State of the Power System

Presentation to American Chamber of Commerce

11 November 2014

Overview of Majuba Incident

Managing the Power Grid

Summer Outlook

Progress on New Build Programme

2

3

Overview of Majuba power station

Sequence of incident

Intact silo 20

and coal feed system

Major vertical

and lateral cracks

Collapse of silo 20 Damaged conveyor

and coal feed system

Situation before failure of silo

Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6

Silo 1 Silo 2 Silo 3

Coal stock-

yard

Delivery of coal

by truck and train

Online Maintenance Conveyor belts

7

Current operations – replenishment of coal stocks

Standard procedure -

deliveries to stock yards

Coal transshipped from

yards to outside plant areas

Coal delivered to silos

10 and 30

Current operations – coal feed to generating units

Mobile feeders

Front-end loaders

Delivery trucks

Recovery Project : high Level scope of work

10

Majuba Recovery Project

Immediate Interim Permanent

Two key aspects:

1. Recovery of Power

Plant Output

2. Safety of Site

(demolishment of the

unsafe and collapsed

structures)

Solution required to

maintain power plant

output whilst permanent

solution is designed,

procured and constructed

Construction of

temporary conveyor

system to feed coal from

coal stock yard to power

station units

Solution that offers long

sustainability could be

“like-for-like” or an

optimised design

Construction of full

works to feed coal

from coal stock yard

to power station units

Immediate Actions undertaken:

Project Manager is appointed

Project set-up in progress including project controls with resources

Group Technology and Group Commercial support mobilized

All other required support for the project to be mobilized as scope of work unfolds

1

2

Overview of Majuba Incident

Managing the Power Grid

Summer Outlook

Progress on New Build Programme

11

In support of 12

Power stations

Station Location Nominal capacity MW

Coal-fired stations (13) 35 650

Arnot Middelburg, Mpumalanga 2 232

Camden Ermelo 1 480

Duvha Witbank 3 450 Grootvlei Balfour 1 090

Hendrina Mpumalanga 1 865

Kendal Witbank 3 840

Komati Middelburg, Mpumalanga 791

Kriel Bethal 2 850

Lethabo Viljoensdrift 3 558

Majuba Volksrust 3 843

Matimba Lephalale 3 690

Matla Bethal 3 450

Tutuka Standerton 3 510

Any risk on the Power System could impact security of supply

1

2

3 4

5

6

Power plants

Primary energy

Transmission

substation

High voltage

transmission lines

Power

substation

Eskom customers

Usage of Emergency reserves – OCGT + Gas Usage

14

A similar level of emergency reserve usage has been required in 2014 when compared

to 2013. Slightly lower OCGT usage was required in September and October in 2014.

Usage of Emergency reserves – ILS Usage

2014/11/11 15

11

9

16

7 7

9

11

5

7

8

0

2

4

6

8

10

12

14

16

18

20

Jan

Fe

b

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Incid

en

ts

Month

IL Usage

2010 Count 2011 Count 2012 Count 2013 Count 2014 Count

Based on 01 till 02 November 2014 data

The use of ILS is coordinated with that of the OCGTs

16

Low Frequency Incidents

The number of low frequency incidents indicates the relative tightness of the system.

Operating the system at lower frequencies increases the risk of an even lower frequency

event following the loss of generation

The power system remains under pressure, requiring a range of activities to keep the lights on

A M M J J A S O N D J F

Expectations are that 3 to 4 days in every week will experience severe supply

shortages, requiring electricity to be used wisely to keep the lights on.

0

1000

2000

3000

4000

5000

6000

MW

2014 2015

Projected MW shortfalls against forecasted demand as at April 20141

1. Note that the projections are indicative only as at April 2014, and changes continually to accommodate system changes and requirements

October 2014 17 | Source: Eskom System Operator, April 2014

To enable critical maintenance to the power generation fleet during the summer,

current planning is preparing for a shortfall of 2,500 MWs over the summer period.

