Capex Presentation

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Information about Capex Presentation

Published on February 14, 2008

Author: Stefanie


PRESENTATION TO THE PORTFOLIO COMMITTEE: 1 PRESENTATION TO THE PORTFOLIO COMMITTEE PROGRESS ON INFRASTRUCTURE INVESTMENTS CAPE TOWN 14 JUNE 2006 Overview: 2 ASGISA INITIAL VERSUS REVISED INVESTMENT PLANS ESKOM TRANSNET KEY RISKS WAY FORWARD Overview Slide 3: 3 Infrastructure Investment - History After a protracted decline in investment spend, government plans to increase infrastructure investment significantly Increased Investment Required : 4 Increased Investment Required In order to achieve the growth targets, gross fixed capital formation will need to comprise 25% of GDP per year by 2014 – this will require growth in investment by about 10% per year. Starting the present Transnet / Eskom investment spend at R22.8 billion (based on an average of R26.6 billion per year for five years), would need to grow to R51,4 billion by year ten if all government spending increased proportionately by 10%. Slide 5: 5 The CAPEX Program – Local Content 42% of the CAPEX is projected to be imported: Growth impact of local content development is extremely significant What will it take for local industry to aggressively respond to the opportunities created by the capex program ? Slide 6: 6 The infrastructure investment and capital expenditure program is core to the achievement of ASGISA goals: Failure to roll out the capex program efficiently will result in failure to achieve the 5% growth target as the ASGISA growth rate assumes that the infrastructure expenditure will take place to stimulate local investment. Failure to roll-out the capex program efficiently could result in infrastructure bottlenecks (insufficient electricity, port capacity) that will inhibit investment and thus growth. Failure to plan infrastructure investment adequately could also result in infrastructure shortages and bottlenecks. It is critical that infrastructure productivity (e.g. port and rail operations) is enhanced as this will decrease the costs of doing business and increase investment which will further ASGISA goals. The building of a national infrastructure supplier industry will both catalyse greater investment within the economy (thus increasing growth) and result in the more competitive provision of infrastructure – this contributes to accelerating economic growth. Initial Versus Revised Investment Plan: 7 Initial Versus Revised Investment Plan Initial Eskom Plan: 8 Initial Eskom Plan Revised Eskom Plan: 9 Revised Eskom Plan Initial Transnet Plan: 10 Initial Transnet Plan Revised Transnet Plan: 11 Revised Transnet Plan Capacity Project Funnel: 12 Build 1000 800 1775 165 Feasibility, Business Case, Contract Concluding Pre - feasibility Research Opportunity Identification PBMR Echo 1128 Grootvlei 1520 Camden 300 Arnot P1&P2 November 600 Juliett Oscar 6000 Mike 1000 Lima 1332 600 India Romeo 1600 Sierra 1050 OCGT 1600 *Papa 1300 Kilo Golf Bravo 961 Komati UCG 17375 MW 7800 MW 20850 MW 1050 Quebec 800 Tango 90 112 4000 Concentrating Solar 100 Version: 26 April 2006 - Coal W - Hydro - Nuclear - Gas - Coal - Coal - Hydro - Nuclear - Gas - Coal Solar - Whiskey 500 Transmission - Songo Apollo HVDC Link Capacity Upgrade * Possible 2400MW Mid Merit Trans KalahariInterconnector 0 0 Discard Coal 0 New Coal Supply 0 90 1546 90 1800 Uniform 1200 Victor 500 Rainbow Millenium 2000 X-ray 1775 3500 Zulu 2100 Delta Charlie 2400 4200 500 Yankee 800 1000 2100 Alpha Hotel 1332 4200 Foxtrot 4200 765kV Cape Strengthening 0 8391 MW 400kV Beta Delphi Capacity Project Funnel Timing of decisions: 13 Timing of decisions Projects in Development : 14 Projects in Development Current Generation Build Programme: 15 Current Generation Build Programme RTS Current Status: 16 RTS Current Status Camden Unit 6: Commercial. Unit 7: Commercial Unit 8 : Expected commercial date end June 2006 Scope of Work (SOW) greater than expected. Staffing >80%. Grootvlei Partnership delivering. Catching up. Centre line & Boiler started. Challenges: staffing, planning, purchasing and partnerships. First unit expected before March 2007 Komati 15 Months into project. Asbestos removal complete. Centre line work started. Major contracts in adjudication Staffing, SOW, engineering specifications, strategy on time. First unit expected before September 2007 Milestones 2006/7: 17 Milestones 2006/7 Total: 1390 MW Quarter 1: 200 MW Quarter 2: 200 MW Quarter 3: 0 MW Quarter 4: 990 MW Next Projects’ Status: 18 Next Projects’ Status Project Alpha (Base load) Approved for R26 000M on 1 Dec 2005 PFMA approval in place Contracting strategy completed 2006 EIA and RoD in progress Coal agreement negotiations in progress Licenses outstanding (water, NERSA) Contract placement before end 2006 CO dates 1st Unit 3rd quarter 2010 3rd Unit 2nd quarter 2012 Project Hotel Pumped Storage (Peaking- 333MW x 4 : 1332 MW) Work on schedule, process world class Approved for R 8 900M, including contracting strategy PFMA approval in process Contract placement December 2006 CO dates 1st unit 2nd quarter 2012 4th unit 4th quarter 2012 Current Transmission Schemes Under Construction: 19 Current Transmission Schemes Under Construction Cape Strengthening (Phase 1) Bacchus and Proteus Series Capacitors commissioned (studies being conducted on extra MW). Palmiet - Stikland line still at risk because the National roads department has not approved Eskom using their servitude. Platinum Basin Apollo-Dinaledi line still at risk due to servitude issues Substation works on target. Significant Savings