File photo: Mike Hutchings
File photo: Mike Hutchings

Eskom in scramble to secure funding

By Staff Reporter Time of article published Dec 5, 2014

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Eskom stepped up its damage control efforts yesterday, saying it had begun discussions with the Department of Public Enterprises and the Treasury to secure funding to keep its gas turbines running as the country descended into another damaging round of power cuts.

Eskom spokesman Andrew Etzinger said in a radio interview with Radio 702 yesterday that the embattled power utility was burning cash as it tried to mitigate the impact of power generation constraints by using gas turbines.

This form of generating electricity was very costly, he said, adding that Eskom now needed funding to build up its diesel reserves as it only had cash for diesel to last through the middle of next month.

Eskom spent about R2 billion a month to run the gas turbines, Etzinger said. The turbines, he said, were meant to be run for three to four hours to plug gaps in the system during maintenance. But lately Eskom had been forced to run them hard for 14 to 16 hours to supplement its power generation capacity and keep the lights on.

Yesterday afternoon, Eskom instituted emergency power cuts nationwide, resulting in gridlock in Johannesburg, Cape Town and elsewhere, while some businesses were forced to shut down.

Logistical issues

The power system was exceptionally constrained due to unforeseen technical problems at power stations and depleted water reserves and logistical issues relating to diesel supplies at peaking power stations, Eskom said in a statement. It added that the electricity system would remain constrained today and the risk of load shedding remained high.

Etzinger said load shedding this weekend was inevitable. It will mark the third consecutive weekend whereby Eskom has been forced to ration power.

After the middle of January Eskom would need to get the extra funds to buy diesel either by changing its internal budgets, or the state would need to provide the extra funds, he told Business Report.

In November, Eskom had spent R1.3 billion on diesel fuel for the combine cycle gas turbines (CCGTs), Etzinger said. Eskom would need between R1bn and R2bn a month to buy the diesel required to run the CCGTs, he added.

Eskom’s latest crisis is an indictment on the country’s ability to plan ahead. Although two new power plants are being built, the construction is months behind schedule due mainly to strikes and shoddy work by some contractors.

Hurdles

Last week Public Enterprises Minister Lynne Brown warned that the next two years could be tough as Eskom looked for ways to tackle delays that had hampered construction of the Medupi and Kusile power stations.

Uncertainty surrounding power supply constraints presents South Africa with more hurdles to overcome in its bid to drive economic growth, put a meaningful dent in unemployment and turn the government’s National Development Plan into a reality.

Urgent maintenance of the Cahora Bassa hydroelectric power station added to Eskom’s problems in recent days, as a portion of capacity normally important from Mozambique suddenly became unavailable.

Etzinger said Eskom planned to use the holiday season lull to continue with its maintenance work at a time when the affect on the economy would be contained.

Even so, the damage to the country’s reputation as a reliable investment destination is beginning to become a worry, according to analysts.

Johan Muller, a programme manager for energy and the environment at Africa Frost & Sullivan, said earlier this week that investors could increasingly start to look at investing elsewhere if the country’s energy supply woes were not decisively addressed.

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