Eskom Presentation

27 August 2014

Select Committee on Communications and Public

Enterprises

Summer Plan 2014/15

27 August 2014

Overview

• The system outlook shows that the system will remain tight going forward and additional levers are required including OCGTs to ensure security of supply.

• Maintenance is set to increase from 9.46% to 10% based on the sustainable generation strategy and on the need to clear partial load losses, with few flexible outages

• May have to cater for higher maintenance in December including half station shutdowns for 3 of our stations. These are

• Taking the Generation strategy and predicted challenges into account there will be risks to the system and an effective Demand Reduction Protocol must be in place to manage risks should they materialise.

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Winter 2014

• The winter plan has yielded the desired results thus far. We had a better handle on the system while on the other hand managed to deal with some opportunity maintenance

• During winter we also managed to achieve the following:

• Reduced Partial Load Losses from an excess of 3500MW to 1500MW

• Connected 538MW renewables IPP winter 2014, bringing the total to 1000MW.

• Total PV installed: 460 MW

• Total Wind installed: 430 MW

• Extended STIPP and Aggreko contracts and they have delivered

• Predictable generation fleet performance still a challenge:

• UCLF cannot change quickly and can only be reduced by removing/repairing each and every damaged component in a power station

• Out of 87 coal fired generating units 32 that require major ‘surgery’ and 4 are in a critical condition

• We are confident inroads are being made to arrest UCLF.

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Summer

• Summer poses a different challenge as the profile looks flat and our planned maintenance (PCLF) increases significantly compared to Winter

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Summer points to note

• Table Mountain profile

• Constrained all day incl. from 6am - 10pm

• Air-conditioning, geysers & pool pumps primarily

impact demand

• Commercial, agricultural & residential customers

can make the biggest difference

Constrained all day

Base Case Assumptions

• The following assumptions were used to determine the summer power system

outlook

• Eskom’s sales forecast based on a1.3% average growth over this period.

• Best estimate of generation plant availability of 75.5% for the 2014/15

Financial Year.

• No additional renewable IPPs in this period

• OCGT use is limited to the approved Corporate Plan budget

• Contracted supply levers (STIPPs and Cross Border) are generating at an

average of 600MW

• Maintain current levels of demand levers

• While Medupi unit 06 will synchronise this year, full power will only be

available in winter 2015

• In the event of load shedding we will not allow the system to go beyond

Stage1 (routine load shedding as it is incredibly disruptive and difficult to

manage) 7

Projected System Outlook

• With the maintenance that needs to be done, the system will remain tight

• The degree of tightness will depend on the UCLF performance as well as the available capacity

• For a 6000MW UCLF the system will most likely operate in Purple, excluding OCGTs

• Purple: 3000 -4000MW short of meeting demand and reserves . All available resources required most of the day throughout the week ILS will be required during peak periods, high risk that their contract time will be reached.

• For a 6500MW UCLF the system will most likely operate in Purple and Brown, excluding OCGTs

• Brown: > 4000MW short of meeting demand and reserves, rotating manual shedding probable.

• For a 8000MW UCLF the system will most likely operate in Brown, excluding OCGTs

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Summer Risks

Variability increases due to the following risks:

• Increased full and partial load losses:

• High vacuum load losses, especially at Matimba: ( >1000MW).

• Deteriorating coal quality impacting on plants ability to reach full load.

