Former Eskom chief executive Brian Molefe says he is in the dark about current problems faced by the power utility, which have seen the return of crippling power cuts as the company battles operational challenges.

Speaking to eNCA on Sunday morning, Molefe said he did not want to apportion blame about what could have occurred at the firm he led between April 2015 and November 2016.

In 2016, former president Jacob Zuma declared that there would be no more power cuts, following a visit to Eskom's headquarters.

'Then the lights went off'

During the interview, Molefe was asked what had gone wrong between that period and now, and he responded: "I don't know, because since we have said that three years have passed, and the lights didn't go off and then they went off."

"I don't know what is happening at Eskom because I am not at Eskom.... I am in the dark," he said.

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"I cannot say I appreciate what the problems are, but it means something must have gone wrong," he added.

Last week, Eskom announced that it would institute load shedding for the first time since December, blaming the problem on the failure of a number of generating units.

In December, Eskom blamed supply challenges on low coal stockpiles.

Related to the coal supply challenge was the controversial 2016 contract with formerly Gupta-owned Tegeta Exploration and Resources, which ran into operational challenges.

Supply constraints experienced by Tegeta were, back then, partly blamed for the current low coal stock piles at Eskom power stations, contributing, in turn, to load shedding.

Molefe, who resigned from Eskom after being named in the State of Capture report by former public protector Thuli Madonsela, stated that the contract was above board. 

He added that he had not been asked to appear before the commission of inquiry into state capture headed by Justice Raymond Zondo.

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Corruption and State capture are major reasons why coal plants Medupi and Kusile are not delivering electricity as planned and why South Africa is facing crippling blackouts, say energy experts.

Kusile and Medupi, the third and fourth largest coal power plants in the world, were originally due to come online in 2014 and 2012 respectively, which would have given the country an extra 9 600MW of power, enough to avoid blackouts.

In 2019 both are still under construction.

When Eskom announced in 2007 that it was to build the two new mega coal power plants, the cost of Medupi was just under R70-billion and Kusile R80-billion.

The latest costs are now R208-billion for Medupi and R239-billion for Kusile.

While some of the units have come online and are generating electricity, they have been plagued by problems. Eskom calls these "design faults" and says it will cost R8-billion to rectify.

Some experts say that is par for the course with mega projects worldwide, now regarded as outdated because of the almost inevitable time delays and cost overruns that go with massive projects.

Others, while acknowledging this, say there was a lack of oversight and control over the projects from an early stage, which paved the way for corruption.

Energy expert Hilton Trollip of the University of Cape Town's (UCT's) Energy Research Centre, said there were serious problems with Medupi almost from the start, but they were not investigated.

​"Unless we are so punch-drunk that we don’t think the ANC’s [African National Congress'] role and benefits in Hitachi Africa, Chancellor House and Medupi contracts were not a clear signal, already reported in 2007, that prosecuting authorities would turn a blind eye to blatant corruption – and what the results of that would be," Trollip said.

When the problems around lack of transparency became systemic, National Planning Commissioner Anton Eberhard had recommended a probe, but nothing had been done.

"Once the conditions for both corruption and impunity had been established at the levels they were in Eskom, and as it become clearer that this impunity persisted, it became increasingly likely that things would develop along the path they have. By now there are so many beneficiaries, large and small, throughout the Eskom ecology, and the culture is so entrenched, that rooting them out within the existing institutional structure is not credible," Trollip said.

Jesse Burton from UCT’s Energy Research Centre agreed that corruption and State capture had been serious underlying factors in the delay and cost overruns of Medupi and Kusile.

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South Africa's Eskom could be split into three separate firms under proposals from experts President Cyril Ramaphosa has hired to help revive the ailing state power company, two sources familiar with the matter told Reuters.

Reforming Eskom is vital to get Africa's most industrialised economy firing on all cylinders. It supplies more than 90 percent of the nation's power but is drowning in debt.

A Sustainability Task Team, picked by Ramaphosa, is due to report to the president next week, but shared its preliminary thoughts about Eskom with senior members of the ruling African National Congress (ANC) at a two-day meeting that ended on Monday.

One senior ANC source briefed by the task team said it proposed a "functional unbundling of Eskom," which would involve separating it into three state-owned entities responsible for power generation, distribution and transmission.

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by Dr. Tobias Bischof-Niemz and Johan van den Berg

Eskom’s current debt is R350-billion, and it needs to raise a further R150-billion over the next three to four years. This is almost certainly impossible, even with a government guarantee. It would appear that Eskom cannot stay afloat without a gargantuan bailout by the South African government.

NERSA’s low electricity price increase announced in December 2017 has passed most of the responsibility for funding Eskom from the electricity customer to the taxpayer and the fiscus. It’s been widely reported that Eskom would have already run out of cash without an emergency bridging loan by the PIC of R5-billion in early February 2018 and a further R15-billion by the end of the month.

But there is a simple way to stabilise electricity prices, cast off Eskom’s crippling debt and boost South Africa’s credit rating, while maintaining public sector control of critical assets in the electricity sector.

