Eskom Presentation to the Parliamentary Portfolio Committee on Energy
21 Aug 2012
Paul O’ Flaherty Finance Director and Group Executive Group Capital
Disclaimer
This presentation does not constitute or form part of and should not be construed as, an offer to sell, or the solicitation or invitation of any offer to buy or subscribe for or underwrite or otherwise acquire, securities of Eskom Holdings SOC Limited (“Eskom”), any holding company or any of its subsidiaries in any jurisdiction or any other person, nor an inducement to enter into any investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This presentation does not constitute a recommendation regarding any securities of Eskom or any other person.
Certain statements in this presentation regarding Eskom’s business operations may constitute “forward looking statements.” All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding the financial position, business strategy, management plans and objectives for future operations of Eskom are forward looking statements.
Forward-looking statements are not intended to be a guarantee of future results, but instead constitute Eskom’s current expectations based on reasonable assumptions. Forecasted financial information is based on certain material assumptions. These assumptions include, but are not limited to continued normal levels of operating performance and electricity demand in the Distribution and Transmission divisions and operational performance in the Generation and Primary Energy divisions consistent with historical levels, and incremental capacity additions through our Group Capital division at investment levels and rates of return consistent with prior experience, as well as achievements of planned productivity improvements throughout our business activities.
Actual results could differ materially from those projected in our forward-looking statements due to risks, uncertainties and other factors. Eskom neither intends to nor assumes any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
In preparation of this document we used certain publicly available data. While the sources we used are generally regarded as reliable we did not verify their content. Eskom does not accept any responsibility for using any such information.
In support of 2 Table of contents
1 2 3 4 5
In support of 3 The structure of SA's electricity industry is changing
Change of the industry value chain
ISMO • The ISMO Bill was tabled in Parliament on 13 May Independent System 2011 and Market Operator • The actual path to be followed is being finalised
To be Eskom moved out Primary Generation System Transmission Distribution Customer Construction energy operations Service sourcing
Support functions
In support of 4 Eskom Corporate Overview Context for creating a world class EPCM organisation
• Infrastructure is the foundation of economic growth and leads it. For electricity supply, a 1% GDP increase requires a 1,5% increase in electricity supply
• Eskom was established in 1923 as the Electricity Supply Commission. In July 2002, it was converted into a public limited liability company, wholly owned by the SA government
• We are one of the top 20 utilities in the world by generation capacity (41 647MW). We generate 95% of the electricity used in SA and about 45% of that used in Africa
• We are vertically integrated - generating, transmitting and distributing electricity to approximately 4.8 million customers in the residential, mining, industrial, commercial, and agricultural sectors
• To meet the increasing electricity needs of South Africa, Eskom managed the construction of 31 000MW of new capacity between 1970 and 1990.
• In the following decade from 1991 to 2005, electricity was in over supply and little was invested in new electricity generation. This resulted in a gradual loss of skills, knowledge and know-how from Eskom and from South Africa.
• We have now returned to the cycle of under supply. We are committed to meeting the electricity and related infrastructure needs of our customers and contributing to the developmental needs of South Africa
• During the last decade we have invested in re-establishing our engineering, procurement, construction and project management expertise to support a massive expansion programme. 5 Eskom Corporate Overview Context for creating a world class EPCM organisation
6
Project Development
Sustainability & Project Innovation Management
EPCM Construction Eskom EPCM Organisation Overview Safety Organisation Management Delivering world class Engineering, Procurement, Construction and Project Management in Africa Governance Engineering
Procurement
• Eskom’s EPCM organisation is undertaking and managing amongst the largest construction projects in the world. The Medupi and Kusile Projects rank amongst the top 5 power generation projects in the world by capacity
• Our portfolio is diverse and includes projects in the energy, transportation, water and communications sectors. Geographically, our portfolio of newly constructed projects are positioned all across South Africa. We are also actively engaging in projects in Southern Africa
• Through delivery of large construction projects, Eskom has and continues to invest on improving its engineering, procurement, construction and project management (EPCM) capability, its people and its systems, processes and tools
• We have aligned our contract management, financial systems, project controls, project system and processes, quality standards and safety with that of our peers. Together with lessons learnt, we are embedding this into the EPCM organisation.
