System Status Briefing

Transcription

1 System Status Briefing Phakamani Hadebe Group Chief Executive 16 November 2018

2 Contents 1 Summary of system performance 2 Operational performance 3 Future outlook 4 9 point recovery plan 5 Conclusion

3 While Distribution, Transmission and Koeberg are operating efficiently, the rest of Generation faces operational challenges Summary of Eskom system performance 1 While Distribution, Transmission and Koeberg are operating efficiently, the rest of Generation faces operational challenges Causes: Deterioration of coal fired power stations 10 stations with less than 20 coal stock days, as per grid code requirement While inherent, other challenges happened in our midst Outcome: Increased utilisation of emergency resources (OCGT s 1, interruptible load shedding and demand response) 3 4 Manifestation of the above: EAF FY19 is 74.2%, is currently inadequate Current system status is therefore not optimal While we have a recovery plan, load shedding cannot be ruled out for the remainder of 2018 South Africans can support by reducing their usage, especially at peak times 1.OCGT Open Cycle Gas Turbine, 2. EAF - Energy Availability Factor. As at end October 18, 3. Current financial year ends In March 2019

4 Despite challenges in generation, Eskom has achieved significant milestones in other divisions Division Description Generation Year to date performance: 74.2% Energy availability (EAF) as at end October financial year 8.82% Planned maintenance (PCLF), forecasted to exceed year-end Generation target of 9% 15.69% Unplanned maintenance (UCLF) and 1.75% Other capacity losses (OCLF) Transmission Distribution Overall system performance on track and positive Sustained maintenance execution with 99% of planned work completed Improved customer experience by reducing outage durations (34.9 vs. target of 38)and frequency of interruptions (14.3 vs.target of 19.8) New electrification connections New Build Note: Figures not audited Medupi Units 3 and 2 synchronised to the national grid on 8 th April and 7 th October 2018 Additional MW from Medupi Unit 3 and Kusile Unit 2 commercial operation (CO) projected within this financial year 540 MW transformer capacity commissioned and km line build on track

5 The Capacity Outlook is based on planned outages and the Tetris chart assists in optimising outage schedules Available Capacity Gas units Operating Reserves PCLF UCLF Peak Demand Installed Capacity Summer UCLF 7000 MW UCLF Summer UCLF 7500 MW PCLF Average Planned Maintenance (PCLF) 5300 MW Operating Reserve Gas Available Capacity Nov Dec Jan Feb Mar To accommodate the anticipated planned maintenance, OCGT s will likely be required for most months up until March Source: Tetris Plan V November 2018

6 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Spet 18 Oct 18 FY19* However, Generation availability has deteriorated to below what we aspired to achieve Generation performance for the 2019 financial year Percentage (%) OCLF UCLF PCLF EAF Contributing factors Undesired coal quality Recent strikes Financial and capacity constraints leading to minimal refurbishments and maintenance on ageing fleet Outage execution (overruns) Ops and maintenance skills availability and training Maintenance cost decreased in past five years leading to unsustainability *Year to date figures. FY 2019 Performance data unaudited and subject to change EAF higher in winter due to lower levels of planned maintenance 9 Point Recovery Plan

7 Major incidents, as well as full and partial losses were key contributors to the increase in unplanned losses Build-up of UCLF for FY19 from major contributors Percentage (%) UCLF DV 4 KR 2 GV 2 LT Full load loss Partial load loss Outage Slip Boiler tube leaks Total unplanned losses (UCLF) Key insights Full and partial losses were the highest contributors with a total of 12.12% of total UCLF for FY19 YTD Outage slips contributed 1.56% to the total UCLF Boiler tube leaks also contributed significantly at 1.61% of total UCLF Note: All figures are year to date and unaudited Source: Generation UCLF performance Analysis FY2019 YTD (14 Nov unaudited data)

8 A 9 point recovery plan has been put in place to address our key operational challenges 1 Fixing new plant 2 Fixing full load losses and trips Fixing human capital 6 3 Fixing units on longterm forced outages Prepare for increased OCGT usage 7 4 Partial losses and Boiler tube leaks Prepare for rain 8 5 Fixing outage duration and slips Fixing coal stock piles 9

9 1 Fixing new plant To reduce Full load losses from 2.79% Objectives Spending on addressing known design errors 1.5 billion Capex investment Established an expert SWAT team to guide recovery State of new units New build units are expected to have initial unreliability. Especially Kusile, unreliability is even higher than expected. Experience from previous new builds (Majuba and Kendal) showed high initial unreliability followed by excellent performance Source: Wikipedia, Bathtub curve

10 2 Fixing full load losses and trips - To reduce Full load losses from 2.79% Process Actions Objective Optimize procurement processes to enable swifter purchases when required Description Relinking: a shift from centrally led approach Improve usage of Local Purchase Orders at site level Maintenance (Online and Offline) Improve planning, execution and effectiveness of maintenance Maintenance Effectiveness Assessments (MEAs) for online and offline works Spares management optimisation Complete project to improve maintenance strategies and work packages 10

