PLASTICS CONVERTORS ASSOCIATION Presentation to NERSA ESKOM REVENUE APPLICATION: MULTI YEAR PRICE DETERMINATION. Polokwane 12 th Jan 2010 Thanks very.

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PLASTICS­CONVERTORS­ASSOCIATION

Presentation­to­NERSA

ESKOM REVENUE APPLICATION: MULTI YEAR PRICE DETERMINATION.

Polokwane 12th Jan 2010

Thanks very much Nonhlanhla,I have attached to this mail my presentation and a copy of the letter sent in advance.To make arrangements please contact Ms Edith Mkhabela on 012 401 4756 .Kind regards,Mike­

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Presenter­CV. Mike­BullockPart­time­employee­PCA­2009-­now.National­Diploma­Plastics­Technology­­­­­­­­­­­­­­­­­­­­­­­­University­of­East­London­UK­1974.Technical,­sales­and­production­positionsManufacturing,­training­and­trading­experience.

MD­Metal­Box­CA­Plastics­Div­1976-82.MD­Aries­Plastics­1982-86.CEO­Plastics­Industry­Training­Board­1990-2000CEO­Plastics­Convertors­Association­2000-­2009

ESKOM­REVENUE­APPLICATION:­MULTI­YEAR­PRICE­DETERMINATION.Polokwane­12th­Jan­2010

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The­Plastics­Sector.

Contribution­to­national­economy­­per­year­­­­­­­­­­­­­­­­­=­R32­billion.Share­­of­National­GDP­­­­­­­­­=5-6%Users­of­electrical­energy­­­­­­=­2nd­(after­Aluminium)Annual­conversion­of­raw­materials­­­­­­­­­­­­­­­­­­­­­­­­­=1.2­m­tons.Number­of­employees­­­­­­­­­­­=­40­000Packaging­sector­­­­­­­­­­­­­­­­­­­=­50%­of­sales

ESKOM­REVENUE­APPLICATION:­MULTI­YEAR­PRICE­DETERMINATION.Polokwane­12th­Jan­2010

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The­Plastics­Industry­

Expects An­uninterrupted­supply­of

Good­quality­electricity

At­a­competitive­price

ESKOM­REVENUE­APPLICATION:­MULTI­YEAR­PRICE­DETERMINATION.Polokwane­12th­Jan­2010

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Pressures­on­the­Plastics­Industry. 

Raw­material­price­increases­based­on­world­oil­prices.Wage­increase­demands­for­labour­above­inflation­rate.

World­recession.Limited­benefit­from­FIFA­World­Cup­and­Gautrain.

ESKOM­REVENUE­APPLICATION:MULTI­YEAR­PRICE­DETERMINATION.Polokwane­12th­Jan­2010

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Pressures­on­the­Plastics­Industry­(cont)

Plastics­becoming­uncompetitive­compared­with­metal­and­board.

Industry­already­at­high­levels­of­efficiency­so­little­opportunity­to­improve.

Packaging­sector­customers­unable­to­accept­above­inflation­price­increases.

Eskom­price­increases.

ESKOM­REVENUE­APPLICATION:MULTI­YEAR­PRICE­DETERMINATION.Polokwane­12th­Jan­2010

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Actions­taken­by­the­plastics­Industry.

Raw­materials.Reduction­of­import­duties­from­10%­to­0%­over­3­years.

Cost­of­labour.Negotiating­within­the­MEIBC­for­a­Special­Plastics­Wage­Table­@­65%.

Cost­of­EnergyChallenging­Eskom’s­price­increases.

ESKOM­REVENUE­APPLICATION:MULTI­YEAR­PRICE­DETERMINATION.Polokwane­12th­Jan­2010

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Eskom­Challenge.Impact­of­proposed­increases.

Industry average as %age of sales =3%

Year Increase Rev­ave­Rev­ave­%age%age

Adjust­for

Inflation­8%

RecoveryRecoveryfrom­from­marginmargin

Year­1 35% 4%4% 3.24% 0.76%0.76%

Year­2 35% 5.5%5.5% 3.5% 2.0%2.0%

Year­3 35% 7.4%7.4% 3.8% 3.6%3.6%

Industry average as %age of sales =3%

ESKOM­REVENUE­APPLICATION:MULTI­YEAR­PRICE­DETERMINATION.Polokwane­12th­Jan­2010

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Industry average as %age of sales =3%

ESKOM­REVENUE­APPLICATION:MULTI­YEAR­PRICE­DETERMINATION.Polokwane­12th­Jan­2010

The­Plastics­Recycling­Sector.The­industry­recycles­about­175­000­tons­per­year­of­plastics.(14.5%)

It­uses­about­3­times­the­amount­of­energy­for­transportation,­washing,­drying­and­processing­when­compared­with­normal­plastics­processing.

Run­by­entrepreneurs­with­no­subsidies.

Creates­over­3000­fulltime­and­about­15­000­informal­jobs.

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Eskom­Challenge.Impact­of­proposed­increases­on­the­

Plastics­Recycling­sector..Industry average as %age of sales =11%

Year Increase Rev­ave­Rev­ave­%age%age

Adjust­for

Inflation­8%

RecoveryRecoveryfrom­from­marginmargin

Year­1 35% 15%15% 12% 3%3%

Year­2 35% 20%20% 13% 7%7%

Year­3 35% 27%27% 14% 13%13%

Industry average as %age of sales =3%

ESKOM­REVENUE­APPLICATION:MULTI­YEAR­PRICE­DETERMINATION.Polokwane­12th­Jan­2010

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Eskom­Challenge.Consequences­of­proposed­increases­on­

the­Plastics­Recycling­sector.

Energy­to­the­sector­would­have­to­be­subsidised.

Companies­would­close­down.

Serious­environmental­impact

Increase­pressure­on­landfill.

Industry average as %age of sales =3%

ESKOM­REVENUE­APPLICATION:MULTI­YEAR­PRICE­DETERMINATION.Polokwane­12th­Jan­2010

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Eskom­Challenge­(cont)

Supply­policy­ought­to­be­reviewed,­direct­or­through­Municipality.

Introduce­a­competitive­environment­because­now­we­are­being­asked­to­fund­inefficiencies.

Generating­capacity­on­mines­must­be­more­competitive­than­shipping­in­coal.

ESKOM­REVENUE­APPLICATION:MULTI­YEAR­PRICE­DETERMINATION.Polokwane­12th­Jan­2010

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ConclusionPlastics­will­not­be­able­to­absorb­the­proposed­increases­without­serious­loss­of­markets­and­jobs.

The­National­economy­cannot­afford­­bleeding­in­a­sector­contributing­6%­to­the­GDP.

Eskom­must­shoulder­its­responsibilities­in­a­responsible­manner.­

ESKOM­REVENUE­APPLICATION:MULTI­YEAR­PRICE­DETERMINATION.Polokwane­12th­Jan­2010

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35%Hertz­!!

Thank­you

ESKOM­REVENUE­APPLICATION:MULTI­YEAR­PRICE­DETERMINATION.Polokwane­12th­Jan­2010