• Increasing supply from local industry and creating jobs is critical. This requires knowledge, skill and technology transfer. We continue to actively drive this by incentivising industry partnerships, employing local labour and through training
• Since 2005, we have delivered 5 756 MW of generation capacity , 4 163.9 km of transmission network, and 20 195 MVA of substation transformers. The infrastructure currently under construction will create approximately 40 000 jobs and more than 50% of the spend will be local
7 Project Development
Sustainability & Project Eskom EPCM organisation has a diverse infrastructure Innovation Management
EPCM Construction portfolio and which it continues to deliver upon Safety Organisation Management
Governance Engineering
Procurement
Actual delivery since 2005 (as at end June Capital investment allocation over 2012) the five financial years from 1 April 2012 – R323 bn
8 Within a global context, we continue to benchmark ourselves and embed improvements
The world has changed since the last built power stations
9 Project Development
Sustainability & Project Within a global context, we continue to benchmark Innovation Management
EPCM Construction ourselves and embed improvements Safety Organisation Management Governance Engineering
Procurement
No. of Ranked by # of Associated Aspect of Project Associated Lessons- Lessons-Learned Learned Cost 1 79 Planning & Develop. 2 73 Specifications 3 69 Schedule 4 65 Design 5 56 Criteria 6 49 Contract. Strategy & Scoping 7 48 Mechanical 8 39 Civil & Structural 9 37 Project Management 10 36 Execution 11 32 Procurement 12 28 Executive Management 13 27 Permitting 14 25 Boiler 15 22 Construction Industry Institute® Turbine 16 22 Project Definition Siting 17 22 Readiness Assessment Communication & Coordination 18 16 Site Layout 19 16 Construction Management 20 14 Material Handling 21 13 Geotech 22 13 Project Staffing & Organization 23 13 Electrical and Controls & Instrumentation 24 10 Construction 25 10
10 New Generation Capacity and Transmission
Networks 2005–2018
-
ment Develop
0 MW TBD 200 MW 0 MW 3 253 KM 12 065MVA
Installed 3 370 MW 0 MW 2 084.3 MW 300 MW 4 164 KM 20 195 MVA Construction Construction In Construction 330MW 9 564 MW 1 332.0 MW 0 MW 2 339 KM 10 210 MVA Total 3 700MW 9 564MW 3 416.3 MW* 300 MW 6 503 KM 30 405 MVA
• ~ 16 980 MW of new capacity (~5 756 MW installed and commissioned) • ~ 9 756 KM of new transmission network (~4 164 KM installed) • ~ 42 470 MVA of new transmission strengthening (20 195 MVA installed)
Medupi is the first coal-generation plant in Africa to use supercritical power generation technology CSP: Concentrated Solar Power PV: Photovoltaic 11 Programme challenges since inception (I/III)
• The market within which Eskom is operating was extremely tight, with The market significant demands on supplier capacity and basic commodities being a feature since 2005
• New thinking on contracting and risk sharing was essential based on the following Global demand for new plant was high The supplier market was global and limited Supplier market was experiencing shortages of material, Contracting and components and engineering capacity risk sharing Fixed price or construction commitments were unable to be secured Increased demand for power plants leading to significant escalation in prices Seller’s market, not a buyer’s market Contract and risk-sharing profiles fundamentally changed
• Given the reserve margin, the Eskom programme was and is working Timeline with very tight timelines
In support of 12 Programme challenges since inception (II/III)
• Eskom clearly found itself in a very challenging funding environment. Funding Until October 2010, Eskom did not have a full funding plan to complete the capacity expansion programme; it now has one
• Despite the importance of executing projects on a tight schedule and within a tight budget, it is Eskom’s firm belief that safety is the most Safety important objective of all. The inherent risky nature of major construction activities requires constant management and leadership
