Eskom: De Ruyter has a plan up his sleeve


In an apparent effort to seize the initiative to end growing and economically devastating load shedding, Eskom CEO André de Ruyter and Chairman of the Board Professor Malegapuru Makgoba have invited experts local and international energy companies at a “Roundtable on the Electricity Crisis” later this month.

They will present a proposal developed internally and approved by the Board of Directors last month at this event, the first in a series of events that will also include engagement with power users and funders.

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The commitments, which Eskom has formally notified to the Presidency and several government departments, will solicit comments on the proposal, which will be consolidated into a final proposal to be shared with relevant ministers and made public in August.

This comes against the backdrop of ever-increasing load shedding, although South Africans have enjoyed some relief with no load shedding instituted over the past week.

Latest data

Eskom’s latest data shows that more than 30% of its production capacity has been disconnected due to unplanned outages over the past four weeks.

The average generation fleet availability factor so far this calendar year is only 59%, compared to 61.79% in 2021.

Source: Eskom

In April and May, Eskom had to revert to phase 4 load shedding, which is more intense than the worst-case scenario foreseen in its winter plan. In May, it also exceeded the 22 days of load shedding predicted in this scenario, ending the month with 26 days of insufficient power.

Meanwhile, Eskom’s Reliability Maintenance Recovery (RMR) program is not delivering the needed results. Only 47 of 84 projects were completed in the previous fiscal year, many of which were postponed due to lack of funds and operational difficulties. Eskom recently reported on this, as shown below.

Source: Eskom

In the recent past, De Ruyter has increasingly reframed his messages from Eskom by linking his hopes for maintenance to improve the performance of his generating fleet to the need to create more generating capacity.

Supply gap

He made it clear that the supply gap is between 4,000 and 6,000 megawatts (MW) and that accelerated supply from Independent Power Producers (IPPs) will give Eskom the space it needs to repair its aging fleet. .

However, Eskom is not mandated to source energy from IPPs. This is the job of the Department of Mineral Resources and Energy (DMRE), which has been widely seen as slow, if not reluctant, to do so.

DMRE’s emergency supply program to acquire 2,000 MW of additional generation capacity, launched in August 2020, has been fraught with pitfalls; only projects of only 150 MW were able to sign power purchase agreements, which is an important step towards financial closure.

De Ruyter’s statements about extra power prompted Mineral Resources and Energy Minister Gwede Mantashe to warn him to “stay in his lane”.

A plan to deal with reluctance and resistance?

It seems that the decision to present a recovery plan and to mobilize support for it aims to circumvent the reluctance and resistance of the system.

Moneyweb has been informed that Eskom sees the upcoming crisis roundtables as an opportunity to provide context and facts to the power supply debate in South Africa.

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It also hopes to create a better appreciation of the role and responsibilities of parties and institutions outside of Eskom on which key aspects related to resolving the electricity crisis depend.

This includes policy which is the responsibility of the DMRE, regulatory matters which are primarily the responsibility of the energy regulator Nersa, and legislative matters which are to be resolved by parliament.

What De Ruyter’s plan entails is still unclear.

The program to finalize the plan includes engagement with donors in the UK, Germany, France, USA, Denmark, China, Japan and South Korea.

It remains to be seen whether Eskom will be able to contract new debts.

When the availability of $8.5 billion in green finance was announced at the COP26 climate change conference late last year, Eskom CFO Calib Cassim said the utility would not be able to take on new debt unless its current debt level is reduced.

Lily:

Energy expert Chris Yelland of EE Business Intelligence proposed that Eskom sell its old power plants and use the proceeds to reduce its debt.

It further proposes that Eskom withdraw from power generation and allow the private sector to supply power on a competitive basis. It should also go out of distribution, he says. Generation has failing power plants and distribution is saddled with huge amounts of unpaid consumer debt.

“Eskom has two toxic companies and a pretty decent one,” says Yelland.

“Let the focus be on the operation and maintenance of the transmission system.”

Lily:

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