Customers eat their pizza in a popular Johannesburg bar using candle light as another rolling blackout affects large parts of the city, Johannesburg.  EPA/KIM LUDBROOK
Customers eat their pizza in a popular Johannesburg bar using candle light as another rolling blackout affects large parts of the city, Johannesburg. EPA/KIM LUDBROOK

State to help Eskom buy diesel

By Robert Brand and Kevin Crowley Time of article published Dec 11, 2014

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Johannesburg - The government will help raise cash to fund Eskom’s purchases of diesel from February, when the power utility runs out of money to purchase the fuel used to prevent blackouts.

While Eskom will struggle to pay for diesel from the end of next month, the government will ensure its “ongoing financial security,” Public Enterprises Minister Lynne Brown told reporters after a Cabinet meeting in Pretoria today. The money could be raised through bonds with state guarantees, she said.

The utility, which provides about 95 percent of the country’s electricity, has been forced to implement managed blackouts in the past two weeks as it struggles to meet demand. Eskom, which has a R225 billion funding shortfall in the five years to 2018, is using “huge” quantities of diesel to run backup turbines, Chief Executive Officer Tshediso Matona said this week.

Eskom relies on expensive gas turbines to generate power when the system is constrained and used about 140 million litres of diesel in November alone. The company spent R10.6billion running the turbines in the year ended March 31, 2014, more than the R3.6 billion it had budgeted, and will spend a similar amount this year, Matona said.

Due to the volume of diesel used, Eskom is not only having trouble paying for the fuel, it’s also struggling with the logistics of supplying its turbines, Matona said.

The company will sign an agreement with the Strategic Fuel Fund and Transnet National Ports Authority, a unit of Transnet, to ensure a regular supply of diesel, the government said today in a statement. - Bloomberg

* Reuters reports from Cape Town that South Africa will increase diesel and gas imports and sign a private sector coal-fired power plant deal as it seeks to stem chronic electricity shortages, the cabinet said on Thursday.

Eskom warned that if it didn't continue to implement rolling blackouts, the entire grid could collapse as it lost up to a third of its 42,000 megawatt power generation capacity.

“Cabinet remains concerned over the disruptive effect the recent power outages are having on the daily lives of South Africans and its impact on households and businesses across the country,” Minister in the Presidency Jeff Radebe told reporters.

A private sector-led coal-fired power plant programme will be launched by January 2015, which should add 2,500 megawatts to the grid, Radebe said, without giving details on when the electricity would be delivered.

South Africa will increase gas imports to supply its under-fuelled power plants, which should help add 500-2,500 megawatts to the grid, the cabinet said. The gas is mostly expected to come from neighbouring Mozambique. - Reuters

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