MPs have expressed concern that some of the conditions attached to the Treasury’s debt relief plan for Eskom will “confine” the utility to generating electricity predominantly from coal. The MPs said they were worried that provisions that would bar Eskom from taking on new debt and restrict capital expenditure to transmission and maintenance would limit its ability to invest in cheaper, renewable energy generation capacity.
During a presentation by the Treasury to the standing committee on appropriation on Tuesday on the Eskom Debt Relief Bill, UDM MP Nqabayomzi Kwankwa said the “tacit message” being sent by these debt conditions was that Eskom’s investment focus should be on upgrading and expanding the transmission network.
“This [implies] we want to own the ‘pipeline’ and not the supply [of electricity] in the medium- and long-term,” he said.
Eskom faces a debt burden of about R423bn. A large portion of the power utility’s debt (about R350bn) is guaranteed, creating a contingent liability for the government and raising SA’s cost of borrowing.
The R254bn debt relief plan for Eskom will cover its full debt settlement requirement over the next three years, said Dr Duncan Pieterse, head of asset and liability management at the Treasury.
But one of the conditions of the debt relief, for which the board will have to account on a quarterly basis, proposed that the only capital expenditure that Eskom be allowed to undertake during the three-year period for generation, amount to required maintenance and to make the necessary changes and upgrades to coal-fired power stations that are needed to comply with minimum emissions standards and other air-quality regulations.
The conditions set by the Treasury also proposes a moratorium on new borrowing from April 1 2023 until the end of the debt-relief period, unless written permission is granted by the minister of finance.
Pieterse said the goal of the debt relief was to strengthen Eskom’s balance sheet and enable it to restructure into separate entities for generation, transmission and distribution, while also investing in the maintenance needed to improve electricity supply.
No “greenfields” generation projects will be allowed during the debt-relief period — a condition seemingly at odds with a suggestion by electricity minister Dr Kgosientsho Ramokgopa that the country’s electricity problems necessitated investment in the refurbishment and life-extension of old coal-fired power plants.
Kwankwa said ruling out spending on new generation projects could derail any aspirations Eskom had to “move into the renewable energy space”.
“To a large extent, investing in renewable energy is now cheaper than the amount one must spend on maintaining existing coal-fired plants and building new ones. Coal has to remain the base, that is unavoidable for SA, but we have to be forward looking. It seems that what the conditions seek to do is to confine Eskom to coal and not provide it with the option to move to renewable energy,” he said.
Kwankwa and other MPs also said if Eskom were only allowed to invest in transmission and not in new generation capacity, the utility would become a price taker in the energy market, purchasing energy generated from renewables by independent power producers (IPPs).
“There will come a time when IPPs will be contributing a significant share of total electricity generated and when that happens, we might not be able to influence the price that we charge to consumers,” Kwankwa said.
EFF MP Natasha Ntlangwini said she agreed with Kwankwa that the conditions set by the Treasury seemed to “binding Eskom to coal”. Eskom should be allowed to explore investment options in “cheaper” energy sources that “will ensure even households in Stutterheim get proper electricity without load-shedding,” she said.
DA MP Erik Marais asked the Treasury why it would seek to limit Eskom’s spending on generation capacity when the electricity supply gap was “the biggest issue” responsible for load-shedding.
Pieterse responded to MPs saying that in the Treasury’s view, the conditions proposed as part of the debt-relief plan “does not bind Eskom to coal”.
“These conditions will only be in place for next three years; technology decisions made by Eskom after the three-year period would not be affected by this,” he said.
Another condition of the debt-relief plan was that Eskom should not implement remuneration adjustments that would negatively affect its overall financial position and stability.
Workers at Eskom are demanding above-inflation wage increases for the 2023/24 financial year. The National Union of Mineworkers (NUM) has indicated its members want a 15% wage increase alongside a string of demand while Solidarity’s members would ask for a wage increase of 3% above the average inflation rate.
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