Eskom Generation – way
forward
Three drivers of change impacting our
business
Market
Restructuring
Need for a more
integrated approach
in growing
capacity
Declining
surplus
capacity
Continue preparation
for deregulation
(also requires a degree
of divisional
independence)
Limited
resource
availability
Need to
maximise
synergies &
operational
excellence
Eskom’s strategic positioning
• Our core business is electricity
– Generation
– Transporting
– Trading (among producers, wholesalers, and bulk
users)
– Retail (to end users)
• Our target market
– South Africa
– SADC and the rest of Africa connected to the SA
grid
– Rest of Africa
Electricity demand and supply – key
challenges
• South Africa is approaching the end of its surplus generation
capacity
• 1st challenge: Avoiding mismatch between demand and supply
– Excess capacity - stranded resources
– Capacity shortage - constrained economic growth
• 2nd challenge: Correct choice of capacity to be constructed
from an array of available options that differ dramatically in
terms of:
– Cost (construction and operating)
– Lead time to construction
– Environmental impact
– Operating characteristics
Eskom's Installed Generating Capacity
Red Solid Line until end 2004 = Actual peak demand PLUS 10% RESERVE MARGIN,
thereafter @ 2.5 % growth in peak demand PLUS 10% RESERVE MARGIN.
Fifty year assumed plant life. Demand Side Management initiatives NOT included
55 60 65 70 75 80 85 90 95 00 05 10 15 20 25 30 35 40 45 50 55 60
50.000
Megawatt Installed
40.000
30.000
20.000
10.000
0
55 60 65 70 75 80 85 90 95 00 05 10 15 20 25 30 35 40 45 50 55 60
Year
5 Year Capital Expansion Plan
In October 2004, Cabinet approved the following:
• Eskom to lead this current phase of creating new
electricity generation capacity
– Earlier Cabinet decision to exclude Eskom from
future build programme was reversed
– Decisions on any future (beyond the current 5
year programme) build programme will be on a
case by case basis
• 5-year infrastructure investment plan in South
Africa's electricity infrastructure amounting to R95
billion (DPE tabling of vote to parliament)
Capacity Outlook - 2003 to 2022
• 6%+ year-on-year demand
increase
• Major risks of insufficient
supply options
• Ageing infrastructure
• Shortages if new build not
initiated
Brownfield (Matimba B) PF
Planning Process Flow
Increasing Certainty
Demand Side
Participation Tariff
Co-Generation
Using of Waste
Monontsa
Brownfield Coal
Coega
Braamhoek
Saldanha
Gas 3
PBMR
Steelpoort
Greenfield Coal
DME-IPP
OCGT
Simunye
Eskom
OCGT
Wind
Western Corridor
NEW
CONCEPTS
PHASE 1
PRE-FEASIBILITY
PHASE 2
FEASIBILITY
BUILD
Eskom’s Return To Service (RTS) project
• 3 stations with a combined nominal capacity of
3800MW
• built in the 1960’s, and were mothballed due to
high excess capacity in the late 1980’s and 1990’s
• An investment expenditure totalling R12 billion
(nominal rand) on the return to service of the 3
stations over the next 5 years
Camden =
1 600MW
Grootvlei =
1 200MW
Komati =
1 000MW
Budget Vote
“Alongside this process, using Eskom’s
purchasing power, we would introduce the
first significant Independent Power
Producers (IPP). This allowed for the initial
indicative 5-year investment figures to be
provided with some degree of certainty. “
Minister Erwin’s Budget Vote Speech, 15
April 2005:
SA enjoys globally competitive prices
Electricity Prices
as at April 1, 2004 for an an end-user
with 1,000kW connection and a monthly usage of 450,000kWh
12
cents/KWh (US)
10
8
6
29% gap
4
2
Country
Price
Italy
10.97
Germany Belgium Denmark Netherlands
9.26
8.72
8.45
8.19
Spain
US
UK
8.06 7.56 6.7
France
6.45
Finland Sweden Australia
5.74
5.36
5.2
A
R
S
Fr
an
ce
Fi
nl
an
d
S
w
ed
en
A
us
tra
lia
C
an
ad
a
U
K
U
S
pa
in
S
el
gi
um
D
en
m
ar
N
k
et
he
rla
nd
s
B
an
y
G
er
m
Ita
ly
0
Canada
4.88
RSA
3.71
Eskom remains committed to keep the lights burning
Day Month Year