grid supply by 2020, creating a cost effective alternate energy network which will allow for infrastructure development and supply energy where the national supply authority has insufficient capacity to do so in the short term.
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Business Development The renewable energy sector is gearing up to be a large SMME and job creation incubator, assisting to reduce energy poverty and increase the acceptance of the various Renewable Energy technologies in Southern Africa. Working for Energy is one of the programmes of government that will provide an enabling environment in which the SMME and job creation activities will incubate. However, in order to do this, the renewable sector for energy poverty alleviation needs considerable more capital or serious donor funding and debt financing at scale and rates of return comparable to social responsible spend in order to meet the challenge and make substantial differences. We are happy to report that many foreign donor organisations, development banks and private equity funds have shown keen interest in collaborating with the programme in order to meet the financial challenges and assist in building a better life for all in South Africa from energy infrastructure. These negotiations are at various stages of development and we are confident that in the new financial year we will see the fruits of our labours. As project streams gain momentum and the technologies are replicated, there is positive indication that the foreign investment potential will also transition into a local assembly and then manufacturing opportunity which will build industry development, job creation and position South Africa strategically for export potential into the southern African region.
Networking and Sector Development As part of the programme’s core activities and objectives, a comprehensive website was developed in order to facilitate widespread communication for those who were willing to be kept abreast of the developments within the programme. Under that development, a communications portal known as WfE Connect was developed to allow subscribers to blog and communicate through the site. We can also report that various sector specific groups have been established where interested parties can be engaged. These knowledge clusters have proved effective and in the coming year it is envisaged to hold specific cluster meetings so that a network is created to find suitable support and allow open knowledge sharing and network opportunities.
Job Creation One of the primary objectives of this programme is the creation of sustainable jobs, and we are pleased with the initial results for the first year of programme operationalisation, in that the two biomass-to-energy projects have created approximately 1 068 person days of employment.
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NATIONAL WORKING FOR ENERGY PROGRAMME cont.
Local Economic Development The provision of Renewable Energy in non-grid localities in rural applications will provide the catalyst for the stimulation of local economic activity in many sectors and will be the enabling environment for the growth of cooperatives, SMMEs and vendors within those communities. Project roll-out in both Bela Bela and Phillipi has created secondary investment, job creation and business opportunities for community members. In Bela Bela, the by-product of the digester is organic fertilizer which the community intends to use in a crop tunnel system to produce subsistence crops and then escalate the project into a SMME to sell produce in the town. Similarly, in Phillipi, the small biodiesel plant produces fuel for farming mechanisation, increasing production and enabling the cost of operations to be reduced while the organic fertilizer assists farmers to increase production yields and establish trade outlets as an income generator. In conclusion, although in the early days of the programme roll-out, the potential for Renewable Energy distributed generation has immense potential as it not only addresses the energy poverty challenge in the rural areas, but it will create the enabling environment for job creation, local economic development, manufacture and export opportunities going forward. With the appropriate funding allocations, donor support and both government and private sector backing, it has the potential to become a booming industry and a major contributor to the green job economy, becoming a significant contributor to the New Growth Path of South Africa.
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HUMAN CAPITAL development
National Hub for Energy Efficiency and Demand Side Management Objectives: • To build human resource capacity; • To deepen and create new knowledge; and • To stimulate innovation and enterprise in the field of energy efficiency and demand side management (EEDSM). SANERI awarded the National Hub for EEDSM to the University of Pretoria to host and strengthen energy related researches, human capacity development, market transformation and enterprise development initiatives. The training programme of the Hub consists of coursework-based and research-based Master’s Graduates and PhD degrees in EEDSM, along with related research topics from Electrical Engineering, Mechanical Engineering, Chemical Engineering, and Civil Engineering to Architecture. A number of short courses are developed, and seminars hosted, for industrial engineers and managers. During the year under review, there were 70 post-graduates studying in the EEDSM post-graduate programme. Of these, 29 MEng and three PhD post-graduate students from three universities in RSA were funded. Eight BEng (Honours, Electrical), nine BEng (Honours, Mechanical), two MEng (Electrical) and one PhD (Electronics) students graduated. The Hub undertook more than 29 research projects on various EEDSM topics, during the year under review, all of which are ongoing. There are 33 journal paper publications, conference presentations and technical reports from the research output of the Hub which have been
46
generated. Of these, 16 research papers were finished, of which seven journal papers and 12 international conference papers were published, or accepted for publication. The following new appointments were made: • One senior research fellow and • One research assistant. The current staff compliment consists: • One director; • One senior lecturer; • One lecturer; • One administrator; • One senior research fellow; • One post-doc; • One teaching assistant; and • Research assistants. Three Hub staff members were awarded the Certified Measurement and Verification Professional by the American Association of Energy Engineers One Hub staff member became the Fellow of IEEE, and the NRF A-rated researcher. A Measurement and Verification team of the Hub is contracted by Eskom.
Challenges The initial bursary programme funding did not take increasing student numbers into consideration and is therefore negotiated annually. The targets of 85% black and 45% female students will be challenging to reach.
SANERI ANNUAL REPORT 2010/11
47
Bursary Support Programme The Bursary Support Programme was one of the key focus areas of the Human Capital Development Programme which was ceded to the Department of Science and Technology with effect 1 April 2010. The bursary support programme commenced in SANERI with the awarding of bursaries since January 2007. Although the programme has been handed over to DST, SANERI finds it necessary to report on the progress of students.
48
Males - 63%
Students who completed PhD’s by gender
Females - 37%
Males - 71%
Females - 29%
Students who completed Masters by gender
HUMAN CAPITAL DEVELOPMENT CONT. NAME OF STUDENT
UNIVERSITY
DEGREE 2011
PROGRESS
M Britten N Caga
University of Cape Town University of Fort Hare
Completed – Graduated Not completed
W Davids AF Fredericks N Hamid (Moosa) A Harcharun M Matthews KJ Moetlediwa D O'Connell M Smith R Worthington K Zihlangu T V Baloyi QS Catherine P Conradie E du Plessis R Fourie EB Friedland LM Jordan CL Julius CT Letete N Mabentsela K Moothi Z Phiri SP Ramaripa KT Sprich C Bode AF Botha CF Breet GH Greyling R Vermaak ACJ Lombard J van Tonder J van Wijk MJ Mert R Schmulian MP Mhlongo L Schietekat LV Ngqongwa S Omardien AP Njokweni M Vicktor P Goyns A Gxasheka T Makube S Maphweli NC Manene TG Mathe B Matimba N Mazomba R Ntoi C Ntui A Sugrue E Janse van Rensburg A Chimpango L Kotsedi LZ Linganiso HM Makgato D Malan C Radue AJ Rix GA Thopil P Vena TM Bredenkamp MW Davids BG Hampton J Sibanyoni TP Fluri (post doc) C Radue (post doc)
University of Western Cape Cape Peninsula University of Technology University of KwaZulu-Natal University of KwaZulu-Natal Cape Peninsula University of Technology North West University Cape Peninsula University of Technology University of Johannesburg University of Johannesburg University of Johannesburg Wits University Cape Peninsula University of Technology Stellenbosch Stellenbosch Stellenbosch Wits University University of KwaZulu-Natal University of Cape Town University of Cape Town University of North West Wits University University of North West Wits University Wits University Wits University Stellenbosch Stellenbosch Stellenbosch Stellenbosch Stellenbosch Tshwane University of Technology Stellenbosch Stellenbosch Wits University University of KwaZulu-Natal Stellenbosch University of Western Cape Stellenbosch University of Western Cape Stellenbosch University of Johannesburg Nelson Mandela Metropolitan University University of Johannesburg University of Fort Hare University of Fort Hare University of KwaZulu-Natal University of the Free State University of Fort Hare Durban Institute of Tech University of Johannesburg University of Johannesburg University of Pretoria Stellenbosch University of Western Cape Wits University University of North West University of Pretoria Nelson Mandela Metropolitan University Stellenbosch University of Pretoria Stellenbosch University of Johannesburg University of Western Cape University of Cape Town University of Western Cape Stellenbosch Nelson Mandela Metropolitan University
Completed – Graduated Completed thesis – Awaiting oral exam Thesis being submitted by September Completed – Graduated Submitted thesis – Corrections received 50% Complete Completed – graduated Completed – graduated Supported in one year only – Not complete Not complete Completed – Graduated Completed – Graduated Completed – Graduated Not complete Completed – Graduated Supported in one year only – Not complete In progress Completed – Graduated Completed – Graduated Completed – Graduated Completed – Graduated Completed – Graduated Not complete Completed Completed – Graduated Completed In progress Completed – Graduated In progress Completed – Graduated In progress In progress Upgrade to PhD studies – In discussion with the university In progress Thesis at examination board Completed thesis – Awaiting oral exam Completed – Graduated In progress Completed – Graduating in December 2011 Completed – Graduated Completed – Graduated Completed – Graduated Thesis handed in – Committee sits in July Completed – Graduated Complete by end of the year Not complete – Dropped off Not complete – Dropped off Complete by end of the year Not complete Not complete Not complete Not complete Not complete – Accepted position to lecture Completed – Officially have degree – Could not attend graduation Completed – Graduated In progress In progress Completed – Graduated Completed – Graduated In progress In progress In progress In progress In progress In progress Completed – Submitted papers back to Switzerland Completed – Submitted papers
SANERI ANNUAL REPORT 2010/11
Masters
PhD
49
CORPORATE SOCIAL responsibility
Different organisations have different definitions of corporate social responsibility although there is a considerable amount of common ground between them. Corporate social responsibility is about how companies manage their business processes to produce an overall positive impact on society. SANERI is committed to being a responsible and contributing corporate entity. SANERI is continuing to explore innovative means of reducing its carbon footprint on the planet by building environmentally-conscious practices in its daily operations. Paper for instance, makes up a large percentage of our waste even though its one of the easiest materials to re-use and recycle. Staff are encouraged not to print all emails but to re-organise their inbox to make emails easier to find and reference. Copiers are set to print on both sides of the paper. Paper recycling boxes are allocated to each staff member and also placed at the copying machines which are collected on a weekly basis. Small steps in the right direction are definitely better than going backwards or not moving at all.
SOS CHILDREN`S VILLAGES OF SOUTH AFRICA
50
Thank you Thembeka for collecting and shredding the waste paper from our offices for recycling.
As stated earlier in the CEO’s report the production of this annual report has been undertaken with various sustainability aspects taken into consideration. It supports the environment and the local empowerment of our people. SANERI staff demonstrate the energy, enthusiasm and passion for making a difference in the lives of others especially children as they realise that children are actually the pride and joy of a nation. Children are the future of South Africa, hence in support of this, SANERI pledged a sponsorship from the proceeds of a golf day to the SOS Childrens Village in Ennerdale. The sponsorship was intended to enable the Childrens Village to install energy efficient technology to ensure that their monthly consumption of electricity was reduced and such savings could be redirected to the needs of the children advancing their skills, inspiring them and activating positive change in their lives.
SANERI ANNUAL REPORT 2010/11
51
ANNUAL FINANCIAL statements
for the year ended 31 March 2011
52
INDEX The reports and statements set out below comprise the annual report presented to the shareholder:
Page
Directors’ Responsibilities and Approval
54
Report of the Independent Auditors
55
Statement on Corporate Governance
58
Performance against Objectives
60
Report of the Board Audit and Risk Committee
64
Directors’ Report
67
Materiality and Significance Framework
73
Statement of Financial Position
74
Statement of Comprehensive Income
75
Statement of Changes in Equity
76
Statement of Cash Flows
77
Accounting Policies
78
Notes to the Annual Financial Statement
88
SANERI ANNUAL REPORT 2010/11
53
Directors’ Responsibilities and Approval
The directors are responsible for the maintenance of adequate accounting records and the preparation and integrity of the annual financial statements and related information. The external auditors are responsible for reporting on the fair presentation of the annual financial statements. The annual financial statements are prepared in accordance with South African Statements of Generally Accepted Accounting Practice and the Companies Act of South Africa, 1973 as amended. These annual financial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates. The directors are also responsible for the company’s system of internal control. These controls are designed to provide reasonable, but not absolute, assurance as to the reliability of the company’s annual financial statements and to adequately safeguard, verify and maintain accountability of assets and to prevent and detect misstatements and losses. The directors acknowledge their responsibilities as stated above and have established internal financial controls and risk management systems that maintain a strong control environment. These systems are designed to provide reasonable, but not absolute, assurance against material misstatements and losses. Based on information and explanations received from management, and the internal auditors on the maintenance of the internal financial controls, the directors are of the opinion that proper accounting records have been maintained and that reliance can be placed on the financial information used for this annual report. Nothing has come to the attention of the directors to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year under review. The going concern basis has been adopted in preparing the financial statements. The directors have no reason to believe that the company will not be a going concern in the foreseeable future, based on forecasts and available cash resources. The viability of the company is supported by an approved budget for 2011/12. The annual financial statements have been audited by the Auditor-General of South Africa who was given unrestricted access to all financial records and related data, including minutes of all meetings of shareholders, the board of directors, committees of the board, and management. The directors believe that all representations made to the independent auditors during their audit were valid and appropriate. The Auditor-General of South Africa’s audit report is attached. The Board Audit and Risk Committee of South African National Energy Research Institute (Proprietary) Limited reviews the effectiveness of internal controls of the company with reference to the findings of both the internal and external auditors. The annual financial statements which appear on pages 67 to 103, for the year ended 31 March 2011, which have been prepared on the going concern basis, were approved by the board of directors in terms of Section 51(1)(f) of the Public Finance Management Act on July 2011 and were signed on its behalf by:
Mr MB Damane (Chairperson) Sandton July 2011
54
Mr K Nassiep (Executive Director)
REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON SOUTH AFRICAN NATIONAL ENERGY RESEARCH INSTITUTE (PROPRIETARY) LIMITED
Report on the financial statements Introduction I have audited the accompanying financial statements of the South African National Energy Research Institute (Proprietary) Limited, which comprise the statement of financial position as at 31 March 2011, and the statement of comprehensive income, 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 information, and the accounting authority’s report, as set out on pages 67 to 103.
