Eskom Presentation to Portfolio Committee on Public Enterprises

Job Creation and Skills Development Initiatives

Progress Update Presentation

28 June 2011

Executive Summary

OverallSkills Development

OverallSkills Development

Welding Skills Development

Welding Skills Development

Job Creation Job Creation

Localisation Localisation

1. Providing 10335 young people with skills development

1. Providing 10335 young people with skills development

February 2011 Position February 2011 Position Progress to date Progress to date

1. 8008 achieved to date – overall on track to achieve targets

1. 8008 achieved to date – overall on track to achieve targets

High level comments High level comments

1. Introduce welding institute and train local welders

1. Introduce welding institute and train local welders

1. To date a total welder requirement of ~ 1300 – 1500 welders identified for current and future needs

2. 100 trainee welders enrolled

1. To date a total welder requirement of ~ 1300 – 1500 welders identified for current and future needs

2. 100 trainee welders enrolled

Eskom now accreditedby the relevant bodiesto ensure a roll out ofaccredited weldertraining

Eskom now accreditedby the relevant bodiesto ensure a roll out ofaccredited weldertraining

1. Create 100,000 jobs 1. Create 100,000 jobs 1. Collating data for Q1 1. Collating data for Q1

Data for job creation iscollected from anumbers of sources andis collected from anumber of sources

Data for job creation iscollected from anumbers of sources andis collected from anumber of sources

1. Embedding BBBEE, CSDP, localisation into procurement process

1. Embedding BBBEE, CSDP, localisation into procurement process

1. Procurement opportunities amounting to R 186bn have been identified and these will drive key NGP imperatives

1. Procurement opportunities amounting to R 186bn have been identified and these will drive key NGP imperatives

Consistently drive the achievement of localisation agenda across identified areas

Consistently drive the achievement of localisation agenda across identified areas

Supplier engagement identified as a critical point and is currently being pursued

Supplier engagement identified as a critical point and is currently being pursued

Eskom will invest significantly to strengthen the energy sector

Support IPPs

R&D• UCG= R 0.8 bn

Support solar geyser program= R 3.5 bn (2010-15)

Growth of renewables• Biomass• Solar2

• Wind• Waste= R 7.4 bn (2010-15)

New build programs• Medupi• Kusile• Ingula • Networks• Gas• Nuclear = R 308 bn1

Growth related to mining• Coal mining projects• Water pipeline• Road maintenance• Majuba rail link (R 4.9 bl)• Mpumalanga rail development (R

2.2 bl)• Waterberg link

Strengthen existing asset base• Boilers• Turbines• T&D networks• IT• = R 48.4 bn (2010-2015)

Accelerating universal access= R 18.5 bn (2010-15)

* Funding still to be found

Eskom today

NOTE: The co-ordination of these initiatives will be done by the Delivery unit reporting to the Chief Executive1 Gas not included, until completion of projects, nuclear until 20152 Even stronger ties with IDC to be forged this year, likely to identify a number of areas to collaborate (eg solar water heaters and supplier support) 3

Supplier Development and Localisation key focus areas• IDM programme• Line and substation construction• Professional services• Fabric filter bags• Cables and conductors

Eskom Strategic Initiatives (EAL, SD & SSU)

4

Eskom plan for youth initiatives, programme and set-aside portions

Growing the youth Growing the expertise

Youth program for non-graduatesTurning non-graduates into skilled artisans

Up-skilling program for unemployed graduatesCreating apprenticeship for up to 2,500 young graduates

Eskom leadership instituteUpgrading Eskom management skills creates more job opportunities through increased leverage, better identification and effective execution of business opportunities

Welding instituteProvides an internationally recognized certification, boosts ongoing skills development and reduces foreign exchange losses (hiring foreign welding personnel)

Power Plant Engineering InstituteIn partnership with local university and global companies to teach power plant engineering skills

Youth opportunities set-asideSupply of PPEIDM initiativesBush clearing and vehicle washingBuilding in Medupi of: - Creches - Community halls - Lapa

Progress to date – Total Learner Pipeline

Area Baseline Plans

for 2011

New Targets for

2012 ActualMay 2011

Number of Eskom learners in Pipeline

4500 * 4850 On Target

(5678)

Number of Non Eskom Sponsored learners

450 * 485 On target(887)

Number of Solar Water Heater Installers in training

0 (400) Reported in the Youth 1 Programme

Total number of Learner Pipeline

4950* 5735 (5335)

On target6563

Note: *Previous financial year Learner Pipeline Shareholder commitment•Eskom has extended its bursary programme in support of NGP and projection is to achieve targets set by the Shareholder by year end. (currently 6563 in learners in the total pipeline)•Number of solar water heater installers is reported in Youth 1 programme

Progress to date – Apprentices enrolled

Number of new apprentices enrolled

650 1000 810

Discipline: Electrical HC & LC

400 500 660

Discipline: Mechanical Fitting

200 400 147

Discipline: Control Instrument

50 100 3

Area Baseline Plans

for 2011

New Targets for

2012 ActualMay 2011

Note:Eskom needs to increase its intake of mechanical & control instrumenttype apprenticeships – this is planned during the third quarter of the financial year

Progress to date – Apprentices qualified

Number of qualified new artisans produced of which:

600 840 12

Discipline: Electrical HC & LC

380 450 12

Discipline: Mechanical Fitting

140 290 0

Discipline: Control Instrument

80 100 0

Area Baseline Plans

for 2011

New Targets for

2012 ActualMay 2011

Note:•The Eskom apprenticeship programme take 3 years and intake in year onewill only qualify in 2014.

