On Tuesday, acting CEO of South African state-owned power utility Eskom, Brian Molefe, delivered the utility’s 2014/15 Integrated Annual Results, which revealed that electricity volumes are down 0.7% compared to the previous year.
Delays with the new generation build programme in conjunction with the utility’s aging coal fleet, has forced Eskom to roll out scheduled power outages, which has caused a loss of 548GWh in electricity sales.
Financial: Annual results
Eskom claimed that it’s poor financial situation is due to the outstanding debt owed by municipalities and Soweto. Another issues is a deteriorating balance sheet in this investment phase, which is funded through borrowings and inappropriate return on assets over a consistent period, due to above inflation cost increases, declining sales volumes and lack of cost-reflective electricity prices.
Arrears municipal debt has been on a significant increase since 2013 from ZAR1.2billion to ZAR4.95 billion in 2015. Molefe added that the bulk of the debt that was in arrears of 60 days was due to municipalities owing ZAR4 billion and Soweto owing ZAR3.8 billion.
Drop in sales
Molefe highlighted that there was a drop in the electricity sales from the mining, international and industrial sectors, which he attributed to:
- Impact of industrial action in the platinum sector
- Contraction in the gold mining sector
- Closure of the Bayside aluminium smelter
- Depressed commodity prices
Molefe said:” Load shedding did have a role to play in the reduction of our [Eskom] electricity sales volumes in the previous year. Because there was load shedding between November and March 2014/15.”
Electricity operating costs per kWh are sold at 67.52c/kWh compared to the 2013/14 actual of 59.67c/kWh.
The utility added that primary energy costs have increased by 19% year-on-year, above both inflation and the 8% tariff increase.
In March 2014 the primary energy cost was ZAR69.812 compared to a significantly higher ZAR83.425 in March 2015.
Molefe added that the increase in the primary energy costs is mainly attributed to the delay in the commissioning of the Medupi coal power station where Eskom has incurred costs of ZAR6.779 million.
Volatile performance of coal fleet
The average age of Eskom’s coal fleet is 34-years with plant availability remaining stable at an estimated 73%, which requires gradual improvement.
Molefe added that network risks will continue due to the ageing assets and vulnerabilities due to network “unfirmness”.
Improving power supply
Molefe further stated that the new build generation programme has contributed an additional 6,237MW generation capacity to the national grid, as well as 5,816km of transmission lines and 29,655MVA substation capacity since 2005.
Renewable Energy Independent Power Producer (IPP) programmes have added a further 1,795MW to the grid, which consists of 1,185MW of solar and 600MW of wind.
To date, there has been a total of 5,701MW of power contracted through IPPs, of which 3,887MW falls under the Department of Energy’s Renewable Energy Independent Power Producer Procurement Programme.
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