Accounting authority’s responsibility for the financial statements The accounting authority, which represents the board of directors, is responsible for the preparation and fair presentation of these financial statements in accordance with South African Statements of Generally Accepted Accounting Practice (SA Statements of GAAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act no.1 of 1999) (PFMA) and the Companies Act South Africa, 1973 (Act No. 61 of 1973), and for such internal control as management determined necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
Auditor-General’s responsibility As required by section 188 of the Constitution of South Africa, 1996 (Act No. 108 of 1996) and section 4 of the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) my responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with International Standards on Auditing and General Notice 1111 of 2010 issued in Government Gazette 33872 of 15 December 2010. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the 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 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 management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.
Opinion In my opinion, the financial statements present fairly, in all material respects, the financial position of the South African National Energy Research Institute (Proprietary) Limited as at 31 March 2011, and its financial performance and cash flows for the year then ended in accordance with SA Statements of GAAP and the requirements of PFMA and the Companies Act of South Africa.
Emphasis of matters I draw attention to the matters below. My opinion is not modified in respect of these matters: Restatement of corresponding figures as disclosed in note 27 to the financial statements, the corresponding figures for 31 March 2010 have been restated as a result of an error discovered during 2011 in the financial statements of the South African National Energy Research Institute at, and for the year ended, 31 March 2010.
SANERI ANNUAL REPORT 2010/11
55
REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON SOUTH AFRICAN NATIONAL ENERGY RESEARCH INSTITUTE (PROPRIETARY) LIMITED continued
Report on the financial statements (continued) Financial sustainability Paragraph seven of the Directors’ report indicates that the South African National Energy Research Institute (Proprietary) Limited incurred a net loss of R12.1 million during the year ended 31 March 2011 and, as of that date, the entity’s total liabilities exceeded its total assets by R20.4 million. These conditions, along with other matters as set forth in the Directors’ report, indicate the existence of a material uncertainty that may cast significant doubt on the entity’s ability to operate as a going concern. The company is dependent on financing from its holding company.
Report on other legal and regulatory requirements In accordance with the PAA of South Africa and in terms of General notice 1111 of 2010, issued in Government Gazette 33872 of 15 December 2010, I include below my findings on the annual performance report as set out on page eight and material non-compliance with laws and regulations applicable to South African National Energy Research Institute (Proprietary) Limited.
Predetermined objectives Usefulness of reported performance information The reported performance against predetermined objectives was deficient in respect of the following criteria: • Measurability: The indicators are not well defined and verifiable, and targets are not specific, measurable and time bound. The following audit findings relate to the above criteria:
Planned and reported targets are not specific, measurable and time bound for the selected objectives: • 29% of the planned and reported targets were not specific in clearly identifying the nature and the required level of performance; • 24% of the planned and reported targets were not measurable in identifying the required performance; and • 86% of the planned and reported targets were not time-bound in specifying the time period or deadline for delivery.
Planned and reported indicators are not well defined For the selected objectives, 24% of the planned and reported indicators/measures were not clear, as unambiguous data definitions were not available to allow for data to be collected consistently.
Planned and reported indicators are not verifiable For the selected objectives, valid performance management processes and systems that produce actual performance against the planned indicators do not exist for 48% of the indicators.
Compliance with laws and regulations Expenditure management The accounting authority did not take effective steps to prevent irregular and fruitless and wasteful expenditure, as per the requirements of section 51(1) (b) (ii) of the PFMA.
Annual financial statements The financial statements submitted for audit did not comply with section 55(1)(c)(i) of the PFMA. Material misstatements were identified during the audit, these were subsequently corrected by management.
56
Internal control In accordance with the PAA and in terms of General notice 1111 of 2010, issued in Government Gazette 33872 of 15 December 2010, I considered internal control relevant to my audit, but not for the purpose of expressing an opinion on the effectiveness of internal control. The matters reported below are limited to the significant deficiencies that resulted in findings on compliance with laws and regulations and performance against predetermined objectives included in this report.
Financial and performance management The processes that have been implemented to monitor compliance with laws and regulations are deficient and the non-compliance matters in relation to laws and regulations and compliance with the Framework for Managing Programme Performance Information could have been avoided. There appears to be a misunderstanding of roles and responsibilities between the company and its parent, which provides the support functions to the company.
Pretoria 4 August 2011
SANERI ANNUAL REPORT 2010/11
57
Statement on Corporate Governance
1. Introduction South African National Energy Research Institute (Proprietary) Limited (SANERI) ensures that its processes and practices are reviewed on an ongoing basis in order to ensure adherence to good corporate governance practices, which are continually benchmarked against best market practices.
2. Compliance The board of directors believe that the entity endorses the principles as set out in the Protocol on Corporate Governance, and where applicable, the King Report on Corporate Governance for South Africa (King III) and have endeavoured to comply with the principles incorporated in the Code of Corporate Practices and Conduct and the Public Finance Management Act (PFMA). The entity has a formalised system of corporate governance as set out below.
3. Governing bodies Board of Directors SANERI has a unitary board structure made up of Executive and Non-Executive directors, appointed by the shareholder. The Board of Directors (the Board) meets at least once every quarter, and executive managers attend by invitation. The board charges executive management with regard to the day-to-day running of business, with the board addressing a range of key issues to ensure that it retains the strategic direction of, and proper control over, the entity. The non-executive directors are appointed on a fixed term. The offices of the Chairperson and Chief Executive Officer are separated. In accordance with the Public Finance Management Act (Act No 1 of 1999) the board is the accounting authority of the entity. In keeping with the recommendations of the King Report, the Board adopted a board charter which sets out the role of the Board as follows. The Board’s primary responsibilities include the appointment of the Chief Executive Officer, determining the entity’s objectives and values and giving strategic direction to the entity, taking effective and appropriate steps to ensure that key risk areas and key performance indicators of the entity’s business are identified, monitoring the performance of the entity against agreed objectives, advising on significant financial matters and reviewing the performance of executive management against defined objectives and applicable industry standards, as well as: •
Approving key policies, investments, risk management and relevant transactions that exceed managements’ levels of authority;
•
Reviewing and approving the entity’s strategy, objectives, and plans;
•
Considering and approving annual financial statements and submissions to the shareholder;
•
Ensuring adherence to good corporate governance and ethics;
•
Monitoring and directing triple bottom line performance; and
•
Reviewing effectiveness of controls.
Company Secretary The Company Secretary provides the board of directors with guidance and advice on matters of business ethics and good governance, as well as on the nature and extent of their duties and responsibilities and how such duties and responsibilities should be properly discharged. Each of the Directors has unrestricted access to the advice and services of the Company Secretary, entity information, and is entitled to seek independent professional advice, at the entity’s expense in pursuance of their duties as a director.
Board Audit and Risk Committee The board audit and risk committee consists of non-executive members appointed by the board of directors. The board audit and risk committee meets at least twice per year and is chaired by an independent non-executive member who is not the Chairperson of the board. The Auditor-General of South Africa, and Chief Audit Executive have unrestricted access to the committee and attend board audit and risk committee meetings. Appropriate executive managers, including those responsible for finance and internal audit attend these meetings by invitation.
58
3. Governing bodies (continued) Board Audit and Risk Committee (continued) The board audit and risk committee reviews the adequacy and effectiveness of internal controls of the entity with special reference to the findings of both internal and external auditors. Other areas covered include the review of important accounting and control issues, material pending litigation, specific disclosures in the annual financial statements, and a review of the performance of the Internal Audit department.
4. Materiality and significant framework A materiality and significant framework is in place. Its purpose is to regulate disclosure of material facts to the Minister of Energy, disclosure in the entity annual financial statements and approval from the Minister of Energy for participation in certain transactions.
5. Directors’ responsibility for the annual financial statements The directors of the entity are responsible for the entity’s annual financial statements and other information presented in the annual financial statements. The Auditor-General of South Africa is responsible for performing an independent audit of the annual financial statements. The annual financial statements and notes thereto are prepared in accordance with South African Statements of Generally Accepted Accounting Practice (GAAP). Accounting policies are consistently applied except where otherwise stated, in which case full disclosure of changes is made. The directors believe that the entity will continue as a going concern in the year ahead.
6. Internal audit South African National Energy Research Institute (Proprietary) Limited use the service of the CEF Group internal audit function that has the support and cooperation of both the board and management. The internal audit function has a written terms of reference, approved by the board of directors annually. The internal audit function reports functionally to the board audit and risk management committee. The internal audit function carries out its work in terms of an approved internal work plan based on the risk framework of the company. The annual work plan is approved by the board audit and risk committee. The Chief Audit Executive has full access to the chairpersons of the board of directors and of the board audit and risk management committee. The key responsibilities of internal audit are to the board, its committees, in discharging its governance responsibilities and to perform the following functions: •
Evaluating the company’s governance processes including ethics;
•
Performing an objective assessment of the effectiveness of risk and internal control framework;
•
Systematically analysing and evaluating business processes and associated controls; and
•
Providing a source of information, as appropriate, regarding instances of fraud, corruption, unethical behaviour and irregularities.
The internal audit function adheres to the Institute of Internal Auditors’ standards for Professional Practice of Internal Auditing and Code of Ethics. The Chief Audit Executive has developed and maintained a quality assurance and improvement programme. The internal audit function is subjected to an external quality review at least every five years, the last review was conducted during 2007 and the evaluation result was “general conformance”, which is the highest level of conformance. SANERI has developed a Risk and Fraud Prevention Plan to ensure strict compliance with PFMA and other legislative and regulatory instruments. Annual Risk and Fraud Prevention workshops serve to maintain awareness of possible risk areas to ensure corrective action is taken where required. A WhistleBlowers hotline is made available to all staff and is an effective means of reporting irregular or unlawful activity anonymously. While there have been no incidents reported via the WhisteBlowers number, the service is well publicised and staff are comfortable that they can use the service without fear of victimisation.
