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TRANSCRIPT
BJM Southern African Energy
Conference
Carl Grim
Chief Executive Officer
Overview of Aveng
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Corporate Highlights (year ended 30 June 2007)
• Revenue up by 38% to R22 billion
• Operating profit (excluding non-trading items) up 111% to R1,3 billion
• Operating margin up from 3,9% to 5,9%
• Headline earnings up 122% to R1,3 billion
• Cash generated by operations of R2,9 billion
• Sale of Holcim concluded in manner that support BBBEE and benefits
shareholders
• Share repurchase of R3,5 billion
• Dividend up by 124% to 85 cents
3
Operating Highlights
• McConnell Dowell revenue up by 95%, EBIT margin to 5,7%
• Grinaker-LTA operational cash flow: R629m with margin acceleration plan in
place
• Order book up 70% to R19 billion
• Continued strong performance from Steel & Allied cluster
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Business segmentation - Revenue
McConnell Dowell Corporation
26%
Manufacturing12%
E+PC1,3%
Grinaker-LTA 34%
Moolmans8%
Trident Steel19%
35%
13%
18%
2% 10%22%
June 2007 June 2006
Engineering & Construction: SA & Africa cluster
Steel & Allied cluster
R22 billion R16 billion
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Organisational structure
Aveng LimitedCarl Grim
Engineering &Construction
Australasia & Pacific
E+PCFrank Saieva
Engineering & Construction SA and Africa
Grinaker – LTANeil Cloete
MoolmansBrian Wilmot
Trident SteelRichard Martin
Steel and Allied
McConnell DowellDavid Robinson
ManufacturingDoug Keet
Director: FinanceDennis Gammie
Company Sec.John Baxter
Clusters
Operating Groups
Continuous Improvement Group
Nick Bell
Business DevelopmentBuzwe Yafele
RiskHylton Macdonald
Human ResourcesJuba Mashaba
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Construction order book (two years)
8.2
9.88.9 8.7 8.7
11.3
19.1
June 2001 June 2002 June 2003 June 2004 June 2005 June 2006 June 2007
Rbn
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Outlook for global energy
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Principal drivers of global energy demand
Rapidly expanding and robust consumption-based economies
Source: World Bank
9
Global investments in energy projects
Source: World Bank
Africa expected to invest about 4% of GDP in energy in the next 30 years
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12% Shipping& Ports
54% Transmission & Distribution
46%Power
Generation
88% Mining
15%Other
13% Refining
72% Exploration &
Development
5% Exploration& Development
8% LNG Chain
37% Transmission & Distribution and
Storage
• Total investment required for the energy supply
infrastructure worldwide over the period 2001-
2030 is expected to amount to US$ 16 trillion, or
US$ 550 billion a year
• Although the total sum of investment needed is
large in absolute terms, it is modest relative to the
size of the world economy, amounting to only
about 1% of global GDP on average over the next
thirty years
• Cumulative investment of US$10 trillion in power-
sector infrastructure will be needed – equivalent to
60% of total energy sector investment
• The power sector in developing countries will
require more than half of the global investment,
exceeding US$5 trillion. Two thirds must flow into
developing Asia
Source: International Energy Agency
Relative global energy spend by sector
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Coal will continue to lead the composition of energy sources...
Despite current trends to move towards cleaner fuels, coal will continue to be the largest contributor to electricity generation in the foreseeable future
Source: DPE
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Global private participation in energy sector
• Private participation in 1 307 projects worldwide from 1990 to 2005
– 5,3% undertaken in Sub-Saharan Africa (2,4% by value)
• In 2004 the global per capita electric power consumption world standard was
2 606 kWh
• By comparison, the per capita consumption in Sub-Saharan Africa was
550 kWh
Source: World Bank
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Factors driving rapid energy expansion in Africa
• Energy intensive industries investing in areas that have low world standard labour and
energy costs
• Lower environmental standards than OECD or developed country norms
• Negative or slow population growth in OCED countries with non-OECD countries
experiencing strong population growth, infrastructure development, access to
transportation, etc
• Increased production of oil, biofuels, coal-to-liquids (in RSA and China by Sasol) and
gas-to-liquids leading to increase in production facilities and GDP per capita
• Higher international oil prices will force importing African oil countries to seek
alternative energy sources
• Low base per capita electrical power demand
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African electricity generation
• US$185 billion or 1% of GDP from 2004 to 2030• Coal is expected to make up about 46% of Africa’s portfolio, with gas increasing from
25% to 38% Source: International Energy Agency
* Assuming Grand Inga
built to full capacity of
39 000MW
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Drivers of energy expansion in South Africa
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Changes in the South African energy arena
• Energy sector accounts for about 15% of GDP and supports about 250 000 jobs
• Abundance of coal enables low-cost power production with above-average energy intensity
• Eskom expected to spend R150 billion over the next five years to build new power stations and enhance distribution and transmission network
– In addition, the proposed 3 600 MW Mmamabula coal-fired power plant in Botswana valued at more than US$5,5 billion
• Government has provided for 30% of the new power to come from IPPs
– Bethlehem Hydro, the countries first IPP, began construction in 2007, awarded to NuPlanet and Energy Development Corporation (EDC)
– Durban and Port Elizabeth IPP project recently awarded to consortium led by AES
Source: Economist Intelligence Unit
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ImportsHydroPumped storage
NuclearCoal
ElectricityCoal
Liquid fuelsGasRenewables
Eskom electricity generation mix
South Africa’s energy demand
• Eskom with 95% of the market,
currently derives most of its capacity
from coal
• Decreasing to about 70% by 2025 with
nuclear power increasing to 17% to
28% range
• 1 600MW of renewable energy will
also be added to the SA energy source
mix by 2025 in the form of solar and
wind power
Source: DPE and Eskom Annual report 2007
South African energy generation follows the global trend...
