Eskom's results and the nuclear decision
On June 14, Eskom announced its financial results for the period from 1 March 2011 to 31 March 2012. The detail and rhetoric is impressive, suggesting that, while no attempt its being made to underplay the challenges, the company is moving decisively and wisely forward.
"At a time when global economic uncertainty is forcing many companies to curtail operations and limit growth, Eskom is hard at work on one of the largest capital expansion programmes in South Africa's history. This R340-billion programme, which commenced in 2005, will have added 17 GW of much-needed electricity-generating capacity to the national grid by 2018/19," says Zola Tsotsi in his chairman's statement.
Some notable results include:
- Gross profit increased from R16,4-billion for the 2011 year to R22,3-billion for 2012. Net profit, after interest and tax deductions, was R13,2-billion, up from R8,4-billion in 2010/11. My simplistic financial skills calculates that this gross profit can pay back the new-build investment in 15 years.
- Revenue from electricity sales increased by 25% from R91,5-billion (2010/11) to R114,8-billion (2011/12), due almost entirely to the 26% average price increase from 1 April 2011.
- The sales of 224 785 GWh of electricity for the year represents an increase of only 0,2% compared to the previous year (2011: 224 446 GWh), as a result of the prevailing economic climate, according to Brian Dames, Eskom's chief executive
- Demand-side management energy efficiency gains of 1 442 GWh and internal energy efficiency of 46,96 GWh were achieved, which totals less than 0,7% of total sales. It is difficult to see this number as a substitute for generation growth and it is nowhere near the 10% savings levels that were being sought a few years back? There has got to be much more potential here.
- The average selling price of electricity was 50,3c per kWh (40,3c per kWh in 2010/11) against an average cost or producing and delivering this electricity of 41,3c per kWh (32,8c in 2010/11).
- The backlog of power stations having deferred maintenance reduced from 36 as of March 2011 to 26 as of 31 March 2012.
Eskom has emerged from the ‘crisis' of 2008 well, albeit with a little help from a downturn. New generation is on its way and, on the renewable side, the REIPP programme seems to be healthy and progressing.
Looking beyond 2018, though, the report starts to express some veiled concerns about ‘policy uncertainty. "The government has not yet announced how its Integrated Resource Plan (IRP2010) will be implemented. Until these decisions are taken, the country has no new capacity commitments beyond the completion of Kusile in 2018/19. Eskom continues to develop a resource plan to cater for the anticipated technologies," says Dames.
I visited Necsa Nuclear Manufacturing earlier this month for African Fusion. The facility is now the only ASME III accredited facility in Africa, ie, it is the only local facility that can manufacture nuclear-quality components. IRP 2010 provides for 9,6 GW of new nuclear capacity, beginning in 2023, and according to Necsa's Arie van der Bijl, we have less than 30 months to complete the procurement process. "If we are serious about maximising localisation, then we really need to do it from the first reactor, and to do that, we need to launch the programme early," he suggests, adding that any delay will leave insufficient time for localisation and everything will have to be imported.
Necsa's Andrew Linington believes that Nuclear is high on the agenda of government, based on the number of statements emerging that reiterate commitment to IRP 2010, including its nuclear ambitions. Costs and financing are the stumbling blocks. But new generation post 2018 will be necessary and neither renewables nor coal are likely to be acceptable options.
On the cost side, Eskom is currently paying an average of R230/t for its coal requirements, but the international price of thermal coal (5 500 kcal coal at Newcastle Australia on a free-on-board basis) is reported to have hit a two-year low of $87/t in June, down from $142/t in January last year. That puts the ‘market' value of coal for the 2011 year at somewhere around R720-R1 180/t, which is considerably more expensive than our coal input costs. This, alone, suggest to me that our calculations of the real costs of coal-based electricity generation is artificially low, and that nuclear, in the long term, with lower input costs and potentially very long operating life, may be a very cost-effective option if a lifecycle costing approach were adopted.
But the key benefit of taking the nuclear plunge now is jobs and localisation. We know we have to move away from coal. We know that we will need additional an replacement base-load capacity by the early 2020s to avoid a repeat of the 2008 crisis. Lets be decisive about nuclear now!
Peter Middleton, Editor
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This magazine's features:
● Pump systems pipes and valves
● Robotics, mechatronics and automation
● Power, energy and energy management
● Modern transport and vehicle solutions
● Innovative engineering
In this month's Special report, Dale Kelly reports back from the recent Africa Frontiers Forum in Cape Town, where questions were asked about whether Cape Town was strategically positioning itself as a services hub for the African oil sector and what should it do to win against rising competition from other emerging hubs on the continent.
Our Power, energy and energy management feature contain an article from the African Utility Week about GE's Steam Cycle control solution, an affordable, flexible and scalable DCS for steam plants in the 5,0-300 MW range. We also talk to Gustav Radloff, MD of Energy Cybernetics, about energy management, the opportunities and problems associated with implementing successful energy efficiency initiatives, and the value of the recently-published standard: ISO 50001, Energy management systems.
Xylem water solutions makes up our lead feature for Pump systems, pipes and valves, and we also include news from Incledon about their new intelligent pressure management valves and DPI Plastics about its commitment to eliminate lead from plastic pipes.
Robotics, mechatronics and automation features a robot solution for cement palletising. We talk to Altus Mostert, managing director of Robotic Innovations and visit one of the blending plants he has recently modernised.
Modern transport features Voith and its award winning offshore construction vessel, North Sea Giant, which is propelled by five Voith Schneider propellers of 3 800 kW each - the largest propeller package Voith has ever delivered to a single ship.
For Innovative engineering, we talk to Tommy Roes of Martec about ultrasound, friction, and the use of ultrasound detection technology as a highly-effective first-pass filter for equipment health.
In July we'll be covering
• Power transmissions, bearings and bushes
• Computer-aided engineering
• Modern engineering materials and processing
• Hydraulic and pneumatic systems
• Innovative engineering