Eskom Presentation Standing Committee on Appropriations - 12 June 2015
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Eskom Presentation Standing Committee on Appropriations 12 June 2015
Contents
Content
1. Introduction
2. Financial situation
3. Eliminating Load shedding
2Executive summary (1 of 2) • Eskom is a fully integrated power utility (generation, transmission, distribution and wholesale/retail) that supplies 95% of SA’s electricity and fourth largest in the world in terms of installed capacity • We are well-governed with a Shareholder, functioning Board and EXCO and more than 46 000 employees • Eskom’s Labour Relations has matured over time and since 1998, Eskom has never had a strike except for isolated localized incidents of work-stoppages (in 2010 and in 2013 both in support of the wage demands). • We are currently undertaking a R280 bn capex programme over 5 years and building two of the biggest coal fired power plants in Africa • Since 2001 we added 32 generating units increasing a number of current units to 121 • Medupi Unit 6 has been synchronised and Sere Wind farm (100 MW) is completed. • Delays in new build has primarily been caused by our contractors through strikes or technical non-performance
Executive summary (2 of 2) • We have a maintenance backlog and this has led to deteriorating power station availability and subsequent load shedding. • We need a minimum of 3000 MW and maximum of 5000 MW capacity either through supply-side or demand-side options within 18 to 24 months and avoid load-shedding • At Stage 1 load-shedding we still supply 96% of the required demand. At stage 2 it is 94% of required demand • We have added about 160, 000 new electrification customers in the last financial year • In Distribution side we have sustainably reduced the duration of customer interruptions over the last three years by close to 10 hours per annum • Eskom is finalising a turnaround strategy addressing its financial strength, operational excellence and new build delivery • A strong and sustainable Eskom is required to ensure a sustainable economy
The Capital Portfolio is made up of almost 8000 projects costing R280bn over 5 years... The main drivers of the CAPEX requirements are: • New build / new capacity (R159bn) • Major overhauls that are capitalized (R29bn) • Refurbishment and replacements (R63bn) • Customer connections (R10bn) • Compliance (legal, regulatory, safety, environmental) R19bn
Contents
Content
1. Introduction
2. Financial situation
3. Eliminating Load shedding
6Finance situation
• Eskom is going through an intensive capital investment phase
• Eskom will remain liquid in the Financial year
• At minimum, Eskom must break-even in the current financial year
which will require a close monitoring of expenditure as well as
improved sales and collections from customers to minimise
impairment of revenue
• We are pursuing a maintenance strategy without load shedding
• The New Build Programme is expected to deliver 3 units in the
current financial year from Medupi (one unit) and Ingula (two
units)
7Eskom is funded through various sources
• Equity: Funding injected by the Shareholder
• Revenue: Funds received through sale of electricity per Tariffs
determined by the NERSA
•
• Debt: Raised through Local & international markets from a
variety of lenders
Debt and equity financing is mainly utilised to close the gap
where there is a short-fall from revenue funding
8Eskom is in a capex intensive phase – this is cyclical
ILLUSTRATIVE
Eskom's
net cash
balance
Eskom Early Years 1990ies - 2005 2006 - 2018 Beyond 2018
And Early 1980 • Cash-out phase • Investment phase • Cash Positive
• Investment phase • Almost no new build • Tight supply • Repayment of debt
• Significant • Oversupply and • Increasing tariff to • Planning for the next
investment into new cheap electricity fund new build phase
power plants
CONFIDENTIAL 9Cash flows for FY2016 indicate a closing balance
of R15.7 bn
Cash flows for FY2016 Key insights
R’ Million
• The R23 bn equity
injection will be
used to fund
CAPEX
• Gearing will
improve from 75%
to 67% with the
conversion of the
subordinated loan
and the R23bn
equity injection
10Eskom plans to raise a total of R55 bn of debt
securities for FY2016
Debt securities
R’ Million
Eskom bonds 8 000
DFI and other loans 7 244
Export credit facilities 10 576
International bonds 16 500
Commercial paper 10 000
DBSA 3 000
Total debt securities raised 55 320
11The total Capital Expenditure for the year is R60bn
with new builds contributing over 40 % of the
expenditure
Capital expenditure Insights
R Million
Capital expansion R Million
- Medupi 10 926 • It is critical that
each division
- Kusile 12 800 keeps within the
Capital allocations
- Ingula 1 474
Transmission 3 427 • Deviations from the
allocated capital
Other 4 737 expenditure will
Total capital expansion 33 364 have an impact on
Eskom’s financial
Generation 9 760 health and
Transmission 959 sustainability
Distribution 6 027
Future fuel (coal) 1 142
Other project related expenses 8 929
Asset purchases 1 471
Total 61 652
12Capital projects are on track with Medupi unit 6
commercial operation expected in Q3 of 2015
Project Description
• Continue to ramp up to full commercial operation. Full Load planned for the 2nd quarter of 2015,
and CO (Hand-over to Generation) during the 3rd quarter of 2015.