11 3 Fixing units on long-term forced outages - To reduce impact of major incidents on UCLF Lethabo Unit 5 (600MW) Description High Pressure (HP) steam pipe failure on 10 October 18 Investigation ongoing so required scope on HP pipework not yet defined Planned outage scope to be executed during repair time Expected return date Repair time between 6 and 12 months Duvha Unit 4 (600MW) On 23 August 17, turbine tripped on generator stator earth fault Duration due to long lead-time for major components 6 November 2018 Grootvlei Unit 2 (200 MW) Auxiliary steam range pipe burst on 26 January 18 Also experience Generator issues Initial delay due to funding constraints 24 November 2018 Kriel Unit 2 (600MW) Stator earth fault on 03 May 18 Spare generator stator now on site (insurance and commercial process delays) Next planned outage being executed during repair time. 30 April

12 4 Fixing partial load losses - To reduce partial losses and boiler tube leaks Planned outages for coal fired generating fleet until Nov 19 Key insights: 59 outages are planned for the coal fleet between Sep 18 and Dec 19 to address PLL s and maintain critical plant systems Next 12 months funding plan: R11,5b Capex 12 to 24 months funding plan: R8.2b Capex Source: GPSS outage schedule for coal fleet (Nov 2018)

13 4 Fixing partial load losses includes addressing major contributors per plant and system Generation UCLF performance per plant and system for FY19 (YTD) Percentage (%) Key Insights from analysis of YTD partial load losses Arnot, Kendal and Duvha contribute ~50% to the total Partial Load Losses Draught Plant and Gas Cleaning contribute about 55% to the total Partial Load Losses YTD

14 5 Fixing outage duration and slips to reduce contribution to UCLF from 1.56% Offline maintenance (outages) Objective Improve outage planning and execution performance to improve PCLF Description Allocate specialist resources at each station for additional focus on: Up front planning Outage readiness Execution quality Drive Rotek outage performance improvement in 4 focus areas: Enabling contracts, personnel skills, spares management and quality OPEX and CAPEX funds need to be available early (Oct in previous year) to execute works effectively 14

15 6 Fixing Human Capital to improve operations Human Capital Initiatives Make appointments in critical positions Appoint permanent Power Station Managers and their critical subordinates Relinking and relocation of Commercial and Human Resources personnel to Generation to keep accountability at Generation group level Internal recruitment plan initiated, plan to effect appointments 1 February

16 7 Prepare for increased OCGT usage Excerpt of OCGT historical performance Recovery plan INCREASE OCGT USAGE 1. Fixing partial load loses 2. To minimise risk of load shedding or reduce degree of load shedding if unavoidable Budget: R 750m to R 1bn forecast by end of March 2019 This does not include OCGT usage to mitigate for risk of rain 16

17 8 Prepare for rain Measures are in place to reduce the impact of the rain season and in compliance with the various power stations Wet Coal Handling Procedures Strategic Stockpiles Procedures Fuel Oil OCGT usage At least 3 days strategic stockpiles for use during sustained rainfall at all critical power stations Procedures in place for how and when to use strategic stockpiles Ensure adequate fuel oil stocks for combustion support when coal is wet Funding available and diesel supply assured for extended OCGT usage in case required for system support 17

18 9a Fix Coal Stockpiles to recover 10 stations that fell below Grid code requirement Focus area Challenge Stock days 10 Stations impacted Risks Description 10 power stations below the Grid Code requirement of 20 days 5 of the 10 stations are below the minimum (<10 days of coal stock) Total stock days 1 was 25.6 days as at 15 November 2018 It is projected to grow to 28.2 days by 31 March 2019 from existing and new signed contracts, ending with 6 stations still below the Grid Code. It is projected that stations will reach expected level between September 2019 and February 2020 Arnot, Camden, Duvha, Hendrina, Komati, Kriel, Kendal, Majuba, Matla, and Tutuka All in Mpumalanga Province Risk of rain Mitigations in place include compacted dry strategic stockpiles 1. Excluding Medupi and Kusile 2. NERSA has been duly informed as required by the Grid Code

19 9b Coal shortages are a result of a number of factors Initial shortages in 2017 As a result of short term reasons And long term reasons Levels improved until October 17 Majuba and Tutuka fell below Eskom minimum but were above the Grid Code required level of 20 days Total system coal stock 1 was more than 40 days Decline started in November 17 due to undersupply from existing suppliers and long period to conclude new coal contracts In 2018 only 8.3 Mt of required 12.2 Mt coal was contracted & supplied 6 Mt cost plus mines undersupply due to lack of capital investment Increased burn at stations with low stock levels low EAF at stations with sufficient coal 750 Kt per month/8.5 Mt per annum coal supply stoppage when 3 collieries 2 were placed under business rescue in February Impact to date is 5.7Mt unplanned shortfall 3 We have diverted coal from other stations to Hendrina and Komati. These stations received 100% of their coal supply from Optimum and Koornfontein Inability to renew /conclude long-term contracts with Arnot, Optimum and New Largo Procurement process takes ~1 year to conclude Lack of capital investment in cost plus results in reduced production Limited investment in opening new mines 1. Excluding Medupi and Kusile 2. Optimum, Koornfontein and Brakfontein collieries 3. equivalent to 15 system stock days

