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Cash flow problems put power utility under strain

Economy

Banele Ginindza

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250315 Fosil Fuel Foundation had their enrgey conference and invited Eskom Steve Lenon as one of their guest speakers in Glenhove North of Johannesburg.photo by Simphiwe Mbokazi 3

ESKOM’S power crisis could deepen with about 800 megawatts of power at risk of being cut due to the power utility’s cash flow problems.

Several short-term power purchase agreements that are due to expire need to be renewed by month-end.

Independent Power Producers (IPPs) are anxious about the silence from government and Eskom on the renewal of power purchase agreements.

Eskom’s group executive for sustainability Steve Lennon told the Second Electricity conference organised by the Fossil Fuel Foundation held at Glenhove Conference Centre in Johannesburg of a looming deadline, which expires at the end of March, for government to sign the renewal of IPP supply agreements, but the process had been delayed.

The agreements are for about 800MW of electricity, which the grid cannot afford to forego, as Eskom yesterday cut as much as 2 000MW of power that plunged large parts of the country into darkness for six hours.

Lennon, who leaves Eskom at the end of this month, said it was not clear whether the cash flow issue could be resolved in the coming few days, according to MiningWeekly.com.

He stressed that, while the funding for the short-term power purchases would form part of a tariff reopener that would be made to the National Energy Regulator of SA (Nersa), the immediate problem was Eskom’s shortage of cash to buy the energy from power generators in the industrial and agricultural sectors, according to MiningWeekly.com.

Brian Day of the SA Independent Power Producers Association delivered a second-hand report of a presentation last week made to the cabinet’s so-called War Room and said the issue was being addressed among others, but that time was running out.

“The clock is ticking, we have six days to roll those contracts over or we lose a massive opportunity to make sure we keep some of the megawatts on the grid that are there,” Day said.

He said funding issues were part of the delay as Eskom had to have the financial wherewithal to sustain the power purchase agreements.

“But I know it is receiving the highest attention in the War Room process,” he said.

He said the War Room had stepped into a crucial gap to help government departments and state-owned energy enterprises to understand each other, which was a major problem in the energy sector for now.

“We are seriously missing each other, we do not understand each other between the private sector, government and the institutions of government whether its Eskom or Nersa,” Day added.

The War Room is an inter-ministerial energy committee that has been set up to oversee the country’s energy crises with emphasis on implementing the cabinet’s five-point plan which includes stabilising Eskom, power co-generation, demand response and IPP opportunities among other functions.

Day said that it was important for the government to take advantage of all supply side options to not lose any of the power in the grid now with power supply so stretched.

He said part of the projects pushed through the War Room included a biogas project to be launched in the next couple of months, which had an initial output of 4.4MW increasing to 6.6MW.

There was also a private power partnership with BMW motors which would supply power to both the state-owned power utility and Tshwane grids.

IPPs on the conference indicated that the power that they could contribute to reducing the local power crisis was being stymied by delays in obtaining government approval on issues ranging from pricing structures to licensing.

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