• The build programme is used to contribute to skills development and Skills facilitate manufacturing capability in South Africa development • Skills remain a significant factor for Eskom. The competition for skills is fierce, both internationally and locally
• The new build began with capabilities, processes and systems Project undefined; the reality is that Eskom currently needs to spend R323bn Management for the 5 years starting 1 April 2012 and be part of the Integrated Resource Plan 2010 beyond
In support of 13 Programme challenges since inception (III/III)
• Contractor capacity and competence at all levels to support the Contractor execution of build programme is still maturing. This requires greater Performance supervision by Eskom to improve quality, cost, schedule and safety performance
In support of 14 Focus is on Medupi, Kusile, and Ingula—the first units will come on line between 2013 and 2014
Construction First unit commissioned Fully commissioned activities started December 2013 May 2017
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Construction Construction First unit commissioned Fully commissioned First unit commissioned Fully commissioned activities started activities started 2014 2014 December 2014 August 2018
Medupi Power Station Ingula Power Station Kusile Power Station
Execution partner Road works Execution partner • Coal supply Civil works • Coal supply • Boiler Infrastructure • Boiler • Turbine • B&E Quanza • Main Civils • Enabling Civils Dam construction • Turbine • Silver Rock • Main Civils • Enabling Civils • Concor -WBHO • Generator transformers • Edwin • Generator transformers
Unit commissioning
Source: Eskom Group Capital Division (Construction Management) 15 Table of contents
1 2 3 4 5
In support of 16 The capex for Eskom’s 3 largest new build projects ranks among the world’s largest construction projects and will result in the most ambitious infrastructure investment South Africa has ever undertaken
$ billions of capex
• Funding required: R227bn 2 • Capacity increase as % of Eskom’s installed base: – Base load increases from Medupi 25% (+9,564 MW) 5 yr capex on rail, and Kusile 8 port and pipeline – Peaking capacity increase from 30% (+1,332 MW) upgrades Ingula
• Will be 4th and 5th largest coal plants in the world and 19th largest Olympic Dam pumped storage scheme 20 – world’s largest mining project • Direct construction employment: 20,000 • People directly impacted ~ 155,000
• Pace of build of Medupi is 30% faster 23 than previous Eskom and main contractors coal builds Medupi Kusile Ingula
Three World’s largest 25 … plus they will keep the lights Gorges dam electricity project on for all of South Africa! In support of 17 The contracting set-up at all stations is international and has a large number of interfaces
Medupi – FIDIC contract (34)
Package title Contractor Package title Contractor • Boiler • Hitatchi Power Africa • Terrace Coal & Ash • ELB Engineering Services • Turbine • Alstom S&E Africa • Coal Stockyard • ThyssenKrupp Materials • Main Civils • MPS-JV Equipment Handling • Accommodation • Various • Electrical Power • Actom • Enabling works • Roshcon Installation • C&I • Alstom • Chimneys and Silos • Actom • LP services • LP Serv. Consortium • Water treatment • Aqua Engineering SA rd • Ash Dump • Basil Read • 3 party inspection • Moody’s Tata’s, and others Infrastructure • LV switchgear • General Electric SA Part B
Kusile – FIDIC contract (46)
Package title Contractor Package title Contractor • Boiler area • Hitachi Power • Combustion Waste Terrace • TBD Europe GmbH Constr. (Phase 1 & 2) • Main turbine area • Alstom S&E Africa • Electrical & Aux Power • Siemens • Main Civils • Kusile Civil JV • Coal Stockyard • Bateman Africa • FGD • Alstom • Terrace Material Handling • Bateman Africa • Terracing • Roshcon Systems Construction • Railroad Construction • TBD • Control & • Alstom • Water Treatment Plant • PDNA instrumentation • Chimney Construction • Concor Karrena JV • Miscellaneous • SSBR JV • Site Services • Roschcon structures Ingula – NEC contract (27)
iWeNhle cost engineering (Pty) Ltd Package title Contractor Package title Contractor
