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Powering The Future www.esor.co.za
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Powering 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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“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,
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s one of South Africa’s benchmark civil engineering and construction groups, Esor has faced a lot of challenges in the past year.
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.”
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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.”
claims in October 2014 and received settlement in November 2014,” explains Van Zyl.
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
When you want to grow your economy and you want to attract investment, you need power. So these projects are essential.
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
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.
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.”
“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.
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.
“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.
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“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.” 8
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