Creamer Media's Chanel de Bruyn speaks to Engineering News Editor Terence Creamer about the outlook for load-shedding this winter, why the electricity system is in a precarious state, power utility Eskom's heavy reliance on its open-cycle gas turbine plants and the utility's calls for additional generation capacity.

Electricity utility Eskom has set a target date of August 2024 for the return to service of Medupi Unit 4, the generator of which was “catastrophically” damaged during an explosion on August 8, 2021.

Acting generation MD Rhulani Mathebula, who has stepped into the role following the resignation of Phillip Dukashe, says assurance and forensic investigations have been completed and that management expects to institute consequence management against those involved by the end of May.

The explosion occurred during the displacement of hydrogen with carbon dioxide and air, respectively, for the purposes of finding an external leak.

Mathebula reports that its captive insurer, ESCAP, has accepted the admissibility of the claim report issued by the loss adjuster, Sedgwick South Africa, and that the commercial process and award of the first contract for the refurbishment of the generator stator is expected by no later than June 15.

“Based on preliminary results from the property damage assessment and long-lead items, the commercial operation of Medupi Unit 4 is expected by August 2024,” he reports.

Meanwhile, Eskom also reports that functional specification has been completed for sign-off on the installation of flue gas desulphurisation (FGD) on the six Medupi units, in line with a stipulation of a World Bank loan.

COO Jan Oberholzer says the retrofitting of FGD to the six Medupi units at the power station is expected to cost between R35-billion and R42-billion, based on its experience with installing the technology at the Kusile power station.

Eskom is working to compile a scope of work, but does not yet have a final date for the issuance of a tender.

Separately, the Eskom board has approved new target dates for the completion of the remaining Kusile units, with Unit 4 slated for commercial operation in January 2023, Unit 5 in December 2023 and Unit 6 in May 2024.

Previously, Eskom had expected Unit 4, which was first synchronised to the grid on December 23 last year, to enter commercial operation in July this year.

Oberholzer says Eskom has every intention to “beat those dates”.

To do so, however, will require more rapid progress on securing coal for the plant, as well as ensuring that the ash-handling facilities are in place.

The CEOs of three leading South African development finance institutions (DFIs) have established a collaborative platform, known as the DFI CEOs Forum, that aims to support the financing of the country’s just transition to a low-carbon economy and climate resilient society by 2050.

Led by Development Bank of Southern Africa CEO Patrick Dlamini, Industrial Development Corporation CEO TP Nchocho and National Empowerment Fund CEO Philisiwe Mthethwa, the forum will seek to locate, define and execute just transition financing.

It is also open to all public national and provincial funds, DFIs and fund managers in South Africa.

A DFI Just Transition Task Team, made up of executives from each organisation, will be created to coordinate work programmes on behalf of the forum and the initial three workstreams include:

Workstream 1, which will define the strategic thrust of South African DFIs and their role in South Africa’s decarbonisation;

Workstream 2, which will study the financial impacts and opportunities associated with the transition and map the options for mobilising climate finance; and

Workstream 3, which will assess and outline DFI opportunities in advancing or participating in the carbon-credit market.

The forum will be guided by the Just Transition Framework being finalised by the Presidential Climate Commission and the individual DFIs will act both collectively and individually, in line with their core mandates, to support South Africa’s just transition.

The DFIs indicated that the decarbonisation of the electricity system will be an immediate priority, with a focus on decommissioning and repurposing Eskom’s coal-fired power stations, the upgrading and extending the grid, and a rapid ramp-up of new renewable projects.

“Early scoping of technology and project pathways as well as financing the development of a hydrogen production sector is essential to achieve the decarbonisation of the petrochemical sector.

“Support for a transformation of the motor and transport sector towards electric vehicles, is also important,” the CEOs noted in a joint statement.

The statement also underlined the importance of decarbonisation for South Africa’s agriculture, manufacturing and mining exports, the competitiveness of which would increasingly depend on them securing low-carbon energy inputs.

