Eskom finds its feet

And promises to keep its promises
Brian Molefe

Eskom acting CE Brian Molefe has given an undertaking that there will be no further delays on the commissioning of power projects. “Let me tell you now, Medupi was delivered on time and Ingula units 3, 4,2 and 1 will be delivered on time. The final units of Medupi will also be delivered on time. These are the dates based on our turnaround plan and they are permanent dates. We will not continue to shift [the deadlines out].”

Molefe was talking at a media roundtable discussion to provide feedback on Eskom’s five-point plan, which was implemented in December to address the country’s electricity challenge; and to provide feedback on the work of the War Room, which began its work in January. Also present were Public Enterprises minister Lynne Brown, War Room project manager Malcolm Simpson as well as directors and deputy directors general from Public Enterprises and National Treasury.

The intended message is that between government, the War Room and Eskom management they have a plan and this is restoring stability to the troubled entity.

Bar unforeseen events, there should also be no further load shedding until May next year. At this point, between May and August, all hell could break loose. But this won’t happen, Molefe says.

There is a massive supply and demand imbalance forecast for winter next year. However Molefe says that unlike this year, Eskom will go into the winter forearmed.

“The only way to handle the supply and demand imbalance this year was through loadshedding.” Next year, he says, will be a different story. There is a plan. For one, Eskom’s “young engineers” are being far more scientific in the way they schedule maintenance to ensure that planned maintenance (plus unplanned outages) do not exceed the available supply. “We will find a solution that allows us to do maintenance without load-shedding.”

The maintenance schedule is aggressive, he says. “Right now 60% of our work is scheduled maintenance and 40% is the backlog. The backlog is improving all the time.

“Everyone understands what is at stake. “

The War Room, which meets weekly, has been instrumental in ensuring that new power supply is secured. For instance it stepped in at the eleventh hour to ensure that existing Short Term Power Procurement Programme (STPPP) agreements to buy electricity from independent and municipal power producers were renewed. The contracts were set to expire in May and in April there was no plan, says Minister Brown. This was an example of an issue that cut across departments and entitites and which required collaboration and cooperation. “Within three days the War Room was able to secure the agreements.”

Similarly the War Room is working with other government departments to ensure other IPP projects are accelerated. By the end of July, when the request for information closed, the DoE had received 4000 expressions of interest for gas to power solutions. “This is hugely positive for South Africa. It is important for the economy that we open up the gas sector,” says Brown.

Similarly the coal RFP closed at the end of August for the procurement of 2500MW of coal-fired energy – allocated in 600MW lots.

The Renewable Energy IPP is progressing with financial closure expected at the end of December for 1120MW while the RFP for the fifth bid submission is scheduled for the second quarter of next year.

Two open cycle gas turbine projects are almost ready for commercialisation. The first, a 300MW plant located in the Coega IDZ will be commercialized at the end of October this year, while the second, a 700MW project near Shakaskraal, north of Durban will come on stream next May.

The successful bidders for 50MW of small renewable projects will be announced within the next month.

The demand side is also receiving attention and a R400 million budget has been agreed for the re-initiation of the solar geyser project.

Another pressing priority is to improve the utility’s financial health. In this regard improving the credit rating, which was downgraded to junk status in March this year is a goal.

Molefe was unable to say what the current cost of borrowing is, but conceded that it has increased as a result of the ratings downgrade. However Eskom has exceeded its capital raising targets for the year and has secured funding commitments of R72.4 billion. This is well over the R55 billion it needs for capital and operational expenditure this year but is still short of the R110 billion it needs in the medium term. “We need to emphasise that this is borrowing,” Molefe says. “And we will have to borrow again if there are no tariff increases. But if there are no tariff increases, we will find the money.”

On the subject of whether Molefe will become a permanent, rather than acting, CEO the water is as clear as mud. Minister Brown confirmed that she had made progress in this regard and would make announcement ‘very shortly’. At the same time today Transnet announced that it has extended Molefe’s tenure by another five years.



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