• Wet coal

• Below minimum coal stock days at Arnot, Kriel UG, Majuba and Tutuka

• Outage management capability and quality

• Increased outage durations due to scope creep or outage slip

• High post outage UCLF

• Insufficient diesel levels to run OCGTs and fuel oil levels

• Continuous heavy rain

• Unreliable availability of supply from HCB

Reputational risks of continual load shedding

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Options to Close the Gap Supply

Lever Operational

Capacity (MW)

Potential

Capacity (MW)

Additional Cost

(R’m)

Comments

STIPPs 300 1643 Expires in March 2015. Extend by 2years

Aggreko 108 - Expires in March 2016

Sasol 200 2310 Available for summer

Tshwane 90 513 Available for summer

City Power 220 1052 Expires in March 2015. Extend by 2years

EDM 80 1421 Available for summer

Barges 42 266 Available for winter 2015

ZPC 47 569 Available for winter 2015

WEPS 50 -

REIPP 700 1200 - Additional 500MW from CSP,PV and Wind

in summer

TOTAL 7774

Coal Stock Days Improvement 900

TOTAL 8674

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• Range for Domestic: R923 - R998 R/MWh

• Range for Cross-border: R1387 – R1618 R/MWh • OCGTs costs R3000 R/MWh

Conclusions

• Constraining the OCGT diesel usage to budget could result in an inability to meet the

demand throughout the remainder of FY15. If target EAF is met then low risk of load

shedding – but this cannot be ruled out due to daily variability

• If load is shed during summer it is likely to be from 06h00 until 22h00 and as per

published schedules

• To avoid load shedding - costs to mitigate depend on EAF achieved

• Opportunities to reduce outage duration and improve post outage UCLF exist.

• Post outage UCLF <10%

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Conclusions cont’d

• Current protocols, NRS048-9, do not allow for planned load reductions due to financial

constraints.

• An alternative protocols and legislative framework is being developed

• To avoid or limit planned or scheduled load reductions could require additional use for

OCGT.

• Additional REIPPs provide an opportunity to displace the use of OCGT during the day

• Considering a country perspective, it is preferable to run OCGTs than to perform planned

or scheduled load reductions over an extended period

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Eskom Holdings SOC Limited

New-Build Programme Update

August 2014

STRICTLY CONFIDENTIAL

• ~ 17.4GW of new capacity (6 137MW installed and commissioned) • ~ 9 756 km of new transmission network (5 524km installed) • ~ 42 470 MVA of new transmission strengthening (27 565MVA installed)

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New Generation Capacity and Transmission Lines Leading and partnering to keep the lights on

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Return-to-service

(RTS) Base load

Peaking and

renewable

Mpumalanga

refurbishment Transmission

• None • Nuclear New Build Programme

• Next Coal (Coal 3) • Biomass • Majuba Underground Coal

Gasification Demo Plant (UCG)

• Primary Energy projects (Road and Rail)

• Pilot Concentrated Solar Power (100 MW)

• Open Cycle Gas Turbine Conversion Project – conversion of Ankerlig and Gourikwa OCGT power plants to a Combined Cycle Gas Turbine (CCGT)

• Photovoltaic (own use)

• Refurbishment and air quality projects

• >60 Grid strengthening projects

• Komati (1 000 MW) • Camden (1 520 MW) • Grootvlei (1 180 MW)

• Medupi (4 764 MW) • Kusile (4 800 MW)

• Ankerlig (1 338.3MW) • Gourikwa (746 MW) • Ingula (1 332 MW) • Sere (100 MW) • Acacia relocation • Solar PV installations:

MWP, Lethabo, Kendal (1.62 MW)

• Arnot capacity increase (300 MW)

• Matla refurbishment • Kriel refurbishment • Duvha refurbishment • Grootvlei Fabric Filter

Plant (FFP) • Kriel Retrofit

• 765kV projects • Central projects • Northern projects • Cape projects

Medupi is the first coal-generating plant in Africa to use supercritical power generation technology

3 700 MW 9 564 MW 3 517.92 MW 300 MW 9 756 km

1. Date moved out after the accident at Ingula end October 2013

Synchronisation of the first units are expected as follows:

• Medupi in the second half of 2014

• Kusile in the second half of 2015

• Ingula in the second half of 20151

Medupi Power Station Project Description: Supercritical, coal-fired power station Location: Lephalale, Limpopo Capacity: 4,800MW (6 x 800MW)

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▪ Boiler Chemical Clean is currently ongoing and is targeted for completion by the end

of August 2014

▪ First Fires are targeted for September 2014

▪ First Unit (Unit 6) Synchronization is targeted for December 2014

▪ Coal has been received on the Coal Stockyard

▪ Other activities continue to support the First Unit synchronization date.