The DFI CEOs Forum also stressed the importance of developing mechanisms, institutional capacity, and governance frameworks to finance both green-economy investments and the social aspects of th transition.

“In this regard, justice for workers and communities who are negatively impacted by the phase-down of the coal value chain must be ensured.”

The forum’s creation comes as South Africa is gearing up to negotiate the terms and conditions of an $8.5-billion climate finance offer made by the European Union, France, Germany, the UK and the US on the side-lines of the COP26 climate talks, in Glasgow, Scotland.

Presidential Climate Finance Task Team head Daniel Mminele, who will play a central role in the negotiations, has indicated that South Africa aims to pursue a financing solution that embraces a “different paradigm” with regard to the allocation of risk, as well as return expectations and investment horizons.

Mminele has also stressed that any debt should be extended on terms that were more attractive than could be secured in the capital markets and should not include unduly onerous reporting requirements.

Toyota South Africa Motors (TSAM) has resumed operation of its catalytic convertor export line and will, in the next few days, also open the Hino truck assembly line. This follows extensive flooding at the Prospecton plant, in Durban, a month ago.

TSAM notes, however, that it will take some time for its main assembly lines – Hilux, Fortuner, Hiace, Corolla Cross and Corolla Quest – to reopen.

The local arm of the Japanese vehicle manufacturer expects to lose around 45 000 units in production, with these vehicles destined for both the local and export markets.

TSAM president and CEO Andrew Kirby says the organisation is implementing “a careful and systematic phased plan” to return the Durban facility to working condition.

He adds that the flooding “has been a tremendous setback for the company, but we have extensive insurance coverage. We are also fortunate that our parent company, Toyota Motor Corporation, is supporting us with all the cashflow challenges that we are likely to encounter.”

“We’ve created an internal slogan for our recovery, called ‘Rebuilding Better Together’,” says Kirby.

“This talks to how we all work together as one team to find a way of renewing and improving our site at the same time.”

“We’ve been through the process of cleaning, drying and flushing,” Kirby explains.

“Now, we are checking all of our equipment, repairing, powering up the control panels and having to order replacement parts where necessary. We are at a point where it’s not easy to predict when we would be able to start-up.”

Toyota global president Akio Toyoda has sent close to 60 top specialists and engineers from Japan to support the recovery of the TSAM plant.

TSAM notes that it is working closely with the City of eThekwini to address some of the infrastructural shortfalls in the area around the plant to prevent a reoccurrence of a similar disaster.

From a human resource perspective, the majority of Toyota employees fall under the National Bargaining Forum (NBF) and, as such, payment is governed by the rules of the NBF, whereby 50% of wages are paid when there is no work available.

However, TSAM says it is working to boost employee earnings by bringing in staff on a rotational basis to assist in clean-up activities; working with government to provide temporary financial relief measures; requesting financial institutions, with whom employees have loans, for a three-month payment holiday; and working with local nongovernmental organisations to use TSAM employees to provide community support following the widespread floods.

Employees who volunteer for such activities will be paid by TSAM.

TSAM sales and marketing senior VP Leon Theron emphasises that Toyota customers remain the company’s priority.

“We are constantly communicating with customers whose vehicle deliveries have been impacted by the floods, and we are truly appreciative of their patience to date.

“With regards to completely built-up models, it’s business as usual – in fact, we have been able to negotiate additional supply despite global shortages. So, we’ll have extra units to compensate for the temporary lack of availability on locally-built models.”

Eskom COO Jan Oberholzer has appealed for urgent and coordinated public-private action to close an immediate electricity shortfall of up to 6 000 MW and to prepare the way for the replacement of 22 000 MW of coal capacity that will be shut over the coming 14 years.

