ESKOM FEATURE

FEATUR

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E S K O M

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ESKOM REPORTS STRONG FINANCIAL PERFORMANCE,

OUTLINES FUTURE PLANS

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ESKOM REPORTS STRONG

FINANCIAL PERFORMANCE,

OUTLINES FUTURE PLANS

Green power, keeping the lights on, securing major funding… these are just some of the things keeping the guys over at

Eskom busy, says spokesperson Hilary Joffe.By Ian Armitage

E skom recently released its interim results, which show a continued strong fi nancial performance.

It is a remarkable turnaround for the state-owned power utility, which slumped to its worst ever loss of R9.7 billion in its 2008/9 fi nancial year.

“We’ve performed very well,” says Eskom spokesperson Hilary Joffe. “We showed continued fi nancial performance, with a surplus that will be reinvested in the business to ensure fi nancial sustainability and that we can repay the debt raised to fund the new build programme.”

The results for the six months to end September 2011 showed increased net profi t of R12.8 billion (2010: R9.5 billion), on revenue which increased to R63.9 billion (2010: 51.1 billion).

“The revenue growth was driven mainly by higher electricity tariffs, which Nersa allowed from April 1,” Joffe says. “We have now had two and a half years of strong fi nancial performance, which is very pleasing.

“It is essential for us in terms of raising the funds we needs to invest in South Africa’s future.”

Eskom’s return on assets remained low at 3.7 percent, while group debt had risen to R179 billion and would rise to over R300 billion over the

Eskom FEATURE

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coming fi ve years as Eskom rolled out its R450 billion capital programme to add 17,000 MW of new capacity by 2017.

“We are committed to facilitating the entry of IPPs into South Africa’s electricity market and we look forward to welcoming more new players into the market in the next few years,” Joffe added.

Long-term underinvestment in the South African electricity industry for new generation capacity, further compounded by an aging fl eet and the need for upgrades in transmission and distribution, have resulted in signifi cant project bottlenecks - and headaches for Eskom.

Signifi cantly, it is making good progress on its new build programme and recently secured yet more development fi nance for ambitious wind and solar projects, with the latest tranche coming in October in the form of an additional $250 million in World Bank funding.

“That was for the approved 100 MW Sere wind farm, to be located 300 km north of Cape Town, and the 100 MW Uppington concentrating solar power (CSP) project,” says Joffe. “It increased the amount of development fi nance available to us for the roll-out of our fl agship renewable energy projects. In total now, we have raised around $761 million of low-cost fi nance for the renewables roll-out.”

She says the latest loan is sourced from the Clean Technology Fund and complements the $260 million from the World Bank’s own resources provided to Eskom for the Upington and Sere projects as part of a $3.75 billion loan

Green power, keeping the lights on, securing major funding… these are just some of the things keeping the guys over at

Eskom busy, says spokesperson Hilary Joffe.By Ian Armitage

E skom recently released its interim results, which show a continued strong fi nancial performance.

It is a remarkable turnaround for the state-owned power utility, which slumped to its worst ever loss of R9.7 billion in its 2008/9 fi nancial year.

“We’ve performed very well,” says Eskom spokesperson Hilary Joffe. “We showed continued fi nancial performance, with a surplus that will be reinvested in the business to ensure fi nancial sustainability and that we can repay the debt raised to fund the new build programme.”

The results for the six months to end September 2011 showed increased net profi t of R12.8 billion (2010: R9.5 billion), on revenue which increased to R63.9 billion (2010: 51.1 billion).

“The revenue growth was driven mainly by higher electricity tariffs, which Nersa allowed from April 1,” Joffe says. “We have now had two and a half years of strong fi nancial performance, which is very pleasing.

“It is essential for us in terms of raising the funds we needs to invest in South Africa’s future.”

Eskom’s return on assets remained low at 3.7 percent, while group debt had risen to R179 billion and would rise to over R300 billion over the

Eskom FEATUREFEATURE

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coming fi ve years as Eskom rolled out its R450 billion capital programme to add 17,000 MW of new capacity by 2017.

“We are committed to facilitating the entry of IPPs into South Africa’s electricity market and we look forward to welcoming more new players into the market in the next few years,” Joffe added.

Long-term underinvestment in the South African electricity industry for new generation capacity, further compounded by an aging fl eet and the need for upgrades in transmission and distribution, have resulted in signifi cant project bottlenecks - and headaches for Eskom.

Signifi cantly, it is making good progress on its new build programme and recently secured yet more development fi nance for ambitious wind and solar projects, with the latest tranche coming in October in the form of an additional $250 million in World Bank funding.

“That was for the approved 100 MW Sere wind farm, to be located 300 km north of Cape Town, and the 100 MW Uppington concentrating solar power (CSP) project,” says Joffe. “It increased the amount of development fi nance available to us for the roll-out of our fl agship renewable energy projects. In total now, we have raised around $761 million of low-cost fi nance for the renewables roll-out.”

She says the latest loan is sourced from the Clean Technology Fund and complements the $260 million from the World Bank’s own resources provided to Eskom for the Upington and Sere projects as part of a $3.75 billion loan

approved in April 2010.Clauses attached to the loans

secured last year insisted on new generation from cleaner energy sources.

“The World Bank approval raised the total we have received from the Clean Technology Fund to $350 million, with the other $100 million facilitated through the African Development Bank (AfDB),” Joffe continues. “Over-and-above that funding, we have also secured further development-finance support of $265 million directly from the AfDB for our green-energy projects, as well as $151 million from Agence France Development.

