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Eskom Presentation to Portfolio Committee on Public Enterprises

Eskom Presentation to Portfolio Committee on Public Enterprises. Job Creation and Skills Development Initiatives Progress Update Presentation 28 June 2011. Executive Summary. Progress to date. High level comments. February 2011 Position.

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Eskom Presentation to Portfolio Committee on Public Enterprises

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  1. Eskom Presentation to Portfolio Committee on Public Enterprises Job Creation and Skills Development Initiatives Progress Update Presentation 28 June 2011

  2. Executive Summary Progress to date High level comments February 2011 Position • Providing 10335 young people with skills development Overall Skills Development • 8008 achieved to date – overall on track to achieve targets Supplier engagement identified as a critical point and is currently being pursued • To date a total welder requirement of ~ 1300 – 1500 welders identified for current and future needs • 100 trainee welders enrolled • Introduce welding institute and train local welders Welding Skills Development Eskom now accredited by the relevant bodies to ensure a roll out of accredited welder training • Collating data for Q1 • Create 100,000 jobs Job Creation Data for job creation is collected from a numbers of sources and is collected from a number of sources • Embedding BBBEE, CSDP, localisation into procurement process • Procurement opportunities amounting to R 186bn have been identified and these will drive key NGP imperatives Localisation Consistently drive the achievement of localisation agenda across identified areas

  3. Eskom will invest significantly to strengthen the energy sector • New build programs • Medupi • Kusile • Ingula • Networks • Gas • Nuclear • = R 308 bn1 Accelerating universal access = R 18.5 bn (2010-15) *Funding still to be found Support solar geyser program = R 3.5 bn (2010-15) Support IPPs Eskom Strategic Initiatives (EAL, SD & SSU) • Growth of renewables • Biomass • Solar2 • Wind • Waste • = R 7.4 bn (2010-15) Eskom today • R&D • UCG • = R 0.8 bn • Growth related to mining • Coal mining projects • Water pipeline • Road maintenance • Majuba rail link (R 4.9 bl) • Mpumalanga rail development (R 2.2 bl) • Waterberg link • Strengthen existing asset base • Boilers • Turbines • T&D networks • IT • = R 48.4 bn (2010-2015) • Supplier Development and Localisation key focus areas • IDM programme • Line and substation construction • Professional services • Fabric filter bags • Cables and conductors NOTE: The co-ordination of these initiatives will be done by the Delivery unit reporting to the Chief Executive 1 Gas not included, until completion of projects, nuclear until 2015 2 Even stronger ties with IDC to be forged this year, likely to identify a number of areas to collaborate (eg solar water heaters and supplier support)

  4. Eskom plan for youth initiatives, programme and set-aside portions Welding institute Provides an internationally recognized certification, boosts ongoing skills development and reduces foreign exchange losses (hiring foreign welding personnel) Power Plant Engineering Institute In partnership with local university and global companies to teach power plant engineering skills Growing the expertise Growing the youth Youth opportunities set-aside Supply of PPE IDM initiatives Bush clearing and vehicle washing Building in Medupi of: - Creches - Community halls - Lapa • Youth program for non-graduates • Turning non-graduates into skilled artisans Eskom leadership institute Upgrading Eskom management skills creates more job opportunities through increased leverage, better identification and effective execution of business opportunities Up-skilling program for unemployed graduates Creating apprenticeship for up to 2,500 young graduates

  5. Progress to date – Total Learner Pipeline • Note: *Previous financial year Learner Pipeline Shareholder commitment • Eskom has extended its bursary programme in support of NGP and projection is to achieve targets set by the Shareholder by year end. (currently 6563 in learners in the total pipeline) • Number of solar water heater installers is reported in Youth 1 programme

  6. Progress to date – Apprentices enrolled Note: Eskom needs to increase its intake of mechanical & control instrument type apprenticeships – this is planned during the third quarter of the financial year

  7. Progress to date – Apprentices qualified • Note: • The Eskom apprenticeship programme take 3 years and intake in year one • will only qualify in 2014.

