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Rossouw working on plan to stablise Eskom’s generation performance

Mike Rossouw

Mike Rossouw

Photo by Duane Daws

25th July 2014

By: Terence Creamer

Creamer Media Editor

  

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Eskom’s appointment of former mining executive Mike Rossouw on a one-year, extendable assignment appears to be closely associated with Public Enterprises Minister Lynne Brown’s appeal for “extraordinary” steps to be taken to deal with the “unsatisfactory” performance of the State-owned utility’s generation fleet.

Interim CEO Collin Matjila, who, together with the board, appointed Rossouw to offer an independent view of the problem, recently referred to the “unintended consequences” of the group’s strategy of “keeping the lights on”.

Matjila said a plan was being formulated to reduce unplanned outages and to ensure that maintenance regimes where sustained, notwithstanding its seriously constrained reserve margin.

The group’s unplanned capacity loss factor rose to around 11% last year, while its energy availability factor fell to 75.1%, against a target of 80%.

It is understood that Rossouw, who resigned from Hatch South Africa to take up the assignment, is spending much of his time at Eskom’s various coal-fired power stations.

The former Energy Intensive User Group chairperson and Xstrata Alloys director has been openly critical about the underperformance of the Eskom fleet ever since the load-shedding crisis of 2008.

In fact, in 2012 he publically questioned why Eskom appeared to be failing to address its maintenance backlog, despite lower-than-expected electricity demand and the use of power buy-backs, which have since been halted.

The performance appears to have deteriorated partly because of the intensified use of the fleet in the run up to and during the 2010 FIFA World Cup and partly because plant operators are continually having to deal with emergency situations, which has served to lower morale and energy levels, while leaving little time for strategic interventions.

It is anticipated the Rossouw could deliver a holistic proposal to Brown on how these problems could be remedied in the coming few months. It is unclear, though, how these proposals will gel with current efforts to cut costs through a so-called business productivity programme (BPP), as it is possible that higher levels of upfront expenditure might be required to arrest some of the problems.

But while Rossouw’s immediate focus was on the generation fleet and how breakdowns and unpredictable plant performance could be decisively addressed, is it is understood that he also has a mandate to interrogate the utility’s entire operational model.

This assignment will be done against the backdrop of serious financial concerns, with Eskom having already indicated that costs savings and efficiency increases will not be sufficient to enable it to plug a R225-billion revenue shortfall – a shortfall that is expected to arise as a result of having been granted five yearly tariff increases of 8% between 2013 and 2018 instead of the 16% it requested.

A ‘comprehensive sustainability plan’ has already been handed to Brown, who is a leading participant in an inter-Ministerial process, which also included the Ministers of Finance and Energy, set up to deal with the utility’s financial problems.

Matjila said recently that components of the plan, including the BPP, were already being implemented. But the plan is also likely to include the option of a further capital injection, as well as possible fresh tariff increases to accelerate moves towards “cost-reflective tariffs” and ensure that the utility received an “appropriate return on assets”.

President Jacob Zuma, who, this week, announced the composition of a new ‘Energy Security Cabinet Subcommittee’, has also raised the issue of Eskom and energy security to the level of an “apex priority”.

Edited by Creamer Media Reporter

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