“Those loan packages mean the funding phase for Sere is complete.

“These projects have obviously been described as transformational, and could lead

the way in securing a clean energy future for Africa and improve energy supply,” she adds. “It will accelerate the development of a clean technology industry.”

Eskom is under significant pressure to boost generation capacity and provide a stable supply of power. Demand is again reaching 2007 levels, and the system is running very tightly, Joffe says.

Eskom’s total capacity is just over 41,000 MW, and it has a 16 percent reserve margin, but that is not sufficient, if it wants to keep an operating reserve of at least 2,000MW at all times to protect the system if units trip unexpectedly.

“The system is very constrained,” she explains. “Our continual challenge is to meet demand and keep the lights on, but also take units out of service on a planned basis to do the maintenance they need. To be honest we are struggling to find the space to keep

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Eskom is actively involved in the renewable energy sector

Hilary Joffe, Eskom spokesperson

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Tel: 0027 11 609 1305Fax: 0027 11 452 6032E-mail: [email protected] welcome!

up with our maintenance schedule. Our fleet is in mid-life, with the many of our power stations more than 30 years old, and they need looking after. Ideally, we would like something like ten percent planned maintenance of our fleet per year, but we are not in a position to do that at the moment – this year so far we have achieved only six percent.”

She acknowledges that the decision to build additional power under the current new build programme was taken too late.

“By the time Eskom was given the go ahead by government to build new power stations and new power lines in 2004, it was already too late,” Joffe says. “Eskom began its new build programme in 2005. We have actually put quite a lot of new generation capacity on the grid since then – we have put more than 5,000 megawatts on the grid; that certainly has helped. But the real big capacity that we need will come on line only from 2013, when Medupi, the first of our large new coal-fired stations, starts to deliver

Eskom FEATURE

These projects have obviously

been described as transformational, and could lead the way in securing a

clean energy future

power to the grid. At least until then, and probably beyond that, the system will be tight and it will be a daily challenge to match supply and demand. That it will continue to be an issue certainly until Medupi and Kusile come on line.

“Eskom has, however, become a real expert in running a tight system.”

The first unit of Medupi is expected to deliver first power to the grid in 2013, with subsequent units coming online at six to eight month intervals after that. Kusile is expected to come online from the end of 2014. Each of the new plants has a capacity of 4800 MW, so together they will boost the capacity of South Africa’s national grid by more than a quarter, providing the supply needed to meet demand and support economic growth.

“We also expect some independent power producers to come on line,” Joffe says.

Eskom has over the past year signed power purchase agreements for more than 800 MW of generation with private and municipal producers. It is set to sign further agreements with new independent producers of renewable energy after the Department of Energy announced a list of successful bidders on 7

November in terms of South Africa’s new renewable energy programme.

Eskom is also pushing ahead with its demand-side management levers to reduce the gap, subsidising investment in energy efficient technologies by industrial and mining customers as well as in solar water heaters and low-energy lighting for residential customers.

And it is partnering with government and the private sector in a colourful campaign to get South Africans to adopt more energy efficient habits. “If you’re not using it, switch it off,” is a slogan of the campaign.

“It is a constant battle,” Joffe says.The completion of the Kusile coal-

fired power station is expected late 2017/early 2018 and will constitute the last stage of Eskom’s committed capacity expansion programme.

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Medupi power station, North western view Unit 6, Lift Shaft, Water wall Panel & Air C

Kusile is the last stage of our

new build expansion

profile

There has been no approval of or commitment to any new generation after that, Joffe says.

“Kusile is the last stage of our new build expansion programme. We aren’t committed to any more after that.

“As a country we do need to make decisions on what to do next. Those will be made within the framework of the Policy-Adjusted IRP, which the government put in place earlier this year; the next step is to start implementing that plan and from Eskom’s side we believe decisions must be made soon so that provisions can be made for the period beyond Kusile.”

She says in order to meet future obligations, Eskom must continue its sound financial performance, raising capital to build new capacity and improve and refurbish its current operations.

“The IRP sets out a 20-year electricity plan — to 2030 — for South Africa to increase capacity and change the nation’s energy mix and competitive landscape within the context of global warming and globalisation,” Joffe explains. “As a country, we need to provide a secure and affordable supply of power and extend access to electricity for the 20 percent of the population who still do not have it – while at the same time addressing the challenge of climate change.

”We are committed to diversifying our energy mix, to moving towards a cleaner future. And we are looking not only to cutting carbon emissions at our new and existing stations but also to more efficient use of South Africa’s scarce water resources.”

With 85 percent of its generation capacity from coal, South Africa is one of the top global polluters and the14th highest emitter of greenhouse gases.

At the moment, a few hydro plants, pumped storage, gas turbines, and nuclear power, as well as a few very small wind turbines and solar projects supplement coal use.

“Eskom is committed to diversifying its energy mix and moving towards a lower carbon future,” Joffe says.

Eskom is responsible for a massive 95 percent of South Africa’s power generation.

It is the largest power producer in Africa, providing more than 40 percent of the electricity used across the continent, and the tenth largest utility in the world by generation capacity.

The utility owns and operates the country’s national transmission system and provides electricity directly to the country’s largest industrial and mining customers, as well as to about 40 percent of all residential end users in South Africa.

Redistributors, including municipalities, supply the other 60 percent of residential users.

To learn more visit www.eskom.co.za. END

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Eskom FEATURE

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