  8. Progress to date – Engineers employed Note: Eskom needs to employ 800 engineers from its engineering pipeline The shortfall of 189 will be employed in the last quarter of the financial year

  9. Channel Deployment Mechanisms for Eskom Strategic Youth Development Initiative (SYDI) 9

  10. 2500 Graduates - Youth programme (SYDI) • Note: • Progress very dependant on engagement and agreements with Supplier network to take on additional learners • Securing of funding

  11. 2500 Matriculants – Youth programme (SYDI) Note: * Solar water heater installer in greater demand

  12. Challenges experienced in meeting targets • Funding for Youth Programmes • Engagements internally are underway to ensure allocation of budget allocation for ramp up costs • Supplier network sensitisation in order to ensure optimum buy-in • Project lifecycle (some projects already coming to end of term) • Misalignment between the project lifecycle and the potential training commitment (e.g. 3 year apprenticeship vs. one year/short term contract) • Supplier network capacity to absorb/host 5000 unemployed Youth 2014-10-29 12

  13. Eskom’s demand for welding skills

  14. Different kinds of welding exists within Eskom and the broader industry Eskom has large demand for highly skilled welders… …requiring qualification according to international codes • Ongoing maintenance and outages for existing power plants • Construction of new power plants (Medupi and Kusile) • Both these application use highly technical welding processes. Including Tungsten Inert Gas (TIG), Manual Metal Arc (MMA), Metal Inert Gas (MIG) • Eskom applications require highly skilled welders given amongst others, the difficult welding positions • Power stations are built to international design codes • Eskom welders must be certified in accordance with the applicable code – ‘CODED WELDER’ • Requirements to employ welder – certification across multiple welding types and processes, and pass code requirement test for all weld types

  15. Eskom requires 1300-1500 coded welders for ongoing maintenance and new build construction ROUGH ESTIMATES Eskom demand over next 3-5 years Number of welders Productivity and quality requirements 1,300- 1,500 • Productivity of ~16 welds per day required • Quality level of <2% repair rate required • Current productivity of local welders at ~3-4 welds per day* • Current quality of local welders at >10% repair rate* 300- 500 Ongoing maintenance Medupi Kusile Total

  16. Eskom has started an internal Welding Institute to train new welders Clearly defined concept developed Objective of Eskom Welding Institute • Create a sustainable welding skillsbase in Eskom to achieve world-class welding performance • Identify and recruit welders/welding candidates • Develop a welding training curriculum • Train welding personnel to meet Eskom’s demand (and South Africa in the long term) using welding training institute • Clear value proposition to multiple stakeholders • Eskom - reduced production losses and re-weld costs • Trainees - route to acquiring a university degree and an internationally recognized certification (retention strategy) • South Africa - boost ongoing skills development and unemployment reduction and reduce reliance on foreign skills • 100 welders to be trained this year and for a further 6 years* • Apprenticeship training programme with minimum two year duration but may be extended to three years • ~15% of welders emerging will be selected to fill critical supervisory positions within Eskom • Balance available to general industry With first intake already started • Eskom has been accredited as an International Institute of Welding Approved Training Body • Eskom has formed an association with the Southern African Institute of Welding for support and assessment of trainees • 100 welders currently in training * Resulting in 700 welders in total, contributing to Eskom’s commitment to develop 10,000 learners

  17. First class of 50 welders at Eskom’s Welding Institute

  18. Challenges experienced in meeting targets Current situation to meet demand • Current Generation outage programme, requires 25-30% foreign welders to execute required scope of work (70-75% local welders) • New build construction (Medupi and Kusile) requires ~75% foreign welders to meet construction schedule • Failure to meet welder demand would result in non-completion of critical maintenance tasks, impacting on current plant performance • Failure to meet welder demand at new build sites could potentially lead to late completion of Medupi and Kusile, with resultant impact on reserve margin

