Post on 07-Apr-2016
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F E A T U R E
www.esor.co.za
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Powering The FuturePowering The Future
Powering The FuturePowering The Future
In late 2013, civil engineering group Esor Limited, then called Esorfranki, sold the geotechnical division to Keller for R578 million. The streamlined group now focuses on civil engineering and pipeline developments. We spoke to CEO Wessel Van Zyl to discuss the effects of this move and to find out more about their flagship civil project, the Kusile power station.
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As one of South Africa’s benchmark
civil engineering and construction
groups, Esor has faced a lot of
challenges in the past year.
“Starting January 2014, it was a completely
new company. We sold about 33% to 35%of
the company through the disposal of the
Geotechnical business and we changed our
name back to Esor. So yes, it is quite a
different company to the one of the past
decade when we were Esorfranki,” says Van
Zyl.
“We finalised the loss making legacy N4
Mooinooi road contract, where we reported
a loss ofZAR150 million. With group
revenue of about ZAR1.6 billion, this
equated to approximately 10% of revenue,
putting working capital under pressure.
However, as a diversified company the
pipelines, pipe-jacking, building, civils,
earthworks, and other divisions stepped
up to the plate.”
Half way through 2014, Esor made some
changes at board level. When the company
listed on AltX, the alternative index to the
Johannesburg Stock Exchange, in 2006, its
non-executive directors were already in
their late sixties and well experienced
business people.
“It is good to rely on the wisdom and
experienceof directors who have seen a
number of business cycles. But it meant
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that nine years later they were looking to
retire,” explains Van Zyl. “They all
committed to remain in office until the
finalisation of the Franki sale to ensure a
smooth transition.”
As part of the board shuffle CEO Bernie
Krone stepped down from his executive
position and was appointed as Chairman.
Van Zyl, chief financial officer at the time,
took his place as CEO. “This was a natural
progression from a succession plan which
had been discussed when I joined in
October 2012.”
Thiswas also a big year for Esor’s flagship
civil project, the Kusileterrace underground
facilities works contract. “We settled on
some claims dating back to March 2011,
particularlyrelated to disruptions, delays
and changes. We successfully finalised the
claims in October 2014 and received
settlement in November 2014,” explains
Van Zyl.
Kusile, a coal-fired power station in the
Mpumalanga province, is owned by Eskom
and is set to consist of six 800MW units,
giving a total capacity of 4800MW
andmaking it one of the largest coal-fired
plants in the world.
The plant is due to be commissioned
during 2015 with first fire expected the
same year. While there may be protests
over the environmental impact of a coal
“ When you want to grow your economy and you want to attract investment, you need power. So these projects are essential.
“
fired plant, it is hardto deny that South
Africa is desperately in need of additional
capacity given the growth potential and the
frequency of outages.
“It’s something thatis imperative for South
Africa. The power infrastructure needs
additional capacityand the current
investment in coal and renewables is to get
it back up to where it should be,” says Van
Zyl.
“When you want to grow your economy and
you want to attract investment, you need
power. So these projects are essential.
Wind, solar, they’re all good initiatives, and
they give you back-up, but they don’t give
you the 4800MW that the coal power does,”
he continues.
“Three or four years ago, South Africa was
ready to investigate and possibly invest in
nuclear as an alternative for base load, but
the whole process was halted after what
happened in Japan. And now there’s talk
again about nuclear — about having a mix
between nuclear, coal, and sustainable
wind and solar. That’s a good solution. At
the moment, South Africa is heavily reliant
on coal as the main source for power
generation. That’s where we are.”
“You need to constantlywork at
relationships with your clients, as we’re
still working on Kusile for another two
years, so there’s no point in a broken
relationship. You both have to work at it.
We’ve been looked after by Eskom through
a predictable payment cycle, and we’re in
the process of trying to settle all the issues
we’ve had.”
As for the year to come, Esor is anticipating
a period of recovery and increased stability,
as South Africa continues to recover from
the global financial crisis.
“The whole world went into crisis in 2008,
but because of the 2010 Soccer World Cup
and all the related construction in South
Africa, we held out until about 2011 before
the full impact was felt in the local
construction industry. As an industry we
were therefore somewhat protected
through the work on hand, but then in
2009, Eskom experienced severe power
supply problems that further impacted
negatively on the construction industry,”
says Van Zyl.
“Between 2008 and 2011Esordoubled in
size. However in 2011 everything in our
sphere came to an abrupt stop,” he
continues. “My big challenge this year is to
restructure the group to the size that it
should be. Let’s just consolidate a bit and
see what we are, who we are, what appetite
we have, and how big we can be. It comes
with a bit of pain, going into a
restructuring process, but things change.
And it will give us stronger footing as a
consolidated group.”
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Physical Address
30 Activia Road
Activia Park
Germiston
Postal Address:
P.O. Box 6478
Dunswart
South Africa
1508
+27 11 776 8700Tel:
+27 11 822 1158Fax:
info@esor.co.zaEmail:
Contact our office in South Africa
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