Questions to Treasury: Did Vgbe appointment follow PFMA process and how much was paid for the report?

By Crown Prince Adil Nchabeleng

The Vgbe Consortium, which consists of Vgbe, Dornier, KWS, RWE and Steag, commissioned by the Treasury, had interesting observations.

What surprises me is why did the Treasury not request power plant managers and engineers, Eskom senior managers, Eskom top executives and divisional heads to do their own comprehensive power plant status report or give a comprehensive Eskom Operational Situation report.

However, the German group, an independent German association of power plant engineers, did the job providing the Eskom Operational Situation report.

The consortium consists of:

– Vgbe Energy Service: Vgbe is an independent German association of power plant engineers. Vgbe is the international technical association for the generation and storage of electricity and heat.

– Dornier Group is a global one-stop shop for all consulting engineering services with a focus on the infrastructure sector.

– RWE generates and trades electricity in the Asia-Pacific region, Europe and the US. It is the world's second-largest offshore wind power generation and Europe's third-largest firm in renewable energy. It also operates some of the largest coal-fired power stations in Europe. It is a publicly traded company on the stock exchange.

– KWS Energy Knowledge, a school dedicated to training of power plant personnel in Germany in the field of combined-cycle gas turbine, hydro power, or renewable energy plants, but also industrial or thermal waste utilisation facilities.

– Steag is Germany's fifth largest power utility, which is a private firm. In addition to solar, wind and geothermal energy, its portfolio also includes hydrogen solutions, storage technologies, engineering services and gas-fired power plants. The company implements projects worldwide for major industrial companies, utilities, cities and municipalities.

As impressive as the above resume of the companies involved in compiling the report it could have easily been done by Eskom power plant managers and executives supported by more than 300 senior managers at Eskom Megawatt Park. This type of scenario has reared its head time and time again as regards Eskom, which I won’t delve into now.

In a nutshell, many detailed and highly technical reports on the Eskom systems update and technical reports have been presented to the Parliamentary oversight committee and similarly have gone unnoticed.

So it would be unfair to say that Eskom does not produce its own high quality detailed systems operations reports that are credible and authoritative.

Why then was it necessary for the Treasury to appoint and pay an overseas organisation to perform a task, which Eskom does already? From where I come from it looks like fruitless and wasteful expenditure, paid for by taxpayers’ money, which was unnecessary.

Where is the prudence exercised by the Treasury? What is worse is that the report was initially buried and kept a secret until there was enough pressure from several quarters to have it released. And only then did the report surface and was made public.

This then erodes trust in the Treasury - not good for its governance and credibility.

Public funds must be spent with a degree of prudence coupled with a tangible return on investment.

Questions for Treasury:

I want to know two things about the deal, which I invite Treasury to call me and clarify, which are in the public interest arena.

1. How much Vgbe was paid to come to South Africa to compile the report?

2. Did the Vgbe association follow the Public Finance Management Act (PFMA) with due processes when the report was commissioned and paid for by Treasury as I can’t find red tape to that effect?

It is important for the Treasury to be transparent on these queries as for now these questions raise a red flag.

Some of the key recommendations of the report at a glance:

– Empower the power plants and focus on operations and maintenance.

− A fundamental change in the management system is needed. It should aim at an empowerment of the power plants with full budget responsibility and accountability of the Power Station General Manager.

− For a limited period of time – 1.5 to two years – the power plants should be allowed to apply fast-track procurement processes under the supervision of the Treasury.

− An interim independent expert team, which reports directly to the Treasury should be engaged with immediate effect and permanently situated at each site with a small oversight / management team.

− The Outage Readiness Index and the Maintenance Performance Index should be replaced by simple and understandable KPI.

− Many specialised functions (e.g. in engineering) were centralised. This expertise should be made available for the sites, by enabling the use of experts at the power plants where they are really needed.

− Some experts were allocated to only one plant, resulting in a loss of these specialised skills to the other power plants. The system of specialised groups located close to the power stations should be reinstated.

− The fixation on the Energy Availability Factor (EAF) must come to an end. The focus should be rather on the phase-locked loop (PLL) as this would address a key technical source for the low EAF. There is a potential of gaining up to 6 000 MW which is related to PLL and could be reactivated by fixing the plants’ defects.

− Proper maintenance. The Vgbe team recommends forming expert teams that are specialised in fixing these issues – from planning to execution. They should support the maintenance work at all plants with their expertise – this could be a service from Megawatt Park for the plants.

− Any regular outage should be properly planned and prepared and then carried out as thoroughly as possible. The outage period should be used to fix all issues contributing to PLL.

− Eskom currently takes up to 10 days to restart its units after outages. This needs to be challenged. It is prudent practice to restart units in parallel with the outages, thus reducing by several days the time needed to reinstate the plant.

− Housekeeping is also one aspect of maintenance work. Although not directly related to an EAF improvement, it is a prerequisite in order to execute proper maintenance and to ensure reasonable plant conditions.

− Learn from Kusile Unit 4: This unit had been operated by the boiler OEM prior and during the period of the Opera assessment. It achieves an EAF of > 90%. Hence, the team has successfully demonstrated that it is possible to achieve a high EAF in the newer plant units.

− Operators’ training should be a top priority for Eskom’s coal fleet.

– Good performance should be rewarded – on an individual and institutional level.

− Many power plants are located in remote industrial areas. In order to attract qualified personnel incentives such as the provision of affordable or free-of-charge accommodation, salary supplements and reimbursement of travel expenses should be considered.