SA Treasury releases damning independent assessment of operations at Eskom’s coal-fired power stations

• South Africa’s National Treasury has finally released a report compiled following an independent assessment of operations at Eskom’s coal-fired power stations.
• The investigation finds that the management system with its governance, structure and processes is dysfunctional and too complex plus Operation and Maintenance (O&M) must be improved and conducted according to industry standards.

National Treasury commissioned VGBE consortium consisting of Dornier, KWS, RWE and Steag, to conduct the independent assessment and compile a report. The assessment was conducted as part of conditions attached to the R254 billion debt relief arrangement for Eskom and some of the findings will be incorporated into Eskom’s 2024/25 Corporate Plan.

National Treasury commissioned the independent assessment of all Eskom coal-fired power stations to obtain an in-depth understanding of their operational challenges. It is hoped that the findings and recommendations will assist in strengthening Eskom’s corporate plan and continue to support the turnaround at Eskom.

The report was handed over to the National Treasury and Minister of Finance in September 2023. Over the last few months, various government and Eskom stakeholders were given time to adequately engage with the report prior to its release.

The scope of assessment comprised a review of the operational situation of the coal fleet, an assessment of the power plant maintenance budgets, a skill-level assessment of power plant personnel, as well as a transmission grid assessment.

The VGBE team visited all the 14 Eskom coal-fired power stations and engaged with affected departments.

The report is damning of Eskom’s operations

The main objective of the coal fleet investigation was to find out reasons for the low Energy Availability Factor (EAF) of the coal fleet – 50.83% as of April 2023 – and to develop measures to improve the situation.  The EAF international bench-marks are in the range of 78%. The study finds that most of the issues relating to the low EAF can be at-tributed to a single root cause, namely:

‘The management system with its governance, structure and processes is dysfunc-tional and too complex’.

Specifically the study finds that:

• There are too many organisational layers and opaque decision-making processes generate a tremendous amount of red tape, with lengthy procedures and a lack of accountability. In many cases the decision-making is delegated to committees, of which there are too many at all levels of the hierarchy.−
• The coal fleet is managed centrally, and very limited authority is given to the plant management. The plant management has to follow complex procedures and is there-fore unable to manage day-to-day operations and maintenance challenges in a timely and effective manner.
• Eskom generation has been trapped within this complex management system for so long that it is no longer able to maintain or improve the technical performance of the coal-fired power plants.
• Although the problems and their solutions are known, the Eskom management has not been able to implement appropriate measures in a sustainable and successful manner. The solutions can be summarised in one sentence: ‘Operation and Maintenance (O&M) must be improved and conducted according to in-dustry standards.’

Skill level

The report found that at manager level, the majority of management showed a high degree of theoretical knowledge. This was also reflected in the results of the written assessment, with an average score of 78% (pass mark 50%). With regards to practical knowledge, however, the picture was very different. With regards to implementation of projects and measures, opinions and knowledge varied considerably. Differences in opinions were particularly visible between plant management and management at headquarters. This lack of agreement makes the implementation process even harder than it already is.

A proper assessment of skill levels with non-management staff could not be carried out because it was strongly resisted by the unions right from the start. It was not really accepted by the plants and was not communicated correctly. The study finds that the poor uptake of the assessment also reflects and reflects the unwillingness to cooperate with central HR.

The report goes into detail describing the operations situation in each of the 14 coal fired power stations.

It is important to note that the report reflects Eskom’s operational situation during the period of the technical assessment, which is March to May 2023.

Link to the full report HERE: VGBE Eskom Report

Author: Bryan Groenendaal