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Eskom is a double whammy for South Africa: power outages and financial darkness. (Illustrative image | sources: Gallo Images / Jacques Stander / kisspng.com)
Given that the rotational power outages will continue until at least March 2022, Eskom told MPs on Wednesday that electricity rates must increase, and how the billions of their bailout are used to pay off the company’s debt. energy which has increased to R488 billion.
Continued blackouts affected Eskom’s briefing of the Standing Committee on Appropriation on Wednesday.
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“Many members are struggling to connect due to the loss of charge … It is affecting supervision,” committee chair Sifiso Buthelezi said before the question session.
Yet no MP asked about the power cuts, costing billions for South Africa’s troubled economy pushed further into recession by the tough Covid-19 lockdown, even after Eskom said the cuts would definitely continue until December 2020, they will resume in January 2021, definitely for March and start again from June 2021.
A key factor in this is a persistent supply shortfall of 11,000 megawatts (MW), in addition to planned power plant maintenance shutdowns.
The Phase 3 power cuts of the schedule “will be necessary every month until March 2022”, according to Eskom’s information document for parliamentarians, if the deficit reaches 13,000 MW.
“It is important to recognize that due to the current unreliability and unpredictability of the system, the risk of loss of load persists. This will be the reality up to 18 months of maintaining reliability (Eskom emphasis) ”, the energy company’s presentation reminded MPs twice on six pages, mostly diagrams.
Finish and Ready.
The impact of violating that unplanned supply shortfall of 11,000 MW was illustrated on Wednesday, just hours after the parliamentary commission briefing. Eskom increased rotational power outages to stage 4 due to an unplanned power shortage of 11,300MW after “multiple unit breakdowns, as well as additional demand caused by cold weather, ”said the utility in a statement.
Eskom is a double whammy for South Africa: power outages and financial darkness.
The energy company has a debt of 488 billion rand as of March 31, 2020, in a continuation of what has led Eskom to be described as the greatest risk to the economy and public finances.
As a result of the 2019 Special Allocation Law, Eskom received additional support of R49 billion for the 2019/20 financial year and R59 billion for the 2020/21 financial year ending on March 31, 2021.
On Wednesday, Eskom CFO Calib Cassim outlined how these R49 billion from the government, effectively the taxpayers, along with surplus operating cash of R36.2 billion was used to cover R70.6 debt payments. billion.
“We need to use government support to pay off our debt,” he said.
Or as the information document says:
“In the year ended March 31, 2020, Eskom paid R31.5 billion of principal and R39.1 billion of service interest. Most of these payments were made using the 49 billion rand received from the government. It should be noted that Eskom generated a positive operating cash flow of R36.2 billion during the year.
“As of March 31, 2020, gross debt was R488 billion, an increase from R440 billion as of March 2019.”
The same is the case for fiscal year 2020/21 ending March 31, 2021 when Eskom says it must also find savings of R14 billion:
“It is clear that without the recapitalization of the government, Eskom would not have been in a position to meet its obligations when they were due. The R56 billion allocated for FY202021 will be used to assist in servicing the estimated R95 billion principal and interest payments due in FY202021. “
Cassim told MPs that a 25% electricity rate increase was needed in real terms, even if he acknowledged that “it cannot go up once due to the impact on the economy.” A 10% rate increase in 2022 would generate R23 billion, it added.
It was a reference to the additional 23 billion rand per year for the next 10 years announced in the 2019 budget, before the Special Adjustment Act provided Eskom with an additional 26 billion rand for the financial year 2019/20 and 33 billion rand for 2020. / 21 fiscal year.
The Neverending Story of Eskom Bailouts: Mboweni Introduces Bill of Billions More
Eskom’s push for higher tariffs comes as its own figures show a five-fold increase between 2008 and 2018/19 to 90 cents per unit. But that’s before municipalities, which depend on electricity sales to generate revenue, put their mark on it.
Eskom’s own figures have correlated rising rates with a drop in electricity sales. Anecdotally, more people are disconnecting from the grid as a reflection of acute and deepening socioeconomic inequalities: while the middle classes invest in solar and gas, the poor and working class increasingly turn to candles and paraffin .
Eskom’s briefing on Wednesday for MPs had an undertone that showed no love between the power company and the regulator, South Africa’s National Energy Regulator (Nersa).
The two are locked in court battles over determining electricity rates and how much the power company can recover through the regulatory compensation account (RCA). When Nersa dismissed the government bailout in its rate calculations, Eskom went to court. The power company won, but Nersa said in early August 2020 that it was attractive.
On Wednesday, Eskom told MPs how much more money it could have had if not for Nersa: R350 billion since 2014, or almost all of its debt. The determination of the regulator’s rates “it doesn’t give Eskom the opportunity to generate enough cash… ”said Eskom’s CFO.
According to the informative presentation to the parliamentarians, “the economy benefits better with the increase in rates,” as the document adds, the “IRP (Integrated Resource Plan) it refers to a competitive price of electricity at least 25% more than Eskom’s price ”.
It’s been 18 months since the first move to pull Eskom out of the deep hole of the State Capture trap, power plants prone to breakdowns, and severe financial difficulties in general.
It was intended to be a clear, time-based project for the financial health of the energy company. The February 2019 Budget set the stage with additional allocations, and details buried in Exhibit W on the separation into transmission, generation and distribution entities under the umbrella of an Eskom Holdings entity.
Mboweni’s Eskom’s Work: The Devil Lives in the Details
The policy document, The “Roadmap for Eskom in a Reformed Electricity Supply Industry” took another eight months to emerge just before the October Medium-Term Budget Policy Statement (MTBPS).
In a flexible approach, the roadmap announced the grouping of power plants and a set of proposed deadlines for the functional and legal separation of the three Eskom entities.
Eskom roadmap: floating ideas with flexible milestones, for an uncertain future
By June 2020, it was clear that the timelines had been extended, leading to the strange situation of Eskom adjusting the timeline of the official roadmap policy to suit itself, as the timeline of the roadmap route were considered “aggressive”.
The long winding stop / Eskom road to separation
On Wednesday it emerged that Eskom had failed to dissolve its Financial Company at the end of March 2020 in a breach of the conditions linked to financial support. The supplemental asset, which provides housing allowances averaging R3,500 per month to employees, now has a new deadline to be decommissioned before March 31, 2021.
From rotational power outages to its balance sheet, Eskom’s prospects are bleak. DM
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