Departing Eskom CEO Andre de Ruyter expects the amount of money it is owed by municipalities — now more than R68bn, including R11bn interest — will rise even further before the 2024 general election.
Requests to various government departments and municipalities for debt to be paid have been unsuccessful, De Ruyter said. Repair and maintenance of the coal-fired fleet is expected to cost R12.3bn in the 2023 financial year, he added.
In an extensive presentation to three parliamentary committees De Ruyter highlighted Eskom’s cash requirements and municipalities’ rising debt, and said that “based on our previous experience” it is expected to accelerate in the lead-up to the 2024 elections.
That acted as a constraint on Eskom’s short-term ability to lower the load-shedding, which has crippled the economy and caused a public uproar that has eroded support for the governing ruling ANC to the extent that it is forecast to fall below 50% in the election.
There has been speculation that Eskom might forgo maintenance in the short term to shore up to shore up support for the government, but De Ruyter emphasised that such a move would be “catastrophic”.
Such a step would perhaps buy six months without load-shedding but the situation thereafter would be “far more catastrophic” as then the units would break down completely,” he said.
“We must guard against the temptation to again postpone maintenance. We need to look after these plants if we want them to be reliable,” De Ruyter said and warned that 2023 will be a tough year in terms of load-shedding.
Eskom’s gross expenditure on independent power producers (IPPs) would increase from R29.7bn in the 2020 financial year to R95.5bn in the 2027 financial year, De Ruyter said, demonstrating the growth in the contribution of the private sector to the country’s electricity generation.
The costs for renewable energy had reduced substantially and the prices being offered for bid windows five and six for wind and solar power — between R400 and R500 per MW hour — are comparable with that for coal and other technologies, he said.
That compares with the first bid round of about R4,552 per MW/h. Eskom has to comply with these contracts which will run for about 11 more years.
De Ruyter also said the state-owned utility’s targeted 60% energy availability factor (EAF, or the percentage of installed capacity available for generation) by the end of the 2023 financial year wasn’t achievable. A goal of 57% was more realistic, he said, implying that load-shedding would remain.
The most immediate solution to load-shedding crisis was to get cash to buy diesel for the company’s open cycle gas turbines to run at their maximum capability of around 3,000MW, De Ruyter said. National Treasury has refused to foot the bill, but De Ruyter told Business Day Treasury had “given comfort” to banks that it would repay any loans Eskom takes to buy diesel, which would amount to R9bn for February and March.
In a breakdown of plant performance, De Ruyter said Medupi was working well, with an EAF of 90%.
“The expedited return of Kusile units 1, 2 and 3 (rendered inoperable as a result of damaged flue duct) could add over 2,100MW to the grid which would reduce load-shedding by two stages,” he added.
“Current indications are that it will take at least a year, but an expedited solution is being investigated. This would however require a relaxation of minimum emission requirements.”
Eskom’s plan to improve its EAF was focused on six plants — Duvha, Kendal, Kusile, Majuba, Matla and Tutuka — which are the main contributors to load-shedding, while sustaining performance on the rest of the fleet, De Ruyter said. “The plan addresses 10 focus areas to improve people, plant and process performance” that could add 1,862MW to the grid by March 2023 and 6,000MW over the next 24 months.
De Ruyter noted there had been a significant increase in law enforcement, with 25 arrests made and three illegal “coal-blending sites” shut down. These sites are used to divert good quality coal from Eskom’s power plants and replace it with poorer product. Police have targeted a further 30 sites.
De Ruyter said it was cause for concern that 33 sites had been operating with impunity and called for intelligence agencies to ramp up their ability to penetrate the criminal syndicates responsible for sabotaging the power plants.
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