1. Background. 2. Introduction

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1 1. Background Eskom has since 2005 embarked on a capital expansion programme which will add ± MW of new generation capacity to the existing net generating capacity of 39, 794 MW by Thus far, ±5500 MW of this new capacity have been installed and commissioned. 2. Introduction Eskom has since 2005 embarked on a capital expansion programme which will add ± MW of new generation capacity by 2018 to the existing net generating capacity of 39, 794 MW by The major projects that Eskom is investing in include the construction of two new coal-fired power stations, Kusile and Medupi, and the construction of a pumped storage scheme in the Drakensberg, Ingula. In addition, Eskom has already successfully returned Camden power station, which was previously mothballed, to service and is in the process of returning Grootvlei and Komati, also mothballed in the eighties, to full operating capacity. Capacity is also being increased at the Arnot power station through refurbishment efforts, which will add an additional 300 MW to the existing 2220 MW. Eskom is continuously researching renewable energy potential, and two renewable energy projects are currently in the construction phase, namely Ingula (pumped storage scheme) and Sere, a wind farm near Cape Town. 3. Kusile Power Station Project Kusile is a coal-fired power station close to the existing Kendal Power Station in the Nkangala District of the Mpumalanga Province. The Kusile site is about hectares in size, and is located on the Hartbeesfontein and Klipfontein farms. Kusile is the most advanced coal-fired power plant project in Eskom after Medupi power station in Lephalale, where construction commenced in As a rule, a coal-fired power station takes about ten years to build, but due to capacity constraints, the Kusile project has been fast-tracked and it is anticipated that it will take about eight years to complete. The station will consist of six units, each rated at approximately 800 MW installed capacity, giving a total of 4800 MW. As such it will be one of the largest coal-fired power stations in the world, once finished. 1

2 The power station will be coal fired, with the coal supplied by Anglo Coal (New Largo and Zondagfontein collieries). The combination of the resources is expected to yield not less than 800 million sales tons over a period of not less than 47 years. Kusile will be the first power station in South Africa to have Flue Gas Desulphurization (FGD) installed. FGD is the current state-of-the art technology used to remove oxides of sulphur (SOx), e.g. sulphur dioxide (SO2), from the exhaust flue gases in power plants that burn coal or oil. This technology is fitted as an atmospheric emission abatement technology, in line with current international practice, to ensure compliance with air quality standards, especially since the power station is located in a priority airshed or airshield The FGD plant is a totally-integrated chemical plant using limestone as feedstock and producing gypsum as a by-product. Gypsum is used in the manufacture of drywalls and ceilings. The first unit is planned for commercial operation in The other units will be commissioned at approximately 8-month intervals, with the last unit expected to be in commercial operation by To date, the project is still on schedule to meet the target date. The construction of Kusile Power Station will have a major impact on the lives and the economy of the community of the Nkangala District, as homes and social infrastructure are being developed to serve the thousands of contractors working on site. Job creation is expected to peak at ± direct jobs during construction. Nkangala s Gross Domestic Product (GDP) is expected to increase by approximately 25% per year as a result of the construction activities. The power station will directly grow SA s GDP by approximately 0.35% per year. Approximately 40% of the project cost is expected to be spent locally. The estimated cost to completion of Kusile Power Station Project as of 31 July 2012 is R169.7 billion The majority of the main contracts have been awarded. The project has selected a total of 40 principal contractors at any given time who utilise further ±300 subcontractors. Approximately people are currently working on the construction site, of which more than 40% are from the local area. 4. Kusile contribution to the community Kusile has enabled many residents from the neighbouring towns, such as emalahleni, Delmas Ogies and Phola, to provide for their families after being employed at Kusile. Local businesses benefit immensely from the project, from the hospitality industry and catering to construction and material supply businesses. The whole project will have more than 40 contractors awarded and 10 contracts for main civils. 2

