Eskom, South Africa’s national power utility, may be unable to avoid a complete restructuring process in order to avert total collapse.
This has been confirmed by the National Energy Regulator of South Africa (NERSA), high-level executives within the company and energy experts. According to a report by Moneyweb, Eskom only narrowly avoided load-shedding this week, despite a decline in peak energy demand and the addition of more than 7 500MW to the power grid.
“If Eskom had been in the private sector, we would probably have had to either decrease our staff or close our doors permanently if we look at the state of our finances.” – Eskom’s Chief Operating Officer (COO), Jan Oberholzer.
Eskom struggling to meet energy demands
Worryingly, despite Eskom’s exorbitant government bailouts and commitment to revitalising the nation’s electricity grid, through the construction of both antiquated and renewable energy projects, the utility is worse off than it was three years ago.
In fact, some energy experts have argued that Eskom was in a better position to supply more energy in 2007, during the national load shedding crisis, than it is now. What went wrong?
According to NERSA, Eskom is currently running on fumes, unable to build up sufficient energy reserves while archaic power plants deteriorate due to poor maintenance
Eskom running out of coal
One of the biggest stumbling blocks facing Eskom’s already dire stagger into the future is its dwindling coal reserves. Eskom CEO Phakamani Hadebe reported that nine power stations were affected by the shortage; this concern has been shared by NERSA.
Eskom rues the day that it signed a dodgy deal with Tegeta Exploration and Resources, a coal company linked the Gupta family. Tegeta, which is now under business rescue administration, is responsible for keeping Eskom’s coal reserves at adequate levels.
Recently, Eskom released a worrying report stating that four of its power plants have less than 10 days’ supply of coal left. In an attempt to stave off a complete operational meltdown, Eskom is planning on moving coal from its Medupi power plant in Limpopo to the facilities in Mpumalanga.
Coal is to be transported via trucks. It’s also reported that Transnet has been called in to assist with the emergency transportation of coal stocks.
Eskom unable to repay debts
Thanks to continuous government bailouts, Eskom, which supplies 90% of South Africa with electricity, currently owes around R387 billion in debt. This amount is set to rise up to R600 billion within the next four years.
As a means of upping its income, Eskom was granted a 4.1% electricity tariff increase, which will come into effect in April 2019. NERSA is also still considering a 15% tariff increase allowance, which, if implemented, will result in skyrocketing inflation rates.
Senior staff abandoning Eskom’s sinking ship
Eskom spokesperson Khulu Phasiwe recently confirmed that two senior employees, responsible for the company’s energy management systems, had resigned from their positions.
Thava Govender, Eskom’s Group Executive for Generation and Acting Group Executive of Risk and Sustainability, tendered his resignation on Monday after working with the energy supplier for 27 years.
The CEO of Eskom Rotek Industries, Johnny Dladla, who gave 23 years to the company, also handed in his resignation last week.
Eskom’s Chief Operating Officer (COO), Jan Oberholzer, issued a damning letter to his colleagues in light of the company’s recent failings. In it, Oberholzer urges Eskom employees to redouble their work efforts during the company’s financial crisis.
Energy expert, Professor Anton Eberhardt, made the letter public on Monday night, commenting:
“Confirmation that South Africa’s power utility Eskom is in serious trouble.
As I’ve predicted, losses will increase this year. It’s not generating enough cash to cover operations and its cost of capital. Interest bill this year will reach R45 billion! Restructuring inevitable.”
In his letter, Oberholzer highlighted the municipal bill owed to Eskom, which currently sits at a whopping R16 billion. He also warned employees that the company simply did not have enough money to approve salary increases, insinuating that the utility may not even have enough funds to meet payday, by asking these questions:
“Does Eskom have the money to pay me on the 26th?
“Have I earned my salary on the 26th … ”
“Am I taking the 26th for granted?”
The COO added that the company was unable to afford its bloated workforce, stating:
“Let me tell you the truth: we do not have the money.
Dear colleagues, the reality is that if Eskom had been in the private sector, we would probably have had to either decrease our staff or close our doors permanently if we look at the state of our finances.”
By: The South African