REPORT -7601 -11-462 Tel/Fax: 27 -457-3213) (Cell: 082 M R Nhlengethwa -306-6952) (Cell: 083 M C Webb • Access Roads • Aveng (Africa) Ltd • Turbines & • ABB South Africa • Infrastructure • African Construction Generators, (Pty) Ltd, Siemens (Pty) Ltd Electrical Auxiliary (Pty) Ltd • Quarry • B&E International Plant, Transformers Quanza Group JV • Mechanical Auxiliary • VOITH SIEMENS • Dams • Braamhoek Dams Plant HYDRO-VOITH Construction JV FUJI • Main • CMC Mavundla • Optic Fibre & IT • TBD In support of Underground & Impregilo Joint Comms Access Tunnel Venture Construction18 Build progress to date (as at 30 June 2012)
5 756 MWs
4 164 KMs
20 195 MVAs
In support of Current capacity expansion plan
200
894 11256
In addition, Eskom has commenced the development of a 100MW CSP plant
In support of 20 Significant progress in build programme – began in 2005 with completion in 2017/18
% of estimated total cost spent as at 30 June 2012
36% R billion spent and to be spent on the capacity expansion programme (excluding borrowing 118.5 costs capitalised) 64%
91.2 In addition, we plan to spend: • More than R10 billion over each of the 5 years to strengthen, refurbish and expand our Distribution network; and • R57 billion on refurbishing our generation plants over the 5 years 53.5% 90% 33.5 50% 19.7 23.8
23,7 In support of 21 Project cost benchmarks - overnight cost ($/kW) benchmarks
Exchange Medupi – Kusile – Overnight Cost Source Rate Technology Overnight Overnight cost ($/kW) Components R/US$ Cost ($/kW) Cost ($/kW)
EPRI (May Pulverized Coal 2010) Data for 7.4 2,403 - 2,656 with FGD IRP2010 • Basic cost 2,210 2,399 • Contingency Pulverized Coal 2,091 - 2,281 without FGD
• Basic cost Super-critical • Contingency Lazard with and 8.3* 2,800 - 5,925 • ODC 2,786 3,269 (June 2009) without carbon • IDC capture • Transmission
Super-critical • Basic cost IEA 8.2 from various 672 - 2,539 • Contingency 2,048 2,325 (2010 Edition) countries • ODC
EPRI: Electric Power Research Institute ODC: Owner’s Development Cost IRP: Integrated resource Plan IDC: Interest During Construction FGD: Flue Gas Desulphurisation IEA: International Energy Agency
In support of 22 Funding plan – R300 billion to 2017 as at 31 March 2012
Amount Draw- Funding Currently supported downs Source of funds sourced secured by to date Rbn Rbn Government Rbn Rbn Bonds 90.0 32.9 32.9 20.4 Commercial paper 70.0 70.0 20.0 0.0 Export Credit Agency 32.9 32.9 15.6 0.0 backed World Bank loan 27.8 27.8 5.6 27.8 AFDB loan 20.9 20.9 5.9 20.9 DBSA loan 15.0 15.0 3.0 0.0 Shareholder loan 20.0 20.0 20.0 20.0 Other sources 23.4 13.2 0.8 4.9 Totals 300.0 232.7 103.8 94.0
(1) (2) (2) Percentages As a percentage of the R300bn funding sourced (1) 44.6% 40.4% In support of (2) As a percentage of the currently secured total77.6% 23 Table of contents
1 2 3 4 5
In support of 24 24 Kusile and Medupi will be the third and fourth largest coal-fired power plants in the world, respectively…
Higher than Sandton 4x more investment than City Towers Gautrain
Coal-fired power plants (MW) 1▪ Taichung (Taiwan, 7 1001) 2▪ Waigaoqiao (China, 5 000) 3▪ Kusile (South Africa, 4 800) 4x 4▪ Medupi (South Africa, 4 764) 5▪ Zouxian (China, 4 540) ~113m 6▪ Kendal (South Africa, 4 374) 7▪ … 8▪ …
Medupi
In support of 1 = 5 500 existing + 1 600 planned 25 In the construction of Medupi, Kusile and Ingula, Eskom will ensure that this contribution is aligned with SA macro economic principles
Medupi, Kusile & Ingula SA principle planned contribution BEE contribution: R21.1 billion A united, democratic and prosperous BWO contribution: R 7.6 billion South Africa SME contribution: R7.3 billion Local Content: R63.3 billion
Electricity consumption is correlated Leveraging the role of state-owned companies to economic growth. Adding (SOCs) to set a foundation for growth and 10 897 MW of capacity supports SA’s development of the economy long-term growth objectives
Contribution to economy A thriving economy connected to the world ~R170 billion construction spend1 and integrated with the broader African continent
