Primary Energy Top Engineers Programme Setup with McKinsey – ppt download

Presentation on theme: “Primary Energy Top Engineers Programme Setup with McKinsey”— Presentation transcript:

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Primary Energy Top Engineers Programme Setup with McKinsey
PEXCO Discussion | 11 December 2015 CONFIDENTIAL

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Principles of Primary Energy programme
FOR DISCUSSION Start with a baselining effort across all coal contracts and power plants to fully understand the current context and set a consistent starting point to support target setting (incl. review of all contracts) Make critical strategic decisions after baselining to ensure focused effort going forward (e.g., prioritization of plants, contract by contract business case for cost plus contract conversion vs. operational improvement) For cost-plus mine turnaround effort, deliver negotiations or operational improvements on a mine-by-mine/contract by contract basis, once baselining is complete. For mine improvements, this assumes access can be achieved. If no access, drive contracts on a plant-by-plant basis, including capex approvals and optimisation Combine short/medium term coal effort with logistics optimisation effort to ensure that all possible alternatives are considered per power plant (optimize between coal price and logistics options) For short/medium-term coal contracting stream, deliver full contracting effort on a plant by plant basis after baselining is complete Develop contract design and management approach in parallel to ensure value delivery once contracts are finalized Launch separate stream to resolve current major “bleeding” issues for Eskom in coal (e.g., Medupi Take-or-Pay penalty, Arnot coal supply)

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Draft Primary Energy programme
FOR DISCUSSION Draft Primary Energy programme Further waves will follow with more mines and plants in parallel based on Eskom capabilities built Baseline and setup (January-February 2015) Wave 1 Wave 2 Agree on strategy going forward Cost-plus contracts 3 weeks 3-4 months each Mine 2 turnaround/contracting Develop overall roadmap Mine 1 turnaround/contracting Historical baseline Baseline coal costs and volumes Assess supplier situation by plant Logistics costs by mode Quality performance by plant Actual negotiation performance Review long term contract outlook (volume, quality) and levers Develop 10-yr outlook by station (cost, volume, quality, capex, logistics) Cost plus mine operations and capex tradeoffs Develop options for each contract and assess potential <Extract learnings from first wave and refine approach> Support turnaround for each mine or contract renegotiation (depending on selected strategy from baselining) – include logistics and quality elements for TCO Short/ medium term contracts 3-4 months Plant 2 Plant 2 Plant 1 <Extract learnings from first wave and adjust approach> <Extract learnings from first wave and adjust approach> Baseline contracts and costs Develop options & launch RFP Develop negotiation strategy and support negotiations Assess & optimize logistics Include logistics and quality elements for TCO Logistics Critical “bleeding” topics 6-8 weeks 3-4 months Launch critical streams (e.g., Medupi, Arnot, Hendrina) Implement selected options Assess current status of opportunities Define expectations and approach going forward to resolve Define implementation plan Setup team Launch negotiations Critical point to align all key stakeholders on approach going forward

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Team set up for the Primary Energy programme
# Number Eskom employees Lead the steering committee Debottleneck any constraints Accountable for targets Sponsor Vusi Mboweni McKinsey leadership Alexander Weiss Agesan Rajagopaul PMO 1 Snr Manager (Project Manager) 1-2 PED employees 1 Top Engineer (JEM) 1 Mckinsey consultant Drive performance and delivery of programme Create performance dashboards and update Lead weekly PMO meetings and escalate key issues Cost-plus contracts 1 E-Band accountable (part time) 1 M18 (Stream Lead) 5 PED Employees (Full time) 1 Top Engineer 1 McKinsey EM + 2 consultants ST/MT Contracts and Logistics 1 E-Band accountable (part time) 1 M18 (Stream Lead) 3 PED Employees (Full time) 1 Top Engineer 1 McKinsey EM + 2 consultants Critical “bleeding” topics 1 E-Band accountable (part time) 1 M18 (Stream Lead) 2 PED Employees (Full time) 1 Top Engineer 1 McKinsey EM + 2 consultants 8 6 5 Manage end-to-end relationships at the mines Accountable for increasing volume and managing cost escalations Identify critical path actions & resolutions Drive existing CP mine optimization programme Lead negotiations of new & existing contracts Develop baseline costing model Maintain end-to-end relationship with mines Identify critical path actions & support resolution Lead negotiations of new & existing contracts Align logistics strategy in line with ST/MT approach Lead negotiations of contracts Prioritise most critical topics that Eskom currently faces on coal management (e.g., Medupi Coal, Arnot coal) Develop overall plan and drive decisions required to move forward (e.g., IFC, ExCo) Deliver rapid execution of selected options