Speaking during a system briefing and amid persistent bouts of power cuts, Oberholzer said the time had come to stop talking and begin acting as ‘South Africa Incorporated’ to tackle the immediate crisis and to prepare for the longer-term transition from coal.

By 2035, Eskom is scheduled to have decommissioned nine power stations with a combined capacity of 22 000 MW, nearly 10 000 MW of which is scheduled for closure by 2030.

For the bulk of the new electricity to arise from variable renewable sources, with associated capacity factors of about 30%, Oberholzer said that South Africa should be preparing to introduce at least 50 000 MW by 2035.

He stressed that this was required in addition to the 4 000 MW to 6 000 MW required to close the current shortfall in generation.

“As SA Inc, we need to understand where we find ourselves from an energy industry point of view, as well as the landscape that we are currently in, and what is coming at us,” Oberholzer said.

The transition challenge was also not unique to South Africa and was likely to result in a competition for equipment and resources, which Oberholzer argued could also present a significant manufacturing opportunity for the country.

“[But] we need to stop talking and we really now need to understand that we have a significant challenge that we are facing, and that we need to get our energy, our focus and all the activities needed to make sure that we have sufficient capacity to grow the economy of this country.”

Oberholzer also stressed South Africa could not rely, particularly in the short term, on a turnaround in the performance of the undermaintained coal fleet to offer supply relief, while providing evidence of how the maintenance backlog had been allowed to grow since the late 1990s.

Presenting benchmarks of Eskom’s performance relative to those of other utilities, using information compiled from VGB, of Germany, Oberholzer showed how Eskom’s energy availability factor (EAF) had been above the global average until 2012.

The utility also created “unsustainable virtual capacity” since 2002 by running its plants hard, as reflected in an energy utilisation factor that remained above that of its peers from 2002 until the present.

Planned maintenance, meanwhile, had dipped below that of its peers for much of the period, during which Eskom’s unplanned capacity loss factor (UCLF) decoupled from the VGB median, particularly since 2011.

In the year to March, Eskom’s UCLF rose to 28%, underpinned by a surge in partial load losses, and the coal fleet’s EAF fell to a dismal 55.5%.

Eskom also experienced its worst-ever year for unplanned automatic grid separation trips, which increase to 697 from 392 in the previous financial year.

“We remain committed to improving the performance of generation, [but] bringing new capacity on to the grid is critical.

“And with power stations reaching the end of their operational life, the gap will increase.”

Electricity utility Eskom has again highlighted the risk of load-shedding during the current winter period, during which it will rely heavily on the country’s expensive diesel-fuelled open-cycle gas turbines (OCGTs) to either avoid rotational cuts or reduce the intensity of such cuts.

Transmission MD Segomoco Scheppers again confirmed that there could be as many as 104 days of load-shedding during the period from May to the end of September, with the utility having already implemented 32 days of load-shedding from January 1 to May 11.

Such a worst-case scenario would arise should Eskom fail to restrict unplanned unavailability, or the combination of full and partial breakdowns, to below 12 000 MW, which has been set as the ‘base case’ threshold for avoiding power cuts this winter.

If breakdowns can be limited to 12 000 MW, the utility expects to operate through winter without resorting to load-shedding, while burning about R1-billion worth of diesel.

However, should breakdowns rise to 13 500 MW, there will be 37 days of rotational cuts at Stage 2 (2 000 MW) and the diesel costs would rise to R3.1-billion during the period.

At a breakdown level of 15 000 MW, the prognosis deteriorates materially to 104 days of load-shedding at higher than Stage 3 (3 000 MW) and a diesel burn of R7.1-billion.

During the most recent summer, the average level of breakdowns during evening peaks was 14 588 MW.

However, acting generation MD Rhulani Mathebula says that the performance of the coal fleet, whose unreliability lies at the heart of the current load-shedding risk, typically improves.

This improvement is partly the result of lower planned maintenance, which will be ramped down to meet higher levels of winter demand of closer to 35 000 MW, as well as the fact that several of the power stations perform better in colder conditions, especially the dry-cooled plants.