SANERI ANNUAL REPORT 2010/11
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Performance Against Objectives
A summary of the SANERI’s business performance against objectives is contained in the table below:
OBJECTIVE
INDICATOR
TARGET
WEIGHT
SCORE
Energy Research and Development
Contribution of SANERI’s flagship projects to knowledge in the energy sector
CESAR – develop position paper for stakeholder discussion. 1= conception at 50%; 2= partially completed 75%; 3= 100% complete and stakeholder feedback; 5= including preparation commitment
2.5
3
Carbon Storage Atlas to be published and distributed. (2). 1= Not operational, 3= Operational, 5= Atlas distributed
2.5
5
Centre for Carbon Capture and storage – SACCCS Steering Committee approved Work plan and implementation thereof. 1= Aborted 3= Work plan 5= Work Pan approval for the following year
2.5
5
Coordinate and establishment of RECORD – Hold Stakeholder workshop for inputs buy in and revised business model to be circulated to stakeholders. 1= No Workshop, 2= Workshop organized and feedback/buy in obtained, 3= Revised business model circulated. (Refer to note 1)
2.5
2
2.5
3
2.5
4
2.5
5
Manage the Wind Atlas of South Africa Collaborative project – disburse funds are per progress lead Project Implementation Unit (PIU) a develop/ disseminate Plan and participate in steering committee. 1= No PIU, 2= Progress Reported to Steering committee, 3= Stakeholder seminar Coordinate the expansion of Green Transport Centre – attract partners and funding and refine work plans. 1= No partner attracted, 2= Partners identified, but no plans proposed, 3= Partners identified, work plan developed, 4= Partner identified work plan developed and implemented SA Coal Roadmap – interaction with Department of Energy/Fossil Fuel Foundation (FFF) to initiate project. 1= SANERI excluded, 3= SANERI included, 5= SANERI included and Finance Manager
60
OBJECTIVE
INDICATOR
TARGET Showcase Green Transport technologies during the 2010 Soccer World CupTM – develop demo plan and secure for demonstration 1= Not completed, 2= Plan completed and vehicles available, 4= Plan being implemented and 4 vehicle demons
Increase in South Africa’s research outputs
Working for Energy programme
Management of the Working for Energy Programme
SANERI funded research projects’ findings delivered at two local and two international conferences. 1= None of targets achieved, 2= Target conference and publications achieved, 5= Targeted number of conferences presentation and publications exceeded Four Publications of SANERI funded projects in international peer – reviewed academic journals. 1= None of targets achieved, 2= Targets conferences and publications achieved, 5= Targeted number of conferences, presentations and publications exceeded Develop M&V protocol, 1= Not completed, 2= Plan completed no document done, 3= Plan completed document done, 4= Plan completed circulated to SANERI EXCO, 5= Plan completed and approved by SANERI EXCO for inclusion of corporate plan. (refer to note 3) >65% approved and budget post for PMO filed, 1= 20% staff in place, 2= 21- 39% in place, 3= 40-65% in place,4= 65- 85% in place, 5= >80% in place >90% of funds used according to approved budget, 1= <85%, 2= 87%, 3= 88-90%, 4= 91-93%, 5=>93%. (refer to note 4)
WEIGHT
SCORE
2.5
3
2.5
5
2.5
5
2.5
2
2.5
3
2.5
4
2.5
5
Investigate three projects within each sub category element of WfE programme. 1= Nothing done, 2= Minimum amount of projects not investigated, 3= Projects investigated but not aligned to work plan, 4= Projects aligned to work plan, 5= Projects aligned to work plan and initiated
SANERI ANNUAL REPORT 2010/11
61
Performance Against Objectives continued
A summary of the SANERIâ&#x20AC;&#x2122;s business performance against objectives is contained in the table below:
OBJECTIVE Human Capital Development
Cooperative Research Activities
Administration of SANERI
TOTAL
62
INDICATOR
TARGET
WEIGHT
SCORE
Oversight and Governance of Centre of Energy Research
All Centres to have management committees in place, 1= No management committee in place or structure in place, 3= Management committee in place, 5= Management committee in place and centres have a high impact in energy research community
10
5
Bursaries awarded
> 75% of budget for bursaries allocated. 1= 60% of budget spent, 2=61-70% of budget spent, 3= 71-80% of budget spent, 4= 81-90% of budget spent, 5= >91% of budget spent
10
5
Jointly funded research projects with industry projects with industry or international organisations
At least R2,4 million external funding for SANERI flagship projects from industry or international organisations. 1= None, 2= Up to R2 million, 3= R2,4 million, 4= R4,5 million, 5 => R5 million
10
5
Strengthening of alliances with other PIER&D centres
At least two new research and demonstration projects initiated with another PIER&D centre, 1= No new project, 3= Two new projects, 5= 3 or more new projects
10
5
Percentage BEE procurement (capital equipment, consumables and non-university research contractors)
Minimum of 25% of non-research services, consumables budget spent on entities with >75% BBBEE status. 1 =< 15% procurement, 2= 16-20% procurement, 3 = 21-25% procurement, 4= 26-27% procurement, 5= >28% procurement
5
4
Staffing of the Institute
75% approved and budgeted post for 2010/11 filled. 1= 40% of staff in place, 2= 41-49% in place, 3= 50-75% in place, 4= 76-80% in place, 5= >81% in place
5
5
Funds are spent according to budget guidelines
90% funds used according to approved budget. 1= <85%, 2= 86-87%, 3= 8890%, 4=91-93%, 5= >94%
10
5
100
4.57
Scoring 1= Not met 2 = Below target 3 = Achieved 4 = Above target 5 = Excellent (stretch target) Explanation for non-achievement of target: 1. The drastic decrease in SANERI’s budget in the 2010/11 financial year to a minimum of R23 million as opposed to R39 million and R42 million in previous years negatively impacted on co-ordination and establishment of RECORD. Due to financial constraints, it was impossible. 2. With the devolution of functions between the general scope of WfE and NEEA, it was decided that M&V will be managed under NEEA as they operate the tax incentive scheme which will drive the need for this process. 3. Funding – the 2010/2011 funding allocation was approved in June 2010 and due to the processing of the documents and National Treasury’s re-classification of funds, the transfer of money only occurred in November 2010. Hence the spending patterns were inevitably delayed.
SANERI ANNUAL REPORT 2010/11
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Report of the Board Audit and Risk Committee
Report of the Board Audit and Risk Committee We are pleased to present our report for the financial year ended 31 March 2011.
Charter The board audit and risk management committee (the Committee) is guided by a detailed charter that is reviewed and approved by the board on an annual basis. The Committee has regulated its affairs in compliance with this charter and has discharged all its responsibilities as contained therein.
Purpose The committee’s purpose and responsibilities arise from the Public Finance Management Act of 1999; Section 76 (4)(d) and Treasury Regulations 27.1. In performing its responsibilities the Committee has reviewed the following: • The effectiveness of the internal control systems; • The effectiveness of the internal audit function; • The risk areas of operations to be covered in the scope of the internal and external audits; • The adequacy, reliability and accuracy of financial information provided to management and other users of such information; • The accounting and auditing concerns identified as a result of the internal or external audits; • Compliance with applicable legal and regulatory provisions; • The activities of the internal audit function, including its annual work programme, coordination with the external auditors, the reports of significant investigations and the responses of management to specific recommendations; and • The independence and objectivity of the external auditors.
Membership The Committee members were appointed by the board of directors and comprises of at least three non-executive members. The Committee consists of the members listed hereunder and should meet at least twice per annum as per the approved Charter. During the financial year four meetings were held.
Name of members:
Number of meetings attended:
Mr VG Magan
3
Ms A Thomani
3
Ms M Nyathi
4
Mr D Hensman
3
External audit The Committee, in consultation with executive management, agreed to the engagement letter, terms, nature and scope of the external audit plan as presented by the Auditor-General of South Africa. We have reviewed the Auditor-General of South Africa Strategic Audit Plan for the 2011 financial year and have recommended approval of their budget to the board of directors. The Committee has satisfied itself that the Auditor-General of South Africa exercised their duties in an independent and objective manner.
64
Internal audit The Committee considered and recommended the internal audit charter for approval to the board and approved the annual work plan for the internal audit function. The internal audit function is responsible for reviewing and providing assurance on the adequacy of the internal control environment across operations. The Chief Audit Executive is responsible for reporting the findings of the internal audit work against the agreed audit plan to the Committee on a quarterly basis. The Chief Audit Executive has direct access to the Committee, primarily to through its chairman. The Committee is also responsible for the assessment of the performance of the internal audit function. In 2007, an external effectiveness review was performed by the Institute of Internal Auditors (IIA), reporting positive results and rating the internal audit function as “generally conformance” with the IIA Standards. The internal audit function is independent and had the necessary resources, budget, standing and authority within the organisation to enable it to discharge its functions. The Chief Audit Executive reports functionally to the Committee and the committee must concur with the appointment and dismissal of the Chief Audit Executive. We are satisfied that the internal audit function is operating effectively and that it has addressed the risks pertinent to the company in its audits. We believe Internal Audit has contributed to the improvement of internal controls within the company.
Internal control effectiveness The Committee is satisfied that a system of internal controls has been put in place and that these controls have functioned effectively during the period under review. The Committee considers the system of internal controls appropriate in all material respects to: • Reduce risks to an acceptable level; • Meet the business objectives; • Ensure all assets are adequately safeguarded; and • Ensure that transactions undertaken are recorded in the accounting records. Internal Audit provides the Committee with assurance that internal controls are appropriate and effective. This is achieved by means of the risk management process, as well as the identification of corrective actions and suggested enhancements to the controls and processes. From the various reports of the internal auditors, we noted that no matters were reported that indicate any material deficiencies in the system of internal control or any deviations therefrom. It was noted that no non-compliance with prescribed policies and procedures has been reported, except for the items reported by the AuditorGeneral of South Africa. Accordingly, we can report that the system of internal controls for the period under review was efficient and effective.
Corporate governance We are of the opinion that the company continues to strive towards complying with sound principles of corporate governance. As per our discussions with management, management confirms that the content and quality of monthly and quarterly reports prepared and issued by the Chief Executive Officer during the year under review were properly formulated and have complied with the PFMA in this regard. The Committee is in the process of reviewing its corporate governance practices with a view to complying with the requirements of the 2008 Companies Act and King III recommendations.
SANERI ANNUAL REPORT 2010/11
65
Report of the Board Audit and Risk Committee continued
Risk management The Board assigned the oversight of the risk management function to the Committee. The company implemented a risk management strategy which includes the fraud prevention plan and combined assurance plan. A formal risk assessment was undertaken for the year ending 31 March 2011 with quarterly reviews, updates and reports. Consequently, internal audit used this assessment to prepare the three year rolling strategic plan and the annual operating audit plan. The Committee monitored the significant risks faced by the company through reviewing risk reporting and participation in the risk assessment workshop. We are satisfied that significant risks were managed to an acceptable level.
Annual financial statements We have: • Reviewed the Auditor-General of South Africa management letter and management response thereto; • Reviewed changes in accounting policies; and • Reviewed significant adjustments resulting from the Auditor-General of South Africa audit. The committee concurs and accepts the Auditor-General of South Africa’s conclusions on the annual financial statements, and is of the opinion that the audited financial statements be accepted and read together with the report of the Auditor-General of South Africa.
Appreciation The Committee expresses its sincere appreciation to the Chief Executive Officer, Management, Internal Audit and the Auditor-General of South Africa.
Mr VG Magan Chairperson 30 June 2011
66
Directorsâ&#x20AC;&#x2122; Report
The directors present their Directorsâ&#x20AC;&#x2122; Report that forms part of the audited annual financial statements for the entity for the year ended 31 March 2011. South African National Energy Research Institute (Proprietary) Limited is incorporated as a private entity in South Africa in terms of the Companies Act, 1973, as amended, and is listed as a national public entity in schedule 2 of the Public Finance Management Act, 1999, as amended. The board of directors acts as the accounting authority in terms of the PFMA.
1. Directors The directors of the company during the year and to the date of this report are as follows:
NAME
APPOINTED
RE-APPOINTED
RESIGNED
Mr MB Damane
1 April 2006
1 April 2010
Dr C Cooper
1 April 2006
1 April 2010
Mr J Marriott
1 April 2006
1 April 2010
Ms M Pyoos
1 April 2006
Mr K Nassiep
1 April 2006
Mr D Mahuma
1 July 2009
Dr V Msimang
1 January 2011
Ms M Mathekgadi
1 August 2010
Mr T Maqubela
1 July 2009
1 August 2010
Mr I Patel (Alternate director)
25 October 2006
20 January 2011
Mr J Subramoney (Alternate director)
1 August 2010
Ms N Mlonzi
1 April 2006
1 April 2010
20 January 2011 1 April 2010 1 August 2010
ATTENDANCE AT MEETINGS
2010/04/29
2010/06/29
2010/10/07
2011/01/28
Mr MB Damane
N
Y
Y
Y
Dr C Cooper
Y
Y
Y
Y
Ms N Mlonzi
N
Y
N
Y
Mr J Marriott
Y
Y
Y
Y
Ms M Pyoos
N
N
N
N/A
Mr K Nassiep
Y
Y
Y
Y
Mr I Patel (Alternate director)
N
N
N
N/A
Mr D Mahuma
Y
Y
N/A
N/A
Mr T Maqubela
N
N
N/A
N/A
Mr J Subramoney (Alternate director)
N/A
N/A
N
Y
Dr V Msimang
N/A
N/A
N/A
N
Ms M Mathekgadi
N/A
N/A
Y
N
Y= Attended meeting N = Apology received N/A = Not a member at the date of meeting
SANERI ANNUAL REPORT 2010/11
67
Directorsâ&#x20AC;&#x2122; Report continued
1. Directors (continued) Board audit and risk committee The sub-committee consists of the following non-executive members:
NAME
APPOINTED
RE-APPOINTED
Mr VG Magan (Non-executive Chairperson)
1 January 2008
1 January 2011
Mr D Hensman (Non-executive)
1 January 2008
Ms A Thomani (Non-executive)
1 January 2008
1 January 2011
Ms M Nyathi (Non-executive)
1 January 2008
1 January 2011
EXPIRY OF TERM 31 December 2010
ATTENDANCE AT MEETINGS
2010/04/21
2010/06/23
2010/10/06
2011/01/26
Mr VG Magan
Y
Y
Y
N
Mr D Hensman
Y
Y
Y
N/A
Ms A Thomani
Y
N
Y
Y
Y
Y
Y
Y
Ms M Nyathi
Y= Attended meeting; N = Apology received; N/A = Not a member at the date of meeting All of the members are independent non-executive members. The board audit and risk committee meets a minimum of two occasions per annum. The Chief Audit Executive, the external auditors and such members of management as are deemed necessary also attend these meetings. The board audit and risk committee is responsible for the internal controls and risk management of the entity delegated to it by the board of directors. In order to meet its requirements it reviews the findings of both internal and external auditors. In addition it reviews important accounting issues, material pending litigation if applicable, entity insurance, risk and disclosure requirements in the annual financial statements. The responsibilities of this sub-committee of the board of directors are set out in the report of the board audit and risk committee which forms part of these annual financial statements.