Use super critical technology A sustainable economy, not harmful to the (less CO emissions per kg coal than sub- environment and committed to climate change 2 critical) mitigation initiatives FGD will be installed
New jobs (Direct + Indirect ) Eradication of poverty and unemployment ~40 000 jobs created
Enhancing the potential of each citizen Training and skills development is through an integrated education and skills a critical component of all of the development system new jobs that will be created
1 Total cost of projects excluding interest, cost of cover, ODC, and contingency TheIn completion support of of Medupi, Kusile and Ingula is important as it will contribute substantially towards the achievement of the six macro economic principles26 of South Africa 26 26 As such, the programme will have significant impact on local industry, skills, jobs, infrastructure and regional development
1 2Local skills 3 4 5Regional Local content development Jobs Infrastructure development >50% of local content Rapid growth in SA’s ~40 000 jobs created, Development of roads Spend and invest- directly benefiting the skills pool directly and indirectly and railways ment in local areas SA economy
SOURCE: Eskom Enterprises division and Medupi project, STATS-SA 1 Based on GDP in 2008 In support of 27 1 A large share of the Medupi, Kusile and Ingula spend will go to the local economy, thereby also benefitting local construction companies % Composition of total project Examples from Medupi, Kusile, and Ingula spend Main civils Main civils (MPS-JV): Medupi 42% 58% 84% of contract are spent Foreign Local locally
Main civils Main civils (KCW-JV): Kusile 56% 44% Local 65% of contract are spent Foreign locally
Access roads package 26% Ingula Foreign Main civils (Grinaker-LTA): 100% of contract are spent 74% Local locally
SOURCE: Medupi, Kusile, and Ingula project management In support of 28 2 Many skills are being developed as local content requirements kick-start whole new industries in SA
New fabrication and training facilities 90% of major orders placed established on mechanical equipment
Equipment Local content
• Brand new fabrication facility built Air Cooled Condenser (ACC) in Nigel >90% • Boiler Membrane Wall Workshop Major pumps >55% • Two new CNC Benders commissioned Heaters >45% • New welding training centre • CNC header drilling machine LP outer casing Unit 6 100% Feedwater tank >80% • Training facilities in Pretoria and in Wadeville Heaters Drain recovery pumps >20%
In support of SOURCE: Medupi project management 29 2 The programme will fuel demand for relevant graduates and artisans and will grow the wide required skill base
Medupi would …
… consume 43% of a year’s relevant university graduation (engine- ering, project planning, etc.)
… deploy 48% of a year’s output of artisans
… rapidly grow South Africa’s supply of engineers, artisans, R&D and project management experts
… develop a wide range of additional skills through Asgi-SA commitments
In support of SOURCE: Eskom Enterprises division and Medupi project 30 Across Medupi, Kusile, and Ingula new employment 3 opportunities will touch the lives of ~160 000 people
DIRECT Medupi Kusile Ingula On site construction 8 300 7 200 4 100 Supporting project staff 2 200 2 000 300 Coal mine expansion 2 100 2 000 Transmission expansion 2 700 200 Crocodile River expansion 3 000 Ongoing operations 700 600 100
Subtotal ~19 000 ~12 000 ~4 500
INDIRECT Social services + 1 700 1 700 1 100 local business Total employed 20 700 13 700 5 600 x family multiplier x 4 (4/family)
Other projects such as 765kV People directly impacted ~160 000 and RTS provide by Medupi, Kusile & Ingula ~ 11 000 direct employment opportunities during construction and a further ~1 700 during operation In support of SOURCE: Eskom Enterprises division and Medupi project 31 Medupi, Kusile and Ingula will support local and national 4 infrastructure
Area of impact Example
National infrastructure Richards Bay to Lephalale and Lephalale bypass 22 km of new Roads roads reinforcing of 3 bridges: >R500bn, 500 jobs
Ongoing roads maintenance Maintenance of local access roads: > R100m p.a.