▪ Construction progress in critical areas was hindered due to the industrial action of July

2014, with labour attendance of 40% - 70% during the period

▪ The workforce is back on site

▪ Through risk mitigation plans and re-assignment of available resources, the target for

First Unit (Unit 6) synchronization remains December 2014

▪ Additional resources have been mobilised to Unit 6 by both the boiler contractor and

control and instrumentation (C&I) contractor to mitigate any resource-driven delays

▪ Similarly, additional shifts have been introduced 24 hours a day, 7 days a week to

accelerate progress on site

▪ Eskom is working with contractors to resolve any issues which could affect the

schedule.

Industrial

Action Impact

First Unit

Synch

Mitigation to

achieve First

Synch in Dec

2014

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Medupi: Executive Summary

Medupi Unit 6 – Key Milestones in support of First Unit Synchronization

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Activity Name Current Target Forecast

Boiler Chemical Clean Start 7-Aug-14 7-Aug-14

Turbine on Barring (with Distributed Control System) 26-Aug-14 31-Aug-14

Chemical Clean Complete 2-Sep-14 25-Aug-14

Draught Group Test Run 13-Sep-14 5-Sep-14

First Oil Fire and Burner commissioning 29-Sep-14 30-Sep-14

First Coal Fires Start 6-Oct-14 8-Oct-14

Blow Through Start 6-Oct-14 8-Oct-14

Steam to Set (Turn on Steam) 1-Dec-14 3-Dec-14

1st Synchronization 24-Dec-14 26-Dec-14

Medupi: Pictorial Progress

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The First Chemical Clean Injection

completed – 19 Aug 2014

Kusile Power Station Project Description: Supercritical, coal-fired power station Location: Witbank, Mpumalanga Capacity: 4,800MW (6 x 800MW)

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▪ The boiler contractor improved boiler construction progress from 0.48%/week (March

2014) to 0.68%/week

▪ Further improvement by the boiler contractor is required to achieve the target date of

December 2015 and Eskom is addressing this

▪ Eskom continues to work with the control and instrumentation (C&I) contractor to ensure the

contractor supports the December 2015 synchronization date

▪ Eskom has also implemented additional measures to mitigate schedule risk associated to C&I.

▪ Priority areas were defined for 2014 in order to support the First Unit (Unit 1)synchronization

target date of December 2015

▪ However, the latest forecast indicates First Unit Synchronization by January 2016

▪ Stringent tracking process and recovery plans have been established by Eskom, together

with contractors, to recover the schedule and achieve the target date of December 2015

▪ A commercial strategy has been defined to increase contractors’ resources and improve their

performance

▪ In addition to the protected strikes from Metal and Engineering contractors, Eskom

experienced unprotected industrial action from Civil contractors during July 2014

▪ Disciplinary action, against Civil contractors whose workers caused disruptions, has been

taken

▪ Resources were transferred to Project Medupi in order to support Medupi’s recovery plan

▪ The workforce is back on site

Industrial

Action Impact

First Unit

Synch

Productivity

Challenges

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Kusile: Executive Summary

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Current Target Schedule/Forecast

To mitigate the schedule risk relating to Control and Instrumentation (C&I), an Early Works Order (EWO) has been placed in parallel to the current C&I contractor work at both Projects Kusile and Medupi

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▪ Work in the two Inclined High Pressure Shafts (IHPS) was placed on hold after the

6 fatalities in October 2013

▪ A plan has been established to re-initiate work on the shafts

▪ Approval has been received to remove equipment and start equipping the shafts (in

progress)