Progress to date – Engineers employed

Number of new engineers employed

800 800 611

Discipline: Electrical HC & LC 400 400 353

Discipline: Mechanical 200 200 220

Discipline: Control Instrument 100 100 35

Discipline: (Process and Nuclear) 100 100 3

Percentage of workforce undergoing training *Employees

• Learner pipeline % of Eskom permanent headcount (the norm is between 8% and 10%)

• Investment spending in Human Capital

80%11.8%

R758m

80%15.0%

R850m

62%14.5%

R980m

Area Baseline Plans

for 2011

New Targets for

2012 ActualMay 2011

Note:Eskom needs to employ 800 engineers from its engineering pipeline The shortfall of 189 will be employed in the last quarter of the financial year

Channel Deployment Mechanisms for Eskom Strategic Youth Development Initiative (SYDI)

9

2500 Graduates - Youth programme (SYDI)

Discipline: Engineering 120 1700 95 Discipline: Finance, Commerce, HR,

etc40 400 38

Discipline: Information Management

20 200 6

Discipline: Legal 20 100 0

2500 Graduates Experiential training

200 2500 139

Area Baseline Plans

for 2011

New Targets for

2012 ActualMay 2011

Note: •Progress very dependant on engagement and agreements with Supplier network to take on additional learners •Securing of funding

2500 Matriculants – Youth programme (SYDI)

Matriculants on further apprenticeships training

0 700 100

Number of heat pump Installers in training

0 400 *40

Electrification skills programme 0 900 96

Other Youth Trades Programmes

0 500 1070(460 energy

efficiency + 610 Solar water geyser)

2500 Matriculants Trade Skills training

0 2500 1306

Area Baseline Plans

for 2011

New Targets for

2012 ActualMay 2011

Note: * Solar water heater installer in greater demand

Challenges experienced in meeting targets

• Funding for Youth Programmes

Engagements internally are underway to ensure allocation of budget allocation for ramp up costs

Supplier network sensitisation in order to ensure optimum buy-in

Project lifecycle (some projects already coming to end of term)

Misalignment between the project lifecycle and the potential training commitment (e.g. 3 year apprenticeship vs. one year/short term contract)

• Supplier network capacity to absorb/host 5000 unemployed Youth

23-04-20 12

Eskom’s demand for welding skills

14

Different kinds of welding exists within Eskom and the broader industry

Eskom has large demand for highly skilled welders…

…requiring qualification according to international codes

• Ongoing maintenance and outages for existing power plants

• Construction of new power plants (Medupi and Kusile)

• Both these application use highly technical welding processes. Including Tungsten Inert Gas (TIG), Manual Metal Arc (MMA), Metal Inert Gas (MIG)

• Eskom applications require highly skilled welders given amongst others, the difficult welding positions

• Power stations are built to international design codes

• Eskom welders must be certified in accordance with the applicable code – ‘CODED WELDER’

• Requirements to employ welder – certification across multiple welding types and processes, and pass code requirement test for all weld types

15

Eskom requires 1300-1500 coded welders for ongoing maintenance and new build construction

• Current productivity of local welders at ~3-4 welds per day*

• Current quality of local welders at >10% repair rate*

500

500

Ongoing maintenance

Kusile

300-500

Medupi Total

1,300-1,500

Eskom demand over next 3-5 yearsNumber of welders

Productivity and quality requirements

ROUGH ESTIMATES

• Productivity of ~16 welds per day required

• Quality level of <2% repair rate required

16

Eskom has started an internal Welding Institute to train new welders

Objective of Eskom Welding Institute Clearly defined concept developed

• Create a sustainable welding skills base in Eskom to achieve world-class welding performance

– Identify and recruit welders/welding candidates

– Develop a welding training curriculum

– Train welding personnel to meet Eskom’s demand (and South Africa in the long term) using welding training institute

• Clear value proposition to multiple stakeholders– Eskom - reduced production losses and re-

weld costs– Trainees - route to acquiring a university

degree and an internationally recognized certification (retention strategy)

– South Africa - boost ongoing skills development and unemployment reduction and reduce reliance on foreign skills

• 100 welders to be trained this year and for a further 6 years*

• Apprenticeship training programme with minimum two year duration but may be extended to three years