2. Company Secretary The secretary of the company is CEF (Proprietary) Limited and the business and postal addresses are as follows: Business address Block C, Upper Grayston Office Park 152 Ann Crescent Strathavon Sandton 2199 Postal address P O Box 786141 Sandton 2146 68
3. Nature of business Main business and operations The current and future business of SANERI is to accomplish the following through research and development: • Cost effective and efficient energy generation, transformation, transport, end use and decision support technologies; • Energy technology innovation; • Sustainable energy development and utilisation of energy resources; • Improvement of the quality of life of the people of South Africa; • Promotion of knowledge development and training of researchers; and • Commercialisation of energy technologies resulting from its research, development and innovation programmes.
Principal activities of the entity The principal activities of SANERI are as outlined below: • Undertake research and technology development; • Register patents and intellectual property in its name resulting from its activities; • Issue licenses to other persons to use its patents and intellectual property; • Utilise its technological expertise in its possession or make such expertise specifically or generally available; • Provide bursaries and educational loans for the development of knowledge in the energy sector; • Commission energy related research, development and innovation programmes in any other research institutions; • Establish facilities for the collection and dissemination of information in connection with research, development and innovation; • Establish and control facilities in those fields of research that the Board may from time to time approve; • Promote cooperation between South Africa and other countries in matters relating to energy research, development and innovation; and • Undertake any other technology development related activity as directed by the Minister of Energy in concurrence with the Minister of Science and Technology.
4. Review of financial position The entity’s business and operations and the results thereof are clearly reflected in the attached annual financial statements. No material fact or circumstance has occurred between the accounting date and the date of this report. The grants decreased by R11 million as a result of the decline in budget allocations across the wide spectrum of government. This impacted on the operations for the year. Further details are listed in Note 11 of the annual financial statements. There was no major change in the nature of the business. There was no significant increase in property, plant and equipment during the financial year ended 31 March 2011.
5. Authorised and issued share capital There were no changes in the authorised or issued share capital of the entity during the year under review.
SANERI ANNUAL REPORT 2010/11
69
Directors’ Report continued
6. Dividends No dividends were declared or paid to the shareholders during the year.
7. Going concern The company incurred a net loss for the year ended 31 March 2011 of R12,1 million (2010: R3,0 million) and as of that date the company’s total liabilities exceeded its total assets by R 20,4 million (2010: R8,3 million). The entity continues to enjoy the support of the holding company, CEF (Proprietary) Limited. Accordingly, the annual financial statements do not include any adjustments, relating to the recoverability and classification of assets or to the amounts and classification of liabilities that might be necessary if the entity is unable to continue as a going concern. The directors believe that the entity will continue as a going concern in the year ahead.
8. Review of operations The 2010/11 financial year has been a very challenging year for SANERI. The budget for SANERI was reduced drastically from R39 million in the previous year to a meagre R23 million in this year. The Energy Act of 2008 makes provision for the establishment of SANEDI, a new entity which will include SANERI and NEEA. The Government Gazette dated 31 December 2010 indicated that SANEDI was listed as a Schedule 3 (a) entity with effect from 1 April 2010. The business case for SANEDI was approved by the Minister for Energy. Once more clarity is received regarding the funding of SANEDI, the organisational structure and systems will be executed. The human development programmes like the Chairs programme, the bursary support programme and the Renewable Energy and Sustainable Energy Hub and spokes were handed over to Department of Science and Technology with effect from 1 April 2010. Summarised below are the highlights of the year:
• Carbon Capture and Storage The Atlas for the geological storage of carbon dioxide in South Africa was launched by the Minister of Energy during September 2010. This was followed by the release of a full report on which the Atlas was based during February 2011. The Atlas addresses storage capacity at a theoretical level. The next stage in the South African Carbon Capture and Storage Road Map is a test injection as a “proof of concept” for carbon capture and storage in South Africa geological formations.
• Green Transport Programme The Green Transport Centre continued to attract attention of various stakeholders and interested parties. Stakeholders and interested parties visited the Centre to see what operations where taking place and through this process, SANERI was able to secure funding to expand the operations at the Centre. The CSIR took interest in the activities of the Centre and took five of the damaged e-bikes to repair and demonstrate on their Pretoria campus. The Gauteng Department of Road Transport increased their contribution to R0,5 million to the expanding of the CNG Demonstration Project and Blue IQ pledged R1 million to expanding the electric vehicle and biodiesel projects.
70
8. Review of operations (continued) • The Hub of Energy Efficiency and Demand Side Management There have been several highlights since the launch of the Hub. The Hub has been successful with their efforts to ensure that the postgraduate programme was effectively managed in 2010. Their advertisements are well received and generates many enquiries from prospective South African and foreign students. A number of energy efficiency and demand side management projects were initiated and partial results have been obtained. There have been several appointments at the Hub namely a Director, 1 Lecturer, 1 Senior Lecturer, 4 post doctoral researchers, 2 research officers, 5 research assistants, 2 administrators and 1 student helper.
• Working for Energy Programme (WfE) The Working for Energy programme experienced significant progress in the third quarter of 2010/11. The initial funding tranche of R5 million and then R3 million was transferred to SANERI for the Working for Energy Programme. In the fourth quarter, the remaining R12 million was transferred together with additional funds for a special project at Lucingweni which WfE is now managing. The Lucingweni Mini-Grid project was transferred to the WfE by the Department of Energy and the Development Bank of SA. All vacant positions in the WfE programme have now been filled.
• Wind Atlas of South Africa (WASA) This is the cooperation between SANERI, RISO, the Danish Institute, the CSIR, the University of Cape Town (UCT) and the South African Weather Services (SAWS). SANERI has signed MoUs with SAWS and RISO respectively to carry out mutual research programmes. The project is funded by the Royal Danish Embassy and the Global Environment Facility. At the first project meeting early in the year the project plans, methods and tools were presented along with the first unverified wind atlas. Ten lattice-type 60 metre wind masts in different locations across the Western, Eastern and Northern Cape were assembled. These masts are used to verify the theoretical data established through the modelling system. The monthly publishing on wind data information was activated on the wind data website in September 2010. The data is available to the public as the aim of the project is to have the atlas publicly available so as to encourage the uptake and use of wind energy.
• Centre for Energy Systems and Research (CESAR) Through CESAR, SANERI funded two research projects in 2010, one focusing on provincial liquid fuel demand in South Africa and the other on building a database of energy data and research outputs. In addition to this, eight students received bursaries for their Master studies as part of human capacity building.
9. Subsequent events The directors are not aware of any matters or circumstances arising since the end of the financial year, which significantly affect the financial position of the entity or the results of the operations. The National Energy Act of 2008 makes provision for the establishment of SANEDI (South African National Energy Development Institute), a new entity which includes SANERI and NEEA. The Government Gazette dated 31 December 2010 indicated that SANEDI was listed as a Schedule 3 (A) entity with effect from 1 April 2010. On 18 March 2011, the State President assented to the Chapter 4 of the Energy Act which in essence stipulates that SANEDI is to be operational with effect from 1 April 2011. SANERI , which is a Schedule 2 (A) company is in the process of being wound up and the new company SANEDI needs to incorporated. Its Government’s vision though that SANEDI will be an independent entity outside of the CEF Group of Companies. It is possible that whilst in this transition, proper and due cognition to applicable policies, procedures and processes may have been flaunted because SANEDI has been using CEF policies, procedures and processes which are applicable to a Schedule 2(A) company.
SANERI ANNUAL REPORT 2010/11
71
Directorsâ&#x20AC;&#x2122; Report continued
9. Subsequent events (continued) A letter has been sent to SARS to deregister SANERI as a VAT vendor during March 2011. SANERI is currently awaiting a response. Africa Earth Events owed SANERI R202 712 as at year end. The Board of Governance for the South African Carbon Capture and Storage Centre appointed Africa Earth Events to host a workshop. The transfer of funds were approved by the Board of Governance and paid over to the company. The workshop did not take place and several invoices were sent to claim the funds back only to discover that the company went into liquidation. SANERI is currently liaising with the companyâ&#x20AC;&#x2122;s attorneys to recover the amount that was paid to them.
10. Shareholder The entity is a wholly-owned subsidiary of CEF (Proprietary) Limited. The annual financial statements set out on pages 67-103, which have been prepared on the going concern basis, were approved by the board of directors on 7 July 2011 and were signed on its behalf by:
Mr MB Damane (Chairperson) Sandton 7 July 2011
72
Mr K Nassiep (Executive Director)
Materiality and Significance Framework
For purposes of materiality (as per PFMA sections 50(1) and 55(2)) and significance (as per PFMA sections 54(2)) framework the following acceptable levels were agreed with the Executive Authority in consultation with the Auditor-General: • Section 50(1) – Material facts to be disclosed to the Minister of Energy are considered to be facts that may influence the decisions or actions of the Stakeholders of the Public Entity or the Group of companies. • Section 55(2) – Disclosure of material losses in the annual financial statements will be for all losses through criminal conduct and any irregular expenditure and fruitless and wasteful expenditure that occurred during the year. • Section 54(2) – The criteria to determine the level of significance was based upon the guiding principles as set out in the “Practice Note on applications under Section 54 of the PFMA no.1 of 1999 (as amended) by Public Entities” as published by National Treasury during 2006 subject to adjustments for any Section 54(4) exemptions. The significant Rand level was determined as being 1% of Revenue as follows:
Approval Levels In Terms Of Section 54
Public Entity’s board approval levels
<R0,502 million
Approval level of the CEF Board in terms of subsidiary companies
>R0,502 million and <R640 million
Obtain DoE approval and inform National Treasury via the top-most holding company
SANERI ANNUAL REPORT 2010/11
>R640 million
73
Statement of Financial Position at 31 March 2011
Note(s) 2011 R‘000
2010 R‘000 Restated
2009 R‘000 Restated
Assets Non-current assets Property, plant and equipment 2 Intangible assets 3 Deferred tax 4
341 229 – 570
323 495 – 818
296 309 201 806
Current tax receivable 5 Trade and other receivables 6 Cash and cash equivalents 7 Total assets
72 11 915 29 556 41 543 42 113
579 2 620 21 302 24 501 25 319
579 2 203 29 952 32 734 33 540
– (20 404) (20 404)
– (8 287) (8 287)
– (5 188) (5 188)
34 725 20 760 3 049 3 983 62 517 42 113
12 481 16 389 3 636 1 100 33 606 25 319
16 379 19 808 1 143 1 398 38 728 33 540
Current assets
Equity and liabilities Equity Share capital 8 Accumulated loss
Liabilities Current liabilities Third party funds 9 Trade and other payables 10 Deferred income 11 Provisions 12 Total equity and liabilities
74
Statement of Comprehensive Income for the year ended 31 March 2011
Note(s) 2011 R‘000 Grant income 13 Operating expenses Operating loss 13 Investment income 15 Finance costs 16 Loss before taxation Taxation 5 Loss for the year Other comprehensive income Total comprehensive loss
SANERI ANNUAL REPORT 2010/11
25 654 (35 617) (9 963) 1 313 (3 471) (12 121) – (12 121) – (12 121)
2010 R‘000 Restated 32 719 (36 069) (3 350) 1 853 (1 224) (2 721) (373) (3 094) – (3 094)
2009 R‘000 Restated 31 077 (41 483) (10 406) 2 847 (285) (7 844) – (7 844) – (7 844)
75
Statement of Changes in Equity for the year ended 31 March 2011
Opening balance as previously reported Adjustments Prior period error Balance at 1 April 2009 as restated Changes in equity Total comprehensive loss for the year Prior period error Total changes Balance at 1 April 2010 Changes in equity Total comprehensive loss for the year Total changes Balance at 31 March 2011 Note(s)
76
Share capital R‘000
Accumulated loss R‘000
Total equity R‘000
–
2 660
2 660
– –
2 528 (5 188)
2 528 (5 188)
– – – –
(4 767) 1 672 (3 095) (8 283)
(4 767) 1 672 (3 095) (8 283)
– – –
(12 121) (12 121) (20 404)
(12 121) (12 121) (20 404)
8
Statement of Cash Flows for the year ended 31 March 2011
Note(s)
2011
2010
2009
R‘000
R‘000
R‘000
Restated
Restated
Cash flows from operating activities Cash receipts from customers
17
16 359
32 301
28 639
Cash paid to suppliers and employees
18
(28 558)
(36 751)
(37 639)
Cash utilised in operations
19
(12 199)
(4 450)
(9 000)
Interest income
1 313
1 853
2 847
Finance costs
(3 471)
(1 224)
(285)
Tax (paid)/refunded 20 Net cash from operating activities
507 (13 850)
(172) (3 993)
(1 437) (7 875)
Cash flows from investing activities Purchase of property, plant and equipment
2
(144)
(221)
(86)
Sale of property, plant and equipment
–
–
16
Purchase of other intangible assets 3 Net cash from investing activities
– (144)
(539) (760)
(63) (133)
Cash flows from financing activities Repayment of/(funds received from) third party funds
22 244
(3 899)
16 379
Proceeds from/(repayment of) shareholders loan
–
–
–
Repayment of shareholders loan Net cash from financing activities
– 22 244
– (3 899)
– 16 379
Cash and cash equivalents movement for the year
8 254
(8 652)
8 390
Cash and cash equivalents at the beginning of the year Cash and cash equivalents at end of the year 7
21 302 29 556
29 954 21 302
21 562 29 952
SANERI ANNUAL REPORT 2010/11
77
Accounting Policies for the year ended 31 March 2011
1. Presentation of Financial Statements Principal accounting policies The annual financial statements have been prepared in accordance with South African Statements of Generally Accepted Accounting Practice, and the Companies Act.
