Johannesburg - Eskom’s insurers paid out R4.2 billion at least five months ago to fix a wrecked unit at Duvha power station in Mpumalanga, but the repairs still haven’t started.
Eskom then tried to bill customers for some of the costs already covered by the insurance payout.
Eskom declined to explain the situation to The Star.
In March last year, Duvha’s unit 3 was destroyed in an over-pressurisation incident, losing 575MW of crucial generating power.
This has been one of the factors blamed for ongoing load shedding.
But 17 months since the Duvha unit was lost, Eskom still has no clear repair or replacement schedule.
Last week, The Star asked Eskom when the repairs would start and when they would finish.
Eskom said: “A process is under way to address all the recommendations from the incident investigation report; the project team is finalising the way forward for the recovery of the boiler. We are currently engaging with potential boiler suppliers to place a contract in the next six months for the repair, or replacement of the boiler.”
But this is exactly what the power utility said in its 2015 Integrated Report, which covers the financial year to March 31 this year, and was released on August 11.
This suggests no progress since March, at a time of insufficient power supply, regular load shedding, and frequent commitments from Eskom’s leadership to prioritise maintenance.
The Eskom report makes it clear the insurance claim was paid in full, and that the cash was very welcome for the struggling utility.
The claim was “estimated at R4.2bn, including business interruption costs”, according to the Eskom report.
The claim was split between Escap (Eskom’s wholly owned insurance subsidy) and an unnamed external insurer.
“Insurance proceeds from the settlement of the Duvha unit 3 claim contributed R4.2bn to other income recognised for the year under review. At group level, the amount receivable from the external reinsurer is R2.7bn, after deducting the insurance deductible of R1.5bn borne by Escap,” the report said.
Elsewhere in the report is a hint that the payout might have been needed to plug other financial holes.
“Income of R4.2bn from the Duvha unit 3 insurance claim and the fair-value gains recognised on financial instruments and embedded derivatives provided some relief. However, arrear municipal debt increased by R2.4bn, resulting in a significant increase in the provision for impairment,” the report pointed out.
In April, Eskom tried to raise the cost of electricity, effectively asking consumers to pay for some of the Duvha costs which the insurance had already covered.
The utility applied to the National Energy Regulator of South Africa (Nersa) for permission to hike the price of electricity, but Nersa ultimately refused.
Eskom’s price application to Nersa was dated April 30, at least a month after the insurance payout, and refers to the loss of capacity at Duvha and the resumption of load shedding.
The application asked for a price hike, mainly to cover the unexpectedly high costs of diesel generators, and independent power producers needed to cover the power generation capacity gap.
However, Eskom didn’t say that the insurance claim for Duvha might cover some of those costs.
“It was not indicated in the application,” Nersa spokesman Charles Hlebela explained.
The Star asked Eskom why the Duvha repairs were delayed, or whether the payout had been spent on something else, how much of the claim was for repairs and how much for business interruption costs. Eskom was also asked whether those business interruption costs included the cost of running the diesel generators to compensate for the loss of the Duvha unit.
“The process for finalisation of the claim is not yet complete. Eskom is currently finalising the claim amount, as well as the mechanism of payment. As we are currently engaging the insurers herein, it will be premature to answer the queries posed,” Eskom said.
THE STAR