Eskom 'technically insolvent', won't last beyond April 2019 - committee hears

konfab

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Eskom is "technically insolvent" and will cease to exist at the current trajectory by April 2019, the portfolio committee on public enterprises heard.
The department of public enterprises (DPE) briefed members of the portfolio committee on public enterprises on Wednesday, where the issues at Eskom were highlighted.
Eskom's R420bn debt burden represents 15% of the sovereign's debt. If Eskom defaults on its debt, it will threaten the economy, the DPE highlighted in a submission to the committee.

Eskom got to this point due to a number of factors, the DPE said.

Over the past 10 years, coal purchase volumes remained flat, and capacity only grew slightly. Additionally employee costs increased significantly due to the associated employee benefits, the report read.
Even though Eskom's revenue grew more than four times since 2007, due to tariff increases – the expenses of primary energy and employees grew faster than revenue growth. The presentation showed that employees grew from 32 000 in 2007 to 48 000 by 2018. The associated costs grew from R9.5bn to R29.5bn.
Further, its opertaing profit has not been enough to cover interest costs, and support capital expenditure.
Growing municipal debt has also contributed to Eskom's woes.

Eskom also has the challenge of maintaining its operational sustainability. The average age of its generation fleet is 37 years but essential mid-life refurbishments have not been implemented. There has also been "poor quality" of maintenance, due to "poor workmanship".
"Forty percent of plant breakdowns are due to human error," the minister said.
The ongoing coal shortages are due to "poor management" and lack of investments in cost plus mines.
There has also been a significant loss of critical skills and low staff morale, the DPE highlighted.

Build programme
Cost overruns and poor performance from the build programme have also added to Eskom's burden.
"Medupi and Kusile have suffered massive delays and cost overruns due to poor planning, poor engineering designs, poor procurement practices and poor contracting and corruption," the report read.
Costs of the plants have escalated significantly to over R300bn. Medupi's costs rose from R24.9bn to R145bn and Kusile's costs doubled from R80.7bn to R161.4bn.
In terms of Eskom's governance – "systemic corruption, malfeasance, fraud and state capture project" compromised the credibility of the organisation and eroded investor confidence.
The effects of corruption have been passed through to consumers and the shareholder (government).
"The ongoing revelations continue to threaten the credibility of the institution," the report read.


Eskom introduced stage 2 load shedding for the first time since December on Sunday. The power utility attributed it to plant breakdowns. By Monday, Eskom shifted load shedding to stage 4, after losing six generating units and continued to implement stage 3 load shedding on Tuesday.

The power utility will on Wednesday implement stage 3 load shedding from 08:00 to 23:00, Fin24 reported.
During the State of the Nation Address debate in Parliament on Tuesday, Gordhan said he met with Eskom's board on Monday to get a better understanding of the cause of the load shedding at the power utility.
He told MPs that not all of Eskom's installed capacity is available, and said Medupi and Kusile power stations were "badly designed and badly constructed' and "not performing at optimum levels". He also assured that the unbundling did not mean that there would be privatisation.

Last week in the state of the nation address, Ramaphosa announced Eskom would be split into three entities - generation, transmission and distribution - which would fall under the company Eskom Holdings.
Additionally government would support Eskom's balance sheet, the details of which will be revealed in the National Budget, to be delivered by Finance Minister Tito Mboweni on February 20.


https://www.fin24.com/Economy/Eskom...st-beyond-april-2019-committee-hears-20190213
 

ArtyLoop

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#3
Eskom also has the challenge of maintaining its operational sustainability. The average age of its generation fleet is 37 years but essential mid-life refurbishments have not been implemented. There has also been "poor quality" of maintenance, due to "poor workmanship".
"Forty percent of plant breakdowns are due to human error," the minister said.
The ongoing coal shortages are due to "poor management" and lack of investments in cost plus mines.
There has also been a significant loss of critical skills and low staff morale, the DPE highlighted.
DUH! How utterly stupid must you be to not realise this would have been the outcome. Oh wait... oinking at the trough trumps logical thinking and reasoning.
The ongoing coal shortages "poor management" excuse is a lie. Its because of the Gupta Family and that aftermath.

