Energy20.11.2022

R9-billion Eskom loan “misguided” — Economist

It is not sensible for Eskom to take its R9-billion loan from the World Bank to convert its defunct Komati power plant into a renewable energy generator.

This is according to Dawie Roodt, chief economist of the Efficient Group, who told the City Press it was “foolish” for Eskom to borrow any more money at present.

He explained that the national power provider is already about R400 billion in debt, and can only service about half of this existing debt.

Finance minister Enoch Godongwana announced in his 2022 Medium Term Budget Policy Statement that the government plans to take over one-third to two-thirds of Eskom’s debt.

He said this would let Eskom prioritise improving its plant performance, reduce load-shedding, and ensure the state-owned power utility’s long-term financial viability.

Godongwana stressed the programme would include strict conditions that Eskom and other stakeholders would have to meet before and during the debt transfer.

“These conditions will address Eskom’s structural challenges by managing its costs, addressing municipal and household arrears due to the utility, and providing greater clarity and transparency in tariff pricing,” Godongwana said.

Dawie Roodt, Efficient Group chief economist

Roodt argued that Eskom needs to prioritise power generation over green energy projects. Therefore, selling Komati to a private investor would have been better.

He added that Godongwana already publicly stated that Eskom should sell its old power station — further proof that the Komati project does not make financial sense.

Thomas Garner, the chairperson of the SA Independent Power Producers Association (SAIPPA), said that when one takes the estimated cost of wind power, solar power, and battery storage, and applies that to the project’s expected output, one could estimate that this part of the Komati project would cost about R5.6 billion.

Citing other anonymous sources, City Press reported that these figures are too low, and a better estimate would be approximately R6.5 billion.

In either case, the remaining portion of the R9-billion loan will be used to decommission the existing plant and implement social interventions to limit the project’s impact on the community close to the power station.

However, Roodt argued that it is not Eskom’s responsibility to get support from these communities, and this cost should not be added to electricity tariffs.

Increased consumer burden

Eskom told the City Press that if it complies with the prescribed legal and regulatory process for the conversion process, it will be able to recover the costs of the loan through electricity tariffs as depreciation and return on capital.

Whatever cannot be recovered from consumers through tariffs would then be paid by taxpayers.

However, MC Botha, a tariff expert and lawyer involved in court victories against the National Energy Regulator of South Africa (Nersa), said it remains to be seen if the loan could actually affect power tariffs.

Botha explained that Nersa is bound by legislation only to allow Eskom to recover efficient costs and a reasonable return on its capital.

Therefore, any plans to add the cost of the loan to consumers would need to be disclosed to the public — at which time, the legality of adding this cost to electricity tariffs could be evaluated.

Komati Power Station

Eskom runs out of diesel

Eskom’s woes continued this week when the energy provider said it did not have enough diesel to run its open-cycle turbine power plants — a crucial part of its emergency power generation fleet.

“Changes in the stages of load-shedding will be more erratic due to the absence of the buffer that is normally provided by the diesel generation capacity between generating unit breakdowns,” the power utility said on Friday.

The energy provider, therefore, put the country into stage 4 load-shedding heading into the weekend – adding that 4,887MW was on planned maintenance, and a further 15,320MW of capacity was unavailable due to breakdowns.

Eskom has since announced that load-shedding was cancelled at 08:00 on Sunday morning — but will be reinstated again from 17:00.


Now read: Suspect linked to bomb threat against Eskom COO arrested

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