Already in the year-to-date, the utility has made expensive use of its OCGT plants to limit the intensity of load-shedding, have spent R6.4-billion on diesel during the 2022 financial year, its worst-ever load-shedding year.

The price of diesel has also surged following Russia’s invasion of Ukraine and COO Jan Oberholzer reports that Eskom is estimating that the rise will have a R15-billion to R20-billion negative impact on its costs this year.

This impact will be felt directly through its purchases of diesel to produce electricity and indirectly in the rise in coal costs, given that coal miners rely heavily on diesel to produce the energy mineral.

Scheppers reinforced that the utility’s ability to consume diesel was, thus, constrained by the group’s finances, as well as the logistical infrastructure used to supply diesel to its OCGT plants.

The utility has stated previously that these logistics constraints place a R1.5-billion-a-month cap on its diesel spend, with logistics at its Ankerlig plant being particularly constrained by the fact that it relies on road tankers for refuelling.

In other words, should the level of breakdowns rise to the 15 000 MW-type level, Eskom’s ability to lower the intensity of load-shedding through the use of the OCGT plants will be constrained in the period ahead.

Human Settlements Minister Mmamoloko Kubayi has tabled her department’s Budget Vote for the 2022/23 financial year at a time when there is rising demand for reform on housing delivery and heightened attention on the portfolio following flood disasters in KwaZulu-Natal and the Eastern Cape.

The Department of Human Settlements’ (DHS’s) budget allocation for the 2022/23 financial year amounts to R33-billion, of which R18.7-billion is allocated to provincial grants, R11.7-billion to municipal grants and R1.6-billion to Human Settlements entities.

In delivering the budget on May 10, Kubayi highlighted how the Human Settlements Development Grant Framework for the new financial year now provides for provinces and municipalities to access up to 30% of the Human Settlements Development Grant for bulk and linked infrastructure services, to help unlock some of the blocked housing projects in the country and considerably increase the scale of housing delivery in a short space of time.

The department will also start implementing front-loading in the Northern Cape and Eastern Cape in the 2022/23 financial year, which will help unlock stalled projects and increase the pace of provision of title deeds to rightful property owners.

To deal with a slow pace of delivery in the department, the DHS has established a “war room” team to fast-track implementation of projects and coordinate reporting of various entities of the department. The team will also identify strategic partners who can assist in unblocking project implementation.

The DHS intends on undertaking a scoping exercise that will include site verification and estimation of all cost implications related to the unblocking of housing projects. Kubayi confirmed that a diagnostic report would be published by the end of the current financial year.

Meanwhile, Kubayi implored municipalities to effectively deal with illegal occupation of land. She mentioned that there are about 2 700 informal settlements in South Africa, most of which are located on unsuitable land, in terms of housing emergencies.

“It is these areas that are most impacted by natural disasters, as evidenced a month ago on the KwaZulu-Natal coast.”

She referred to the flash flooding experienced in Durban and surrounds and up to certain areas of the Eastern Cape, which left more than 15 000 houses damaged to varying degrees.

During the 2021/22 financial year, the DHS published a request for proposal calling on private developers to partner with government on integrated housing projects’ development. The department received 95 proposals from individual companies, consortiums, developers and communities that own parcels of land.

Kubayi noted that announcements on Phase 1 of this initiative will be made upon the successful conclusion of public-private partnership agreements.

In the new financial year, the DHS has decided to focus on housing for mining communities and, to strengthen the department’s relationship with mining companies, will establish a framework to help guide the implementation of joint projects for housing.

Kubayi concluded her address by acknowledging the persistent title deeds backlog, and reiterated the department’s commitment to fast-tracking delivery of housing deeds by partnerships with financial institutions and the Youth Employment Service.

