Revenue squeeze hurts Eskom’s investment plans

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Johannesburg - Eskom, which supplies about 95 percent of South Africa’s power, scaled back investment plans because of lower-than-anticipated revenue, the Treasury said yesterday.

The power utility cut planned capital expenditure to R56.4 billion for the year to March, from a previous estimate of R61.9bn, the Treasury said in its annual Budget Review released yesterday. Infrastructure spending is expected to total R151.7bn in the next three fiscal years.

“Eskom’s infrastructure figures have been revised downwards over the medium term due to lower projected revenue,” the Treasury said.

Eskom needs to find R191bn to fill a funding deficit created after the National Energy Regulator of SA allowed it to raise prices by an average of 8 percent in each of the five years up to March 2018, half of what the utility requested.

Eskom is replacing aging equipment and adding two coal-fired plants to avoid a repeat of blackouts that affected homes, mines and factories for five days in 2008.

Last week, Eskom twice used emergency measures to ask industrial users to cut power consumption after four generating units went down for unplanned maintenance.

The delays in bringing the new Medupi power plant on line might have hampered South Africa’s economic growth, Pravin Gordhan conceded yesterday. “It is very clear that electricity has been a constraint on growth,” he said before his Budget speech.

“The delays at Medupi are unfortunate… really they’re regrettable because if we had those supplies earlier the economy might have grown a little bit better and might have created a bit more certainty in our environment. But there is not much we can do about that.”

After several delays, it is expected that the first of six 794 megawatt units at Medupi will start producing electricity in the second half of this year.

The estimates of national expenditure show that for the next three years the bulk of the Energy Department’s budget will go to Eskom and expanding the national energy grid.

It reveals that the Treasury has made an allocation of R190 million to the SA Nuclear Energy Corporation to improve its facilities. It, however, gave no indication of far greater amounts that will be needed to procure 9 600MW of nuclear power, in a surprise step announced by President Jacob Zuma a fortnight ago.

“The additional funding is to make improvements to the Safari-1 nuclear reactor, conduct research and development and upgrade and refurbish the Pelindaba facilities in 2014/15,” the estimates of national expenditure states.

The research reactor has been in operation at Pelindaba for nearly 40 years. - Bloomberg and Sapa

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