Founder: Turnaround Talk
In the realm of business rescue and business turnaround, a company exits business rescue (a situation of financial distress) when it proves to be profitable once again. Key to this is increased efficiency or profitability of its operations.
Eskom has long been criticised for the fact that the company is in the state it is in, given that the company only has one product that it supplies to the country. Inefficiencies caused the Energy Crisis and has seen the demise of more than one of the company’s executives. An explosive interview with former CEO Andre de Ruyter forced the Government’s hand when it realised it could no longer ignore the problem. A task force was put in place, a plan was devised, and a new sheriff (Kgosientso Ramokgopa) was brought in to oversee the company’s turnaround.
Those living outside the ambit of the City of Johannesburg have not had loadshedding for more than 100 days. This is a massive turnaround for a company that was switching off the lights for up to nine hours a day in some periods. What is behind this turnaround?
Big cut in diesel use
Notably, Eskom has achieved this turnaround without burning more diesel than last year.
Rumours and conjecture ahead of the elections at the end of May suggested that Government had been burning tons of diesel as a ploy to garner votes. This has been disproved by Eskom.
Until the first week of August, it has spent just R3.5 billion on diesel for its open cycle gas turbines (OGCTs), nearly a full R10 billion less than the same period last year. The load factor for the OCGTs for the financial year thus far is hovering around 5%, compared to an astonishing four times as much (20.6%) over the same period.
Also significant is that Koeberg Unit 2 (around 950MW) remains offline for its steam generator replacement. Also outstanding is regulatory approval of its extension of life. The unit is scheduled to return to service in September, which will give Eskom headroom for additional maintenance in the summer months.
Image By: Supplied
Coal fleet’s ‘impressive’ performance
Central to the turnaround, however, has been fixing the performance of the coal fleet.
This has reduced unplanned breakdowns to the 10 500MW level (on average). Its energy availability factor (EAF) in July was 67.41% — an impressive performance considering it was more than 10 percentage points lower in the same month last year.
Since April, the EAF has increased to 63% from 55% over the same period in 2023.
In the first week of August, nine of its coal stations achieved an EAF of above 60%, with five of these exceeding 70%.
Five of the nine stations were on the priority list in its recovery plan.
Tutuka, one of its ‘most broken’ coal power stations, has seen its performance improve dramatically. Ramokgopa said, “From March to August, the unplanned capacity loss factor [UCLF] has reduced by 29%.”
“That’s significant from where Tutuka started; they’ve moved from 2 411MW to 949MW.”
Read: The shocking performance of Eskom’s three worst power stations [Mar 2024]
There have been similar improvements at Kendal and Kriel, with unplanned outages reducing from 2 500MW to 900MW and 1 400MW to 500MW, respectively.
Image By: Simon Hurry via Unsplash
More planned maintenance
The strong performance has enabled Eskom to perform more planned maintenance than planned. This is sitting at about 5 500MW, from the less than 5 000MW it anticipated. So far in this financial year, its planned outage factor is at nearly 13%, versus 11% for the same period in 2023. This will ramp up as it historically does most of its maintenance in summer.
Eskom will receive a further boost with the synchronisation of Kusile Unit 6 (800MW) and the return to service of Medupi Unit 4 (800MW). The latter exploded a month after the power station’s ‘official’ completion in 2021. A replacement generator was sourced in the Netherlands last year and arrived in March. Once Unit 6 at Kusile achieves commercial operation, that station will also finally be complete.
Eskom will share its forecast for summer in the coming weeks. Based on its current performance, we should expect good news.
Effective leadership
Ramokgopa recently told the media that the numbers indicate that we are within touching distance of permanently ending load shedding. The Eskom issue is a perfect case study about the value of strong (decisive) leadership.
President Cyril Ramaphosa took a significant gamble in creating the Ministry of Electricity in an already bloated cabinet. But his next move was even more telling. Ramaphosa dissolved the Ministry of Public Enterprises and removed energy from the Ministry of Mineral Resources. Eskom went from having three ministers and a President calling the shots to one minister and the President. For South Africa, this is a seismic shift! And to his credit, Ramokgopa is currently proving he is more than competent at his job. Emphasis needs to be placed on currently because his second rubicon moment will be his ability to gravitate towards renewables.
But let’s stay on the leadership tangent. If Eskom is becoming a perfect case study in the value of strong leadership, Johannesburg is becoming a case study in the dangers of weak leadership. The ANC lost the metro in the 2021 municipal elections. Since then, the city has had six mayors (one was recently re-elected) in a period of three years. Infrastructure in the country’s economic hub is crumbling, with residents and businesses having to live with load reduction, which is load shedding in a different disguise. Businesses cannot continue to face a future of uncertain energy supply.
Let’s learn a leadership lesson from the Eskom turnaround. Who would have thought we would blow this trumpet a few months ago?
We live in interesting times.