▪ Dedicated teams have been staffed to fast track reviews in preparation of re-starting

work on the IHPS

▪ The enquiry by the Department of Mineral Resources, relating to the fatal incident of

October 2013 is underway at site

▪ First Unit Synchronization (Unit 3) is targeted for October 2015

▪ Two critical areas to support the First Unit Synchronization target date have been

identified: i) The completion of Upstream Waterways and ii) The completion of

Downstream Waterways as well as Surge Chambers

First Unit

Sync

October 2013

Fatalities

Update

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Ingula: Executive summary

First Synchronisation and Commercial Operation Forecast Dates for Ingula units

FIRST

SYNCHRONIZATION U3

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U 4 U2 U1

COMMERCIAL

OPERATION (COM OP.) U1 U2 U3 U4

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Ingula: Overall Project Progress

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Re-baseline due to ERA

revision

Planned

COD for U1

of June

2015

Forecasted

COD for U1 of

August 2016

Transmission Projects

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Transmission: On target to meet the Shareholder Compact of Lines Built

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KM LINE BUILT Jun-14

YTD Plan YTD Actual YE Plan YE Projection

Plan Actual

Northern Grid Projects: 36.4 33.7 100.1 113.5 208.8 204.9

HPM: 132kV interconnecting line, 400kV line 8.0 0.0 8.0 7.7 57.2 58.3

Kusile: Vulcan bypass, loop 1 and 2 0.0 0.0 0.0 0.0 2.0 2.0

Anglo deviation 0.0 0.0 0.0 0.0 1.5 1.5

Medupi: Section E, F, G and Medupi Masa 28.4 33.7 92.1 105.8 148.1 143.1

765kV Projects: 5.0 8.7 10.0 13.9 70.0 73.9

Kappa Turn ins 5.0 8.7 10.0 13.9 10.0 13.9

Kappa Sterrekus 0.0 0.0 0.0 0.0 60.0 60.0

Cape Grid Projects: 0.0 0.0 0.0 0.0 6.0 6.0

Mercury Mookodi 400kV line 0.0 0.0 0.0 0.0 6.0 6.0

Central Grid Projects 0.0 0.0 0.0 0.0 30.3 30.3

Eros-Vuyani 400kV line Section A and B 0.0 0.0 0.0 0.0 25.9 25.9

Verwoerdburg Loop-in Loop-out 0.0 0.0 0.0 0.0 4.4 4.4

Power Delivery Projects 41.4 42.4 110.1 127.4 315.1 315.1

Transmission: On target to meet the Shareholder Compact of MVA Installed

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Key Issues - Projects

8/25/2014 30

Item Description Resolution

Welding

Defects

- Inadequate and/or failed Weld Procedure

Qualification Records (WPQRs) and Post Weld

Heat Treatment (PWHT) on the boilers

- Welds for which there was no evidence of PWHT

- Misalignment of the Super-Heater that resulted in

design changes

- Defective and sub-standard welds needed to be re-treated

or redone

- Contractors had to revisit and correct their quality data

books to ensure compliant and adequate quality control.

- All boiler repair work has since been completed.

Control and

Instrumentati

on (C&I)

- The contractor was not able to meet some of its

contractual requirements relating to C&I

- This posed a risk to both Projects Medupi and

Kusile and could have delayed the projects

further

- Eskom has worked- and continues to work with the

contractor to resolve identified issues within the required

timelines.

- However, an alternative supplier was contracted on the

Boiler Protection System (BPS) component for the 1st two

units of Medupi and an Early Works Order (EWO) has

been placed in parallel to the current C&I work to further

mitigate schedule delays

Safety

Performance

- Poor safety performance on sites, including the 6

fatalities at Project Ingula in October 2013

- Eskom and its contractors have implemented safety

interventions, appointed additional resources, removed

non-performing resources and changed work methods

- Safety performance and behaviour has improved

significantly

- Eskom and its contractors will continue with efforts to

further improve performance

Thank you