Currently, and into the foreseeable future, a significant contribution is required from

mitigating / alternate measures to maintain power supply

UCLF and EAF trends

1. UCLF measures the lost energy due to unplanned production interruptions resulting from equipment failures and other plant conditions

2. EAF measures plant availability, plus energy losses not under the control of plant management

18

Actual Annual year-end target

Unplanned capability loss factor (UCLF1) %

12.6 12.1

Energy availability factor (EAF2) %

Demand Side Management

IDM cumulative performance over time (Measured and Verified savings provided for annual report 2013/14)

These verified savings do not reflect

demand response or demand market

participation impacts

Cumulative demand

savings (MW)

Cumulative energy

savings (GWh)

90

16

2

43

2 10

82

19

99

23

71

27

25

30

72

35

31

39

41

12

6

28

5 1

00

4

26

56

43

43

49

06

62

40

75

90

94

17

10

78

0

0

2000

4000

6000

8000

10000

12000

2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

We are making a difference

Demand Response Products (continued)

Emergency DR Fixed Time DR

Emergency Reserves Operational Reserves

When needed during emergencies Only for three Winter months

On the day or day ahead e-mail

notification Daily SMS reminder notification

30 minute integration metering 30 minute integration metering

Number of events, participant’s

availability dependent One Event per day

Reduction measured against average of

previous 3 similar days (CBL)

Reduction measured against previous

winter weekdays profile

Performance measurement over 30 min Performance measurement over 30 min

Performance linked Energy Payment for

load reduction at R1250/ MWh

Performance linked Energy Payment

for load reduction at R1250/ MWh

22

Illustration of typical RESERVE deployment order

Em

erg

en

cy

RE

SE

RV

E M

AR

KE

T

Em

erg

en

cy

red

ucti

on

NR

S 0

48-9

Incr

eas

ing

“Tig

htn

ess

” o

f Su

pp

ly

Stage 4

Load shedding and curtailment ( Stages 1& 2 )

Curtailment ( Stage 0 )

Load shedding and curtailment ( Stage 3 )

Supplemental DR

Op

era

tin

g

Automatic Gen Control (AGC)

Instantaneous DR Instantaneous

ENERGY MARKET

Interruptible Load

Agreements

Max cont. rating/Emergency Level 1

Self Generation DR (Hi Rate)

Self Generation DR (Low to Medium Rate)

Open Cycle Gas

Turbines

2014/11/11 23

Impact of renewable generation

Ensuring adequate power capacity to supply peak demand periods and shortfalls is expensive

OCGTs, the demand response programme (DR) and Power Alert are currently the

primary measures used to address the country’s power needs during peak demand

periods

Typical daily load profile1

October 2014 24

Note 1. Indicative profile only. Source: IDM data framework and IEP planning (Andries Gildenhuys)

Note 2. Source: Minister of Public Enterprises as published by Engineering News. http://www.miningweekly.com/article/eskom-weighs-gas-options-as-

diesel-costs-double-to-r105bn-2014-07-11; http://www.engineeringnews.co.za/article/the-case-for-a-time-of-day-tariff-for-biogas-2014-08-25

Note 3. Source: IDM programme manager for supplemental DR

Note 4. Media and operational spend (Mediashop), Impact data (M&V report) for June 2014

OCGT2: ~R3.00/kWh

Communication = a cost competitive (short term) component of the response to the

supply challenges, with limited impact on the economy compared to alternatives

Power Alert 4: R1.85/kWh &

R 0.14 million/MW

DR3 : R1.25/kWh (supplemental)

IDM : R 2 million/MW DR Additional considerations. Economic

impact of constraining business sectors;

Revenue losses; sustainability concerns related

to continued use of already fatigued key

customers. 1,000MW signed up.

Additional considerations. Environmental

implications of diesel, cost of supply exceeds

revenue; OCGTs are also run beyond initial design

capacity shortened lifespan and increased

maintenance costs

Additional considerations. Revenue losses,

Limited economic impact in residential sector;

Sustainability of energy awareness

Time of the day (hours)

2 24 4 6 8 10 12 14 16 18 20 22

Ele

ctr

icit

y d

em

an

d

(Me

ga

wa

tts)

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

OC

GT

DR

PA

Costs (R/kWh)

1

2

3

1 2 3

1

2

3

Overview of Majuba Incident

Managing the Power Grid

Summer Outlook

Progress on New Build Programme

25

Summer profile

• Summer poses a different challenge as the profile looks flat and our planned maintenance (PCLF) increases significantly compared to Winter