South Africa’s decision to sell a majority stake in the country’s loss-making national airline represents an ongoing financial risk to the state as the terms were skewed heavily toward the buyer, the National Treasury said.

The finer print of the deal that saw the Takatso Consortium take a 51% shareholding in South African Airways last year represents a “contingent liability,” the Treasury said in a document emailed to Parliament’s Standing Committee on Public Accounts that was later withdrawn.

That’s partly because Takatso -- made up of a local jet-leasing company and private-equity firm -- has the right to assess whether any ongoing liabilities in SAA be settled by the government, the Treasury said in the document seen by Bloomberg.

The emergence of the concerns came as Public Enterprises Minister Pravin Gordhan was set to appear before the public-accounts committee. Gordhan, a former finance minister, had made the removal of SAA from the state roster a key tenet of his role overseeing he Department of Public Enterprises, which also counts debt-laden utility Eskom Holdings among its responsibilities.

The terms “may result in the state providing funds in excess of its shareholding,” the Treasury said.

While the letter was withdrawn, Finance Minister Enoch Godongwana said at the hearing that the National Treasury didn’t participate in the sale process and the substance of the “letter stands.” The department declined to immediately comment further.

PLANES GROUNDED

The sale of SAA was announced in June last year after the airline emerged from lengthy bankruptcy proceedings, during which its planes were grounded for well over a year and the workforce cut by 80%. The airline, which used to serve destinations across Africa and a number of major global cities, hasn’t made money since 2011 and received state bailouts that totaled billions of rand.

“We all have the responsibility in government to reduce the guarantees and contingent liabilities,” Gordhan said in the hearing.

The Department of Public Enterprises declined to comment further.

The National Treasury said it was not consulted on the sale of the stake, which it said cost 51 rand ($3.16), and remains in the dark about a number of other agreements such as Takatso’s proposed issue of preference shares to the DPE. It’s also concerned that government guarantees on SAA’s debt remain in place, according to the document.

The finance minister at the time of the sale, Tito Mboweni, clashed repeatedly with Gordhan over SAA, maintaining the company be allowed to go bankrupt and airlines operated by private companies. He was replaced by Godongwana in August.

“The strategic equity partner may assume very minimal shareholder risk for the acquisition of a majority shareholding a the purchase price of 51 rand,” the Treasury said.

Takatso consists of Johannesburg-based Global Airways, which owns domestic airline Lift, and private-equity firm Harith General Partners.

It is just amazing to see the innovation that the mining industry is capable of scaling up, President Cyril Ramaphosa told the Investing in African Mining Indaba in his enthusiastic address on Tuesday.

“Last week, I attended the launch by Anglo American of the world’s largest hydrogen-powered mine haul truck.

“This truck will be powered by an entire ecosystem of hydrogen production around the mine itself, and I got so excited and so taken away that when Botswana President Mokgweetsi Masisi remarked on seeing the photograph of me in this massive truck that I looked like a young boy excited over a toy.

“I said to President Masisi, when I get fired from my job, I’m going to apply to go and work on this type of truck,” Ramaphosa quipped as he digressed from his keynote address which drew considerable applause.

“Yes, President Masisi, I still get excited over things like that,” he reiterated to the Botswana President, who was in the packed auditorium with Zambian President Hakainde Hichilema and Democratic Republic of Congo President Jean-Michel Sama Lukonde,

“We are keen to harness the opportunities of the hydrogen economy,” said Ramaphosa, who highlighted that the Mining Indaba is taking place at a time when the world is having to adapt to new circumstances, confront new challenges and be prepared to seize new opportunities.

“The mining industry also needs to manage the risks and potential benefits of rapid technological change, shifting market demand, climate change and geopolitical uncertainties that abound.

“After more than 150 years, mining remains a critical pillar of our economy. I often refer to it as a continuous sunrise sector of our economy,” said Ramaphosa, who drew attention to mining being a significant contributor to export earnings, an important source of foreign direct investment, while directly employing nearly half a million people.