1.1 Basis of preparation The annual financial statements are prepared under the historical cost basis, except where otherwise specified. The annual financial statements are prepared in accordance with South African Statements of Generally Accepted Accounting Practice and the Companies Act of South Africa and the Corporate Laws Amendment Act. The annual financial statements have been prepared on the historical basis. Assets and liabilities or income and expenditure will not be offset, unless it is required or permitted by a standard. These annual financial statements are presented in South African Rand since that is the currency in which majority of the entityâ&#x20AC;&#x2122;s transactions are denominated. Rounding is to the nearest Rand in Thousands.
1.2 Comparative figures Comparative figures are restated in the event of a change in accounting policy or prior period error.
1.3 Property, plant and equipment Property, plant and equipment represents tangible items that are held for use in the production or supply of goods or services, or for administrative purposes and are expected to be used during more than one period. Carrying amounts All property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost Cost includes all costs directly attributable to bringing the assets to working condition for their intended use. Improvements are capitalised. Maintenance, repairs and renewals which neither materially add to the value of assets nor appreciably prolong their useful lives are charged against income. Impairment The carrying amounts of property, plant and equipment are reviewed annually for impairment. If such indication exists and where the carrying amount exceeds the estimated recoverable amount, the assets are written down to their recoverable amount. Impairment losses are recognised in the profit and loss. The recoverable amount of property, plant and equipment is the greater of fair value less costs to sell or value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a 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 largely independent cash flows, the recoverable amount is determined for the cash generating unit to which the asset belongs. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years.
78
1.3 Property, plant and equipment (continued) Impairment (continued) A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount under another standard, in which case the reversal of the impairment loss is treated as a revaluation increase under that other standard. Depreciation Depreciation is charged so as to write off the depreciable amount of the assets over their estimated useful lives to estimated residual values, using the straight line method to write off the cost of each asset that reflects the pattern in which the assetâ&#x20AC;&#x2122;s future economic benefits are expected to be consumed by the entity. Where significant parts of an item have different useful lives to the item itself, these parts are depreciated over their estimated useful lives. The following methods and rates were used during the year to depreciate property, plant and equipment to estimated residual values: Item
Average useful life
Furniture and fixtures
5 years
Computer equipment
3 years
Communication equipment
6 years
The methods of depreciation, useful lives and residual values are reviewed annually.
1.4 Intangible assets An intangible asset is an identifiable non-monetary asset without physical substance. Intangible assets are initially recognised at cost if acquired separately or internally generated or at fair value if acquired as part of a business combination. If assessed as having an indefinite useful life, the intangible asset is not amortised but tested for impairment annually and impaired if necessary. If assessed as having a finite useful life, it is amortised over its useful life using a straight line basis and tested for impairment if there is an indication that it may be impaired. Research costs are recognised in profit or loss when incurred. Development costs are capitalised only if they result in an asset that can be identified, it is probable that the asset will generate future economic benefits and the development cost can be reliably measured. Otherwise it is recognised in profit or loss. Item
Useful life
Computer software
2 years
1.5 Leases Operating lease Operating lease payments are recognised in profit or loss on a straight-line basis over the term of the relevant lease except where another systematic basis is more representative of the time pattern of the userâ&#x20AC;&#x2122;s benefit. Contingent rentals are recognised in profit or loss as they accrue.
SANERI ANNUAL REPORT 2010/11
79
Accounting Policies for the year ended 31 March 2011 continued
1.6 Financial instruments Initial recognition and measurement Financial assets and liabilities are recognised initially on the companyâ&#x20AC;&#x2122;s statement of financial position when the company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities as a result of firm commitments are only recognised when one of the parties has performed under the contract. Financial instruments recognised on the statement of financial position include cash and cash equivalents, trade receivables, investments, trade payables, and borrowings. Measurement Financial assets and liabilities are initially measured at fair value, plus transaction costs. However transaction costs of financial assets and liabilities classified as fair value through profit or loss are expensed. Subsequent measurement will depend on the classification of the financial instrument as detailed below. Financial assets The entityâ&#x20AC;&#x2122;s principal financial assets are investments, accounts receivable and cash and cash equivalents. Investments: The following categories of investments are measured at subsequent reporting dates at amortised cost by using the effective interest rate method if they have a fixed maturity, or at cost if there is no fixed maturity: (a)
Loans and receivables originated by the entity with fixed maturity;
(b)
Held-to-maturity investments; and
(c)
An investment that does not have a quoted market price in an active market and whose fair value cannot be measured reliably using an
appropriate valuation model.
Loans and receivables with no fixed maturity period and other investments not covered above are classified as fair value through profit and loss on initial recognition. Fair value for this purpose, is market value if listed or a value derived by using an appropriate valuation model, if unlisted. Trade and other receivables Trade and other receivables are classified as loans and receivables and are subsequently measured at amortised cost, less an allowance for any uncollectable amounts. An estimate for impairment is made when objective evidence is available that indicates the collection of any amount outstanding is no longer probable. Bad debts are written off when identified. Cash and cash equivalents For the purposes of the statement of cash flows, cash and cash equivalents comprise of cash on hand, deposits held on call, and investments in money market instruments, net of bank overdrafts, all of which are available for use by entity unless otherwise stated. The carrying amount of these assets approximate their fair value. Cash and cash equivalents comprise cash at bank and on hand and instruments which are readily convertible to known amounts of cash and are subject to an insignificant risk of change in value.
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1.6 Financial instruments (continued) Financial liabilities The companyâ&#x20AC;&#x2122;s principal financial liabilities are interest bearing borrowings and accounts payable. All financial liabilities are measured at amortised cost, comprising original debt less principal payments and amortisations, except for financial liabilities held for trading and derivative liabilities, which are subsequently measured at fair value. A change in fair value is recognised in profit or loss. Impairment and uncollectability of financial assets An assessment is made at each reporting date to determine whether there is objective evidence that a financial asset or entity of financial assets may be impaired. If such evidence exists, the estimated recoverable amount of that asset is determined and an impairment loss is recognised for the difference between the recoverable amount and the carrying amount as follows: For financial assets held at either cost or amortised cost â&#x20AC;&#x201C; the carrying amount of the asset is reduced to its undiscounted estimated recoverable amount either directly or through the use of an allowance account and the amount of the loss is recognised in the income statement for the period; and for financial assets at fair value â&#x20AC;&#x201C; where a loss has been recognised directly in equity as a result of the write-down of the asset to recoverable amount, the cumulative net loss recognised in equity is transferred to the income statement for the period. Gains and losses on subsequent measurement All gains and losses arising from a change in fair value of or on disposal of held for trading financial assets are recognised in profit or loss. Gains and losses arising from a change in the fair value of available for sale financial assets are recognised in equity, until the investment is disposed of or is determined to be impaired, at which time the gain or loss is included in the profit or loss for the period. Gains and losses arising from cash flow hedges are recognised in profit or loss. In relation to fair value hedges, which meet the conditions for hedge accounting, the portion of the gain or loss on a hedging instrument that is determined to be an effective hedge is recognised directly in equity and the ineffective portion is recognised in profit or loss. If a hedged firm commitment or forecasted transaction results in the recognition of an asset or a liability, then the associated gains or losses recognised in equity are adjusted against the initial measurement of the asset or liability. For all other cash flow hedges, amounts recognised in equity are included in profit or loss in the same period during which the commitment or forecasted transaction affects profit or loss. Derecognition A financial asset or part thereof is derecognised when the entity realises the contractual rights to the benefits specified in the contract, the rights expire, the entity surrenders those rights or otherwise loses control of the contractual rights that comprise the financial asset. On derecognition, the difference between the carrying amount of the financial asset and the sum of the proceeds receivable and any prior adjustment to reflect the fair value of the asset that had been reported in equity is included in net profit or loss for the period. A financial liability or a part thereof is derecognised when the obligation specified in the contract is discharged, cancelled, or expires. On derecognition, the difference between the carrying amount of the financial liability, including related unamortised costs, and the amount paid for it is included in net profit or loss for the period.
SANERI ANNUAL REPORT 2010/11
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Accounting Policies for the year ended 31 March 2011 continued
1.6 Financial instruments (continued) Fair value considerations The fair values at which financial instruments are carried at the balance sheet date have been determined using available market prices. Where market values are not available, fair values have been calculated by discounting expected future cash flows at prevailing interest rates. The fair values have been estimated using available market information and appropriate valuation methodologies. The carrying amounts of financial assets and financial liabilities with a maturity of less than one year are assumed to approximate their fair values due to the short-term trading cycle of these items. Offsetting Financial assets and financial liabilities are offset if there is an intention to either net the asset and liability or to realise the asset and settle the liability simultaneously and a legally enforceable right to set off exists.
1.7 Tax Current tax assets and liabilities The charge for current tax is based on the results for the year as adjusted for income that is exempt and expenses that are not deductible using tax rates that are applicable to the taxable income. Deferred tax is recognised for all temporary differences, unless specifically exempt, at the tax rates that have been enacted or substantially enacted at the reporting date. Deferred Tax Assets A deferred tax asset is only recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised, unless specifically exempt. It is measured at the tax rates that have been enacted or substantially enacted at the reporting date. Deferred Tax Liability A deferred tax liability is recognised for taxable temporary differences, unless specifically exempt, at the tax rates that have been enacted or substantially enacted at the reporting date. Some of the income of the entity is earned from the State and is exempt from tax.
1.8 Subsequent events Recognised amounts in the annual financial statements are adjusted to reflect events arising after the reporting date that provide evidence of conditions that existed at the reporting date. Events after the reporting date that are indicative of conditions that arose after the reporting date are dealt with by way of a note.
1.9 Revenue Revenue is recognised when it is probable that future economic benefits will flow to the enterprise and these benefits can be measured reliably. The measurement is at fair value received or receivable net of VAT, cash discounts, rebates and settlement discounts. Revenue from the rendering of services is measured using the stage of completion method based on the services performed to-date as a percentage of the total services to be performed. Revenue from the rendering of services is recognised when the amount of the revenue, the related costs and the stage of completion can be measured reliably and when it is probable that the debtor will pay for the services.
82
1.10 Irregular and fruitless and wasteful expenditure Irregular expenditure means expenditure incurred in contravention of, or that is not in accordance with, a requirement of any applicable legislation, including: • The PFMA; or • Any provisional legislation providing for procurement procedures in that provincial government. Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided had reasonable care been exercised. All irregular and fruitless and wasteful expenditure is charged against income in the period in which it is incurred. When an accounting authority determines the appropriateness of disciplinary steps against an official, the accounting authority must take into account: •
The circumstances of the transgression;
•
The extent of the expenditure involved; and
•
The nature and seriousness of the transgression.
All unauthorised, irregular or fruitless and wasteful expenditure are disclosed as a note to the annual financial statements of the company.
