WRAP | Expect more load shedding, Eskom warns

During Eskom's quarterly state of the system briefing on Thursday, the power utility's officials said that load shedding will likely persist in the near future as plants undergo much-needed reliability maintenance.

Both stage 1 and stage 2 load shedding are expected. The majority of coal-fired power stations are past the midway of their operational life - which has resulted in huge amounts of breakdowns, this has warranted reliability maintenance and refurbishment projects up until the winter of 2021.  

Chief Operations Officer Jan Oberholzer constantly expressed that his colleagues were doing a "sterling job" despite the circumstances. He also stressed that with generation being challenged, it was equally important to strengthen and extend the transmission system - a loss to the transmission network would be "disasterous" for South Africans, he said.

To make do with reduced capacity, Eskom has also had to resort to using Open Cycle Gas Turbines which run on a diesel- a huge expense. As a result, Eskom has overshot its budget by R800 million, the target is R561 million.

Responding to questions on debt, CEO Andre De Ruyter noted that with the unbundling of the power utility into three entities, it is envisioned that the bulk of debt would be carried by the generation entity, and the transmission and distribution entities would each carry a quarter. Eskom is however mindful of debt covenants and the decision would need to ensure Eskom does not default.

De Ruyter also noted that green financiers were ready to provide financing to support Eskom's just energy transition - to include renewable energy. The move would not only respond to climate justice concerns but would also make more business sense as the cost of renewable technologies has decreased substantially. A possibility of concessionary financing is on the cards - on the condition that Eskom decarbonise. The appointment of financial advisers is being finalised to assist in this regard. 

Responding to a question on the progress of an investigation of alleged sabotage at Tutuka power station, Oberholzer says that the matter is with the police services investigating unit.

But Eskom has provided necessary information to the investigation. 

Oberholzer weighs in on the load shedding outlook.

Both Stage 1 and Stage 2 load shedding are possibilities.

De Ruyter says Eskom envisions that the bulk of its debt will fall under the generation entity, while the transmission and distribution entities would carry a quarter.

This is subject to further work, he said. "We must not precipitate a default under our loan agreements as we restructure Eskom," he said.

De Ruyter stresses that in addition to the reliable maintenance needed- we also need additional capacity. 

Eskom started the 2019 financial year with 46 000 employees. At the end of the last financial year it came down to 44 000 employees.

We have been deliberate in not losing key and critical skills.

Eskom has implemented a recruitment freeze- a deliberate reduction of the headcount without impacting operations.

A voluntary severance package for senior managers has also been implemented.

Natural attrition will keep a cap of staff growth. Eskom is on track to reach a targeted headcount of 38 000 employees by the end of FY 2023. 

De Ruyter says since the start of the pandemic- the impact on the revenue line is R9bn.

That is the loss of revenue for FY20 was R5bn But for the current financial year to date is about R4bn.

De Ruyter says Eskom is trying to recover some of the costs that occurred due to state capture.

"Even if we are only successful in recovering some of it- it still requires us to service our debt. That is the legacy not only Eskom but South Africans have to bear."

De Ruyter says that Eskom has engaged with communities dependent on coal plants in terms of achieving a just energy transition.

While the first round of conversations got off to a rocky start, the second round of engagements has been more positive. "Communities are appreciating the fact that there is a future after the power station goes into retirement."

Green financiers are standing ready to assist Eskom in its just energy transition, says De Ruyter.

Eskom is considering options of concessional financing - to deal with its R480bn debt, by reducing its carbon footprint. 

Eskom does not have capacity for new build renewables and is seeking help from private capital - by reducing its carbon footprint.

The power utility is finalising the appointment of financial advisers to assist in this regard.  

Responding to a question on a breakdown on municipal debt:

Overdue debt amounts to R31.8bn. The interest on that is R6.7bn according to De Ruyter. 

Oberholzer concludes the system update.

He notes: 

Eskom is committed to not compromise on reliability maintenance and mid-life refurbishment of plants. 

There will be a sustained focus on the transmission and distribution network. Although Eskom has challenges in generation - should a transmission network be lost, it would be a disaster. Millions of people would be without power for days. "It is important to understand that value chain - you can't generate electrons without transmitting it and distributing it to customers."

Scheppers says there is little room for "slips" in the maintenance plan - such as extending maintenance plans or adding outages. 

Commenting on emissions, there have been improvements in emissions levels from Kendal, due to short term maintenance at the plant, says Mathebula.

Mathebula says critical positions had to be filled to improve performance, 1 384 out of 1 852 positions were filled by April 2020.

In addressing partial load losses- Eskom took advantage of lockdown level 5 to do short term maintenance, says Mathebula. 

In terms of generation - Oberholzer says his colleagues are working long hours. 

"We are fully confident we will turn this around, we just need time," says Oberholzer.

The EAF is down 68% when the internal target is 70%. 

Oberholzer also notes theft and vandalism on electrical networks - pylons and substations.

Discussing nuclear power station Koeberg - Oberholzer says it is being run safely. 

Koeberg has an availability of 81.35%, above the target of 80.57%.

Oberholzer says a lot of maintenance is being done- and the step changes will be seen in April 2021.

But until then- the risk of load shedding remains. 

Once design defects at Medupi and Kusile are solved, we will bee able to move away from the risk of load shedding.

When these power stations perform well, it provides relief to the rest of the system, says Oberholzer.

Arrear debt by municipalities was at R31.4 bn, as at August 2020. 

De Ruyter urges South Africans to "pay for what they consume" this as municipal debt is still a challenge for Eskom.

Since 2015 - Eskom has also suffered of cable theft, resulting in r50 million losses per annum. it contribute to a lack of reliability of the system.

De Ruyter says there are concerns of continued illegal activities affecting the grid.

R2.5 billion a year is being lost due to electricity theft and illegal connections.

"This is not a loss we can accommodate". As a result load reduction is being implemented in certain areas at peak hours.

De Ruyter comments on the 11 000 MW of additional power as well as 2 000 MW emergency power procurement decisions which will be valuable to ensuring security of supply. 

"We can only fix so much - the average age of the power station is 39 years," says De Ruyter.

The majority of stations are reaching the end of their design lives. 

Eskom plans to decommission between 8 000 to 12 000 MW over the next decade. This will create a shortfall of electricity, he says.

De Ruyter said work is being done to recover stability of the generation system.

The reliability maintenance programme has been "stepped up". 

Commenting on a court ruling allowing Nersa to appeal a previous decision on Eskom tariffs - De Ruyter said the judgement is being studied.

He notes that tariffs should be cost-reflective.