Outsourcing builds a resilient operation

Press release

Abattoirs rank among the most utility-heavy operations in the agricultural industry, with electricity, water, cooling and heat being in high demand throughout the year to keep these facilities running. The sprawling operation belonging to Meyerton-based pork products supplier, Lynca Meats, is a notable case in point, where finding the most effective means of containing operational costs remains a top priority.

Running at full capacity, 24/7, Lynca Meats comprises 28 temperature-regulated rooms for the production of a host of processed pork products; an abattoir that markets carcasses, boxed meat and offal; and dedicated units that offer multi-principle cold storage warehousing and logistical solutions to clients.

This means that the basic utilities of electricity and heat represent some of the biggest running costs on Lynca’s balance sheet. As Manie de Waal, CEO of EP Solar explains, outsourcing these functions to a service provider has made all the difference in keeping this part of the business as economical as possible.

“Operating a massive refrigeration set-up like this at full capacity every single day of the year is hugely expensive in South Africa, where annual electricity tariff increases continue to exceed inflation. Luckily, this same production schedule makes Lynca Meats a prime candidate for affordable renewable energy.”

Lynca consulted with EP Solar on the issue, and the solution put forward was a 962kwp rooftop-mounted photovoltaic system. The size of the system was limited by the rooftop space that the client had available, but it would still be able to account for about 15% of the facility’s energy usage. According to De Waal, generating renewable energy on site in the form of solar power, would potentially save the operation around R350 000 in the first year alone. “We estimate that throughout the length of the contract, the client would save around R16 million in electricity costs.”

“In addition, the solution would be provided as part of a power purchase agreement, meaning that the client did not need to invest any upfront capital or be burdened with the daily operation of the system.”

De Waal notes that the system provides peak output during regular business hours, when grid-based electricity tariffs are at their highest. “Through software on the inverters, solar power is always prioritised during the day, while the site runs completely on electricity from the grid during off-peak hours. The advantage of an operation such as this, which runs 24/7, is that it ensures that 100% of the PV power is utilised every day of the year, strengthening the business case. The PV system is currently in the process of being commissioned and will soon be producing electricity for the site.”

Cutting down on electricity spend also required Lynca to review the most energy-intensive parts of its operation. “Of course, this was refrigeration. Again, outsourcing this was by far the most viable option, and EP Refrigeration was able to offer a state-of-the-art solution,” says Dawie Kriel, Director of EP Refrigeration.

With the temperature requirements for the facility ranging from -25⁰C to 5⁰C, Kriel explains that Lynca Meats’ existing 20+ year-old refrigeration system was fast becoming inefficient. “The old system had extremely high energy requirements, and system maintenance had become quite challenging and expensive.”

EP Refrigeration subsequently offered the upgrade under the EP Cooling Sales Model on a ten-year contract. The entire system would be installed at no capital cost to the client, and EP Refrigeration would maintain the system and sell refrigeration as a utility to Lynca Meats, who would reserve the right to buy the system on residual value at any point in time.

“We operate on a tariff structure that is similar to most other utilities. This includes an availability charge and a maintenance fee that makes up the set monthly cost for the service. Along with that, there is also the variable charge for refrigeration, which is measured in kilowatt-hours refrigeration (kWh_R),” explains Kriel. 

To accurately quantify and measure refrigeration, and to bill the client correctly, EP Refrigeration pioneered a cost-effective refrigeration meter to ensure accurate readings. In effect, these meters primarily measure temperature and pressure, from which the used refrigeration measure is calculated. This data is also made available to Lynca Meats, to be used for operational or management decisions down the line.

Having started in January of 2019, work on the plant officially concluded in the first week of April, without any operational disruptions having been experienced by Lynca Meats over the working period. The newly installed system is performing as predicted and has achieved a 30% reduction in the cost of refrigeration for the client. In addition to this, with the client no longer having to be responsible for managing and maintaining the system under the outsourced contract, Lynca Meats is also saving countless man-hours.  

Lastly, there was one final crucial component requiring a more elegant solution – the boilers. With an average steam consumption of around 530tons per month, which gets used for cooking, sterilisation, cleaning and ablutions, Lynca’s boiler units were due for a major upgrade.

Jonathan Probert, CEO of EP Dryden Combustion – a wholly owned subsidiary of Energy Partners - says that a new 4ton per hour coal-fired boiler fitted with EP Steam’s proprietary control and monitoring system would do the trick. “Additionally, a small reverse osmosis plant was installed to provide the boiler with good quality feedwater, as the site water source is borehole water of poor quality. We took over operation of their two existing oil-fired boilers as well. These boilers are only used in the case of either planned or unplanned downtime of the coal boiler to ensure a continuous steam supply.”

Probert explains that with EP Steam taking over this part of the operation on an outsourced basis, Lynca was able to save another R110 000 per month. “Other benefits include improved uptime because we now have redundancy built into the design (standby boilers), and that the client no longer needs to pay any attention to the steam generation operation (including labour, maintenance and inspections).”

In closing, De Waal says that Lynca Meats currently stands out as a testament to what is possible when one takes a fully outsourced approach. “This general principle can apply to any abattoir, as well as any other operation that runs at full capacity for most of the year. We would go as far as to say that this is exactly what the agri and food production sectors will need to do to maintain their profit margins in the years to come,” De Waal concludes.

Relevant pages in Agribook.Digital include "Abattoirs and the meat industry" and "Renewable and alternative energy".