Even so, the loss of critical skills is now an impossible problem to address.. the people with skills happen to be white, which immediately disqualifies them from actually being employed here to fix this utter and complete mess.
 

konfab

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#7
The solution is very simple IMO.
Let reality and the market kick in.

Allow Eskom and all the other SOEs which are bankrupt to go bankrupt, the government looses its credit rating and the world realises what we see every time the power goes off- that the government is not capable of doing its job.
Liquidators can come in and sell off the assets to the private sector, which would both scrub off most of the debt and install competent people to run the plants.

But this isn't going to happen.
The Messiah of property rights and energy generation will simply just give Eskom more money. Because the means of production must be owned by the people.
 

ArtyLoop

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The only thing that we can be sure of in South Africa is that come 8 May the people will vote exactly the same as in 1994.
Of course, the voters out there don't care much about loadshedding, where they live they hardly ever have power anyway.
But this isn't going to happen.
The Messiah of property rights and energy generation will simply just give Eskom more money. Because the means of production must be owned by the people
.
Of course. I am willing to bet good money that come budget speech we are all going to be carrying Eskom even harder than before. Remember how people had to pay extra tax to fund the 1994 elections, the same is going to happen here. We will be raped on income tax, a nice extra little dock on that to carry Eskom, and they will then STILL loadshed us.
 

krycor

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#10
Of course, the voters out there don't care much about loadshedding, where they live they hardly ever have power anyway.

Of course. I am willing to bet good money that come budget speech we are all going to be carrying Eskom even harder than before. Remember how people had to pay extra tax to fund the 1994 elections, the same is going to happen here. We will be raped on income tax, a nice extra little dock on that to carry Eskom, and they will then STILL loadshed us.
And even then.. Soweto won’t pay for their use haha
 

ArtyLoop

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And even then.. Soweto won’t pay for their use haha
Soweto is a special case, I don't even know how the heck that came to be but ja, they get free power. I guess that's because they are where the largest part of the folks live whom the ANC depends on to keep them in charge of SA.
 

Gordon_R

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#12

reactor_sa

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#17
Next week the finance speech will reveal just how much Eskom is in the red for. And how much government will have to pay up. And how much more tax the people will pay. Prepare the burn shield lotion.
 

daveza

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#18
https://www.fin24.com/Budget/ramaph...-will-have-to-make-difficult-choices-20190214

SA's public finances are constrained and government will have to direct resources to programmes with the greatest impact on poverty alleviation, job creation and economic growth, President Cyril Ramaphosa said.

The president was addressing the National Assembly on Thursday, as part of his replies to issues raised by MPs during the State of the Nation Address debate which has taken place over the past three days.

"We are at a moment in our history where we need to make difficult choices. Our public finances are constrained, we will hear this more clearly when Finance Minister Tito Mboweni announces the budget," he said.

The finance minister will announce the National Budget on February 20.


Ramaphosa said that Eskom will need assistance from government to stabilise its finances.

"Doing so means stabilising the economy of the country," he said.

This comes at a time when public finances are constrained, so financial support must be accompanied by a "credible, far-reaching" turnaround plan by Eskom which has both an immediate and "lasting impact", he said.

The department of public enterprises told the oversight committee that Eskom's R420bn debt represents 15% of the country's debt. If it defaults, it will threaten the SA economy.

We know already there will be urgent handouts to Eskom, to SAA, to the SABC - which have little to do with poverty alleviation, job creation and economic growth ( Eskom excluded from this one ).
 

lsheed_cn

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#19
Soweto is a special case, I don't even know how the heck that came to be but ja, they get free power. I guess that's because they are where the largest part of the folks live whom the ANC depends on to keep them in charge of SA.
Simple - you don't pay, you get loadshed first.

Soweto first, they owe 18bn + 500ml/month + whatever else has been wiped clean previously.
Fark them, they can go back to using matches and tyres to keep warm in winter, ANC style.
 
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