2014/11/11 26

22000

24000

26000

28000

30000

32000

34000

00:0

0

01:0

0

02:0

0

03:0

0

04:0

0

05:0

0

06:0

0

07:0

0

08:0

0

09:0

0

10:0

0

11:0

0

12:0

0

13:0

0

14:0

0

15:0

0

16:0

0

17:0

0

18:0

0

19:0

0

20:0

0

21:0

0

22:0

0

23:0

0

Summer points to note

• Table Mountain profile

• Constrained all day incl. from 6am - 10pm

• Air-conditioning, geysers & pool pumps

primarily impact demand

• Commercial, agricultural & residential customers

can make the biggest difference

Constrained all day

27

Outlook for summer

• The system remains tight in summer, with different challenges due to the summer load

profile

• Unlike winter, where the demand increases significantly during the evening peak (5pm -

9pm), the demand profile during summer is much flatter with an increased demand

profile throughout the day.

• This is because of a relatively high percentage of almost constant industrial load and the

impact of air conditioning in the commercial and marginally in the residential sector

during the day. The significant residential component over evening peak is not as

evident in summer. If there is a constraint, the system is constrained all day

• Summer is typically maintenance season, but this summer maintenance will increase

based on the generation strategy as most of the maintenance is fixed and cant be

deferred.

• The challenge is to ensure that there is sufficient generation capacity throughout the

day, as we continue with our maintenance plan and focus on reducing unplanned

outages

• The degree of tightness will depend on the performance of the plant and the level of

unplanned maintenance (UCLF) as well as the available capacity

• Eskom will not compromise its generation plant and will load shed if necessary to

protect the power system from total collapse.

Priority Summer Risks

Variability increases due to the following risks:

• Increased full and partial load losses:

• High vacuum load losses, especially at Matimba:( >1000MW).

• Deteriorating coal quality impacting on plants ability to reach full load.

• Wet coal

• Below minimum coal stock days

• Outage management capability and quality

• Increased outage durations due to scope creep or outage slip

• High post outage UCLF

• Insufficient diesel levels to run OCGTs and fuel oil levels

• Continuous heavy rain

• Unreliable availability of supply from HCB

28

29

Projected System Outlook

Hi Peaks &

Volatility

Overview of Majuba Incident

Managing the Power Grid

Summer Outlook

Progress on New Build Programme

30

• ~ 17.4GW of new capacity (6 137MW installed and commissioned) • ~ 9 756 km of new transmission network (5 629.9km installed) • ~ 42 470 MVA of new transmission strengthening (27 655MVA installed)

31

New Generation Capacity and Transmission Lines Leading and partnering to keep the lights on

Un

der

co

nstr

ucti

on

In

develo

pm

en

t

Return-to-service

(RTS) Base load

Peaking and

renewable

Mpumalanga

refurbishment Transmission

• None • Nuclear New Build Programme

• Next Coal (Coal 3) • Biomass • Majuba Underground Coal

Gasification Demo Plant (UCG)

• Primary Energy projects (Road and Rail)

• Pilot Concentrated Solar Power (100 MW)

• Open Cycle Gas Turbine Conversion Project – conversion of Ankerlig and Gourikwa OCGT power plants to a Combined Cycle Gas Turbine (CCGT)

• Photovoltaic (own use)

• Refurbishment and air quality projects

• >60 Grid strengthening projects

• Komati (1 000 MW) • Camden (1 520 MW) • Grootvlei (1 180 MW)

• Medupi (4 764 MW) • Kusile (4 800 MW)

• Ankerlig (1 338.3MW) • Gourikwa (746 MW) • Ingula (1 332 MW) • Sere (100 MW) • Acacia relocation • Solar PV installations:

MWP, Lethabo, Kendal (1.62 MW)

• Arnot capacity increase (300 MW)

• Matla refurbishment • Kriel refurbishment • Duvha refurbishment • Grootvlei Fabric Filter

Plant (FFP) • Kriel Retrofit

• 765kV projects • Central projects • Northern projects • Cape projects

Medupi is the first coal-generating plant in Africa to use supercritical power generation technology

3 700 MW 9 564 MW 3 517.92 MW 300 MW 9 756 km

1. Date moved out after the accident at Ingula end October 2013

Synchronisation of the first units are expected as follows:

• Medupi in the second half of 2014

• Kusile in the first half of 2016

• Ingula in the second half of 20151

32

Unit 6

Unit 4

Unit 5

Unit 3

Unit 2 Unit 1

Medupi Power Island - 2009

33

Medupi Power Island - 2014

▪ Boiler Chemical Clean on Unit 6 was completed ahead of schedule on 21 August

2014.