20 9c Progress to date on short term coal stock recovery and recovery acceleration Short term provisions Fast tracking recovery Progress on 4 Mt urgent procurement 27 new coal contracts have been concluded between January 2018 and October 2018 for supply of 15.8 Mt in the current financial year. Total contracted volume is 73 Mt (need 116 Mt/annum) Additional contracts in the pipeline are at advanced tender stage Limited transfer of Medupi coal by road has commenced 1.4 Mt per annum Medupi coal transfer by rail is planned to commence in Dec 2018 Eskom is executing urgent purchasing of 4 Mt for immediate supply to recover all power stations to above minimum level by 31 March Success in procuring this coal will see system stock increasing to 36.3 days by 31 March 2019 Only 1.1 Mt of the required 4M t through urgent procurement is currently firm National Treasury engaged on process to execute urgent procurement Eskom then issued 2 requests to all existing suppliers for above maximum contractual supply and alternative coal offers ~4 Mt coal offered to be supplied above max level of existing contracts over 11 months Confirmation of supply above max coal on existing contract issued for commencement More than 30 Mt of alternative coal offered for supply in excess of two years 3.2 Mt coal from offers can be delivered within four months against 4 Mt target Alternative coal offers are subject to National Treasury approval First coal expected December 2018

21 9d Simulating the inclusion of 4Mt potential emergency coal shows an increase in total stock days Actual and forecasted stock days for total system between Jun 17 and Mar 20 Simulating the inclusion of 4Mt potential emergency coal shows an increase in total stock days on 31 March 2018 to 36.3 days from the 28.2 days reflected in the recovery plan Key insights The success of sourcing the urgent 4Mt will see all stations reaching healthy alarm level and 36.3 system stock days by March 2019 work in progress Only 1.1 Mt of the required 4M t through urgent procurement is currently firm The 2.9 Mt balance is still to be contracted through the urgent procurement process for first coal in December 2018 Source: November 2018 Supply Plan (02Nov2018) v1a Including Pipeline sources 21

22 9e Our strategy is to revert coal supply to dedicated long term coal contracts Coal strategy Eskom Long Term Coal Strategy revised to revert Eskom s coal supply to dedicated long term coal contracts for the life of the stations, with preference for conveyor delivered coal. 1 Cost plus contract extension to match power stations life and utilize the dedicated coal reserve for supply to other power station 2 Reinvestment in cost plus mines to enable contractual supply and more 3 Extension of existing long term fixed price contracts for designated power stations and options to supply other power stations 4 Coal Open Tender to source uncontracted coal for the life of power stations 5 Transnet to provide rail solutions for Eskom on Build, Own, Operate basis Eskom to focus on core business (generation and supply of electricity)

23 In conclusion, the 9-point system recovery plan aims to return EAF to 75% by November 2019 Eskom s 9 point plan aims to achieve 5 key objectives We are currently implementing a 9-point system recovery plan that will return EAF to 75% by November This will result in: A robust emergency procurement process that will shorten maintenance restoration times Significant head-way in returning long-term outage plants back to service Reduction in full load losses (FLL s) and partial load losses (PLL s) Critical vacancies filled in Generation Coal stock levels returned to grid code heights

24 YTD EAF (%) The recovery plan is forecasted to improve EAF, and extra effort will be made to get closer to our aspiration Comparison of aspirational versus achievable YTD EAF for Nov 18- Nov Nov 18 Nov 19 Nov 20 Arrest EAF deterioration and plan for EAF recovery 75.8% 75.1% 77.1% 76.3% EAF improvements based on 80% of aspirational trends Aspirational YTD Trend Probable YTD Trend Nov 18 Jan 19 Mar 19 May 19 Jul 19 Sep 19 Nov 19 Jan 20 Mar 20 May 20 Jul 20 Sep 20 Nov 20 Jan 21 Mar 21 Based on analysis and the recovery plan, the green line is the aspirational recovery trend while the red line represents the most likely recovery trajectory. Source: Generation EAF improvement estimates required to achieve 78% by FY2021

25 Backup

26 Significant progress towards becoming a trusted SOC 12 implicated senior executives exited. Finalisation of outstanding disciplinary hearings relating to senior executives being accelerated 11 criminal cases opened, five of which involve nine senior executives Total of outstanding cases since April 2018, of which 822 have been finalised, resulting in 97 employee exits As at end of September 2018 for 2018/19, a total 271 whistle blow cases are under investigation, 68 of these have been completed. Of the 68, total sanctions issued (i.e. actions taken) are 39. Remedial action has been taken against 25 staff doing business with Eskom; 7 exited Lifestyle audits of senior management in progress. There is effective declaration of interest Investigated all irregular supplier contracts (so far, five are no longer doing business with Eskom). Recovered R902 million from McKinsey with an additional R99 million recovered relating to interest Cooperating with eight regulatory bodies conducting major investigations 1 1. National Treasury procurement investigations, Zondo Commission, Hawks, SIU, Parliamentary Inquiry, National Director of Public Prosecutions, Standing Committee on Public Accounts and SAPS 26