“And we expect mining’s significance and contribution to our economy to continue growing,” he emphasised at the Indaba address covered by Mining Weekly.

Like many other parts of the African continent, South Africa was abundantly blessed with vast mineral deposits that form the basis of the most important applications used in society and economies today.

Mining companies still saw the potential in South Africa and Southern Africa, President Ramaphosa added.

At the fourth South Africa Investment Conference earlier this year, investments valued at around R46.5-billion were pledged towards mining and mineral beneficiation.

But in addition to the great prospects for South African mining, the industry also faced significant challenges.

“It is a matter of grave concern that South Africa has fallen into the bottom 10 of the Fraser Institute’s Investment Attractiveness Index rankings.

“We are currently standing at seventy-fifth of 84, which is our worst-ever ranking.

“This ranking underlines the fundamental reality that South Africa needs to move with greater purpose and urgency to remove the various impediments to the growth and development of the industry.

“We understand very clearly the need to fix the regulatory and administrative problems that have crept into the system.

“We need to clear the backlog of mining and prospecting rights and mineral rights transfer applications, put in place a modern and much more efficient cadastral system, and implement an effective exploration strategy.

“We understand very clearly the need to significantly improve the functioning of our railways, which have fallen into disrepair, and ports, which are not performing at the level that we want them to perform, and the vital importance of ensuring a secure and reliable supply of affordable electricity,” Ramaphosa said.

These tasks were, he added, at the forefront of South Africa’s economic reconstruction and recovery efforts, which he described as being now firmly underway as part of Operation Vulindlela, an initiative of the Presidency and National Treasury, working in partnership with the Department of Mi...

The Airports Company South Africa (ACSA) is implementing several emergency measures to secure a sustainable supply of jet fuel at the OR Tambo International Airport (ORTIA), in Johannesburg, and to prevent airlines from having to cancel flights because of not being able to get fuel from their regular suppliers.

Fuel supplies at ORTIA are impacted as a result of damage to Transnet Freight Rail’s (TFR’s) rail infrastructure in KwaZulu-Natal after a destructive storm on April 11 resulted in widespread flooding and damage to infrastructure.

This has resulted in some fuel suppliers enforcing force majeure on fuel supply contracts. However, not all airlines use the same fuel suppliers.

ACSA, on May 9, met with executives from TFR, the Central Energy Fund (CEF), the South African Petroleum Industry Association, the Board of Airline Representatives and the Department of Mineral Resources and Energy to develop a plan to mitigate jet fuel shortages.

ACSA CEO Mpumi Mpofu told media afterward that jet fuel supply to ORTIA was stable, with about three-and-a-half days worth of fuel currently available at the airport.

“Comfortable” stock holding of jet fuel at ORTIA is about five days’ supply, she pointed out.

Mpofu explained that while there was a jet fuel supply and demand “mismatch” at ORTIA, the issue was small and confined to only some fuel suppliers, consequently impacting only two airlines.

ORTIA was able to continue jet fuel supply to 40 other international airlines during the time of disruption.

In this regard, an international airline cancelled 14 flights between April 24 to May 1 – a situation in which 3 150 passengers were impacted. Another international airline cancelled a single flight on April 24, affecting less than 100 passengers.

To address the situation, she said a shipment of 20-million litres of fuel landed in the Port of Durban would be pumped to the refinery of the National Petroleum Refiners of South Africa at about 19.00 on May 9, after which it would be piped to ORTIA.

In addition, ACSA, together with the CEF, has developed a framework to provide as much as 1.5-million litres of jet fuel to airlines that have been impacted by force majeures being enforced by their suppliers.

A possible Plan B will see the CEF issue directives to airlines for a jet fuel swap.

Meanwhile, ACSA said TFR had informed it that rail infrastructure between Durban and Johannesburg would return to 50% of its capacity by June 9, with 100% set to be restored by the end of October.