Business

Eskom is running at just 66% capacity

2018-11-19 17:29

Eskom’s power stations hit historically low levels of performance this month and load shedding during summer is almost a certainty.

In the past week, only 66% of Eskom’s capacity was being used, according to the company’s weekly status update.

Maintenance backlogs are being compounded by a coal shortage crisis. Ten power stations have critically low coal stockpiles, while five of these have less than 10 days’ worth of fuel at hand, Eskom separately announced on Friday at its quarterly system update briefing.

Eskom is budgeting on spending almost R600 million on diesel generators between now and the end of March – that excludes the additional use of the ludicrously expensive diesel peaking plants if there is more rain than expected.

The power utility this week unveiled a “nine-point plan” to address the next looming power crisis.

The key long-term solution is to reverse former Eskom CEO Brian Molefe’s 2016 decision to discontinue so-called cost-plus mines attached to Eskom stations and where Eskom contributes to the capital expenditure.

The company is scrambling to find an additional 4 million tons of coal to restore stockpiles by March, but so far “only 1.1 million tons are currently firm”.

The stations with low coal supplies are all in Mpumalanga – Arnot, Camden, Duvha, Hendrina, Komati, Kriel, Kendal, Majuba, Matla and Tutuka.

While Eskom struggles to keep the lights on, its finances continue to deteriorate.

Early financial results for the first quarter of Eskom’s current financial year show the beleaguered power utility already falling behind its budget.

Numbers presented to union representatives at a “strategic forum” last month showed Eskom’s pretax loss in the three months to the end of June reaching R2.5 billion.

This was only slightly worse than the loss that Eskom had budgeted for – R2.2 billion – but things would have been far worse if it wasn’t for a one-off windfall related to the power utility’s contracts to supply aluminium smelters at tariffs tied to the aluminium price.

This “embedded derivative” was revalued due to a huge spike in the aluminium price between March and June. This reduced Eskom’s losses by R1.8 billion.

Unfortunately, the aluminium price has subsequently crashed back down to a level even lower than it was before March. This could force Eskom to take a massive loss on revaluing this contract.

In the first quarter of its financial year, Eskom spent R788 million less than it budgeted on renewable energy from private producers due to “adverse weather conditions”.

It made up for that by spending R559 million more than budgeted on coal, according to a presentation made by acting chief financial officer Calib Cassim at the strategic forum.

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May 26 2019