Primary Energy Division

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Primary Energy Division

• Operations in Primary Energy Division
• Mr Vule Nemukula
• Acting Managing Director
• PED

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• The Business of Primary Energy

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PED aspires to make a major contribution to both
the development of the country and its employees
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• Importance of key words
• Sustainable, secure environmental, social,
  economic and technical sustainability and
  stewardship
• Affordable minimise energy costs to support the
  provision of low cost electricity that enables
  economic development
• Partnerships develop long term, collaborative
  and trust-based relationships with key
  stakeholders (suppliers, power plants,
  government, communities and interest groups)
• Shape and transform to deliver world class
  performance drive new levels of efficiency,
  safety, environmental responsibility and social
  transformation in the supplier industries
• Challenge always stretch, push and expect the
  best of our colleagues
• Support seek opportunities to collaborate,
  mentor and help colleagues find their passion in
  a caring, honest way

• "Ensure sustainable, secure and affordable fuel
  and water supplies for South Africa's energy
  needs through a network of partnerships that
  shape and transform the supplier industries to
  deliver world class performance.
• Challenge and support our fellow employees to
  achieve their full potential in delivering on
  this goal"

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PED already has widespread impact on South Africa
and the contribution will grow with Eskoms
infrastructure expansion
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Direct contribution
Indirect contribution
Induced contribution

• Eskoms Primary Energy Division (PED)
• Mining companies that are directly extracting
  coal
• Logistic providers transporting coal
• Rail transportation companies
• Trucking companies
• Eskom conveyors

• Companies building infrastructure
• Rail construction companies
• Road construction and maintenance companies
• Conveyor belt production
• Companies providing equipment
• Locomotives/wagon production
• Truck manufacturers
• Companies providing maintenance services
• Maintenance of infrastructure
• Maintenance of equipment

• Housing and accommodation
• Hotels
• Security services
• Transportation, including taxis and buses
• Food and entertainment for workers
• General stores/markets
• Entertainment activities
• Restaurants
• Other services
• Medical care
• Banks
• Churches
• Schools
• Laundry

PED will add jobs and have a GDP contribution to
each of these three business types
Source Team analysis
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• 2008/9 PED Highlights Challenges

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PED Highlights

Target of 42 system stock days was
achieved
System stock days progress
Long term fuel contracts (10 years) concluded for
Ankerlig and Gourikwa
Contract with Transnet was concluded, allowing
for more coal to be transported cheaply and safely
15-Jun-08
10-Feb-08
20-Mar-09
The long term coal supply strategy was developed
and subsequently approved by the board in
December 2008
The National Energy Coal Forum was launched in
February 2009
There has been increased robust stakeholder
engagement and collaboration with Government
Transnet
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PED Challenges 2008/9
Financial
Safety Logistics

• Road conditions are rapidly deteriorating
• Funds to repair maintain roads are an issue
• 2008/9 saw an unacceptable level of safety
  incidents on the road

• Primary Energy costs have seen substantial
  increases
• Huge internal pressure to reduce primary energy
  costs

Coal quality volumes
People

• Several coal quality problems experienced -
  impacts costs
• Wet coal issue of last year coarse coal
  stockpiles built
• Production at some mines are posing a serious
  challenge

• Issue of skills and attracting and retaining core
  skills

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• PED Focus Areas 2009/10

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Focus Areas for 2009/10 (1/2)

• Finance funding
• - Manage costs within tight financial constraints
• - Focus on funding for logistics infrastructure

• Contracts
• Finalisation of the medium term contracts
  negotiations
• Conclude new long term contracts

• Stakeholder engagements
• Improve engagements with all stakeholders
• Engage effectively with the National Energy Coal
  Forum
• Launch the National Coal Transport Forum
• Improve internal stakeholder engagements
• Engage stakeholders on environmental issues and
  water issues

• People
• Finalise the PED structure populate the
  structure
• Develop implement effective attraction,
  retention talent management strategies
• Build an effective PED team

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Focus Areas for 2009/10 (2/2)

• Logistics
• Implement short term logistic solutions
• Increase railed tons manage FOT contracts
• Focused intervention on road safety Vision
  Zero
• Consider road improvements its impact on
  security of coal supply
• Clarify funding allocation for road repairs

• Water issues
• Trigger high level discussions around water
  infrastructure development for MCWAP
• Review update all Eskom water management
  related standards guidelines
• - Review all power stations water management
  practises via stations assessments

• Coal quality
• Work on coal quality improvements at affected
  stations
• - Identify other opportunities for improvement
  in coal quality

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• The PED Organisation

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PEDs Mandate

• Primary Energys role is to optimally identify,
  develop, source, procure and deliver the required
  amounts of primary energy (water, coal, liquid
  fuels sorbent), to client specification, to the
  required locations, on time and at minimum cost,
  over the full plant life cycle of Eskoms
  generating assets

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PED is organised around the following functions
(1/2)
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Coal supply Operations
Fuel Supply Contracting

• Focuses on
• Long term and short/medium term coal
• negotiations
• - Logistics negotiations
• - Gas, liquid fuels and sorbent contracting

• Focuses on coal supply operations
• contracts management
• Comprises technical services
• Focuses on operations planning

KEY OPERATIONS
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Water and Environmental Operations
Logistics Operations

• Focuses on water management
• at the power stations
• Focuses on environmental operations
• of the PED business

Will focus on - Network planning and
optimisation - Rail operations - Road
operation
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PED is organised around the following functions
(1/2)
Strategy
Commercial Compliance

• Focuses on divisional and Eskom
• strategies for primary energy (coal,
• water, liquid fuels sorbent)
• Also focuses on market intelligence

• Focuses on
• Commercial activities within PED
• - Compliance to Eskoms governance

SUPPORT SERVICES
Human Resources
Financial Services

• Focuses on
• Providing financial services to the PED
• business
• - Integrated risk management

• Focuses on the people aspect of PED

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• PEDs expectations of its Supplier

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Migration of Mindset
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PED KEY GOAL F2009/10
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TRANSACTIONAL RELATIONSHIP (Non-value adding)
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STRATEGIC PARTNERSHIPS (VALUE BASED)

• SAVINGS R 6.3 bn
• RECESSION!

• Partnership Imperative
• Innovation
• Status Quo Challenge
• Value Chain Optimisation

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Best practice contract management requires Eskom
to track supplier performance in three areas

• Rationale

• Supplier KPIs

• Ensure in-specification, regular, and sustainable
  coal supply by tracking daily supplier performance

• Adequate quality
• Agreed volume
• Regular deliveries
• Rapid responsiveness
• Remaining resources

• Reliability

• Aim for cost-efficient suppliers with a focus on
  competency, accuracy, and continuous improvement
  processes

• Information accuracy
• Continuous improvement
• Operations flexibility
• Technical competency

• Efficiency

• Act socially responsible, by enforcing
  transparent and responsible operations from
  suppliers

• Mining act compliance
• SHE programmes
• Road safety compliance
• Transparent governance

• Regulatory

Source Supplier External Performance review
McKinsey Company team analysis
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Thank you