The latest round of load-shedding could have been avoided if money specifically set aside by Eskom for maintenance had not been diverted to Gupta-linked projects.
Crucial maintenance work has repeatedly been put off — some of it directly as a result of state capture — and now the effects are being felt, said sources inside the state power utility.
The Mail & Guardian has learned that more than R2-billion reserved in 2015 and 2016 for the maintenance of Eskom’s coal plants was used to pay R1.5-billion to McKinsey and Trillian. Another R658-million was paid as prepayment to the Guptas mining company Tegeta Resources and Exploration for coal, and hundreds of millions of rands were paid to Tegeta for coal that was never delivered.
Last week Eskom announced stage two load-shedding because of plant breakdowns and planned outages for maintenance purposes. These actions shed a minimum of about 9 000MW from the grid. Eskom said it had not invested adequately in the past in the maintenance of its plants and this resulted in unpredictable breakdowns.
Another complicating factor, Public Enterprises Minister Pravin Gordhan told a press briefing at Eskom’s Megawatt Park headquarters on Thursday was that original equipment manufacturers, such as Hitachi, had done shoddy work on both the Kusile and Medupi power station builds. This has caused major delays in the projects that should be providing an additional 7 800 MW to the grid. Gordhan said the work on the two stations was under investigation.
The country was caught off guard last week when Eskom announced it would be embarking on stage one load-shedding because of a number of unplanned outages. On December 1 this was ramped up to stage two and since then has been teetering between one and two as more stations broke down.
Eskom managed to get a deviation approval from treasury to purchase emergency diesel to make up for the downed coal units. “Eskom applied for a deviation from normal procurement procedures so it could buy diesel it required urgently. There was no rand value attached to the application,” said treasury spokesperson Jabulani Sikhakhane.
Two executives at Megawatt Park said the load-shedding could have been averted if Eskom chief executive Phakamani Hadebe had heeded internal advice not to defer maintenance.
They said this was not the first time his ignoring of advice had led to a crisis.
The other example, they said, was the disastrous handling of negotiations with labour early this year, which resulted in workers downing tools and acts of sabotage, including torching and damaging plants.
The three Eskom executives said that an earlier disastrous decision to shift funds reserved for maintenance — which was made during the time of former Eskom chief executive Brian Molefe — was repeated by the company’s new leadership last year, despite warnings from within that it would lead to problems.
“All these prepayments and McKinsey consultancy fees come from there,” said one executive. “They forced us to sign these things and approve payments from maintenance because they said they wanted to avoid load-shedding. Look where we are now.”
Another said: “Since May, coming to now, we knew that we were going to have a problem. That’s why we had a continuous fight [among the executives] on two issues: generation maintenance and coal.
“Some of us could see that if we don’t do the maintenance right on time and we do not get the coal, we are going to have a problem. We had conflicting versions from Phakamani [Hadebe] because they were chasing [saving] money and nothing else.”
Eskom was ground zero for state capture where billion of rands were looted in schemes designed to benefit the Gupta family and friends of former president Jacob Zuma.
The damage done by various enablers — including former Eskom chief executive Molefe, former executives Matshela Koko and Anoj Singh, former board chair Zethembe Khoza, and former public enterprises ministers Malusi Gigaba and Lynne Brown — lost the state company billions and incurred irregular expenditure, bringing it to the brink of destruction.
Two reports, by treasury and Parliament’s portfolio committee on public enterprises, recommended that criminal action be taken against implicated parties.
Eskom’s own internal action has resulted in the dismissal of 14 senior executives, the opening of 12 criminal cases, and the finalising of 858 out of 1 049 cases in bid to clean up the power utility.
The after-effects of the 2017 decision to defer maintenance — on the back of the already strained Eskom fleet of power stations — has also exposed divisions among Eskom’s leaders. Hadebe ignoring the advice against deferring maintenance to accelerate the Medupi and Kusile build projects was a source of unhappiness.
Eskom spokesperson Khulu Phasiwe this week said the “very unusual decision” in 2017 to defer maintenance backfired and that Eskom has learnt a tough lesson.
“The rationale [to shift the maintenance funds to Medupi and Kusile] at the time was that you have new machines coming on stream [and]let’s put the money in them so that we can have this project coming on stream to give us this extra capacity that we need.
Obviously this has backfired because the units that were supposed to go on statutory maintenance are breaking down now and, as a result, they are causing problems.
“Management has set aside over R11.5-billion to deal with over 60 generating units that need to be repaired and that process is going to take a minimum of 12 months … Once that is done you have to be very strict to do maintenance,” said Phasiwe.
He did not respond to questions about the Gupta-payments coming from maintenance budgets at the time of going to print.
The M&G has established that the latest coal supply crisis could have been averted if the parastatal had notified state oil company PetroSA that it would require emergency diesel.
By the time the SOS was sent out two weeks ago, PetroSA, which had helped Eskom successfully to avert load-shedding at a cost of R200-million to Eskom during the June to October winter months, was coming out of a crisis of its own. Its production plant in Mossel Bay had been down for longer than 28 days and had not produced any diesel.
This was because a once-in-four-years planned maintenance cycle, from September 28 to October 30, overran because of additional work that was required.
PetroSA spokesperson Tumo Mogamisi said: “When PetroSA embarked on the plant statutory shutdown in September 2018, there were no orders for diesel from Eskom, nor any indications that Eskom would soon require emergency diesel supply for their power plants.”
A PetroSA insider, speaking on condition of anonymity, said they were caught off guard by Eskom’s request for emergency diesel late last month and were only able to obtain about 2 000-million litres on Tuesday and would deliver more by next week.
“Ordinarily, if they [Eskom] had told us their demand would increase to this level, we would have made sure we keep product for them despite the [planned] shutdown. We would have imported if we needed,” the insider said.
“These are the types of arrangements we had during that time of the big load-shedding in 2008. In this instance they were not proactive and the fact that their crisis came at a time when our plant was down just made things worse because we were not as responsive and the market has a shortage.” — Additional Reporting by Tebogo Tshwane