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Powering The FuturePowering The Future

Powering The FuturePowering The Future

In late 2013, civil engineering group Esor Limited, then called Esorfranki, sold the geotechnical division to Keller for R578 million. The streamlined group now focuses on civil engineering and pipeline developments. We spoke to CEO Wessel Van Zyl to discuss the effects of this move and to find out more about their flagship civil project, the Kusile power station.

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As one of South Africa’s benchmark

civil engineering and construction

groups, Esor has faced a lot of

challenges in the past year.

“Starting January 2014, it was a completely

new company. We sold about 33% to 35%of

the company through the disposal of the

Geotechnical business and we changed our

name back to Esor. So yes, it is quite a

different company to the one of the past

decade when we were Esorfranki,” says Van

Zyl.

“We finalised the loss making legacy N4

Mooinooi road contract, where we reported

a loss ofZAR150 million. With group

revenue of about ZAR1.6 billion, this

equated to approximately 10% of revenue,

putting working capital under pressure.

However, as a diversified company the

pipelines, pipe-jacking, building, civils,

earthworks, and other divisions stepped

up to the plate.”

Half way through 2014, Esor made some

changes at board level. When the company

listed on AltX, the alternative index to the

Johannesburg Stock Exchange, in 2006, its

non-executive directors were already in

their late sixties and well experienced

business people.

“It is good to rely on the wisdom and

experienceof directors who have seen a

number of business cycles. But it meant

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that nine years later they were looking to

retire,” explains Van Zyl. “They all

committed to remain in office until the

finalisation of the Franki sale to ensure a

smooth transition.”

As part of the board shuffle CEO Bernie

Krone stepped down from his executive

position and was appointed as Chairman.

Van Zyl, chief financial officer at the time,

took his place as CEO. “This was a natural

progression from a succession plan which

had been discussed when I joined in

October 2012.”

Thiswas also a big year for Esor’s flagship

civil project, the Kusileterrace underground

facilities works contract. “We settled on

some claims dating back to March 2011,

particularlyrelated to disruptions, delays

and changes. We successfully finalised the

claims in October 2014 and received

settlement in November 2014,” explains

Van Zyl.

Kusile, a coal-fired power station in the

Mpumalanga province, is owned by Eskom

and is set to consist of six 800MW units,

giving a total capacity of 4800MW

andmaking it one of the largest coal-fired

plants in the world.

The plant is due to be commissioned

during 2015 with first fire expected the

same year. While there may be protests

over the environmental impact of a coal

“ When you want to grow your economy and you want to attract investment, you need power. So these projects are essential.

“

fired plant, it is hardto deny that South

Africa is desperately in need of additional

capacity given the growth potential and the

frequency of outages.

“It’s something thatis imperative for South

Africa. The power infrastructure needs

additional capacityand the current

investment in coal and renewables is to get

it back up to where it should be,” says Van

Zyl.

“When you want to grow your economy and

you want to attract investment, you need

power. So these projects are essential.

Wind, solar, they’re all good initiatives, and

they give you back-up, but they don’t give

you the 4800MW that the coal power does,”

he continues.

“Three or four years ago, South Africa was

ready to investigate and possibly invest in

nuclear as an alternative for base load, but

the whole process was halted after what

happened in Japan. And now there’s talk

again about nuclear — about having a mix

between nuclear, coal, and sustainable

wind and solar. That’s a good solution. At

the moment, South Africa is heavily reliant

on coal as the main source for power

generation. That’s where we are.”

“You need to constantlywork at

relationships with your clients, as we’re

still working on Kusile for another two

years, so there’s no point in a broken

relationship. You both have to work at it.

We’ve been looked after by Eskom through

a predictable payment cycle, and we’re in

the process of trying to settle all the issues

we’ve had.”

As for the year to come, Esor is anticipating

a period of recovery and increased stability,

as South Africa continues to recover from

the global financial crisis.

“The whole world went into crisis in 2008,

but because of the 2010 Soccer World Cup

and all the related construction in South

Africa, we held out until about 2011 before

the full impact was felt in the local

construction industry. As an industry we

were therefore somewhat protected

through the work on hand, but then in

2009, Eskom experienced severe power

supply problems that further impacted

negatively on the construction industry,”

says Van Zyl.

“Between 2008 and 2011Esordoubled in

size. However in 2011 everything in our

sphere came to an abrupt stop,” he

continues. “My big challenge this year is to

restructure the group to the size that it

should be. Let’s just consolidate a bit and

see what we are, who we are, what appetite

we have, and how big we can be. It comes

with a bit of pain, going into a

restructuring process, but things change.

And it will give us stronger footing as a

consolidated group.”

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Physical Address

30 Activia Road

Activia Park

Germiston

Postal Address:

P.O. Box 6478

Dunswart

South Africa

1508

+27 11 776 8700Tel:

+27 11 822 1158Fax:

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