Office for grid investors
ESKOM: PRIVATE SECTOR APPETITE ‘INSATIABLE’ – ELECTRICITY MINISTER
Govt in move to encourage business to take part in expanding network.
Minister of Electricity Kgosientsho Ramokgopa on Tuesday indicated that government will create a dedicated office for the procurement of private sector participation in expanding Eskom’s transmission network.
The anticipated model for such participation is a build-operate-transfer contract, which will see private sector companies build new transmission lines and operate them for a specified period, after which the asset is transferred to the relevant organ of state.
It is a model used to finance large projects, typically infrastructure projects developed through public-private partnerships.
The Gautrain is one example of such a contract; it was awarded to the Bombela consortium and comes to an end in 2026 when the train system will revert to government.
Best of both worlds
Ramokgopa said the establishment of the office is aimed at ensuring the procurement occurs with speed and innovation without relinquishing state ownership through the National Transmission Company, which is being unbundled as a subsidiary of the Eskom group.
In establishing the transmission IPP office – which he referred to as the Transmission Project Office – Ramokgopa will follow the example of the IPP office in the Department of Mineral Resources and Energy (DMRE) which has been running the procurement of generation capacity from the private sector since 2011.
The DMRE’s IPP programme was lauded as one of the best in the world, but later rounds were slow to be rolled out and fraught with problems.
Following the recent conclusion of a memorandum of understanding with Public Enterprises Minister Pravin Gordhan, Ramokgopa has the powers to lead procurement in the area of transmission.
Ramokgopa emphasised that procuring more generation capacity without expanding the grid leads to stranded assets.
The grid is severely constricted in especially the Eastern, Western and Norther Cape regions, where renewable energy resources are best. Ramokgopa described the transmission crisis as equal to the generation crisis and said it will be catastrophic if not attended to. “We are not waiting for the crisis to confront us,” he said.
He said the transmission IPP programme will supplement Eskom’s Transmission Development Plan, a rolling 10-year plan that is updated annually.
Eskom’s current plan provides for 14 000km of new transmission lines in the next decade, compared with 4 000km in the previous decade. The utility has a fully funded plan for the construction of 1 400km over the next three years, but Ramokgopa says it is not enough. The private sector must get involved to increase this to 6 000km.
We are not waiting for the crisis to confront us
Funding
He says there is “insatiable” appetite among investors to participate in the transmission IPP programme. This was confirmed at the World Economic Forum in Davos, where one global bank declared its willingness to underwrite the investments. He did not name the bank.
He indicated that either the Industrial Development Corporation or the Development Bank of Southern Africa will be central to the financing of the programme.