Medupi unit 6:
• Unit 1 Boiler Re-heater hydrostatic test was successfully executed per the acceptance criteria on
12 April 2015. Balance of Plant items is progressing
Kusile Project:
• our first utility-scale renewable energy project, was put into commercial operation on 31 March
The 100MW Sere 2015
Wind Farm
• We have 48 active schemes contributing to 14,415 MVA of transformer capacity and 4,397km to
Transmission the network at completion. Financial year 2014-2015 we achieved 318.6 kms of line built and
Projects 2,090 MVA transformation capacity built.
• 1st commercial train expected in the 2nd quarter of 2017.
Majuba Rail
• Progress is being made on PV rollout at power stations and administration buildings for self-
consumption, with a Solar PV plant
Other Projects:
• Future build falls under the Minister of Energy.
Future Build Plans • The Cabinet approved IRP 2010 however provides for 9,600 Megawatts of electricity to be
including Nuclear: generated through nuclear power, with the first unit commissioned by 2023.
Source: Team analysis 13Eskom needs to ensure capital is available to ensure
delivery of one Medupi and two Ingula units for FY16 xx MW added to
the network
Post MYPD3
• Commissioned in • First sync Mar • Unit 4 to be • Unit 1 to be • Kusile 1 will be
early Feb 2015 2015 commissioned Apr commissioned commercially
• Additional 100MW • Full stable power 2016 Aug 2016 operating Aug
added to the by Jun 2015 2017 2015/16
network 1466 MW
Medupi x1 unit
100 800 333 333 800
Ingula x2 units
Feb 2015 Aug 2015 Mar 2016 Jul 2016 Aug 2017
Sere Wind Farm Medupi Unit 6 Ingula Unit 4 Ingula Unit 1 Kusile 1 Total MW
5532
Mar 2015 Jan 2016 May 2016 Sep 2017 2019/2020
Majuba Ingula Ingula Medupi 5 Duvha 3
Recovery Unit 3 Unit 2 Recovery
1200 333 333 800 500
• 600MW from unit • Unit 3 to be • Unit 2 to be • Medupi 5 • Duvha 3 will be
3 gap solution in commissioned commissioned commercial fully recovered in
Feb & 600MW Jan 2016 May 2016 operation date is 2019/2020
from Unit 4 in Mar Sep 2017 • This project falls
2015 out of MYPD3
window
Source: GCD, Team analysis 14Principles of electricity prepayment
There are key benefits that can be derived from maximizing
prepayment across all the customer groupings, these include:
• Improved cash flows as a once-off benefit
• Improve most balance sheet ratios
• Interest free borrowing mechanism
• Reduces long term debt
Increases short term debt
SOURCE: Team analysis
14Contents
Content
1. Introduction
2. Financial situation
3. Eliminating Load shedding
165 May 2015 Stage 1 load shedding was implemented
during evening peak due to a 2180MW shortfall
Available capacity vs peak demand for 5 May 2015 Key Insights
MW Type Number Number Nominal %
of of units capacity
45,000 43,500
stations (MW)
40,000 Coal-fired 14 87 35 721 82
Hydro 2 6 600 1.4
35,000
32,180 electric
30,000 Pumped 2 6 1 400 3.2
storage
25,000 Nuclear 1 2 1 860 4.3
20,000 Gas 4 20 2 409 5.5
15,000 Imports 1 1 1500 3.4
10,000 Total 24 124 43 4901
nominal
5,000 capacity
0
Available Capacity Peak demand
SOURCE: National Control
175 May 2015 Stage 1 load shedding was implemented