1.11 Key assumptions made by management in applying accounting policies In preparing the annual report, management is required to make estimates and assumptions that affect the amounts represented in the annual report and related disclosures. Use of available information and the application of judgement are inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual report. Significant judgements include: Going concern Management considers key financial metrics and loan covenant compliance in its approved medium term budgets, together with its existing term facilities, to conclude that the going concern assumption used in the compiling of its annual financial statements, is relevant. Evaluation of the useful life of assets On an annual basis, management evaluate the useful life of all assets. In carrying out this exercise, experience of asset’s historical performance and the medium term business plan are taken into consideration. Contingent liabilities Management considers the existence of possible obligations which may arise from legal action as well as the possible non-compliance of the requirements of completion guarantees and other guarantees provided. The estimation of the amount disclosed is based on the expected possible outflow of economic benefits should there be a present obligation. Impairment testing Impairment tests are performed when there is an indication of impairment of assets or reversal of previous impairments of assets. Management therefore has implemented certain impairment indicators and these include movements in exchange rates, commodity prices and the economic environment its businesses operate in. Estimates are made in determining the recoverable amount of assets which include the estimation of cash flows and discount rates used. In estimating the cash flows, management base cash flow projections on reasonable and supportable assumptions that represent managements’ best estimate of the range of economic conditions that will exist over the remaining useful life of the assets, based on publicly available information. The discount rates used are pre-tax rates that reflect the current market assessment of the time value of money and the risks specific to the assets for which the future cash flow estimates have not been adjusted.
SANERI ANNUAL REPORT 2010/11
83
Accounting Policies for the year ended 31 March 2011 continued
1.11 Key assumptions made by management in applying accounting policies (continued) Capital Management Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the group treasury. Group treasury invests surplus cash in money market investments, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined.
1.12 Related parties The services received or rendered from or to related parties arise mainly from service transactions, including management fees for services performed on behalf of the company. The receivables from related parties arise mainly from service transactions and are due one month after the date of services. The receivables are unsecured in nature and bear no interest. There are no provisions held against receivables from related parties. The payables to related parties arise mainly from service transactions, including management fees and are due one month after the date of purchase. The payables bear no interest. The loans to or from related parties arise from loan agreements entered into for the year under review.
1.13 Income from investments Interest income is accrued on a time basis by reference to the principal outstanding and at the interest rate applicable Dividend income from investments is recognised when the shareholders’ right to receive payment has been established.
1.14 Finance costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until the assets are substantially ready for their intended use or sale. Qualifying assets are assets that necessarily take a substantial period to get ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the cost of those assets. Other borrowing costs are recognised as an expense in the period in which they are incurred.
1.15 Government grants and assistance When the conditions attaching to government grants have been met and have been received, they are recognised in profit or loss on a systematic basis over the periods necessary to match them with the related costs. When they are for expenses or losses already incurred, they are recognised in profit or loss immediately. The unrecognised portion at the reporting date is presented as deferred income (as a deduction from the asset to which it relates). No value is recognised for government assistance.
1.16 Adoption of Generally Accepted Accounting Practice The entity has adopted the following new and amended IFRSs’ as of 1 January 2010: 1. IFRS 3 (revised), ‘Business combinations’ (effective from 1 July 2009) The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement.
84
1.16 Adoption of Generally Accepted Accounting Practice (continued) 1. IFRS 3 (revised), ‘Business combinations’ (effective from 1 July 2009) (continued) There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree at fair vale or at the noncontrolling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed. The company will apply IFRS 3 (revised) prospectively to all business combinations from 1 April 2010. 2. IFRS 5 (amendment), ‘Non-current assets held for sale and discontinued operations’ (effective 1 January 2010) The amendment clarifies that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirement of IAS 1 still apply, in particular paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1. 3. IFRS 7 (amendment) ‘Financial instruments – Disclosures’ (effective 1 January 2009) The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. As the change in accounting policy only results in additional disclosure, there is no impact on earnings per share. 4. IAS 1 (revised), ‘Presentation of financial statements’ (effective 1 January 2011) The amendments to IAS 1 clarify that an entity may choose to present the required analysis of items of other comprehensive income either in the statement of changes in equity or in the notes to the financial statements. The company will present the required analysis of other comprehensive income in the statement of changes in equity. The amendments have been applied retrospectively. As the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share. The company has applied the amendment in advance to their effective date. 5. IAS 7 ‘Statement of Cash Flow’ (effective date 1 January 2010) The amendments (part of Improvements to IFRSs (2009)) specify that only expenditures that result in a recognised asset in the statement of financial position can be classified as investing activities in the statement of cash flow. Consequently, cash flows in respect of development costs that do not meet the criteria in IAS 28 Intangible Assets for capitalisation as part of an internally generated intangible asset (and, therefore, are recognised in profit or loss as incurred) have been reclassified from investing activities to operating activities in the statement of cash flow. Prior year amounts have been restated for consistent presentation. 6. IAS 21 (amended), ‘The effects of Changes in Foreign Exchange Rates’ (effective 1 July 2010) Consequential amendments were made to IAS 21 due to the changes to IAS 27 ‘Consolidated and Separate Financial Statements. The amendment clarifies the transition rules in respect of the disposal or partial disposal of an interest in a foreign operation. 7. IAS 24 (revised) ‘Related party disclosures’ The first amendment to IAS 24 modifies the definition of a related party and removes inconsistencies. The second amendment to IAS 24 simplifies disclosures for government-related entities. Until now, if a government controlled, or significantly influenced, an entity, the entity was required to disclose information about all transactions with other entities controlled, or significantly influenced by the same government. The revised standard still requires disclosures that are important to users of financial statements but eliminates requirements to disclose information that is costly to gather and of less value to users. It achieves this balance by requiring disclosure about these transactions only if they are individually or collectively significant.
SANERI ANNUAL REPORT 2010/11
85
Accounting Policies for the year ended 31 March 2011 continued
1.16 Adoption of Generally Accepted Accounting Practice (continued) 8. IAS 27 (revised), ‘Consolidated and separate financial statements’ (effective from 1 July 2010) The revised Standard has affected the comopany’s accounting policies regarding changes in ownership interests in its subsidiaries that do not result in loss of control. In prior years, in the absence of specific requirements in IFRSs, increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognised, when appropriate; for decreases in interests in existing subsidiaries that did not involve a loss of control, the difference between the consideration received and the adjustment to the non-controlling interests was recognised in profit or loss. Under IAS 27(2008), all such increases or decreases are dealt with in equity, with no impact on goodwill or profit or loss. The company will apply IAS 27 (revised) prospectively to transactions with non-controlling interests from 1 January 2010. 9. IAS 38 (amendment), ‘Intangible Assets’ The amendment is part of the IASB’s annual improvements project published in April 2009 and the company will apply IAS 38 (amendment) from the date IFRS 3 (revised) is adopted. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and it permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives. The amendment will not result in a material impact on the company’s financial statements. The following standards and amendments to existing standards have been published and are not yet effective and the company has not adopted them earlier: 1. IFRS 3 (amended), ‘Business combinations’ (effective from 1 July 2010) When IFRS 3(2008) was issued, it was unclear as to whether the new requirement for contingent consideration should be applied to contingent consideration arising from business combinations that took place before the application of IFRS 3. Consequently, the IASB amended IFRS 3 as part of Improvements to IFRSs issued in 2010 to clarify that the new requirements for contingent consideration set out in IFRS 3 should not be applied to business combinations whose acquisition date preceded the application of IFRS 3. The amendments are effective for annual periods beginning on or after 1 July 2010, with earlier application permitted. At the date of the application of IFRS 3, where entities have outstanding contingent consideration arrangements arising from business combinations whose acquisition dates preceded the application of IFRS 3, they should consider early application of the amendments. As part of Improvements to IFRSs issued in 2010, IFRS 3 was amended to clarify that the measurement choice regarding non-controlling interests at the date of acquisition (see above) is only available in respect of non-controlling interests that are present ownership interests and that entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation. All other types of non-controlling interests are measured at their acquisition-date fair value, unless another measurement basis is required by other Standards. In addition, as part of Improvements to IFRSs issued in 2010, IFRS 3 was amended to give more guidance regarding the accounting for share-based payment awards held by the acquiree’s employees. Specifically, the amendments specify that share-based payment transactions of the acquiree that are not replaced should be measured in accordance with IFRS 2 Share-based Payment at the acquisition date (‘market-based measure’). 2. IFRS 7, (amended) ‘Financial Instruments – Disclosures’ (effective from 1 January 2011) The first amendment to IFRS 7 clarify the required level of disclosures about credit risk and collateral held and provide relief from disclosures previously required regarding renegotiated loans. The amendments have been applied retrospectively. As the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.
86
1.16 Adoption of Generally Accepted Accounting Practice (continued) 2. IFRS 7, (amended) ‘Financial Instruments – Disclosures’ (effective from 1 January 2011) (continued) The second amendment to this standard require additional disclosure on transfer transactions of financial assets, including the possible effects of any residual risks that the transferring entity retains. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. 3. IFRS 9, ‘Financial instruments’, issued in November 2009 (effective 1 January 2013) This standard is the first step in the process to replace IAS39, ‘Financial Instruments: Recognition and measurement’. IFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect the company’s accounting for its financial assets. The standard is not applicable until 1 January 2013. 4. IAS 12, ‘Income Taxes’ (effective 1 January 2012) IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40 Investment Property. The amendment to provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will, normally, be through sale. As a result of the amendments, SIC-21 Income Taxes – Recovery of Revalued Non-Depreciable Assets would no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC-21, which is accordingly withdrawn.
SANERI ANNUAL REPORT 2010/11
87
88
equipment
Total
Reconciliation of property, plant and equipment â&#x20AC;&#x201C; 2011
(20) 341
135
62
144
value
899
16
484
399
Cost
2010
(576)
(10)
(375)
(191)
depreciation
323
6
109
208
value
Accumulated Carrying
9 296
138
Computer equipment
Communication equipment
149
Furniture and fixtures
Balance
Opening
Reconciliation of property, plant and equipment â&#x20AC;&#x201C; 2010
323
6
109
Computer equipment
Communication equipment
208
Furniture and fixtures
Balance
Opening
1 044 (703)
155
485 (423)
Computer equipment
Communication
404 (260)
Furniture and fixtures
depreciation
Cost
Carrying
2011 Accumulated
2. Property plant and equipment
Notes to the Annual Financial StatementS for the year ended 31 March 2011
144
221
-
96
125
Additions
(383)
(7)
(250)
(194)
(3)
(125)
(66)
Depreciation
(126)
(10)
(47)
(69)
Depreciation
139
-
5
Additions
679
16
388
(126)
depreciation
Accumulated
2009
275
Valuation
Cost/
323
6
109
208
Total
341
135
62
144
Total
296
9
138
149
value
Carrying
SANERI ANNUAL REPORT 2010/11
89
Cost/
Reconciliation of property, plant and equipment – 2010
Software
309
Balance
Opening
Software
539
Additions
(415)
amortisation
(353)
Amortisation
(266)
Amortisation
495
Balance
2009
(289)
(3)
(129)
Accumulated
724
Valuation
Opening
495
depreciation value
Accumulated Carrying
1 263 (768)
Cost
(287)
Reconciliation of property, plant and equipment – 2011
229
value
Carrying
2010
86
–
(12)
(157)
Depreciation
(275)
–
53
33
1 263 (1 034)
Software
amortisation
Accumulated
Cost
2011
786
3. Intangible assets
12
226
Computer equipment
Communication equipment
548
Furniture and fixtures
balance
Disposals
Opening Additions
Reconciliation of property, plant and equipment – 2009
2. Property plant and equipment (continued)
Notes to the Annual Financial StatementS for the year ended 31 March 2011 continued
495
Total
229
Total
309
value
Carrying
296
9
138
149
Total
Notes to the Annual Financial StatementS for the year ended 31 March 2011 continued
2011 2010 Opening R‘000 R‘000 balance Additions Amortisation 3. Intangible assets (continued)
Reconciliation of intangible assets – 2009 Software
2009 R‘000 Total
582
63
(336)
309
Deferred tax asset Recognised in other comprehensive income
–
–
201
Reconciliation of deferred tax asset At beginning of the year Charged to profit and loss Balance at end of year
– – –
201 (201) –
– 201 201
Current Local income tax – current period
–
172
201
Deferred Originating and reversing temporary differences
– –
201 373
(201) –
4. Deferred tax
5. Taxation Major components of the tax expense
No provision has been made for 2011 tax as the company has no taxable income. The estimated tax loss available for set off against future taxable income is R11 298 000 (2010: R4 493 000).
90
2011 R‘000
2010 R‘000
2009 R‘000
5. Taxation (continued)
SARS for income tax Opening balance Tax refunded Interest on late payment Payment made Balance due to/(from) SARS
(579) 590 (11) (72) (72)
(579) – – – (579)
657 – – (1 236) (579)
Taxation summary as per balance sheet Tax payable Tax payable/(receivable)
– (72) (72)
– (579) (579)
– (579) (579)
12 103 6 9 – (203) 11 915
2 193 – 7 420 – 2 620
2 137 – 66 – – 2 203
6. Trade and other receivables Trade receivables Employee costs in advance Prepayments National Energy Efficiency Agency Provision for doubtful debts Provision for doubtful debts The provision for doubtful debt consists of the amount due from Africa Earth Events. The balance is aged at 90-120 days.