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Eskom capital expenditure
Total: R113 billion between 2007 and 2011Source: 2007 Budget Review
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20
Eskom will spend R150 billion over the next 5 years
15 753
19 81923 572 23 476 22 981
3 228
6 130
5 2733 803
1 954
3 806
4 340
4 5824 096
4 229
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
2008 2009 2010 2011 2012
Corporate Distribution Transmission Generation
Rand
(M
illio
n)
Eskom breakdown from AFS (Rand Millions) 2008 2009 2010 2011 2012 TotalGeneration 15 753 19 819 23 572 23 476 22 981 105 601Transmission 3 228 6 130 5 273 3 803 1 954 20 388Distribution 3 806 4 340 4 582 4 096 4 229 21 053Corporate 813 699 753 460 480 3 205Total 23 600 30 998 34 180 31 835 29 644 150 247 Source: Eskom
Indicative Medupi local spend of ±R20 bn (out of total cost of R80 bn)
Boiler & Turbine
Packages
Turbine
R13 billion
Boiler
R17 billion
OEM supply
Turbine/Generator
(+/-R8 billion)
Local Erection and
Specialised parts
(+/- R5 billion)
Engineering
& Design
Local Content/
R13bn
Tx & Dx
Pressure Parts
Busbars (R6bn)
Plant Erection
R7 billionStructural Steel
LP Piping
M&E
Our experience and track record
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Matimba Power Station
Client: Eskom
Completion: 1991
Project scope:
• Boiler House Construction - Units 1 to 6 with five
coal mill foundations, four fan bases, a 120m high
freestanding lift shaft, main boiler supports, blow
down and ash dumps per boiler house unit
• Turbine Hall Construction - Units 5 and 6
including base and foundations for the 665MW
turbo-generators, and ancillary auxiliaries for the
machines
• Water Treatment Plant
• Electrostatic Precipitators
• Materials Handling System
• Ancillary Electrical Reticulation
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Majuba Power Station
Client: Eskom
Completion: 1995 - 1998
Project scope:
• Civil works for all terrace structures in front and
behind boilers for East and West units 1 to 3
• Design and construction of 250m high multi-flue
chimney including ancillary electrical reticulation;
aircraft warning lights and lightning protection
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Kendal No.1 and No.2 Chimney
Client: Eskom
Completion: 1986 - 1988
Project scope:
Chimneys Design and Construction
•Ancillary Electrical Reticulation
•Aircraft Warning Lights
•Lightning Protection
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Duvha
Client: Eskom
Completion: 1983 - 1988
Project scope:
• Six cooling towers, each turbine generator of
600MW with 135m high reinforced concrete
shell
• Construction of bulk coal stockyard terrace
for the 3600MW power station
• Complete civil works to station foundations,
boiler and fan foundations, turbine generator
blocks, including columns and foundations,
cooling water pipe work and pump houses
including all buildings, drainage and high
voltage yards
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Matla
Client: Eskom
Completion: 1984 and 1991
Project scope:
• Construction of Matla No.2 Chimney with
height of 269m and outside diameter of 22m
• Supply and installation of the structural
steel including flue inlets, staircase tower,
louvers, electrical installation, lightning
protection and aircraft warning lights
• Civil works for the Wet Ash Handling Plant
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Kriel Access System
Client: Eskom
Completion: 1991
Project scope:
Built the following:-
–Cooling Towers
–Ash Handling Plant
–CW Ducts
–Turbine House
–Boiler House
–Ancillary Electrical Reticulation
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Hendrina Power Station
Client: Eskom
Completion: 1991
Project scope:
Built the following:-
–Cooling Towers
–Boiler House
–Electrostatic Precipitators
–Coal Plant
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Client: Eskom
Completion: 1984
Project scope:
•Construction of main civil works and
also sea water pump houses and additional
buildings
•Pressurised Water Reactor (PWR) power
station with electrical output of 1 844 MW
Koeberg Nuclear Power Station
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Drakensberg
Project scope:
• Machine and transformer halls
• Tailrace tunnel
• Surge shafts
• Access tunnels
• Underground control room
• Surface Works
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Gariep
Orange River – Fish Tunnel Construction
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Project scope:
•Dam Wall
•Underground Power Station Complex
•Transmission Lines
•Diversion Tunnels
•Coffer Dams
•Apollo Sub-Station
Cabora Bassa
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St Aubin Power Station, Mauritius
Client: CTDS / Sotramon
Completion: 2005
Project scope:
• Civil works for a privately financed 35MW coal fired power station for electricity supply to the
