Why Jacob, why?

JACOB Maroga, Eskom's chief executive, is friendly, affable and charming.

He radiates a type of fatherly serenity and, what's more, he can think on his feet. Over the past two years he has single-handedly, on numerous occasions, squared up to hostile audiences about the mess at Eskom.

Each time he has persuaded them with charm, presenting clear arguments in which he converts highly technical details into layman's language that even a child could understand.

But when his responses to difficult questions are analysed, it's clear that he always reverts to Eskom's reserve margin, the difference between the power giant's generating capacity in peak demand for electricity.

According to international benchmarks these should be above 15%, but the government's refusal to let Eskom build new power stations has allowed it to drop to under 5%.

The smaller reserve margin really means everything else at Eskom will have to work as efficiently as a Swiss timepiece to avoid problems. Why then did Maroga flatly ignore the clear warning to him by Susan Olsen?

She didn't need the money

Olsen, an affluent, internationally recognised oil and coal consultant in her mid-60s from Boston, Massachusetts, did not liaise directly with Maroga, but knew him and apparently did not doubt he would appreciate the situation when she made an appointment with him in July 2007.

Two years before, Olsen had been appointed by Rob Lines, who then headed Primary Energy, which is just a nicer name for Eskom's coal division, as a consultant for power generation and primary energy. She was recruited by another senior Eskom employee who was working in the US and got to know her there.

Her salary was $30 000 a month - in today's terms nearly R240 000 - which is an indication of how highly she was regarded. "She retired a long time ago. She's rich and doesn't need money. She did it because she wanted to help us," says a colleague who worked with her.

She was appointed in the period following the crisis in the Western Cape, when a large bolt damaged the rotor of one of Koeberg's two turbine generators and, for all practical purposes, destroyed the turbine.

Eskom had to transmit electricity along power lines from Mpumalanga to the Cape, but the transmission lines were in such bad condition that the entire Western Cape was crippled for months.

Despite assurances in parliament from Alec Erwin, the then Minister of Public Enterprises, that there was no threat of an electricity crisis, the power problems in the Western Cape were a first indication to Eskom's management of how the electricity network had deteriorated.

Olsen normally reported to Lines, but they did not get along well. "She discovered problems at the Optimum coal mine, but Lines ignored her complaints," said the colleague.

In the report that she sent to Maroga shortly before her dismissal, she highlighted the so-called "cost-plus" contracts that had mostly been concluded years before and were later converted to fixed-price contracts.

That seemed good to Eskom, but only until the mining houses in time began to export the mine's coal. Then all the inferior-quality coal was delivered to Eskom and the higher-quality coal exported. "Optimum, Grootegeluk and Douglas/Middelburg are examples," the report announces.

Optimum produces about 11.5m tons of coal a year, half of which is delivered to Eskom. The rest is exported.

She sought several people's advice because her concerns about the malpractices were falling on deaf ears. Eventually, through a contact, she got an interview with Maroga.

Olsen's recommendations

From her report of just over six typed pages it is clear she advised Maroga to replace Lines. The following are a couple of extracts:

The division's "failure to enforce the quality provisions of existing coal supply agreements has resulted in damage to generating plant".
• Majuba Power Station receives coal from more than a dozen sources, very little of which even remotely resembles its design coal.

  "It is only to the credit of Majuba Power Station's operating people that the station remains available despite the widely fluctuating and mostly unknown qualities of coal it receives on any given day. No wonder Scottish Power hired two of Majuba's shifts and moved them en masse [sic] to Scotland."

And in her conclusion:

• "GPE [Generation Primary Energy] lacks leadership, experience, knowledge and direction. It is haemorrhaging talented staff and is left with those who have delivered it to its current condition...

  "Without intervention and an imperative to become a fuel procurement and management department worthy of Eskom's world-class operating plain [sic], without appointment of a commercial competent managing director supported temporarily by external exports, I predict that GPE will collapse under its own weight."

But Olsen was not in Maroga's office long enough to have a cup of tea. He passed her report on to Lines and Echwood Matya, the head of electricity generation.

A couple of days later, all the files on her desk had been removed when she arrived in the morning. She had a flat in Johannesburg and a car provided by Eskom, but these were immediately withdrawn. Less than two weeks later she was on a plane back to the US.

Six months later exactly what she had predicted happened.

A confidential daily report on conditions at power stations on the fatal day of January 25 2008 that was secretly handed to Sake24 shows that 29 generating units produced insufficient power that day. At 14 of them coal problems were the cause. These units can each generate 475 to 575 megawatts of electricity. The inferior quality coal reduced this to between 30 and 115 megawatts per unit.

Nersa's audit after the events in January 2008, which cost the country R50bn in lost production, showed that coal stocks after August 2007 - a month after Olsen's appointment with Maroga - dropped below acceptable levels.

In December there was an average of 11 days' supply at power stations, but at the beginning of December the coal division simply suspended buying according to the short-term contracts. The reason? Yes, Primary Energy had packed its bags and gone on holiday.

By January the average stockpile was less than one day's consumption.

A month later, however, Maroga did what Olsen had advised him to do: he got rid of Lines and Matya.

- Fin24.com