Freight forwarding Richards Bay facility: R90m, 150 jobs
3 x 38 wagon train per day for limestone, 2 x 12 tank carriers per Trains year of oil maintenance or rail lines: 100 jobs
Local infrastructure Catering and workforce Food, laundry, maintenance security supplied to workforce: supply >R2bn, 1 000 jobs
Hotels Hotels to expand significantly
Local transport Additional buses at peak, increased taxis: ~500 jobs
Vehicle maintenance 1 000+ extra vehicles maintained locally: 50 jobs
3 300 houses and accommodation units to be built by Eskom and Housing suppliers: ~R4bn
Water Benefit from Crocodile River diversion pipeline from Kendal
Sanitation Sewerage plant upgrade: R50m
7 schools impacted, increased policing, recruitment centre, fire, Social facilities social club, ICT centre. Ongoing work with stakeholder forums In support of SOURCE: Eskom Enterprises division and Medupi project 32 Each project will measurably impact the local towns 5 through local spend & investment
Impact on local town’s GDP from each project
Lephalale (Medupi) 95%
Delmas (Kusile) 25% Other businesses and infrastructure created: Ladysmith (Ingula) 7% • Catering • Laundry • Building companies Typical local businesses and infrastructure created • House maintenance • Hotels • Entertainment • Training facilities • Security Shops Civil infrastructure • Schools / education • Policing • Churches • Medical care • Banks & financial services
Schools Transport
In support of SOURCE: Eskom Enterprises division and Medupi project 33 Table of contents
1 2 3 4 5
In support of 34 Build programme overview - Medupi
• Greenfields Project - Lephalale (Limpopo Province) Project • 6 unit coal-fired power station summary • Planned capacity 4 764MW
Financial & • Projected project cost to completion ~ R91.2 bn (excl. IDC) economic • Estimated 95% impact on Lephalale town GDP impact
• Construction commenced March 2007 Project • First Unit planned to generate power to the grid between May development 2013 and September 2013 • Subsequent Units at 6 to 9 month intervals thereafter
In support of IDC: Interest During Construction GDP: Gross Domestic Product 35 Medupi has been delayed for various reasons, particularly related to the Unit 6 civil and boiler
Civil Boiler ~10mths delay ~10mths delay
Key delay Civil Steel modifications events access Erection
▪ Unanticipated ▪ Ongoing ▪ Poor tracking and Root causes difficulty in modifications to logistics systems levelling site structural steel in terms of foundation design delays locating boiler manufacturing material ▪ Boiler and erection ▪ Boiler materials foundation timelines design not not supplied in Total delay frozen ▪ Manufacture of order needed to from 3 incorrect pieces support efficient Issues with civil events = ~20 ▪ leads to erection contractor months substantial re- ▪ Issues with boiler performance work In support of erection contractor performance 36 The boiler is essential for the overall timeline, though it is just one of many construction packages
Medupi consists of 38 packages … …of which the boiler is the critical path
P01 Coal Overland Conveyor P22B Infrastructure & Delay on the critical path imposes P02 Boiler Major Ash dams & dumps the same delay on the whole project P23 Diesel Generator P03 Turbine packagesBoiler timeline P04 LP Services P27 Coal Stockyard Turbine P06 Water Treatment Plant Equipment P07 Chimney andMain Silos civil P28 Ash Dump P08 Main CivilsAccommodation Equipment and Ash Overland P09 Technical EnablingBuilding works Equipment C&I P31A Reservoirs P10 Enabling SiteLP Facilitiesservices P31B Clarifiers P11 Electrical PowerAsh dump Installation infrastructure P32 Dust Handling P12 LV SwitchTerrace Gear Coal and Ash and Conditioning P13 MV SwitchgearCoal stockyard equipmentP33 Terrace Coal P14 Aux.TransformersElectrical power installation and Ash P15 Gen TransformersChimneys and silos P35A Buildings - P16 UPS Water treatment Critical rd P17 C & I 3 Party inspection P35B Buildings – P21 LaboratoryLV Switchgear Non-technical P22A Infrastructure & P35C Buildings – Ash dams & dumps Technical
