If there are no tariff hikes and no debt solution for Eskom, then just how does the power utility maintain its creaking infrastructure?
Eskom will be freed from borrowing more money for its operational needs and capital requirements for the next five years because of the government’s debt relief package and the tariffs approved by the national energy regulator, Nersa.
This is according to Eskom’s acting chief executive, Calib Cassim, who met parliament’s standing committee on appropriations to discuss the Eskom Debt Relief Bill on Tuesday.
Cassim said the debt relief package of R240 billion will enable the electricity utility to properly plan and fund maintenance and plant refurbishment for the first time in years. Eskom has accumulated debt of R420 billion, mostly incurred from the construction of its Medupi and Kusile power stations.
“The debt relief has, in the first place, relieved a lot of pressure on Eskom needing to go and approach markets to raise anything from R40 billion to R60 billion an annum, which is what we have done in the last few years,” said Cassim.
“This is the first time in the last six years that we were able to release three years’ capital expenditure across the divisions. That is a tremendous relief from a financial and operational perspective. It also allows the management to focus on generation performance and to focus on reducing the intensity of load-shedding.”
Under the debt relief package, the treasury will cover all debt-servicing costs over the next three years, a move aimed at freeing up cash for Eskom to undertake immediate and much-needed maintenance and investment to reduce load-shedding.
The relief includes R184 billion in cash over the next three years and thereafter government’s take over of up to R70 billion of Eskom debt if it meets the conditions attached to the relief.
Last month, Nersa approved an 18.65% tariff increase for 2023-24 and 12.74% for 2024-25.
Cassim said that with the tariff for 2023-24, the debt relief meant Eskom would not have to borrow for the next four years.
But MPs argued that Eskom was incapable of meeting the conditions of the debt relief, which include that it may not borrow or invest in new generation projects and must not award wage and salary increases that affect the company’s sustainability.
Electricity Minister Kgosientsho Ramokgopa has presented a plan to President Cyril Ramaphosa proposing that the lifespan of Eskom’s plants set for decommissioning in five years be extended.
Public Enterprises Minister Pravin Gordhan told the parliamentary committee that the solution was to change Eskom’s mindset and that “both board and management have to ensure that they take serious cognisance of the concerns raised in this meeting”.
“There must be an impact that is palpable for the population and as far as load-shedding is concerned,” he added.
Eskom board chairperson Mpho Makwana said Eskom’s cash flow problems had “short-circuited” maintenance.
“As a board we started out realising that we needed to create a platform to fix Eskom to ensure that our various power stations are maintained as they should be so that they can operate with a little bit of predictability because what has been happening is that maintenance programmes have been short-circuited and as a result we have frequent outages due to tripping,” he said.
Ramokgopa warned that despite the debt relief, the winter ahead is likely to be dark because it will be some time before improved maintenance results in reduced load-shedding or new privately owned power generation reach the grid. He also said that should Eskom refuse to increase funding for diesel procurement, the load-shedding would rise to higher stages.
In a powerpoint presentation tabled at the ANC’s national working committee last week, Ramokgopa recommended that Eskom increase funding for diesel procurement to help lessen load-shedding.
He said the department of mineral resources and energy needed to rapidly release further bid windows for independent power producers.
“Bid window 7 should be released in May 2023 for 5 000MW of solar PV and wind, targeted in provinces where grid capacity is available [in the Free State, Limpopo, Mpumalanga and North West].”
Ramokgopa said the mineral resources and energy department should ensure preparatory work is undertaken to explore a “mega bid window” or rolling bid window to follow Bid Window 7.
He proposed a “mega bid window” for the procurement of renewable energy to curb rolling blackouts and recommended buying a minimum of 15 000 megawatts of energy, in addition to other measures.
During a recent interview with radio station 702, Mineral Resources and Energy Minister Gwede Mantashe said the solution for the power crunch lay in addressing emergency power procurement.
“Emergency procurement must be taken seriously. Eskom must not pretend to be having electricity when it does not,” he said.
Busi Mavuso, chief executive of Business Leadership South Africa, said Ramokgopa’s plan was not up to scratch.
“It was disconcerting to see last week a major deviation from that plan being proposed to the cabinet,” she said. “It was rejected, with the instruction that it should first be considered by NECOM [the national energy crisis committee]. But why did the new minister contemplate the proposal which envisaged a major new investment in coal and extending the life of coal-powered stations? Such plans must be considered carefully.”