The Eskom generation fleet consists of 15 coal-fired power stations. They all have a limited lifetime, and were built to serve the country and economy before being retired and replaced. Scheduled decommissioning dates start soon, and end in 2050 or later. Given that these assets were meant to be extinguished over time for the common good, we can choose to do so in the most beneficial manner. The value of the power stations does not stem from their steel and metal, but from the fact that they are able to produce electricity over the residual lifetime of the plant. If we can manage to sell the Eskom coal fleet at the “net present value” of this residual lifetime value, we will be able to raise enough money to pay back the Eskom debt. This can be done as described below.

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The nascent private power industry and its substantial financial backers are reeling from Energy Minister Mmamoloko Kubayi’s recent apparent hit-and-run attack on them.

Last week, the industry was shocked to hear Kubayi announce they must all renegotiate their previously-agreed tariffs down to 77c/kilowatt-hour.

This would get them their long-delayed power purchase agreements with Eskom by November.

Looking for clarity, they learnt that Kubayi had left for the Brics summit in China and would take leave afterwards, said Mark Pickering, managing director of solar industry lobby group Sapvia.

“The minister drops this massive bombshell, then promptly leaves for China. After that, we are told, she is on leave for two weeks,” he told City Press.

The department and the minister’s spokespeople said they could not confirm the minister’s itinerary.

“The lawyers are really clear – there is no legal basis for this,” Pickering told City Press.

The department of energy simply endorsed Eskom’s attempt to “squash” South Africa’s flagship public-private partnership initiative – the renewable energy independent power producer (IPP) purchase programme – he said.

Kubayi’s announcement affects 27 projects representing at least R60 billion in capital expenditure.

“By setting a date and a price, you contradict the idea of a negotiation,” said Pickering.

“What is left to negotiate? It is absolutely clear that it is Eskom trying to squash the IPP office. To our astonishment, the minister has bought Eskom’s line hook, line and sinker,” he told City Press.

Eskom seems to be winning the battle on other fronts as well.

Coincidentally, the National Energy Regulator of SA (Nersa) is this week holding a hearing on complaints that the renewables sector lodged against Eskom months ago.

Despite the industry’s objections, it would be a closed hearing, said Pickering.

Not only had Oliver Wyman failed to approve the payments – it had red flagged them and recommended a legal review of the entire contracting process 
28 AUGUST 2017 - 13:31 STEPHAN HOFSTATTER
Eskom has admitted it lied when it defended making payments totalling R1.6bn to Gupta linked financial advisory firm Trillian and global consultancy McKinsey.

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May and June 2017 will go down as two of the most dreadful months in the history of the South African power utility Eskom. Its credibility in the eyes of the public has reached rock bottom after a series of well-publicised scandals.

Following the suspension of the then acting Eskom CEO, Matshela Koko, over a large contract allegedly benefitting his step-daughter, the nation was stunned by the reinstatement of the former CEO, Brian Molefe, who had previously left the utility under a cloud. The saga also forced the power utility to face the wrath of the parliamentary portfolio committee on Public Enterprises.
Highly damaging revelations followed from leaked emails, corroborating the findings of the Public Protector that Eskom’s leadership had allegedly irregularly assisted the Gupta family’s Oakbay Investments in securing the Optimum mine and the associated coal supply contract. The emails apparently also highlighted indefensibly close links between the Guptas and specific Eskom board members and executives. To top it off, the R4-billion Duvha boiler replacement was inexplicably awarded to a Chinese company, at a much higher cost than proposed by its competitors.
The scale of these alleged transgressions and the initial unwillingness or inability of government to deal with these matters has generated the impression that there are other agendas at play. It suggests that, like many other state-linked entities, Eskom has been taken over by persons furthering individual interests at the expense of the national good, a phenomenon now referred to as state capture.
This further raises the suspicion that the brazen taking of sides in the rollout of new generating capacity is also driven by other motives. Koko and Molefe have been outspokenly pro-nuclear and have blocked the long outstanding conclusion of power purchase agreements with successful bidders under the Renewable Energy Independent Power Producers Procurement Programme (REIPPPP). The power utility appears to have also promoted the distorted narrative that renewables are chiefly responsible for job losses at Mpumalanga coal mines.
The latest REIPPPP projects offer vastly reduced power purchase tariffs compared to the early rounds. Most renewables are now clearly cheaper than the cost of new coal and nuclear. Therefore Eskom’s opposition to REIPPPP on affordability grounds sounds decidedly hollow. The perception has therefore been created that Eskom is part of an effort to sabotage the renewable energy sector, which is the nuclear industry’s chief competitor in South Africa’s future energy landscape.
By late June, after Molefe and Eskom board chair Ben Ngubane left, Lynne Brown, the minister of public enterprises, had clearly had enough of the scandals at the power utility and the associated public outcry. The Eskom board was reconstituted, and with it came the appointment a new and favourably received interim CEO, Johnny Dladla.
The deep crisis that Eskom is embroiled in requires drastic action. The new board must be firm and decisive in dealing with the scandals. The public needs to be convinced that no efforts are being spared in prosecuting those that have done wrong, and in recuperating irregular expenditure.
The power utility continues to be a key enabler of South African economic and social development, and its functionality and effectiveness remains a national imperative. The bulk of Eskom’s employees and the broader public support that goal.
While at this stage not directly compromised in the manner of Eskom, the nuclear industry too is in need of deep introspection. The sector has failed to condemn the irregularities and presidential interference in the nuclear procurement process to date, which saw Russian developer Rosatom allegedly placed in a dominant position over its competitors.
The Western Cape High Court ruling that the Russian nuclear agreement is invalid is viewed in some quarters as merely a speed hump rather than a call to return to the drawing board. NECSA board chair Kelvin Kemm’s defiant pronouncement in Moscow that the nuclear deal will be finalised before year end, probably to Rosatom’s advantage, is the worst thing the nuclear sector could do right now. Whatever the intention, such sabre rattling will merely harden the opposition from a public seemingly skeptical of all things nuclear.
There are respected people working in the nuclear field who genuinely believe that nuclear technology has a role in the future South African energy mix. These nuclear advocates have to now recognise that rehabilitating their sector requires the rebuilding of public trust, and honest attempts to allay concerns about costs, safety and potential corruption associated with new builds.
The renewable energy sector has been riding high on the back of positive international sentiment and the successful implementation of projects from the first three REIPPPP phases. That ride is however about to get much bumpier as the sector runs into opposition from unions and government.
While this opposition is to some degree based on misinformation, possibly planted deliberately, the renewable industry also needs to re-evaluate its tactics. Green hype and crude PR are no longer going to cut it, and current and past mistakes are about to be exploited ruthlessly. As with nuclear, sober engagement and diplomacy are now crucial to take the renewable energy sector forward to its rightful place in South Africa’s energy landscape.