3 During construction ± people will be employed by the utility at the peak of the project and approximately 600 when it s fully operational. The project has a multi-package contract strategy, and included in the contracts is a strong focus on the requirement for local development (Competitive Supplier Development Programme). The focus is on local employment, business development, sustainability and financial investiture to leave a long-term legacy in Mpumalanga and South Africa. 5. Success stories to date Below are some of the success stories that were made possible through the project. These include, amongst others, local procurement, job creation and skills- and entrepreneurial development, as well as socio-economic development. Local procurement Contract Status. 88 % of the main packages have been placed to date for the Kusile Project as reflected below: STATUS OF MAIN PACKAGES AS PER ORIGINAL/REVISED STRATEGIES AS PER APPROVED REVISED STRATEGY NUMBER OF PACKAGES PACKAGES PLACED 56 PACKAGES IN NEGOTIATION AND EVALUATION 1 PACKAGES ISSUED FOR ENQUIRY INTO THE MARKET 0 PACKAGES NOT PROCESSED / ISSUED 5 TOTAL NUMBER OF APPROVED REVISED STRATEGY 62 TOTAL NUMBER OF ACTIVE CONTRACTS 91 Local content/procurement of the Kusile project (i.e % of local content) Local Content Placed Contracts Foreign Content Foreign Contracts 67.63% 32.37% It is estimated that Eskom and its contractors will spend R2.38 billion in Mpumalanga. To date, a total of R2.522billion has been spent in the Mpumalanga Province. Over R50 billion has been contracted in Kusile, of which 67.63% has been committed for local content (South Africa). 3

4 Local businesses benefit in the following fields: Steel supplies and fabrication Plant- and equipment hire Building and construction Building material supplies Employee transportation services Trucking Provision of staff accommodation Cleaning and security services Consulting and engineering services Job creation By the end of January 2013, the Project had a total of people employed on the construction site are from the Nkangala District, 1084 are from the rest of Mpumalanga, 6103 from the rest of South Africa and 254 are foreign craft are skilled, 3096 are nonskilled, 8032 are skilled workers and 1768 are either in supervisory and management level. It is estimated that from the project will have directly impacted people. Some of the skills needed in the project include: Shutter hands, concrete hands, steel fixers and erectors, scaffold erectors, coded welders and riggers to name but a few. Skills Development The Project has placed contractual requirements on its contractors to train approximately 2979 skills development candidates in various trades and professions, such as artisans, engineers, technicians, etc. The objective is to have a large number of skilled people who are employable within the Nkangala District and Mpumalanga Province. Enterprise Development Over R16 million spent on the Contractor Academy. This programme has seen over 14 students graduating in In 2012, 30 students enrolled for the programme from Lekwa, Msukaligwa, Thembisile Hani and Dr JS Moroka Municipalities. The programme is aimed at equipping the business owners in business skills, costing, marketing, etc. Upon graduating, the business owners are qualified to compete, not only in Eskom s procurement process, but also in the industry at large. Eskom, through Eskom Foundation has, committed funding for an additional 30 business owners to attend the Contractor Academy Course with the University of Limpopo in of these business owners will come from Emakhazeni Municipality and other municipalities from the Nkangala District Socio-economic development Eskom s social responsibility in Nkangala has focused on the following areas: 4

5 Skills development Job creation Capacity building Social development and poverty alleviation Mathematics, science and engineering Health, safety and environment and Energy efficiency Eskom has recently spent R1 717,000 on education in the Nkangala District, R 8 726,000 has been spent on local economic development. A further R1 044,000 has been spent on health and welfare. Safety and security in the region has received an infrastructure upgrade to the value of R3 840, houses have been built on the farm next to Kusile. An additional 6 house were built in Phola to accommodate the relocation of 18 families from the Kusile site. An agricultural programme has started to assist the relocated families to farm for self-sustainability. In December 2010, each family was given a food hamper for the festive season. Additional employment possibilities on the Kusile project are being explored. A total of R19million was spent on this project Eskom offers a schools outreach programme, whereby learners have an opportunity to visit the project. During their visit, these learners have an opportunity to listen to career talks and join site tours offered by the various professionals in the project environment. 65 learners received university bursaries in 2010, 72 in 2011, 116 in 2012 and 201 in locals received accredited training in various trades such as concrete hands, steel fixers, shutter hands, etc. An additional 657 bursaries have been awarded to students from various districts of the province in 2012 alone. Eskom has also put in place Information Centres in emalahleni, Wilge and Delmas and these facilities offer local people an opportunity to get information on available employment and business opportunities at Kusile. Local people are also afforded an opportunity to register on the employment database at each of the Information Centres. There are further initiatives planned to continue Eskom s social investment in the community for the duration of the project. 5