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Partner support required
# Number Eskom employees Lead the steering committee Debottleneck any constraints Accountable for targets Sponsor Vusi Mboweni McKinsey leadership Alexander Weiss Agesan Rajagopaul PMO 1 Snr Manager (Project Manager) 1-2 PED employees 1 Top Engineer (JEM) 1 Mckinsey consultant Drive performance and delivery of programme Create performance dashboards and update Lead weekly PMO meetings and escalate key issues Cost-plus contracts 1 E-Band accountable (part time) 1 M18 (Stream Lead) 5 PED Employees (Full time) 1 Top Engineer 1 McKinsey EM + 2 consultants ST/MT Contracts and Logistics 1 E-Band accountable (part time) 1 M18 (Stream Lead) 3 PED Employees (Full time) 1 Top Engineer 1 McKinsey EM + 2 consultants Critical “bleeding” topics 1 E-Band accountable (part time) 1 M18 (Stream Lead) 2 PED Employees (Full time) 1 Top Engineer 1 McKinsey EM + 3 consultants 8 6 5 1 coal mining operations expert with experience in South Africa 1-2 Highly analytical consultants with strategy/analysis/mining experience 1 Logistics expert 1-2 Analytical consultants with experience in market research and analysis 1 Coal mining expert with commercial experience (either negotiating sale or purchase of coal contracts) 1-2 consultants with experience in rapid DD/strategy/market research type work, able to work under pressure

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Resource estimated ramp up over time
Immediate priorities Ramp up Phase Peak support Steady state 4 January 2016 1 February 2016 1 August 2016 December 2017 Workstream focus Baselining and roadmap across all coal contracts Accelerated launch of “Bleeding Topics” Cost plus and Fixed price contract stream Short term and logistics stream Bleeding topics stream Cost plus and Fixed price contract stream Short term and logistics stream McKinsey team setup 1x EM+2 1x EM+3 2x EM+2 1x EM+3 2x EM+2 Partner team setup Experts 1 Mining Operations Expert 1 Coal industry commercial and strategy expert Consultants 2 Highly analytical consultants with experience in mining economics, strategy, financial analysis and market analysis Experts 1 Mining Operations Expert 1 Coal industry commercial and strategy expert 1 Logistics expert Consultants 1-2 consultants with strategy/analysis experience 2 consultants with experience in market intelligence 1-2 consultants with experience in rapid due diligence/strategy/market research Experts 1 Mining Operations Expert 1 Logistics expert Consultants 1-2 consultants with strategy/analysis experience 2 consultants with experience in market intelligence

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Experience and qualifications Problem solving skills
Role descriptions Experts (sometimes part time) Consultants (Full time for selected periods) Experience and qualifications Bachelor’s Degree minimum >10 years of experience in particular industry related to workstream supporting Management experience Deep knowledge of the topic (coal mining, markets, contract negotiations, etc) Bachelor’s Degree minimum (Finance, Accounting, Business or Engineering(Mining)) 2-3 years work experience in one of: Financial analysis Strategy development Mining economics Experience in high-paced environments Problem solving skills Structures problem into key buckets Focuses on prioritization of work Thinks through bigger picture of a problem (does not get stuck in details) Structured communicator, adjusts to context Hypothesis driven problem solver Able to iterate thinking between technical issues and strategic issues Structures problem into key buckets Prioritises work and meets deadlines with discipline Does not get stuck in details – seeks guidance when required Comfort with hypothesis driven problem solving Can link technical issues with strategic drivers Communicates and presents confidently Collaborative in all aspects (problem solving, presentations, developing solutions) Open to giving and receiving feedback Comfortable with fast iterative process Focus on transparency and communication Provides clear direction to junior colleagues Credible communicator Collaborative in team settings Open to giving and receiving feedback Comfortable with fast iterative process Develops an opinion with only most critical facts Self starter – has a perspective on what to do next Soft skills Restrictions Cannot work for any related industry players in parallel (e.g., Anglo, South32, Glencore, Exxaro, Transnet, DMR) or for 2 years after completing Eskom work Cannot work for any related industry players for 2 years after completion of Eskom work