Eskom expects to provide easier access to its power grid to developers of renewable energy projects of up to 100MW in the next three to four months by making land available near the connection points in Mpumalanga.
This is intended to accelerate the addition of new generation capacity to alleviate the current supply shortfall. It will relieve pressure on Eskom and create space to shut down its heavy-duty power plants for maintenance.
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The Minister of Public Companies, Pravin Gordhan, announced this measure on Wednesday, December 15, in the presentation of Eskom’s financial results for the semester ended September 30.
The South African Wind Energy Association welcomed the news.
Eskom posted a net profit after tax of R 9.2 billion for the period, compared to breakeven during the same period last year. It projects a net loss after tax of R9.1 billion for the full financial year. This is a huge improvement over previous projections of a loss of R22 billion for the full year.
Due to various structural factors, such as the higher winter rates charged during the first half, Eskom always performs much better in the first half of the financial year than in the second.
Professor Anton Eberhard of the UCT Graduate School of Business, where he directs the Power Futures Lab, commented on the surprising nature of the results:
It is rare these days to see performance improvements in South African state-owned companies, so good to see these results today from the electric power company. @Eskom_SA . Income, earnings, cash, debt service coverage ratio all up.
– Anton Eberhard (@AntonEberhard) December 15, 2021
While the company saw an improvement in all financial indicators, Eskom CFO Calib Cassim cautioned that this was due to a 15% rate hike and financial assistance from the government to the tune of R32 billion.
He said Eskom’s fees do not yet reflect its costs and until that is the case, the government will have to maintain its assistance. Over the next two financial years, this aid will amount to R21 billion per year.
Outstanding municipal debt has risen to 41 billion rand and efforts led by Vice President David Mabuza to address this have so far not taken a toll, according to Cassim.
Gross debt has dropped from R 463 billion a year ago to R 392 billion, which is still roughly double what Eskom can cover on its own.
Eskom has requested a 20.5% tariff increase for 2022/23. Energy regulator Nersa published the request last week and invited interested parties to submit written comments before January 14.
The determination of rates will be finalized on February 25.
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Regarding the land offer, Eskom CEO Andre de Ruyter explained that the utility has 36,000 hectares of mostly unused land around its coal-fired power plants in Mpumalanga.
The plan is to make it available to developers of renewable energy projects of up to 100MW, who plan to generate electricity for their own use or sell it to third parties.
Eskom will follow a competitive bidding process that will favor projects that deliver the most energy faster. Offers 20-year leases.
This will, on the one hand, alleviate the problem of network access for those developers who want to take full advantage of the license exemption announced by President Cyril Ramaphosa earlier this year and, on the other hand, create economic activity in communities that They currently support older power plants that will be closed in the next few years.
While the best wind and solar resources are available in the north, east and west of the Cape, the grid in those provinces is saturated. Gordhan also announced plans to expand the network’s capacity in these provinces, but said it will take time. Meanwhile, Mpumalanga’s plan should unlock additional generation capacity.
Eskom has expressed its opinion on the need for an additional generation capacity of 4000MW to 6000MW, without which the load cut will be inevitable and it will continue to lack the reserve capacity to carry out maintenance.
Business Leadership SA welcomed the territorial plan. He said in a statement: “If maximum absorption is used, this has the potential to add up to 20 GW to our supply capacity. For example, 400 50MW plants or 200 100MW plants could be developed, mobilizing huge amounts of investment and substantially increasing electrical capacity in South Africa ”.
De Ruyter said Eskom is ready for legal separation from the transmission business.
He said he will meet with the lenders to obtain their consent for the transfer of assets to the newly registered National Transmission Company SA, but has yet to obtain a new transmission license as the current one is in the name of Eskom Holdings.
Read: Eskom’s Choice: R300bn Environmental Compliance or 16,000MW Closure