Eskom faces ris­ing sur­plus or plant clo­sures

Eskom's fu­ture ca­pac­ity plans

CityPress - - Business - JUSTIN BROWN busi­ness@city­ Source: Eskom Graph­ics24

Eskom’s lo­cal power sur­plus is set to rise as it brings on more gen­er­a­tion ca­pac­ity at a time when lo­cal de­mand for en­ergy has dropped to an 11-year low.

The ris­ing sur­plus means that Eskom will have to start clos­ing its high­est-cost power sta­tions to save costs. Fail­ing this, it will face in­creas­ing fi­nan­cial pres­sure as it could ul­ti­mately strug­gle to find a buyer for the sur­plus power, ei­ther lo­cally or in the re­gion.

Last year, Eskom’s power sales fell to 214 121GW of power – the util­ity’s low­est en­ergy sales since its 2006 fi­nan­cial year when it achieved en­ergy sales of 207 921GW.

Eskom al­ready has a sur­plus in the re­gion of 4 000MW at any given time as it has brought on 9 157MW of ex­tra ca­pac­ity power since 2005.

Over the five years from April this year to March 2022, it is plan­ning to add more than 7 000MW of ex­tra ca­pac­ity; yet, dur­ing this time, fore­cast­ers are ex­pect­ing lo­cal eco­nomic growth to stay be­low 2% per year, so lit­tle of the ex­tra ca­pac­ity is go­ing to be ab­sorbed by lo­cal de­mand.

Thava Goven­der, trans­mis­sion ex­ec­u­tive at Eskom, said this week “if there is no growth and we con­tinue to see neg­a­tive growth, that sur­plus will go to be­tween 3 000MW and 5 000MW and con­tinue to grow be­yond that”.

In its re­sults pre­sen­ta­tion ma­te­rial, Eskom noted: “Sur­plus ca­pac­ity cur­rently ex­ists and is pro­jected to grow steadily over the next three years.”

Some of the old­est and most costly coal-fired power sta­tions that Eskom has in op­er­a­tion in­clude Cam­den, Grootvlei, Kriel, Ko­mati and Hen­d­rina, all in Mpumalanga, which to­gether have a gen­er­a­tion ca­pac­ity of 9 400MW.

How­ever, in May, Eskom re­versed a de­ci­sion to close five power sta­tions to main­tain the jobs of its em­ploy­ees as well as those em­ployed at the coal mines that sup­ply the sta­tions.

Eskom is sell­ing part of the sur­plus power to cus­tomers in the rest of south­ern Africa, with in­ter­na­tional power sales in­creas­ing by 12% in the year end­ing March to about 15 000MW.

Eskom’s in­stalled ca­pac­ity now stands at 44 134MW.

Chris Yel­land, man­ag­ing di­rec­tor of EE Pub­lish­ers, said that over the past decade, lo­cal con­sump­tion had dropped as the price of power sky­rock­eted, which prompted more ef­fi­cient use of power.

The re­la­tion­ship be­tween eco­nomic growth and lo­cal power use had de­cou­pled as the coun­try be­came less de­pen­dent on pri­mary in­dus­tries and man­u­fac­tur­ing and shifted to­ward the less power-in­ten­sive ser­vice sec­tor.

Yel­land said that an in­creas­ing power sur­plus would lead to Eskom hav­ing to close its high-cost power sta­tions to save money.

Eskom is also look­ing to re­duce its use of gov­ern­ment guar­an­tees. It has drawn R215 bil­lion of its to­tal of R350 bil­lion in gov­ern­ment guar­an­tees.

That said, Eskom’s act­ing CEO, Johnny Dladla, said that the util­ity would be re­leas­ing R105 bil­lion in gov­ern­ment guar­an­tees over the next two years by con­vert­ing this debt to un­guar­an­teed debt.

Eskom’s chief fi­nan­cial of­fi­cer (CFO), Anoj Singh, said the re­place­ment debt could be raised from ex­port credit agen­cies.

The re­duc­tion in Eskom’s reliance on gov­ern­ment-guar­an­teed debt would re­duce the bur­den on the fis­cus, Eskom said in its an­nual re­port.

Eskom has lost con­trol of debt owed by mu­nic­i­pal­i­ties, de­spite threat­en­ing lo­cal au­thor­i­ties with power cuts and entering into pay­ment ar­range­ments.

Mu­nic­i­pal debt owed to Eskom rose from R6 bil­lion at the end of March last year to R9.4 bil­lion at the end of March this year.

Eskom has pay­ment ar­range­ments with 60 mu­nic­i­pal­i­ties of which 20 are hon­our­ing these agree­ments, 11 are “par­tially” hon­our­ing the ar­range­ments and 29 are in de­fault.

In Soweto, R5.3 bil­lion in debt, be­fore in­ter­est, is owed to Eskom and 99% of this amount is over­due and un­paid.

Eskom has R32.4 bil­lion in debt owed to it by in­dus­trial power users and mu­nic­i­pal­i­ties, of which R15.4 bil­lion is within due date and R17 bil­lion is over­due. MW= Megawatt

Kusile unit 1 July 2018 Medupi unit 4 July 2018

April 2017 to March 2022

Kusile unit 2 July 2019 Medupi unit 3 June 2019 Medupi unit 1 May 2020 Medupi unit 2 De­cem­ber 2019

7 176MW to be com­mis­sioned over the next five years

Kusile unit 4 March 2021 Kusile unit 3 Au­gust 2020 Kusile unit 5 Novem­ber 2021 Eskom has com­mis­sioned 9 157MW in new power gen­er­a­tion ca­pac­ity since 2005, in­clud­ing 3 020MW since 2015.

Over the next five years, Eskom is ex­pect­ing to com­mis­sion 7 176MW of new power gen­er­a­tion ca­pac­ity

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