​Source..... EE Publishers

Energy Intensive User Group of Southern Africa (EIUG) believes there is policy, legislative and regulatory space to introduce new electricity pricing arrangements to help restart of idle mining and process-industry activities, as well as encourage new investments to absorb Eskom’s surplus, which it sees persisting for a number of years yet.
Amid flat demand and rising supply, the State-owned power utility claims to have up to 4 000 MW of surplus available on a daily basis and has indicated that the excess-supply situation will persist until at least 2021 – a marked departure from the recent past, when it resorted to rotational load-shedding to avoid a national blackout.
The organisation is, therefore, supportive of Eskom’s initiative to promote mining and industry electricity sales and reports that its members are engaging with the utility to explore opportunities to reopen mothballed plant. “These sectors are major contributors to the South African economy. There is the potential to grow significantly and continue to be and become even more important as a catalyst for economic growth and job creation.”​
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The National Energy Regulator has approved an electricity price hike for 2016/17.

The National Energy Regulator (Nersa) approved a 9.4% electricity hike for 2016/17 on Tuesday.
Eskom submitted an application to Nersa in November last year to recover R22.8bn, which the utility said it used to avert load shedding.
The decision comes after extensive consultation with government, unions, small and intensive users, who engaged in public hearings in six provinces, according to Nersa chairperson Jacob Modise.
“The public interest was also considered as well as input of stakeholders,” he said.
Nersa evaluated the “regulatory clearing account” (RCA) balance for the first year (2013/14 period) of the third multi-year price determination (MYPD3) amounting to R22.8bn.
Energy expert Chris Yelland said Nersa allowed only half of what Eskom claimed for due to reduced sales , i.e. Eskom only received R6.2bn of the R11.7bn it had claimed for due to reduced sales.
“Nersa also only allowed a small part of what Eskom claimed for diesel, i.e. R1.3bn compared with the R8bn Eskom claimed for diesel,” he said.
The hike will kick on 1 April.
Nersa said based on the available infomation and the analysis of Eskom’s RCA application for the first year of the third Multi-Yar Price Determination (2013/14), the Energy Regulator decided that:

1. The RCA balance of R11.2bn be recoverable from standard tariff consumers, local Special Pricing Agreements and international consumers in the financial year 2016/17.
2. An amount of R10.256bn be recoverable from standard tariff consumers for the 2016/17 financial year only.
3. The average tariff for standard tariff consumers be increased by 9.4% for the 2016/17 financial year only.
4. The amount of R983m be recoverable from Eskom’s local SPA consumers and international consumers for 2016/17 financial year only.
5. Eskom must submit a new MYPD application within three months, based on revised assumptions and forecasts that reflect the recent circumstances.

Finance Minister Pravin Gordhan said at his press briefing ahead of his 2016 Budget Speech last Wednesday that tariff increases should only be approved if they are necessary, and not just to make things more comfortable.
“Regarding tariff increases, are they necessary or just comfortable in a particular environment?” Gordhan asked. “We need to improve governance, financial management and state-owned entities’ contribution to the developmental agenda.”
In the Budget Review, Treasury said “further efficiency improvements are necessary at Eskom to ensure moderation in future tariff increases”. “SOEs are not sacrosanct,” Gordhan said. “We are willing to take a tougher look at them.”
His comments came a day before Nersa was scheduled to announce possible electricity price increases through a tariff hike to fund Eskom’s shortfalls. It postponed its announcement to this Tuesday.

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​Fin24