Mandate

Efficiently operates the existing generating capacity, and ensures world-class engineering solutions.

Highlights	Future priorities
Avoided load shedding in the past year Powered the 2010 FIFA World Cup™ over the winter period – the coldest winter in the last 20 years Kept water use within target across the fleet of power stations Installed gaseous emission monitoring systems measuring SO2, NOx and CO2 on one unit/stack of each coal-fired power station The water use performance stabilised. Water used as part of the process to generate electricity increased slightly from 1.34RA to 1.35RA litres/kWh sent out (see details of actions taken on page 154).	2% reduction in unplanned capability loss factor of the power stations over three years Zero harm to people, plant and environment remains a key focus area which will be addressed through the continuation of programmes to enhance safety and environmental performance Implementation of energy efficiency programmes across the Eskom fleet.
Challenges
The return to service of Duvha unit 4 turbine and generator which was extensively damaged in an incident in February 2011. Estimated recovery period is 12 to 18 months Security of supply as Generation balances the need for planned maintenance on ageing plant with the demand of a growing economy Particulate emissions performance is still a challenge even though it decreased from 0.39 to 0.33kg/MW sent out compared to the previous year Coal-related energy losses have increased substantially since 2008, contributing to the lower availability of some coal-fired plant to meet demand Improved performance of Koeberg nuclear power station as measured by the INPO index curtailed by two significant forced outages immediately following a refuelling outage.

RA	– Reasonable Assurance provided by the independent assurance provider (Refer here).

Financial results – Generation Business
R millions		2011	2010
	Total revenue	63 549	49 732
	Profit for the year	3 870	192
	Total assets	177 680	131 039
	Capital expenditure including capitalised interest	40 595	40 484

 

Overview

The Generation Business portfolio was established in 2008. It is a diverse portfolio encompassing the operations and engineering of the existing power stations, the supply of primary energy (coal, liquid fuels and nuclear fuels), the supply of water, the project development, project management, construction and commissioning associated with the return-to-service (Camden, Grootvlei and Komati) and new power stations which are being commissioned.

The Generation Business portfolio has since been unbundled. Its divisions have been re-aligned to give effect to the new Eskom strategy and operating model, subject to shareholder approval.

Eskom aims to ensure no supply interruptions due to plant unavailability in support of national government’s social and economic imperatives.

Eskom’s supply objectives

• Aspire to an energy availability factor of 90% (which will put Eskom’s generating capability among the capabilities of the top five power generating utilities in the world)¹
• Enhance the generating fleet’s availability of supply by reducing forced outages by 2% in three years
• Conduct all planned maintenance by finding innovative ways to create the required outage space, aided by demand-side reductions and non-Eskom generation capacity coming on line.

1.	In terms of the McKinsey database – Power Gauge.

 

Energy availability turnaround programme

A turnaround programme focusing on the key levers that will impact on the energy availability factor will be implemented and rolled out across the fleet, with transparent target setting and Eskom-wide accountability that links directly to Eskom’s energy availability factor aspiration. The programme will include but not be limited to the initiatives described below. The 84.2% energy availability factor aspiration for 2012 is consistent with the plan’s assumptions about balancing supply and demand.

• Improve plant operations, which will result in reducing variability and duration of start-up times (by proper recommissioning, for example); run units at contracted load (by improving adherence to guidelines and instructions); reducing losses due to trips by eliminating human error; and optimising auxiliary power usage.
• Accelerate optimisation of control and instrumentation refurbished units; improve co-ordination and co-operation between the station, the Group Capital division and other contractors.
• Improve preventive maintenance to reduce the number of planned maintenance activities, reduce the duration of planned short outages and facilitate better planning of opportunity work.
• Optimise and improve the execution of big planned outages to reduce their duration.