on these projects Transmission Project Status: 20 Transmission Project Status Beta - Delphi Construction has commenced on the longest 400Kv line in the country R460m project Schedule completion by end May 2007 26% of foundations completed Challenges Weather impact Supplier capability 765 kV “Super Grid” R6.3bn investment Scheduled completion by 2009 Challenge servitude and ROD approval Slide 21: 21 Reflection on Transmission BLOEMFONTEIN DE AAR KOMATIPOORT RICHARD'S BAY WITBANK Namibia Botswana Mozambique Swaziland CAPE TOWN DURBAN EAST LONDON PORT ELIZABETH PRETORIA DE AAR Mercury Perseus Hydra Gamma Omega Kudu 2009 Matimba 2009/10 for integration of project Alpha Marang Dinaledi Grassridge Eros Delphi Neptune 2010 2007 BEAUFORT WEST Juno Bloemfontein 2009 2009 To Option A4 Major transmission needs have been identified and will need to be implemented regardless Further major decisions include HV/DC link and further major improvements to comply with higher reliability criteria. Interrelationship with future long term generation options is key Options for greater reliability and capacity: 22 1. Accelerate Kudu Power First Kudu Power CCGT unit (400 MW) April 2010 and the second 400 MW unit is July 2010. On critical path: finalisation of the gas supply agreements and construction of the upstream component. Proposal due by end January 2006, still not received. Critical. 2. Accelerating Coega as a mid merit option - feasibility Accelerating Coega as a mid merit option, it is possible, subject to favourable Record of Decision to run 400MW earliest winter 2009 onwards using liquid fuel. 3. New Nuclear in the Cape – feasibility A concept study has been launched for conventional nuclear including a review of Eskom sites. Timeframes are still being developed Options for greater reliability and capacity Eskom Standard Project Schedules: 23 Eskom Standard Project Schedules Overall Project Timescales to first unit: OCGT 4 Years LNG 5 ½ Years CCGT 6 Years COAL 9 Years HYDRO 10 ½ Years NUCLEAR 11 ½ Years TRANSNET: Aligning Strategic Focus with the Economy: 24 TRANSNET: Aligning Strategic Focus with the Economy Heavy Manufacturing zones Mining zones Micro-economic strategy: Support SA’s export-led growth strategy Reduce the cost of doing business SA’s economy: Mining (6%) 49% Manuf. (20%) 45% Agriculture (4%) 6% Why Strategic corridors? Majority of export/ import traffic (excl. containers) is typically bulk and heavy manufacturing on rail Majority of road haulage is for domestic distribution To support the export strategy and economic growth for current key sectors, connectivity between inland transportation systems and ports are critical Create efficient export systems for growing sectors Freight Typology: Up to 70% of economy is bulk, heavy-haul, long distance and low to medium value traffic Production location of key sectors Transnet Strategic Direction Focus on Rail and Ports (Operations & Infrastructure) Focus on improving key corridors/ clusters Transnet Focus Slide 25: 25 Port Elizabeth East London Maputo Gauteng Mega Industrial Zone Sishen Beit Bridge Richards Bay Durban Saldanha Volumes and Investment per Corridor – 5 year budget Cape Town Slide 26: 26 Port Elizabeth East London Maputo Gauteng Mega Industrial Zone Sishen Beit Bridge Richards Bay Durban Saldanha Major Projects – Five Year Capital Budget Cape Town Directing Capital Expenditure: 27 Directing Capital Expenditure Directing Capital Expenditure: 28 Directing Capital Expenditure CAPEX 5YEAR PLAN (CORE): 29 CAPEX 5YEAR PLAN (CORE) RAIL (R31.5bn) Replacement: Ore Line sustain (R460m) Coal Line sustain (R6192m) Capitalization of Maintenance (R8124m) General Freight (R10827m) Other smaller replacement projects (R1475m) Expansion: Ore Line expansion (R2283m) Coal Line expansion (R1765m) Other smaller projects (R345m) Ports (R18.6bn) Replacement: Pier 1 resurfacing (R659m) Reconstruct Island View Berths (R134m) Remodel Maydon Wharf (R1249m) Remodel South Arm (R633m) Other smaller replacement projects (R836m) Expansion: Construction of the Port of Ngqura (R2493m) Container Terminal Expansion- Salisbury and Bayhead (R3837m) Cape Town Capacity expansion (R1838m) Other smaller expansion projects (R6888m) 5 Year Capex Spend R 64bn Amounts against projects are 5 year spending (not estimated total cost) CAPEX 5YEAR PLAN (CORE): 30 CAPEX 5YEAR PLAN (CORE) 5 Year Capex Spend R 64bn (continued) Pipeline (R4.9bn) Replacement: Upgrade of Gas Line - Lilly (R396m) Expansion: New Multi-product pipeline (R2905m) Gauteng to Maputo line (R620m) Terminalling and logistics (R499m) Other smaller expansion projects (R1627m) Amounts against projects are 5 year spending (not estimated total cost) CAPEX 5YEAR PLAN (CORE): 31 CAPEX 5YEAR PLAN (CORE) 5 Year Capex Spend R 64bn (continued) Amounts against projects are 5 year spending (not estimated total cost) Key Risks: 32 Key Risks Scarce Skills (Project Management, Engineering, Commercial and Finance), high demand for resources worldwide Capability of suppliers - SA not be highest priority Steel – demand, availability and price Commercial complexities associated with Primary Energy Sources Water constraints increasingly becoming a constraint to station positioning Environmental Processes – increasingly complex and difficult Timescales tight Project execution strategy Delays due to approval processes outside of Eskom Planning for 6% GDP (4.4% electricity growth): 11 New Build Projects should be in process 9 are in process 4 are on time 5 are in funnel, but late THANKING YOU: 33 THANKING YOU

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