• ~15% of welders emerging will be selected to fill critical supervisory positions within Eskom

• Balance available to general industry

With first intake already started

• Eskom has been accredited as an International Institute of Welding Approved Training Body

• Eskom has formed an association with the Southern African Institute of Welding for support and assessment of trainees

• 100 welders currently in training

* Resulting in 700 welders in total, contributing to Eskom’s commitment to develop 10,000 learners

17

First class of 50 welders at Eskom’s Welding Institute

18

Current situation to meet demand

• Current Generation outage programme, requires 25-30% foreign welders to execute required scope of work (70-75% local welders)

• New build construction (Medupi and Kusile) requires ~75% foreign welders to meet construction schedule

• Failure to meet welder demand would result in non-completion of critical maintenance tasks, impacting on current plant performance

• Failure to meet welder demand at new build sites could potentially lead to late completion of Medupi and Kusile, with resultant impact on reserve margin

Challenges experienced in meeting targets

Job creation and local development

20

In this context Eskom has a proven track recordon skill building and job creation

Direct

Indirect

• On site construction• Supporting project staff• Coal mine expansion• Transmission expansion• Crocodile River expansion• Ongoing operations

Subtotal

• Social services and local business

Total employed

8,3002,2002,1002,7003,000

700

~19,000

1,700

20,700

Medupi

7,2002,0002,000

200

600

~12,000

1,700

13,700

Kusile

4,100300

100

~4,500

1,100

5,600

Ingula

Jobs created by Medupi, Kusile & Ingula

Other projects such as 765 kV and RTS provide ~11,000 direct employment opportunities during construction and a further ~1,700 during operation

~ 40,000

Project Project value Identified local development opportunities

▪ IDM1 – Energy reduction projects. Three programmes – Performance Contracting, Residential Load Management (RLM) and Demand Response Acceleration (DRAcc) program .

2.7 ▪ Smart Metering - to industrialise in manufacturing of smart meters based on volumes.

▪ Demand Response - EMEs2 , job creation and possible technology development through DST.

▪ Performance Contracting – skills development and job creation.

21

1 Integrated Demand Management Programme – Smart Metering (R240m), Demand Response (R2bn) and Performance Contracting (R500m)2 EME - Exempted Micro Enterprise3 Based on projected spend from 2012– 2027 as detailed in the Group Capital Projects Plan

Estimated value Rbn

▪ Filter bags - The initial projected capital spend of ~R6bn on the replacement of Electrostatic Precipitators represent a fraction of the life-time spend on actual filter bags.

273 ▪ Filter bags locally stitched as a minimum. Other opportunities include filter bags made of locally needled and developed fibre. This will assist in reviving the local textile industry

▪ Line and Substation construction – Construction of the transmission lines and substations. Focus on tower and structure steel.

▪ Potential to create a competitive steel fabrication industry that might prevent an industry from closing down completely, whilst allowing possible exports into Africa.

120

▪ Phase 1 – placing learners with existing contracts

▪ Phase 2 – embedding job creation targets on all new contracts

▪ Professional services

1.25

12.75

Procurement focus areas that will drive socio-economic development imperatives over the next 5 years

Project/ commodity Contract valueIdentified local development opportunities

• Fuel Oil 7.5 • 100% local content , skills development and job creation

22

• Wind - Sere 2.5 ▪ 100% of unskilled and semi skilled labour will be sources locally. Skills transfer will also be persuaded

• Liquid Fuel 1.5 • 100% local content. Contract awarded to Black Owned and BWO suppliers

• Fleet - supply of fleet vehicles 1 year contract

0.7 ▪ Local content (60%), skills development and job creation

• Properties (Facilities) - Building Eskom regional offices.

1.0

• Coal supply 1.5 • 100% local content, skills development and job creation.

▪ Black suppliers and job creation

• Cables and Conductors 7.5 • Foster development of scarce skills in this industry and assist local black supplier to increase capability and capacity

…continued

Challenges experienced in meeting targets

• Eskom recognizes an import leakage could occur due to:– Requirements of the funding institutions like World Bank or other development funding

institutions – Concerns about quality, reliability or costs when sourced locally

• Educational environment has to support growth (number of graduates and artisans, quality of education, integration of SOEs)

• Funding of the youth program still to be resolved in collaboration with SETAs, SOEs etc.• Environment should be favourable for localisation and industrial development (e.g., space,

infrastructure, financing, policy)• Incentives to maintain employment in SOEs have to be in place as retention will become

an issue and job markets become more and more global• Government will play an important facilitation role in job creation and localisation through

– Policy making– Fostering collaboration through SOEs

Please partner with us

• Embrace energy saving as a national culture, joining the global journey towards a sustainable future

• 49M campaign aims to create a culture of energy efficiency in SA

• Remember the three Ps: save

power, save your pocket and

save our planet . If you’re not using it, switch it off!

24

Thank you