national grid which included boiler and turbine bases and houses, cooling towers, coal silo and
external works
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Belle Vue Power Station, Mauritius
Client: Compagnie Thermique De Belle Vue
Completion: 1999
Project scope:
The civil works included heavy reinforced concrete foundations to all structures; cooling towers, silo,
reservoirs, stores, warehouses, office block and main building, steel superstructures to main plant
buildings and associated bulk earthworks, pipelines and infrastructure work
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Bongong Hydro Power Unit (Victoria, Australia)
Client: AGL Southern Hydro
Completion: 2009
Project Scope:
The Bogong Power development project
consists of a network of tunnels and shafts and
the construction of a new 140 MW
underground hydro electric power station near
the Victorian ski fields at Falls Creek.
– 6.5 km of 5 m diameter hard rock TBM
tunnel
– 1.3 km of drill and blast tunnels
– 250 m of 5 m diameter shafts
– 5,000 t penstock liners
Project Description
Kogan Creek is a 750MW single turbine coal-fired power station situated approximately
280km West of Brisbane and will be the largest single unit in Australia
Civil & Building contract of approximately 30,000m3 of reinforced concrete forming the
footings for all plant items. Chimney contract – design & construction of a 160m high slip-
formed concrete windshield with a 7m diameter single steel flue
Client
Siemens Limited
Location
Queensland, Australia
Value
R274 million
Kogan Creek Power Station
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Temora to Lake Cowal 132kV Transmission Line, Australia (AUD$4m)
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Groundline and Overhead Inspections, Australia (AUD$38m)
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Klipbank Opencast Coal Mine
Project Description
Mining Coal and Overburden
Client
Ingwe Colliery & BHP Billiton
Location
Mpumalanga Coalfields,
South Africa
Value
R1 billion
Duration
May 2000 to
February 2008
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Aveng’s positioning for the capital spend
• Aveng has already played a significant role in Southern Africa and Australia’s Power
Generation heritage
• Based on our experience and capability, we recognise our role to participate in the
future expansion of the power industry in these markets
• Gearing up our vast resources to help deliver our rapidly expanding power generation
infrastructure
– Combined skill sets within the Group
– Partnerships with external companies for specialist capability
– Ability to craft holistic turnkey packages which reduce our client's risk profiles and resource
requirements
– Ample financial resources
– BBEEE credentials and ability to leverage local content
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The World at Night: 1.6billion people, 25% of the world’s population, live in the dark
Canada: 58% hydro power
USA: 91% fossil fuels and nuclear power
Iceland: 100% hydro and geothermal power
Norway: 91% hydro power
Britain: 96% fossil fuels and nuclear power
Brazil: 83% hydro power generation
Africa: Over 509m people live without access to electricity
India: 713m out of 1.4bn live without electricity
China: 98% of people have access to electricity but 82% of that is fossil fuels generated
Australia: 92% fossil fuel generation
New Zealand: 68%hydro and geothermal power
Energy is the backbone of global economic growth and development
• Despite the many areas of prosperity 25% of the world’s population live without electricity
• To achieve the UN Millennium Development Goals (UNMDG) a combination of stand-alone and grid-connected electricity development will be needed
• This is to alleviate people from poverty in an environmentally sustainable manner
• There are abundant sources of renewable energy on each continent (hydro, geothermal, biomass, wind and solar)
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www.aveng.co.za
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Disclaimer
This presentation contains forward-looking statements about the company’s operations and financial conditions.
They are based on Aveng Limited’s best estimates and information at the time of writing. They are nonetheless
subject to significant uncertainties and contingencies many of which are beyond the control of the company.
Unanticipated events will occur and actual future events may differ materially from current expectations due to new
business opportunities, changes in priorities by the company or its joint ventures as well as other factors. Any of
these factors may materially affect the company’s future business activities and its ongoing financial results.
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