In support of 37 Build programme overview - Kusile
• Greenfields Project - Delmas (Mpumalanga Province) Project • 6 unit coal-fired power station summary • Planned capacity 4 800MW
Financial & • Projected project cost to completion ~ R118.5 bn (excl. IDC) economic • Estimated 25% impact on Delmas town GDP impact
• Construction commenced Mid 2008 Project • First Unit planned to be commissioned December 2014 schedule • Subsequent Units 2 & 3 at 12 month intervals and Units 4, 5 & 6 at 8 months thereafter
In support of IDC: Interest During Construction GDP: Gross Domestic Product 38 Build programme overview - Ingula
• Greenfields Project - Ladysmith (KwaZulu-Natal Province) Project • 4 unit pumped-storage power station summary • Planned capacity 1 352MW
Financial & • Projected project cost to completion ~ R23.8 bn (excl. IDC) economic • Estimated 7% impact on Ladysmith town GDP impact
• Construction commenced Mid 2006 Project schedule • First Unit planned to be commissioned 2014 • Subsequent Units at 3-month intervals thereafter
In support of IDC: Interest During Construction GDP: Gross Domestic Product 39 Build programme overview - Return to Service
• Refurbishment and return to service of previously moth-balled coal fired power stations in Mpumalanga. Project Camden (8 units—total 1 520MW) summary Grootvlei (6 units—1 180MW) Komati (9 units—1 000MW)
Financial & economic • Projected RTS cost to completion ~ R25.5 bn (excl. IDC) impact
• All 8 units at Camden power plant are now in commercial operation Project • All 6 units, have been commissioned at Grootvlei. schedule • 6 units, each rated at 125MW, have been commissioned at Komati power station. 3 final units expected to be commissioned by 31 March 2013
In support of IDC: Interest During Construction 40 Build programme overview – Transmission Construction Portfolio 2005 to 2018
• Transformers - ~42 470 MVA planned with 20 195 MVA installed. Large projects in construction include: 765kv (Planned: 12,000 MVA) Cape Grid (Planned: 1,500 MVA) Northern Grid (Planned: 3,500 MVA) Project Central Grid (Planned: 3,600 MVA) summary • Transmission Lines – ~9 756 km planned with 4 164 km installed. Large projects in construction include: 765kv (1,689.9 km) Northern Grid (1,253.6 km) Cape Grid (621 km) Central Grid (413 km) Financial & • Remaining spend in 5 years starting 1 April 2012 is R56 bn excl. IDC (R16 bn for economic projects in construction and R40 bn for projects in development) impact
• 765kV: December 2013 Project • Northern Grid: June 2015 schedule • Central Grid: Mar 2015 • Cape Grid: Aug 2016
In support of Transmission Development Plan is reviewed regularly with NERSA and the future plan can change depending on IDC: Interest During Construction 41 country needs Table of contents
1 2 3 4 5
In support of 42 SA national planning process - driven by Regulations on New Generation
Feasi- Fund IRP bility Build IPP Procurement PPA
The IRP A feasibility study Suitable IPPs are Buyer of electricity IPPs often require Building for determines which is conducted and procured through signs Power PPAs prior to Eskom or IPPs technologies will IRP capacity is the IPP Purchase obtaining external can only be built allocated to the procurement Agreements funding. Such commence once most suitable; process (PPAs) with power PPAs will require investment IPPs or Eskom producer government decision has Background backing been taken
DoE DoE - According to DoE / Single Buyer Minister must Eskom, IPPs Eskom, IPPs New Generation Office assign a buyer of Regulations each PPA
Responsible
Regulations state This process has The IPP Currently, the Eskom may Construction of new generation not yet been procurement Single Buyer Office receive funding IRP projects may capacity must be executed and is process must be is ring-fenced with government be delayed due represented in the required for finalised to ensure within Eskom to backing. Costs to required IRP to receive subsequent participation of sign PPAs based are recovered via upstream
