Eskom’s big turnaround plan is failing

 ·10 Mar 2023

On 22 January 2023, Eskom chair Mpho Makwana said the group had embarked on a turnaround journey to improve plant performance and reduce load-shedding. This turnaround plan is failing.

When the new Eskom board was appointed, Public Enterprises Minister Pravin Gordhan gave it the mandate to increase the energy availability factor (EAF) to 75%.

EAF is a core performance metric for Eskom because it is directly linked to load-shedding. When the EAF declines, less power is available, which typically leads to load-shedding.

Eskom’s EAF has been declining for years because of poor maintenance at power stations and increased breakdowns.

Five weeks ago, Makwana said the board’s plant performance recovery plan was at the final stages of approval.

“It will be driven vigorously, and an external project management company will assist the board in stress testing and monitoring the execution of this recovery plan,” he said.

The Eskom chairman cautioned that Eskom’s coal fleet recovery would not be achieved within the short term. “It will take at least two years to improve the EAF from the current 58% to 70%,” he said.

“The journey of the turnaround will see a stretch target EAF being driven toward 60% EAF by 31 March 2023, a mere ten weeks away, then 65% EAF by 31 March 2024 and 70% by 31 March 2025.”

He said the key levers to the success of the recovery of the Eskom fleet is fixing the systematic issues that are troubling the organisation.

The problems include leadership, organisational culture and poor internal controls required to operate an organisation. “These will be embedded as part of the recovery plan,” he said.

Time of reckoning is approaching – and it is not looking good

With less than four weeks until the first deadline, 31 March 2023, it looks unlikely that Eskom will reach its 60% AEF target.

Eskom’s weekly generation statistics show that its energy availability factor has been declining in February.

In week 8 of 2023, Eskom’s EAF was 51.13%, significantly lower than the 54.67% two weeks earlier.

The average EAF in 2023 is 52.11%. It is misguided to expect it to suddenly jump to 60% by the end of the month.

Eskom’s acting head of generation, Thomas Conradie, said last month the company could not reach an EAF of 60% by 31 March.

The main culprit is breakdowns, which, in combination with planned maintenance, is driving Eskom’s generation availability down.

Eskom’s failed turnaround strategy should not come as a surprise. Many experts have warned that the board can do little to improve the power utility’s performance.

Makwana said that in their first 112 days, the Eskom board had more than 50 meetings of their various committees.

Unfortunately, these high-level strategic meetings will do little to stop corruption, mismanagement, and incompetence at Eskom’s power stations.

Former Eskom generation executive Rhulani Mathebula said fraud, corruption, funding constraints, poor planning, and shoddy work were behind the power utility’s decline.

Strong leadership is needed to address these issues, including cutting the workforce, firing corrupt and incompetent employees, and doing away with poor procurement rules.

However, the government has been a hindrance to implementing the changes needed to fix Eskom’s problems.

The declining EAF should, therefore, be expected, as nothing concrete was done to address the real problems at Eskom.

This article was first published on Daily Investor and reproduced with permission. Read the original here.

Read: Eskom is running out of load shedding stages – fast

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