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Eskom could sell some coal-powered plants to raise R450bn

Idea likely to be opposed by labour unions.

South Africa could dispose of some of Eskom’s coal-fired plants and allow households to sell electricity back into the grid as part of a restructuring of the state-owned power utility.

The stations could be sold through a series of auctions and would include related staff contracts, coal-supply contracts and environmental obligations, according to an economic policy paper the National Treasury released for public comment on Tuesday. The plan could raise R450 billion, the Treasury said, citing an independent study.

The disposal of coal plants would be tied to a power-purchase agreement at a pre-defined, station-specific tariff, according to the paper.

Details of the proposal give another glimpse of the many options being considered to get Eskom back onto a sustainable footing and start reversing the damage the indebted company’s finances have brought onto the economy and the nation’s budget.

Read: South Africa sees selling coal plants and visa reform boosting GDP

President Cyril Ramaphosa said in February Eskom would be split into transmission, generation and distribution businesses. The utility told senior managers last week that will take long as three to five years.

Selling plants may be opposed by labour groups, including the National Union of Mineworkers, that see privatisation as resulting in job losses.

“Our thinking as the Num is that the selling of power stations or whatever will not help Eskom,” Paris Mashego, the union’s energy coordinator, said by phone. Selling the plants to private investors also wouldn’t solve the issue of emissions that it’s trying to reduce, he said.

Solar panels

The move to allow non-state entities to become power producers would signal a new commitment for investment in the sector. The pace of private renewable projects stalled after the government signalled a preference for nuclear energy, but deals were signed last year and the Department of Energy has said more would be welcome.

“Eskom’s unwillingness to sign independent power-purchase agreements with bidders in the past” has undermined investor confidence, the Treasury said. Enabling the independence of the single buyer’s office “will ensure the sustainability of independent power producers,” it said.

The option was also proposed on a smaller scale. The government would avoid large capital spend on power infrastructure if the system would allow households and business to sell excess electricity generated through solar panels back into the grid, Treasury said.

The government is giving Eskom a R28 billion bailout over the next three years to keep it afloat and has appointed a chief restructuring officer to oversee the unbundling of the company, which doesn’t have a permanent chief executive officer yet.

Read: Eskom wants government to take over majority of its debt

“While Eskom’s pressing short-term operational challenges have abated somewhat, another crisis is on the horizon,” the Treasury said.

© 2019 Bloomberg L.P.

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Would you buy a used power station from Eskom? I wouldn’t. Better value assets elsewhere!!

Especially with “related staff contracts”.

Who would pay good money for the worst bloated workforce and management in the world.

This sounds like “I have a dream” to me.

With a Power Purchase Agreement in place for 20 years, increasing with inflation! Lots of companies will! Financing will be an issue though, banks reluctant to fund coal projects.

A power purchase agreement?
US companies that in any case don’t care about pollution – or other “dirty” countries like China – will hopefully snap up Medupi and Kusile. What’s the likelihood of the Chinese Development Bank, or Brics Bank, financing it? But perhaps increasing by a little more than inflation to provide for retrenchment packages.
It might work – us tax payers really NEED IT!

Who on earth would buy defunct coal powered plants?
Only, possibly the Chinese who are trying to make us buy their low grade coal excess…whilst they convert to cleaner energies!
Talk about the dark ages. Are we really going to become the worlds dumping ground for old technologies? What a slap in the face…how low have we sunk in the views of the civilized world.

I’m not so sure. Motsepe (Ramaphosa) could be a buyer using money “borrowed” Surve style from the IDC or PIC. He then doesn’t care what he pays, scoops 10% for himself and signs up contracts to supply power to Eskom from these stations at inflated prices. Great deal.

The bulk of power stations under Eskom are ancient and require de-commissioning. The new plant are broken already. You would therefore have to first fix them, fully commission them and then prove they operate well before even thinking about selling them. If you did that then you will still take a knock but you could probably shave off a few hundred billion off Eskom’s debt.

Privatizing is also really the only one to deal with Munic debt. Make Eskom the only distributor of energy if you want, Munics making revenue on electricity revenue makes no sense and just overly complicates it, especially since they collect the revenue then just don’t pay Eskom. We do not have the skills at Munic level to do much.

Opening up the grid by unbundling transmission makes sense and wheeling is also the way of the future but you need a strong distributor to plug the gaps. IF Eskom was clever they would be for this model, they build a new generation business with less debt based on cleaner tech and then have a completely separate distributor in the works.

The treasury plan is positive and structural reform is absolutely needed to save SA but it also needs to go deeper than that. Education, healthcare, transport and security need to be completely relooked at and invested in, without those then it’s just a loop.

Medupi and Kusile are brand new! AND not affordable to SA taxpayers a minute longer! (Same as SAA.)

As usual the unions will hold us back from taking the necessary steps to dig ourselves out of a massive black hole. They simply don’t want to change the status quo, which is what got us into this mess in the first place.

PLEASE ADD THE FOLLOWING PARAGRAPH TO THE PLAN FINANCE MINISTER:

Of the top 6 Biggest Chinese energy supplying companies

1. ALL 6 are registered on the Hong Kong stock exchange
2. ALL 6 are registered on the New York stock exchange some since 1994

Google The 6 Biggest Chinese Energy Companies

Think this article is total clickbait.

No chance of this happening in real life.

There are many private solar installations in JHB and CoCT and many more being installed at a rapid pace.

I am sure there are many private owners of solar installations who are in the same situation I am in, we have excess power production from our PV panels for 9 months of the year, and we wouldn’t mind giving the power away for free forget about actually getting paid for any excess power that we could place onto the grid.

Whether our system don’t produce the power, or do and we give it away for free makes almost no difference to us.

I personally have an excess of around 160 kWh/month for 9 months of the year. I would be happy to give this 1.5 MWh/annum away for free onto the grid, but I cannot even give it away for free, because the smart meter at my property has been configured to meter exported power to the grid as if I had actually imported (used) that power from the grid and so I would have to pay to give the power away.

In my opinion a meter that meters export power onto the grid as if the power had been consumed from off of the grid is 200% inaccurate and should be considered an illegal or faulty meter.

Simply not metering the power exported to the grid and letting me give it away for free is only a pre-paid “token” away, a “token” that could be sms’ed to me and that I can enter into the smart meter to configure it to not meter exported power.

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