Eskom's approach to leveraging developmental benefits in the roll-out of its capacity expansion programme. 3rd Annual Eseta Conference 27-28 November 2007.

Eskom's approach to leveraging Eskom's approach to leveraging developmental benefits in the developmental benefits in the

roll-out of its capacity expansion roll-out of its capacity expansion programme.programme.

3rd Annual Eseta Conference3rd Annual Eseta Conference

27-28 November 200727-28 November 2007

A GROWING ECONOMY THAT BENEFITS ALL…

• Government led Accelerated and Shared growth initiative (ASGI SA) is about ensuring that the country achieves 6% growth, whilst having poverty and unemployment by 2014.

• This initiative is made necessary by the need to ensure that growth in our economy is both accelerated and shared

Special Focus on bridging the gap between the 1st economy & the 2nd economy

ASGISA seeks to create jobs, alleviate poverty, improve service delivery and promote good governance

Objectives

Alleviate poverty

Develop skills

Improve service delivery

Promote good governance

Targets

6% growth

Half the number living in poverty by 2014

Half the number of unemployed by 2014

SOEs have been tasked to support ASGISA through job creation, poverty alleviation, skills development and infrastructure development.

Create jobs

Eskom will contribute through its core business of supplying electricity and leveraging economic benefits from associated activities

6% growth

Half the number living in poverty

Half the number of unemployed

Growing its assets to meet electricity demand growth

Maximising local contentProcuring from BEE, SME and BWO suppliers

Training new learners

Electrification

Focussed CSI programmes

R150bn over next five years

4 000 learner pipeline

Over 3.4 milion homes electrified since 1991

Over R400 million invested by the Eskom Development Foundation, since 1999.

Source for stats: Eskom Holdings Annual Report 2007

The multi – billion rand build programme presents an opportunity to leverage developmental benefits on a significant scale

Return to service of Camden, Grootvlei & Komati power stations (total of 3 800MW)

Camden (near Ermelo in Mpumalanga) – 8 units of 200MW –5 units under commercial operation. Another planned for commercial operation by end 2007, and last unit scheduled for commissioning in 2008.

Grootvlei (near Balfour in Mpumalanga) – 1200 MW–1st unit to be commissioned by end 2007–Last unit scheduled for commercial operation by end 2009

Komati (between Middelburg & Bethal in Mpumalanga) – 1 000MW (5 x 100MW and 4 x 125MW) –1st unit is planned to be commissioned in 2008–Last unit scheduled to be in commercial operation in 2011

CamdenGrootvlei

The build programme presents opportunity for leveraging developmental benefits…

The build programme presents opportunity for leveraging developmental benefits…

Open Cycle Gas Turbine Stations

Ankerlig ( Atlantis, Cape Town) (9 units x 147.17 MW)– 4 units rated at 147.17MW under commercial operation– 5 additional units of 147.17MW to be built

Gourikwa (Mosselbay) – 1200 MW– 3 units rated at 146,29MW under commercial operation– Additional 2 units of 146MW to be built

Grootvlei

Gourikwa Site

Pumped StorageIngula (near Van Reenen, beteen KZN & Free State) -1 332MW– Will comprise 2 dams, undergraound waterways, underground powerhouse

complex, access tunnels & access roads– Station to be fully operational by 2012

Coal Fired Power StationMedupi (Lephalale, Limpopo) - 6 units totalling 4 788MW installed capacity– 1st unit to be commissioned by 2011.– Boiler & Turbine contracts have been recently signed

• Local Content¹ commitment• BEE compliance• 2nd tier BWO participation• 2nd tier SME participation • Skills development² commitment

– According to pre-identified skills catagories

Technical Financial ASGISA readiness

Existing prerequisite Additional prerequisite

40% 40% 20%

Notes:

1. Value that is added in South Africa by South African Resources

2. Training and development in a specific trade to the point where the trainee passes a trade test and qualifies as an artisan.

3. BEE – Black Economic Empowerment

4. SME – Small & Medium Enterprises

5. BWO – Black Woman Owned Businesses

“ASGISA readiness” criteria are being applied for awarding contracts, in order to ensure developmental benefits in the roll – out of the infrastructure programme

ASGI-SA compliance is to be awarded 20% of the total tender evaluation points, i.e. 80% is awarded for price and quality and 20% for ASGI-SA compliance. A scorecard approach is used with the following weightings for each of the ASGI-SA criteria:

Criteria Weight

1. BEE 20%

2. BWO 15%

3. SME 15%

4. Local Content 25%

5. Skills Development 25%

ASGI-SA TOTAL (20%) 100%

A Suppliers’ tender response must achieve a total ASGISA score greater than 60% for a tender to be evaluated and a contract to be approved.

The model seeks to strike a balance between technical criteria and evaluated price on the one hand, and the achievement of ASGISA objectives on the other hand.

In executing the boiler and turbine contracts for the Medupi Power station, local content and the transfer of knowledge and skills will be supported.

• Boiler and turbine contracts recently signed for Medupi

– Boiler contract to the value of R20,2 billion, has been awarded to an Hitachi Consortium, (consisting of Hitachi Power Europe GmbH and Hitachi Power Africa (Pty) Ltd)

– The turbine contract, valued at R13,2 billion, has been awarded to Alstom S&E Africa (Pty) Ltd

More than 50% of the two contracts combined will be procured locally.

NEW BUILD: ASGISA CONTRIBUTIONS

This includes a significant portion of skills development across various artisan and technical categories, BEE, SME and BWO contracting

The growth in our infrastructure is accompanied by increasing skills requirements

We need skills to build the infrastructure, operate the new plant and still retain our existing skills to run our current assets, in an era characterised by global infrastructure expansion.

In order to meet our skills requirements, a multi-pronged resourcing strategy is required …

BOOST

Build

BorrowB

ridge

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•Succession

Plans

•Promotion

•Career

progression

Buy• Recruitme

nt• Head-

hunting• Agencies

Birth

•School

Program

s

•University

Partners

•Pipelining

•Training

•Deve

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•Coach

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•Mentorsh

ip•Outsourcing

•Contracting

•Consulting

• Deploym

ent

• Secondm

ent

• Redeploym

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nt

•R

eten

tion

•In

cent

ives

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mpl

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ent

Bra

nd Resourcing Strategy

ESKOM’S SKILLS REQUIREMENTS

YEAR Total Number Required

2008 1431

2009 1240

2010 1111

2011 1042

2012 1369

TOTAL 6193

Source: Eskom Annual Report 2007, pg 62

Learner intake is increasing. The ASGISA commitment of a 4 000 learner pipeline was exceeded by 1 136.

Target Actual 2007 Actual 2006

Total Learner pipeline 4000 5136 2163

The development pipeline covers all catagories of learners, including university bursars, learnerships, engineers in training and graduates in training.

Source: Annual Report 2007, pg 20, 63

ESKOM’S APPROACH• Recruited more learners than planned on the ASGISA drive to

accelerate the process

• 800 more bursars were recruited in addition to the Eskom existing bursars

• Partnerships were sought to alleviate training capacity shortages i.e. Denel (training 89 Artisans in collaboration with Denel in 2007 )

• Agreements with supplier companies to provide workplace exposure to learners where we lacked capacity

• Eskom sponsors two teachers per school to teach Maths and Science and supporting material is provided to 18 schools

• Winter School programmes conducted centrally and at various business units to build capacity in maths and Science for matriculants

End