Status generation and planning actions these producers upon the DoE the MYPD decisions distribution procurement submissions licenses or decision electricity tariff receive a Section 34 exemption from the minister
In support of 43 IRP outcomes
IRP 2010
Total additional new capacity (without committed) until 2030 in GW 25 Share 15% 23% 6% 6% 9% 42% of total 20 new GW 17,8
15 8,4 Solar PV 10 9,6 1,0 CSP 6,3 5 3,9 8,4 Wind 2,6 2,4
Coal Nuclear Hydro Gas - Peak - Renewables CCGT OCGT
in 2010 = 260 90% 5% 5% 0% < 0,1% 0% Energy TWh share in 2030 = 454 TWh 65% 20% 5% 1% < 0,1% 9%
In support of 44 Long lead times for power generators & related infrastructure require timely firm commitments
New build options Coal (PF, FBC, Import Gas – Nuclear Peak – OCGT Wind CSP Solar PV Total imports, own hydro CCGT build) MW MW MW MW MW MW MW MW • DoE first wave of 2010 0 0 0 0 0 0 0 0 renewables 2011 0 0 0 0 0 0 0 0 0 targeted 3750MW 2012 0 0 0 0 0 0 0 300 300 to be procured in 2013 0 0 0 0 0 0 0 300 300 5 rounds 1 2014 500 0 0 0 0 400 0 300 1 200 1 2015 500 0 0 0 0 400 0 300 1 200 • First round of bids 2016 0 0 0 0 0 400 100 300 800 yielded 1 400MW 2017 0 0 0 0 0 400 100 300 800 (wind 600MW, 2018 0 0 0 0 0 4004 1004 3004 800 CSP 150MW, PV 2019 250 0 0 2373 0 4004 1004 3004 1 287 650MW). 2020 250 0 0 2373 0 400 100 300 1 287 Advanced stage, 2021 250 0 0 2373 0 400 100 300 1 287 2022 250 0 1 1432 0 805 400 100 300 2 998 contracts being 2023 250 1 600 1 1832 0 805 400 100 300 4 638 finalised 2024 250 1 600 2832 0 0 800 100 300 3 333 2025 250 1 600 0 0 805 1 600 100 1 000 5 355 • Second round 2026 1 000 1 600 0 0 0 400 0 500 3 500 yielded 1000MW. 2027 250 0 0 0 0 1 600 0 500 2 350 In earlier stages 2028 1 000 1 600 0 474 690 0 0 500 4 264 of procurement 2029 250 1 600 0 237 805 0 0 1 000 3 892 process 2030 1 000 0 0 948 0 0 0 1 000 2 948 Total 6 250 9 600 2 609 2 370 3 910 8 400 1 000 8 400 42 539
Firm commitment necessary now Final commitment in IRP 2012
1. Built, owned & operated by IPPs 2. Commitment necessary due to required high-voltage infrastructure, which has long lead time 3. Commitment necessary due to required gas infrastructure, which has long lead time 4. Possibly required grid upgrade has long lead time and thus makes commitment to power capacity necessary In support of 45 Electricity Potential in the SADC Region
Libya Egypt
Mali
18 000 + MW Nigeria Ethiopia Hydro in Ethiopia +- 3 000 MW Kenya Geothermal in Kenya > 20 000 MW Hydro on DRC Angola and DRC Tanzania East Transmission Corridor West transmission Angola corridor Zambia 1000 MW Hydro in Zambia 1200 MW Coal Namibia in Botswana Botswana 5000 MW Hydro, Coal 1000 MW Gas and Gas in Namibia in Mozambique
Generation potential in SADC is significant, 46 46 275684-01-SADC-v01-11Apr11investments-DP-pf-CPT.ppt in Power Generation and Transmission are needed to unlock potential In conclusion, since 2005 until today
• The new build programme is significant by any measure. Cost increases are understood and taken into account, lessons have been learnt and implemented for future projects and across existing projects • Good progress has been made, but many serious risks, including contractor performance, will need to be carefully managed in the future. Strong mitigating measures have been and are being put in place to manage these risks • The global financial crisis has affected all sectors of the economy, Eskom included. This led to a review of the build program taking into account • Financial contractions of the markets, • Resultant re-prioritisation of certain capacity projects and • Delaying the execution of some of the projects at certain times since 2005; full go ahead on Kusile was given in October 2010 • Macro-economic factors have negatively impacted the build programme: • CPA, and Cost of cover and other market forces • Decisions are required on allocations of build for IRP 2010
In support of 47 Thank you