▪ Unit 6 Turbine on Barring achieved on 30 August 2014;

▪ C&I Site Integration Test (SIT)/Site Acceptance Test (SAT) completed ahead of

schedule on 04 September 2014 ; and

▪ Draught Group Test Run commenced on 07 September and will run for 12 days.

▪ Other activities continue to support the December 2014 synchronization date.

▪ Construction progress in critical areas was hindered due to the industrial action of July

2014, with labour attendance of 40% - 70% during the period

▪ The workforce is back on site

▪ Through risk mitigation plans and re-assignment of available resources, the target for

First Unit (Unit 6) synchronization remains December 2014

▪ Additional resources have been mobilised to Unit 6 by both the boiler contractor and

control and instrumentation (C&I) contractor to mitigate any resource-driven delays

▪ Similarly, additional shifts have been introduced 24 hours a day, 7 days a week to

accelerate progress on site

▪ Eskom is working with contractors to resolve any issues which could affect the

schedule.

Industrial

Action Impact

First Unit

Synch

Mitigation to

achieve First

Synch in Dec

2014

34

Medupi Power Station

Kusile Power Station Project Description: Supercritical, coal-fired power station Location: Witbank, Mpumalanga Capacity: 4,800MW (6 x 800MW)

35

▪ The boiler contractor improved boiler construction progress from 0.48%/week (March

2014) to 0.74%/week

▪ Further improvement by the boiler contractor is required to achieve the target date and

Eskom is addressing this

▪ Eskom continues to work with the control and instrumentation (C&I) contractor to ensure the

contractor supports the target synchronization date

▪ Eskom has also implemented additional measures to mitigate schedule risk associated to C&I.

▪ Priority areas were defined for 2014 in order to support the First Unit (Unit 1)synchronization

target date

▪ Stringent tracking process and recovery plans have been established by Eskom, together

with contractors, to recover the schedule, where required, and achieve synchronization by

January 2016

▪ A commercial strategy has been defined to increase contractors’ resources and improve their

performance

▪ In addition to the protected strikes from Metal and Engineering contractors, Eskom

experienced unprotected industrial action from Civil contractors during July 2014

▪ Disciplinary action, against Civil contractors whose workers caused disruptions, has been

taken

▪ Resources were transferred to Project Medupi in order to support Medupi’s recovery plan

▪ The workforce is back on site

Industrial

Action Impact

First Unit

Synch

Productivity

Challenges

36

Kusile Power Station

Ingula Pumped Storage Scheme Project Description: Pumped storage scheme Location: Van Reenen, KwaZulu-Natal Capacity: 1,332MW (4 x 333MW)

37

Many industries have the potential to generate energy from waste products and processes

| Source: http://www.igsgeneration.com/distributed-generation/ 38

Thereby (partially) displacing the need for power to be supplied from the grid

May 2014

Conclusion

• The system remains tight this summer, requiring the use of costly open cycle gas turbines to ensure secure supply of electricity

• Maintenance of power stations will not be compromised

• Eskom is managing the tight electricity supply to protect the integrity of the power system, and will therefore implement load shedding only if necessary, to protect the system from a devastating country blackout

• Unlike winter, in summer, the system is tight all day up to 10pm, due to the flat “Table Mountain” profile

• We thank customers for beating the peak in winter and continue to ask you to ‘Live Lightly’ in summer as the system will be tight all day due to the flat load profile

• Eskom is on track to achieve first synchronisation of Medupi Unit 6 at end of December 2014, with full power expected in the first half of 2015.

39

Less is more - Live Lightly

• Saving electricity reduces pressure on the grid and cuts your electricity bill and South Africa’s carbon emissions

• The power system remains vulnerable all day during Summer

1. Use air-conditioning efficiently

- Set air-conditioning at 23 degrees

- Close windows and doors to optimize conditioning

- Switch off 30 minutes before leaving the office

2. Switch off all geysers (during the day – until 9pm) and pool pumps all day until 9pm, invest in a timer

3. If you use the pool frequently, limit pool filtering cycles to 2 cycles daily, not between 5pm & 9pm

4. Switch off all non-essential lighting

5. Respond to the Power Alert messages by switching off all appliances that are not being used

40

Thank you