Doomed from the start — Eskom board fails first big test

Eskom’s board has failed to meet its first major target set by government — improving the utility’s generating fleet energy availability factor (EAF) to 65% by March 2024.

Eskom’s latest system status outlook showed that the utility’s power stations recorded an average EAF of 52.37% in the first 12 weeks of 2024, going up to 24 March 2024.

This is worse than at the same point in 2023, when the average EAF was 54.71%.

One would have to factor in the last week’s performance for the average EAF up to the end of the month to definitively state the board has failed to meet the 65% target.

However, it has already been a mathematical impossibility for the EAF to have increased to 65% by the end of March 2024 for several weeks.

Even if all of Eskom’s power stations were operating at 100% of their capacity in the last week of the month, a beyond optimistic assumption, the average EAF over 13 weeks would only increase to 56.03%.

The table below shows how Eskom’s average weekly EAF has changed since the start of 2024.

The board’s ambitious EAF targets — first announced by public enterprises minister Pravin Gordhan when he appointed them in October 2022 — were met with criticism.

In the first week of that month, Eskom’s average EAF was around 59.06%, around 7% higher than its latest figure.

In addition to bumping the EAF up to 65% by March 2024, the board set a target of 70% by March 2025.

Many energy experts and former company board members argued that the board’s mandate should not include operational matters and that it was effectively set up to fail.

Former Edcon and Massmart CEO, Grant Pattison, who also served as non-executive director on many South African boards, explained the problem with thinking that the Eskom board could stop load-shedding.

Pattison questioned whether the Eskom board had the power to raise capital or retire debt, and asked whether it could hire, fire, give incentives to senior management, restructure and retrench.

“Can they build new power plants, and are they in control of liabilities added to their balance sheet?” he asked. “What role do they have in influencing the energy policy of coal, nuclear, and renewables?”

The reality is that most of these powers lay with government officials, including the public enterprises and electricity minister.

Gordhan vs Ramokgopa
Electricity minister Kgosientsho Ramokgopa (left) and public enterprises minister Pravin Gordhan (right).

Yelland also explained that the EAF was on a declining downward trend for the past five years and that there could not be a step change in this movement.

Improving the EAF to the extent demanded from the board would require maintaining or fixing all of Eskom’s 90 generating units simultaneously.

“To increase Eskom’s EAF, there must first be a slowdown [in the deterioration],” Yelland explained.

“It then has to bottom out, stabilise, and start to rise. This process will take several years,” he said.

“It is mathematically impossible for this to happen in the 2023/2024 or 2024/2025 financial years,” Yelland said.

“Talk of a 70% or 75% energy availability factor is misleading the public, and it is not achievable by Eskom.”

Yelland’s graph below shows how Eskom’s weekly average EAF in 2024 compares with 2023 and 2022.

Board chair Mpho Makwana resigned from his position barely a year after his appointment and six months before the 65% EAF deadline.

He was replaced by former MTN South Africa and Altron CEO Mteto Nyati.

Although Eskom’s announcement about Makwana’s resignation said it was amicable, no explanation was given for his departure.

News24 reported that it was due to disagreements with public enterprises minister Pravin Gordhan.

Mpho Makwana, chairman of Eskom Holdings Ltd., listens at the 2011 CERAWEEK conference in Houston, Texas, U.S., on Thursday, March 10, 2011. Photographer: F. Carter Smith/Bloomberg

Neither the board nor the government has given an indication of a lowering or scrapping of the EAF targets.

As recently as February 2024, Eskom spokesperson Daphne Mokwena said that the company was still targeting the EAF improvement.

“We do anticipate fluctuations in the EAF as generation units are taken out of service for dedicated maintenance,” she said. “However, we are targeting an average EAF of 65% by March 2024.”

In its fifth Multi-Year Price Determination for Eskom’s latest electricity tariffs, the National Energy Regulator of South Africa (Nersa) said its approvals were based on an assumption of a 64.8% EAF in Eskom’s 2023/2024 financial year.

If the EAF remained around 55%, Eskom would have to use 132% of its budget for diesel used in its open-cycle gas turbines to reduce load-shedding in that financial year.

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Doomed from the start — Eskom board fails first big test