Eskom hit with R36-billion bill

Eskom’s poor financial position may worsen with a huge bill from contractors working on the Kusile Power Station.

The City Press has reported that a claim of this size – R36 billion – is normal on big construction projects to claw back money for unforeseen costs to get the job done.

Economist Mike Schussler described the size of the claim as “shocking”, however, asking: “Where on earth is Eskom going to get the money to pay it?”

Eskom has confirmed the R36-billion contractor claim, but said it is overstated and that it provided for a smaller amount in its total R161-billion Kusile budget.

Medupi and Kusile

Medupi and Kusile, which are well behind scheduled completion, have six 800MW generation units each with more modern technology and higher efficiency than Eskom’s older power stations.

If all 12 of Medupi and Kusile’s generation units were functioning optimally, they would add 9,600MW of electricity to the grid.

Eskom subsequently decided to divert maintenance funds to finish these projects, a move which backfired spectacularly and resulted in a load-shedding crisis.

Reasons for Eskom’s inability to complete construction of the power stations in time include corruption and mismanagement.

The power utility is now in deep trouble, with its current power stations in bad shape due to a lack of maintenance – while its new power plants are not functioning as planned and still require considerable further investment to deliver enough power to the national grid.

Government bailout

At the same time, the government announced a record R69-billion bailout for Eskom in February to be paid over three years. Of that, R23 billion is pledged for the current financial year.

Based on the 2% limit of the appropriated national budget, though, only R17.7 billion can be transferred.

The remaining balance will have to be subject to the normal appropriation process when parliament is constituted later this year.

The R23 billion required a special bill that didn’t come up before parliament completed it business before the 2019 election, and the National Treasury had targeted disbursement between August and October 2019.

“Because were are in recess for the election period we can not process any new bills which have to go through a proper procedure of consideration and engagement with stakeholders,” Pinky Phosa, chairwoman of the National Assembly appropriations committee, said on the matter.

“The new parliament will have to consider these reports once it takes over.”

Now read: Eskom’s big blunder – How poor decisions and corruption caused load-shedding

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Eskom hit with R36-billion bill