Cape Town - Power utility Eskom said it foresees a challenging period for the power system for the new year as major generation units are expected to be offline.
It said with three power generation units offline at Kusile power station, one at Medupi and another at Koeberg, over 3 500MW will be unavailable for power generation when demand picks up mid-January and this poses a significant risk to the power generation capacity, Eskom Chief Operations Officer (COO) Jan Oberholzer was reported saying.
He said it was ‘going to be difficult’ and the power utility will have to run existing units at higher utIlisation or at the same levels as it does now.
Oberholzer said this comes with more challenges, News24 reported.
“It's going to be a difficult period. Really, we see a challenging period ahead of us,” Oberholzer said.
The power utility, while presenting its annual results for the year that ended in March 2022, reported 65 days of load shedding for the year compared to 47 days in 2021.
Eskom said its Energy Availability Factor (EAF) which is a measure of its power plant performance has dropped from 62.2% from 64.19% in 2019.
According to Chriss Yelland, an independent energy analyst noted the power utility’s EAF for week 50 of 2022 dropped to an ‘all-time low’ of 50.73%.
Outgoing CEO, André de Ruyter said the deteriorating plant performance was ‘regrettable’ and noted more planned maintenance Eskom does the higher the EAF.
"We believe this is the only way to restore some semblance of reliability to our coal fleet", News24 reported De Ruyter saying.
However, there is currently an urgent need to add between 4 000MW and 6 000MW to the national power grid.
De Ruter said it was becoming a matter of extreme urgency and that Eskom has brought this to the attention of the national energy crisis committee.
For the year ended in March 2022, Eskom's earnings before interest, taxes, depreciation, and amortisation (Ebitda) of R52.4 billion was 61% higher than the R32.6 billion reported in 2021 due to higher revenue and improved cost control.
While its operating profit grew 238% to R20.4 billion, which is up from R6 billion in 2021.
Unsustainably high finance costs have gradually destroyed the power utility’s profitability.
Debt burdens continue to play a significant role in the financial life of Eskom, De Ruyter said.
He said the power utility would have been profitable had it not been burdened by these extraordinary amounts to service its debt.
Eskom spent R38.9 billion to repay capital and spent R32.5 billion on interest payments.
Chief Financial Officer (CFO) for the power utility, Calib Cassim was reported stating Eskom ios a going concern due to the sizeable financial support it receives from goverment, R31.7 billion in the year under review.
Eskom’s after tax losses were narrowed to R12.3 billion in 2022 which is down from a R25 billion loss in 2021.
The power utility now foresees a loss of R20.1 billion due to a decline in sales volumes and increased maintenance spend as well as a higher spend on emergency generators and fuel oil due to the continued low EAF and capacity constraints.
Primary energy costs were also pushed up as it spent R14.7 billion on diesel, this is up from R7 billion in 2021.
“This is not a sustainable way to generate electricity, particularly because allowance made by NERSA (National Energy Regulator of South Africa) for diesel consumed by our peaking plants is significantly below this number which means that the balance has to be funded through internal savings,” De Ruyter said.
According to Cassim, the power utility’s debt cost needs to be addressed if significant losses are to be stemmed.
As the NERSA deliberates on Eskom’s application for a 32% tariff hike.
De Ruyter said Eskom needs a cost reflective tariff.
The power utility also presented the rise in arrears municipal debt of R44.8 billion for the year ended March.
It said this number has since grown to 56 billion to date and other than municipal and residential arrears debt it only has two customers who owe amounts over R100 million.
According to Eskom, Transnet owes R437 million and Mozambique utility, EDM owes R579 million of which R350 million is in dispute.
A ruling by the Constitutional Court will prevent the power utility from cutting off the power to non-paying municipalities.
“A solution needs to be found as the situation is unsustainable. Eskom cannot be carrying this growth in debt of about R10 billion per annum,” Cassim said.
De Ruyer also welcomed the deployment of the South African National Defence Force (SANDF) to four power stations.
He confirmed soldiers were now stationed at six power plants.
“My only regret is that it's taken so long for our security forces and agencies to start engaging with a matter of national security,” De Ruyter said.
He further stated it was a pity Eskom had to fund its own intelligence operation in an attempt to address the rampant criminality in and around its operations and now hopes the power utility has reached a turning point in its mission to root out crime and corruption within the utility.
On December 14, De Ruyter officially resigned as Eskom CEO and is set to make the exit in March 2023.
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