  19. Job creation and local development

  20. In this context Eskom has a proven track recordon skill building and job creation Medupi Kusile Ingula • On site construction • Supporting project staff • Coal mine expansion • Transmission expansion • Crocodile River expansion • Ongoing operations • Subtotal • Social services and local business • Total employed 8,300 2,200 2,100 2,700 3,000 700 ~19,000 1,700 20,700 7,200 2,000 2,000 200 600 ~12,000 1,700 13,700 4,100 300 100 ~4,500 1,100 5,600 Direct Indirect Jobs created by Medupi, Kusile & Ingula ~ 40,000 Other projects such as 765 kV and RTS provide ~11,000 direct employment opportunities during construction and a further ~1,700 during operation

  21. Procurement focus areas that will drive socio-economic development imperatives over the next 5 years Estimated value Rbn Identified local development opportunities Project value Project • IDM1 – Energy reduction projects. Three programmes – Performance Contracting, Residential Load Management (RLM) and Demand Response Acceleration (DRAcc) program . 2.7 • Smart Metering - to industrialise in manufacturing of smart meters based on volumes. • Demand Response - EMEs2 , job creation and possible technology development through DST. • Performance Contracting – skills development and job creation. • Line and Substation construction – Construction of the transmission lines and substations. Focus on tower and structure steel. 120 • Potential to create a competitive steel fabrication industry that might prevent an industry from closing down completely, whilst allowing possible exports into Africa. • Professional services 1.25 12.75 • Phase 1 – placing learners with existing contracts • Phase 2 – embedding job creation targets on all new contracts • Filter bags - The initial projected capital spend of ~R6bn on the replacement of Electrostatic Precipitators represent a fraction of the life-time spend on actual filter bags. 273 • Filter bags locally stitched as a minimum. Other opportunities include filter bags made of locally needled and developed fibre. This will assist in reviving the local textile industry 1 Integrated Demand Management Programme – Smart Metering (R240m), Demand Response (R2bn) and Performance Contracting (R500m) 2 EME - Exempted Micro Enterprise 3 Based on projected spend from 2012– 2027 as detailed in the Group Capital Projects Plan 21

  22. …continued Identified local development opportunities Project/ commodity Contract value • Cables and Conductors 7.5 • Foster development of scarce skills in this industry and assist local black supplier to increase capability and capacity • Fuel Oil • 100% local content , skills development and job creation 7.5 • Liquid Fuel 1.5 • 100% local content. Contract awarded to Black Owned and BWO suppliers • Fleet - supply of fleet vehicles 1 year contract 0.7 • Local content (60%), skills development and job creation • Wind - Sere 2.5 • 100% of unskilled and semi skilled labour will be sources locally. Skills transfer will also be persuaded • Black suppliers and job creation • Properties (Facilities) - Building Eskom regional offices. 1.0 • Coal supply 1.5 • 100% local content, skills development and job creation. 22

  23. Challenges experienced in meeting targets • Eskom recognizes an import leakage could occur due to: • Requirements of the funding institutions like World Bank or other development funding institutions • Concerns about quality, reliability or costs when sourced locally • Educational environment has to support growth (number of graduates and artisans, quality of education, integration of SOEs) • Funding of the youth program still to be resolved in collaboration with SETAs, SOEs etc. • Environment should be favourable for localisation and industrial development (e.g., space, infrastructure, financing, policy) • Incentives to maintain employment in SOEs have to be in place as retention will become an issue and job markets become more and more global • Government will play an important facilitation role in job creation and localisation through • Policy making • Fostering collaboration through SOEs

  24. Please partner with us • Embrace energy saving as a national culture, joining the global journey towards a sustainable future • 49M campaign aims to create a culture of energy efficiency in SA • Remember the three Ps: save power, save your pocket and save our planet . If you’re not using it, switch it off!

  25. Thank you

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