7. Cash and cash equivalents Cash and cash equivalents consist of cash on hand and balances with banks and investments in money market instruments. Cash and cash equivalents included in the balance sheet comprise the following: Short–term investments in money market and cash on hand USD dollar account
29 556 – 29 556
21 302 – 21 302
29 952 – 29 952
Authorised 1000 Ordinary par value shares of R1 each
1
1
1
Issued 100 Ordinary par value shares of R1 each
–
–
–
8. Share capital
SANERI ANNUAL REPORT 2010/11
91
Notes to the Annual Financial StatementS for the year ended 31 March 2011 continued
2011 R‘000
2010 R‘000
2009 R‘000
1 011 459 237 1 254 101 – 204 8 352 – 71 – 792 – 12 481
5 468 5 189 – 3 001 – 2 – 1 000 – – – 1 719 – 16 379
34 725
12 481
16 379
1 470 11 686 1 293 6 311 20 760
1 630 9 885 1 248 3 626 16 389
3 169 6 560 857 9 222 19 808
3 636 (20 761) (1) 20 175 – 3 049
1 143 (30 574) (1 143) 34 210 – 3 636
1 811 (28 514) (1 999) 28 038 1 807 1 143
9. Third party funds
Carbon Storage Atlas Biofuels European Union Project – COCATE Centre of Energy Systems Analysis and Research Seventh Framework Programme National Energy Efficiency Agency Norway CCS Capacity Building South African Carbon Capture and Storage Centre SA Coal Roadmap SOS Childrens Village SDC EE Monitoring and Implementation Project Wind Resource Mapping Working for Energy Programme
131 487 497 – 89 – 407 11 694 489 – 3 133 23 17 775 34 725
The funds can only be used for the specific projects once the project has been commissioned. Current liabilities Projects
10. Trade and other payables Trade payables VAT Accrued leave pay Other payables
11. Deferred income Opening balance Costs incurred during the year Costs incurred during the year that relates to Green Transport Grants received from the Department of Science and Technology Grants received from Green Transport
South African National Energy Research Institute (Proprietary) Limited received grants from the Department of Science and Technology to fund future related costs.
12. Provisions Reconciliation of provisions – 2011 Opening Additions Balance Bonus provision 1 100 3 983
92
Utilised during the year (1 100)
Total
3 983
12. Provisions (continued) Reconciliation of provisions – 2010 Opening Additions Balance Bonus provision
1 398
1 100
Utilised during the year
Total
(1 398)
1 100
Reconciliation of provisions – 2009 Bonus provision
Opening Additions Total Balance –
1 398
1 398
25 654
32 719
31 077
506
754
249
32 538 266 126 13 881 13 235
156 910 353 194 12 571 13 688
112 361 336 289 12 721 30 351
263
131
151
12 1 301 1 313
– 1 853 1 853
1 2 846 2 847
2 144 1 327 3 471
– 1 224 1 224
– 285 285
13. Operating loss Operating loss for the year is stated after accounting for the following: Grant income Grants received Operating lease charges Premises • Contractual amounts Equipment • Contractual amounts Amortisation on intangible assets Depreciation on property, plant and equipment Employee costs Research and development
14. Auditors’ remuneration Fees
15. Investment revenue Interest revenue South African Revenue Services Interest from funds held by holding company
16. Finance costs Late payment of tax Other interest paid
Interest capitalised on third party funds. These funds have been ring-fenced as they relate to specific borrowings for capital projects. Refer to note 9 for the composition of these funds.
SANERI ANNUAL REPORT 2010/11
93
Notes to the Annual Financial StatementS for the year ended 31 March 2011 continued
2011 R‘000
2010 R‘000
2009 R‘000
25 654 (9 295) 16 359
32 719 (418) 32 301
31 077 (2 166) 28 639
35 617 (4 371) (2 688) 28 558
36 069 3 420 (2 738) 36 751
41 504 (1 969) (1 896) 37 639
(12 121)
(2 721)
(7 865)
126 – (1 313) 3 471 266 2 883 –
194 – (1 853) 1 224 353 (298) –
289 270 (2 847) 285 336 – 1 397
(9 295) 4 371 (587) (12 199)
(418) (3 420) 2 489 (4 450)
(2 166) 1 969 (668) (9 000)
579 – (72) 507
579 (172) (579) (172)
(657) (201) (579) (1 437)
17. Cash receipts from customers
Other revenue Movement in trade and other receivables
18. Cash paid to suppliers and employees Operating costs Movement in trade and other payables Non-cash items adjusted
19. Cash utilised in operations Loss before taxation Adjustments for: Depreciation Loss on sale of assets Interest received Finance costs Amortisation Movements in provisions Provisions Changes in working capital: Trade and other receivables Trade and other payables Deferred income
20. Tax refunded/(paid) Balance at beginning of the year Current tax for the year recognised in profit or loss Balance at end of the year
94
Annual report for the year ended 31 March 2011
Salary
Bonuses and performance payments Fees
Expense allowances Other
Total
21. Directors’ emoluments
SANERI: Year ended 31 March 2011
Directors: Mr MB Damane* Mr J Marriott Ms N Mlonzi Dr C Cooper* Ms M Pyoos* Mr I Patel* Mr T Maqubela Mr D Mahuma* Mr J Subramoney Dr V Msimang Total
Board audit and risk management committee:
Mr D Hensman Mr VG Magan Ms A Thomani Ms M Nyathi Total
Executive Director:
* The directors are not remunerated in their personal capacity.
Mr K Nassiep
SANERI ANNUAL REPORT 2010/11
– – – – – – – – – – –
– – – – – – – – – – –
– 90 56 – – – – – – – 146
– – – – – – – – – – –
– – – – – – – – – – –
– 90 56 – – – – – – – 146
– – – – –
– – – – –
26 34 12 31 103
– – – – –
– – – – –
26 34 12 31 103
1 464
237
–
–
30
1 731
95
Notes to the Annual Financial StatementS for the year ended 31 March 2011 continued
Salary
Bonuses and performance payments Fees
Expense allowances Other
Total
21. Directors’ emoluments (continued)
SANERI: Year ended 31 March 2010
Directors:
Mr MB Damane* Mr J Marriott Ms N Mlonzi Dr C Cooper* Ms N Magubane* Ms M Pyoos* Mr I Patel* Mr T Maqubela* Mr D Mahuma* Total
Board audit and risk management committee:
Mr D Hensman Mr VG Magan Ms A Thomani Ms M Nyathi Total
Executive Director:
* The directors are not remunerated in their personal capacity.
96
K Nassiep
– – – – – – – – – –
– – – – – – – – – –
– 91 63 – – – – – – 154
– – – – – – – – – –
– – – – – – – – – –
– 91 63 – – – – – – 154
– – – – –
– – – – –
30 53 21 35 139
– – – – –
– – – – –
30 53 21 35 139
1 108
223
–
–
30
1 361
Salary
Bonuses and performance payments Fees
Expense allowances Other
Total
21. Directors’ emoluments (continued)
SANERI: Year ended 31 March 2009
Directors:
Mr MB Damane* Mr J Marriott Ms N Mlonzi Dr C Cooper* Ms N Magubane* Ms M Pyoos* Total
Board audit and risk management committee:
– – – – – – –
– – – – – – –
– 70 70 49 – – 189
– – – – – – –
– – – – – – –
– 70 70 49 – – 189
Mr D Hensman
–
–
27
–
–
27
Mr VG Magan
–
–
33
–
–
33
Ms A Thomani Ms M Nyathi Total
– – –
– – –
16 16 92
– – –
– – –
16 16 92
1 048
255
–
–
30
1 333
* The directors are not remunerated in their personal capacity.
Executive Director: K Nassiep
SANERI ANNUAL REPORT 2010/11
97
Notes to the Annual Financial StatementS for the year ended 31 March 2011 continued
2011 R‘000
2010 R‘000
2009 R‘000
22. Related parties
Related party transactions
CEF (Proprietary) Limited Interest received Amounts owed by related parties Services rendered from related parties Amounts owed to related parties
1 300 29 556 1 731 547
1 853 21 302 1 649 630
2 846 29 952 850 183
Department of Science and Technology Grants/Interest received
26 954
34 210
28 038
Key management personnel refer to note 21.
The above transactions were carried out on commercial terms and conditions.
23. Financial instruments Financial risk management The company’s corporate treasury function performed by CEF (Proprietary) Limited provides financial risk management services to the business co-ordinates access to domestic and international financial markets and monitors and manages the financial risks relating to the operations of the company through internal risk reports which analyses exposures by degree and magnitude of risks. These risks include market risk (including interest rate risk) credit risk and liquidity risk. The company’s objectives policies and processes for measuring and managing these risks are detailed below. Compliance with policies and exposure limits is reviewed by the board audit and risk management committee annually with the results being reported to this committee. Fair values The company’s financial instruments consist mainly of cash and cash equivalents trade receivables and trade payables. As at 31 March 2011 no financial asset was carried at an amount in excess of its fair value. Financial assets which potentially subject the group to concentrations of credit risk pertain principally to trade receivables and investments in the South African money market. Trade receivables are presented net of the allowance for doubtful debts. The exposure to credit risk with respect to trade receivables is not concentrated due to a large customer base. The company manages counter-party exposures arising from money market and derivative financial instruments by only dealing with well-established financial institutions of a high credit rating. Losses are not expected as a result of nonperformance by these counter parties. Credit limits with financial institutions are approved by the board.
98
Annual report for the year ended 31 March 2011
23. Financial instruments (continued) Fair value (continued) The entity’s financial instruments consist mainly of cash and cash equivalents, trade receivables, investments and trade payables. As at 31 March 2011 no financial asset was carried at an amount in excess of its fair value. The following methods and assumptions are used to determine the fair value of each class of financial instrument: Cash and cash equivalents The carrying amounts of cash and cash equivalents approximates fair value due to the relatively short-term maturity of these financial assets. Trade receivables The carrying amounts of trade receivables net of provision for bad debt, approximates fair value due to the relatively short-term maturity of this financial asset. Investments The carrying amounts of short-term investments approximates fair value due to the relatively short-term maturity of these assets. The fair values of other long-term investments are not materially different from the carrying amounts. Trade payables The carrying amounts of trade payables approximates fair value due to the relatively short-term maturity of these liabilities. Maturity profile The maturity profiles of financial assets and liabilities at balance sheet date are as follows: At 31 March 2011
Assets Cash Trade and other receivables Total financial assets
Less than 1 year 29 556 12 109 41 665
Liabilities Trade and other payables
9 074
Between 1 Over 5 years and 5 years – – – – – –
Non-interest bearing – – –
29 556 12 109 41 665
–
–
9 074
Between 1 Over 5 years and 5 years – – – – – –
Non–interest bearing – – –
Total
–
Total
At 31 March 2010 Assets Cash Trade and other receivables Total financial assets
SANERI ANNUAL REPORT 2010/11
Less than 1 year 21 302 2 616 23 918
21 302 2 616 23 918
99
Notes to the Annual Financial StatementS for the year ended 31 March 2011 continued
Less than 1 year
Liabilities Trade and other payables
6 504
–
Assets Cash Trade and other receivables Total financial assets
29 952 2 137 32 089
Liabilities Trade and other payables
13 248
23. Financial instruments (continued)
Between 1 Over 5 years and 5 years
Non-interest bearing
Total
–
–
6 504
– – –
– – –
– – –
29 952 2 137 32 089
–
–
–
13 248
At 31 March 2009
Interest on financial instruments classified as floating rate is repriced at intervals of less than one year. Interest on financial instruments classified as fixed rate is fixed until maturity of the instrument. The other financial instruments of the entity that are not included in the above tables are non-interest bearing and are therefore not subject to interest rate risk. Liquidity risk The entity manages liquidity risk through proper management of working capital, capital expenditure and actual vs. forecasted cash flows. Adequate reserves and liquid resources are also maintained. The entity manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash resources are available to meet cash commitments. Interest rate risk Exposure to interest rate risk on liabilities and investments is monitored on a proactive basis. The financing of the group is structured on a combination of floating and fixed interest rates.