Power station performance

Overall Generation performance deteriorated in 2011 compared to the previous year. The main contributing factors to the deteriorating performance were the performance of the return-to-service stations (stations that were mothballed, refurbished and re-commissioned), the effects of poor coal quality on critical plant components, an ageing plant that requires substantially more maintenance in a capacity constrained environment and major energy loss events that occurred at the Duvha, Kriel and Camden power stations. Like in previous years, boiler tube failures were the single biggest contributor to the total unplanned energy losses in the Generation division.

Koeberg’s performance was negatively impacted due to two consecutive forced outages following refuelling outage 118. The first was due to a design tolerance error which emerged during re-commissioning, following a turbine retrofit. The second, three weeks later, was due to failure of a newly reloaded nuclear fuel assembly.

Incident at Duvha power station

On 9 February 2011, the 600MW unit 4 at Duvha power station was taken off load for a statutory turbine test. The protection on the unit failed, causing severe mechanical damage and starting a fire, which was rapidly brought under control by the power station’s fire team.

The damage to the 600MW unit 4 at Duvha power station is being
assessed and the clear-up operation is in progress.

Extensive mechanical damage was caused to the turbo generator. More specifically the damage was contained to the high-pressure turbine, intermediate pressure turbine, the two low-pressure turbines as well as the generator and exciter. There has also been some damage to civil and building structures due to flying debris.

The repair process will take approximately 12 to 18 months. An independent investigation is underway to determine the root cause of the incident after which stripping will commence in order to repair and return the unit to service.

Environmental performance

The Generation division has not met its relative emissions target for 2011 but relative emissions improved from 0.39^RAkg/MWh sent out in 2010 to 0.33^RAkg/MWh sent out. Plant failures, specifically dust handling plant, and sulphur trioxide plant have contributed significantly to emissions. Several scheduled maintenance opportunities had to be postponed or cancelled because of the prevailing network constraints. A comprehensive air quality strategy to reduce emissions was approved by Eskom’s board this year. Refurbishment is underway at Matla and Kriel and fabric filter plant retrofits are in an advanced planning stage.

Generation Business has managed to meet its relative water consumption targets due to sustained focus on areas for improvement. Legal contraventions have increased due in part to the inclusion of all ground water contaminations as legal contraventions in the division’s register.

Establishment of the Power Plant Engineering Institute

A Power Plant Engineering Institute will build power plant engineering capabilities and is a response to meeting South Africa’s future energy needs, and the needs of the Southern African region. The institute will build capacity in universities, creating and sustaining a flow of qualified engineers in areas relevant to the power industry. Eskom’s pro-active role in building new capacity will also bring with it the opportunity to grow a new power plant service industry, which will need these engineering skills at all levels. Preparation work on establishing the institute is advanced, and the first programme will start in 2012. Eskom plans to roll out similar initiatives for its Transmission and Distribution divisions.

Stakeholder engagements

Generation Business has continued to build and maintain sustainable relationships with a range of stakeholder groups at power stations and visitor’s centres. Participation in the Mpumalanga Eskom forum has strengthened relationships at provincial and local governmental levels and has given Eskom an opportunity to discuss issues of mutual interest.

A memorandum of understanding was signed with the Department of Water Affairs, and quarterly meetings are held to discuss common issues such as efficient water use at the power stations.

Generation division’s visitors’ centres host different stakeholder groups daily. More than 33 000 people visited the centres at Drakensberg, Koeberg, Palmiet, Ingula, Ankerlig and Lethabo power stations during 2011. More than 150 000 visitors have been exposed to the Eskom story since 2007. Statistics evaluating visitors’ perceptions showed a 42% swing towards a more positive view of Eskom after a visit.

 

Future focus

Five strategic shifts have been targeted in the Generation Business in the next three years:

1.	Pursue an energy availability factor (EAF) of 90%.
2.	Energy efficiency – reduce power plant consumption.
3.	Reduce carbon footprint – investigate co-firing coal-fired power stations with biomass, thereby reducing coal usage by 10%.
4.	Operational excellence – Back2Basics in the policies, processes and systems that govern the operation and maintenance of power plants.
5.	Financial excellence – 10% reduction in operating costs.