during evening peak due to a 2180MW shortfall
Available capacity vs peak demand for 5 May 2015 Key Insights
• Installed capacity is 43500MW
MW Planned
Available • Peak demand for Tuesday 5
Available maintenance
This resulted
capacity isin a
during
45,000 43,500 Unplanned May 2015 was 32180MW
capacity during
shortfall
currently
peak is at of
maintenance
peak is 6500MW is • Planned maintenance is
40,000 2180MW
30200MW
~30200MW currently at currently at 6500MW
7000MW • Unplanned maintenance is
35,000 32,180 currently at 7000MW
• To complete sufficient
30,000
maintenance, deficit between
We have demand and capacity should
25,000 6000MW at
not exceed 4500MW
Risk of
20,000 Breaking
• Available capacity during peak
down is ~30200MW
15,000 • This resulted in a shortfall of
2180MW
10,000 • The shortfall was reduced
through the use of Pot lines
5,000 (680MW)
• The remaining shortfall of
0
1500MW resulted in stage 1
Available Capacity Peak demand
load shedding
SOURCE: National Control
185 May 2015 Stage 1 load shedding was implemented
during evening peak due to a 2180MW shortfall
Available capacity vs peak demand for 5 May 2015 Key Insights
Planned maintenance is • Installed capacity is
MW currently at 6500MW 43500MW
• Peak demand for Tuesday 5
Unplanned maintenance is
May 2015 was 32180MW
45,000 43,500 currently at 7000MW
• Planned maintenance is
currently at 6500MW
40,000 Available capacity during peak • Unplanned maintenance is
is ~30200MW currently at 7000MW
35,000 32,180 • To complete sufficient
maintenance, deficit between
30,000 demand and capacity should
not exceed 4500MW
25,000 We have This
• Available capacity during
6000MW resulted
peak is ~30200MW
20,000 at Risk of in a
shortfall • This resulted in a shortfall of
Breaking
of 2180MW
15,000 down
2180MW • The shortfall was reduced
10,000 through the use of Pot lines
(680MW)
5,000 • The remaining shortfall of
1500MW resulted in stage 1
0 load shedding
Available Capacity Peak demand
SOURCE: National Control 19The strategy is to do maintenance without load
shedding
Available capacity vs peak demand
MW
45,000 43,500
40,000
Maintenance Budget < = 9,500
Key Insights
35,000
1,000
33,000 Maintenance Budget < =
30,000 Available capacity – Daily Peak
Demand + Operating Reserves
25,000
20,000
15,000
10,000
5,000
0
Available Capacity Peak demand
SOURCE: National Control
20 20Eskom needs to prioritise risk maintenance to ensure
sufficient capacity is available for philosophy
maintenance
Planned • Philosophy maintenance
maintenance • Safety maintenance
• Statutory maintenance
Maintenance
• Risk maintenance
Unplanned • Breakdowns (Total and
maintenance partial load losses)
Maintenance = Philosophy + safety + statutory + risk + breakdowns
In the short term, Eskom will prioritise RISK MAINTENANCE in order
to reduce the amount of unplanned maintenance
On average Eskom has a maintenance budget of 9500MW, this is
dependent on demand requirements
SOURCE: Generation 11Contents
Content
1. Introduction
2. Corporate governance
3. Financial situation
4. Eliminating Load shedding
22Thank you
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