24. Financial assets by category The accounting policies for financial instruments have been applied to the line items below: 2011 Loans and receivables Trade and other receivables 12 109 Cash and cash equivalents 29 556 41 665
100
Fair value Fair value Held to through profit through profit maturity or loss – held or loss investments for trading designated – – – – – – – – –
Available for sale
Total
– – –
12 109 29 556 41 665
24. Financial assets by category (continued) 2010 Loans and receivables Trade and other receivables 2 616 Cash and cash equivalents 21 302 23 918
Fair value Fair value Held to through profit through profit maturity or loss – held or loss investments for trading designated – – – – – – – – –
Available for sale
Total
– – –
2 616 21 302 23 918
Trade and other receivables Cash and cash equivalents
Loans and receivables 2 137 29 952 32 089
Total
2009
2 137 29 952 32 089
25. Financial liabilities by category The accounting policies for financial instruments have been applied to the line items below: 2011 Financial Fair value liabilities at through profit amortised cost or loss – held for trading Trade and other payables 9 074 –
Fair value through profit or loss designated –
Total
9 074
2010 Financial Fair value liabilities at through profit amortised cost or loss – held for trading Trade and other payables 6 504 –
Fair value through profit or loss designated –
Total
6 504
2009 Financial liabilities at amortised cost Trade and other payables 13 248
Total
13 248
26. Commitments Operating lease commitments CEF (Proprietary) Limited – within one year
SANERI ANNUAL REPORT 2010/11
556
594
212
101
Notes to the Annual Financial StatementS for the year ended 31 March 2011 continued
2011 R‘000
2010 R‘000
2009 R‘000
26. Commitments (continued) Block C, Upper Grayston Office Park, 152 Ann Crescent, Strathavon, Sandton. The entity has leased Portion 13, remaining Extent of Erf 14, Portion 1 of Erf 14 Simba Township, together with the building erected thereon from CEF (Proprietary) Limited. The agreement commenced on 1 April 2009 and the rent payable shall annually, on the anniversary date, escalate by 10% or alternatively, shall escalate in accordance with the CPI, whichever is greater. Either party shall be entitled to terminate this lease on six months written notice to the other party. Holding 16 Properties CC – within one year – in second to fifth year inclusive
311 941 1 252
342 570 912
– – –
Erf 665, Aiken Street, Halfway House The entity has leased office and showroom space for the Green Transport project located at Erf 665, Aitken Street, Halfway House, from Holding 16 Properties CC. The lease commenced on 1 December 2009 and has a term of three years, with the option to renew for a further three years.
27. Prior period errors The prior period comparative figures were restated due to receipts of foreign debtors invoices per the previous financial year as well as for the inclusion of the bonus provision. VAT was also accounted for accordingly as SANERI was required to register for VAT. Retention bursaries relating to prior periods were no longer payable as the students completed their studies. The annual financial statements were adjusted as follows: SANERI
102
Adjustment to the provision for performance bonus in the previous financial year to operating expenses: Previously stated After adjusted new balance
– –
– –
– 1 398
Adjustment to trade and other receivables for the inclusion of VAT receivable: Previously stated Increase in trade and other receivables
– –
– –
– 12 864
Adjustment to trade and other payables for the inclusion of VAT payable and retention projects payable: Previously stated Decrease/(Increase) in trade and other payables
– –
– 1 467
– (19 406)
Adjustment to operating expenses for provision for performance bonus provided for after year end: Increase in operating expenses
–
–
1 398
Adjustment to operating expenses for the inclusion of input VAT: Decrease in operating expenses
–
–
(12 864)
2011 R‘000
2010 R‘000
2009 R‘000
Adjustment to grants received for the inclusion of output VAT: Decrease in grants received
–
–
19 424
Adjustment to third party funds in the previous financial year to sundry income: Previously stated Increase in sundry income
– –
– –
– (314)
Adjustment to third party funds in the previous financial year to operating expenses: Previously stated Increase in operating expenses
– –
– –
– 220
Adjustment to trade and other receivables for the inclusion of a foreign debtor: Previously stated Increase in trade and other receivables
– –
1 334 1 553
– –
Adjustment to operating expenses for the inclusion of a foreign exchange loss: Previously stated Decrease in operating expenses
– –
– 12
– –
Adjustment to sundry income for the inclusion of a foreign debtor: Increase in sundry income
–
219
–
27. Prior period errors (continued)
28. Fruitless and wasteful expenditure SANERI has incurred interest of R10 000 as a result of late payments to SARS and the Auditor-General. This has been classified as fruitless and wasteful expenditure. Reconciliation of fruitless and wasteful expenditure Opening balance Fruitless and wasteful expenditure – relating to prior year Fruitless and wasteful expenditure – relating to current year Less: Interest earned on non-payment of current year fruitless and wasteful expenditure Less: Amounts condoned by the Board of Directors Fruitless and wasteful expenditure awaiting condonation
22 – 10
– – 22
– – –
– (32) –
– – 22
– – –
Analysis of awaiting condonation per economic classification Current Capital
– –
22 –
– –
Total
–
22
–
SANERI ANNUAL REPORT 2010/11
103
ANNUAL REPORT acknowledgements The 2010/11 year has proven to be the toughest challenge faced by SANERI and its staff. Not only was the budget for SANERI for the financial year reduced drastically from R39 million to R23 million for the year but the human capital development programmes were handed over to Department of Science and Technology with effect 1 April 2010 with the exception of the Hub for Energy Efficiency and Demand Side Management. It’s a known fact that funds follow function, hence the reason for the drastic reduction in the budget. In prior years, a considerable amount of valuable time was spent on developing and charting the way forward for the Chairs, Associate Chairs, the Hub of Renewable Energy and Sustainable Energy and the Spokes. Notwithstanding this challenge, SANERI has still been able to produce results of the highest calibre, including producing an ongoing supply of energy researchers to assist in stimulating innovation in the energy sector. The National Energy Act, (Act 34 of 2008), made provision for the establishment of SANEDI and considerable time and effort was expended, together with the Department of Energy, the architects of the Act, and other Departments to pave the way forward for the operationalisation of SANEDI. Despite financial and institutional constraints, SANERI was able to deliver on its promised targets and achieved a performance rating of 99%. In the few instances where SANERI fell short of meeting specific targets, it was due to lack of financial resources and other extraneous factors beyond the control of the organisation. SANERI would not have been able to fulfil its objectives without the support and assistance from various individuals who need to be acknowledged:
• • • • • • • • •
The Minister of Science and Technology, MP, Ms Naledi Pandor; The Minister of Energy, MP, Ms Dipuo Peters; The Director General of the Department of Science and Technology, Dr Phil Mjwara; The Director General of the Department of Energy, Ms Nelisiwe Magubane; The Chairman of the Board of Directors of SANERI, Mr Mputumi Damane; The Board of Directors, SANERI; The Chairman of the Board Audit Committee, Mr Viren Magan; The Committee Members of the Board Audit Committee and The supporting officials of the Department of Science and Technology, Department of Energy and CEF (SOC) Ltd.
104
SANERI has an established relationship with the universities/researchers/students/other organisations including international organisations with whom we have worked with. We are indebted to you for committing your time and resources to supporting our research programmes this year. It was wonderful to share a platform with such passionate and enthusiastic individuals. You are assisting in empowering future generations and creating a better life for all. We look forward to continuing this fruitful relationship in the year ahead. The success of any organisation is based on values like accountability, transparency, responsibility, and professionalism, SANERI has espoused these values with the strong support from industry, donors and civil society. SANERI has been fortunate that we have continued to receive the necessary support from these key stakeholders in the energy sector – thank you for contributing to SANERI’s growth. We look forward to your continued support as we transform into SANEDI. I am cognisant of the fact that staff are vital to the success of any organisation and those working in SANERI are dedicated and committed in everything they do. Over the past five years, their energy, passion and enthusiasm has resulted in SANERI’s success. We have a bright, colourful and innovative team who have contributed to the development of SANERI. To each of you – thank you for your sterling efforts in contributing to SANERI’s growth. I value each one of you and my best wishes are with each of you! As we transform into SANEDI, we will always cherish the past, adorn the present and there are many important issues for us to address now and in the future for us to make our contribution to the energy space locally and internationally, thus creating a sustainable future for all South Africans.
KM Nassiep Chief Executive Officer
SANERI ANNUAL REPORT 2010/11
105
KEY TO abbreviations ABET
Adult Basic Education and Training
GDP
Gross Domestic Profit
AIDC
Automotive Industrial Development Corporation
GPDRT
Gauteng Province Department of Roads Transport
BEE
Black Economic Empowerment
Gt
Gigatonne
BBBEEE
Broad Based Black Economic Empowerment
GWh
Gigawatt Hour
BIPV
Building Integrated Photovoltaics
HPHT
High Pressure High Temperature
CESAR
Centre for Energy Systems Analysis and Research
HySA
Hydrogen South Africa
CEF
CEF Group of Companies formerly known as Central
HVAC
Heating Ventilating and Air Conditioning
Energy Fund
IAS
International Accounting Standards
CEM
Clean Energy Ministerial
IASB
International Accounting Standards Board
CEO
Chief Executive Officer
IEA
International Energy Agency
CDC
Coega Development Corporation
IEEE
Institute of Electrical and Electronics Engineers
CGS
Carbon Gas Storage
IFRS
International Financial Reporting Standards
CHEC
Cape Higher Education Consortium
IGCC
Integrated Gasification Combined Cycle
CNES
Centre of New Energy Systems
IIA
Institute of Internal Auditors
CNG
Compressed Natural Gas
INRF
National Research Foundation
CO2
Carbon Dioxide
IP
Internet Protocol
COMPS
Centre of Material and Process Synthesis
IPP
Independent Power Producer
CoRD
The Centres of Research and Development
JSE
Johannesburg Stock Exchange
CPD
Continuing Professional Development
kW
KiloWatts
CPI
Consumer Price Index
kV
KiloVolts
CPV
Concentrator Photovoltaics
LNG
Liquefied Natural Gas
CSIR
Council for Scientific and Industrial Research
LPG
Liquefied Petroleum Gas
CSC
Community Steering Committee
LSM
Living Standards Measure
DBSA
Development Bank of Southern Africa
LTMS
Long Term Mitigation Scenarios for Climate Change
DDGS
Distillers Dried Grains with Solubles
MJC
Muslim Judicial Council
DEAT
Department of Environmental Affairs and Tourism
MoU
Memoranda of Understanding
DoE
Department of Energy
MP
Minister for Parliament
DME
Department of Minerals and Energy
MSW
Municipal Solid Waste
DSM
Demand Side Management
Mt
Megatonne
DST
Department of Science and Technology
MTEF
Medium Term Expenditure Framework
EDC
Energy Development Corporation
MW
Mega Watt
EEDSM
Energy Efficiency and Demand Side Management
NAFU
National African Farmers Union
EIA
Environmental Impact Assessment
NBI
National Business Initiative
ETDE
Energy Technology Data Exchange
NEEA
National Energy Efficiency Agency
ERC
Energy Research Centre
NERSA
National Energy Regulator of South Africa
ERID
Eskomâ&#x20AC;&#x2122;s Research and Innovation Department
EVI
Electric Vehicles Initiative
FFF
Fossil Fuel Foundation
FPGA
Field Programmable Gate Arrays
FSC
Forest Stewardship Council
GAAP
Generally Accepted Accounting Practice
GCCSI
Global Carbon Capture and Storage Institute
106
NGO
Non-Governmental Organisation
WRI
World Resource Institute
NGV
Natural Gas Vehicles
WWT
Sewage Waste
NMMU
Nelson Mandela Metropolitan University
NWU
North West University
NUMSA
National Union of Metalworkers of South Africa
OES-IA
Ocean Energy System Implementing Agreement
PAA
Public Audit Act
PEFC
Programme for Endorsement of Forest
Certification Schemes
PDI
Previously Disadvantaged Individual
PFMA
Public Finance Management Act
PV
Photovoltaics
RE
Renewable Energy
RECORD
Renewable Energy Centre for Research and
Development
REEEP
Renewable Energy and Energy Efficiency
Partnerships
R&D
Research and Development
SABA
South African Biofuels Association
SABS
South African Bureau of Standards
SACCCS
South African Centre for Carbon Capture
and storage
SADC
South African Development Community
SAJEMS
South African Journal of Economic and
Management Sciences
SANEDI
South African National Energy Development Institute
SANERI
South African National Energy Research Institute
SANTACO
South African National Taxi Council
SARS
South African Revenue Services
SMME
Small Micro Medium Enterprises
STT
Solid-State Transformer
SWH
Solar Water Heating
UCT
University of Cape Town
UJ
University of Johannesburg
UKZN
University of KwaZulu-Natal
UNEP
United Nations Energy Planning
UNU
United Nations University
UP
University of Pretoria
US
United States of America
USD
United States Dollar
UWC
University of the Western Cape
TB
Tuberculosis
TUT
Tshwane University of Technology
WASA
Wind Atlas of South Africa
WfE
Working for Energy Programme
SANERI ANNUAL REPORT 2010/11
107
IT’S A TEAM effort