HomeIndustry SectorsAsset MaintenanceEskom keen to renegotiate PPA contracts with IPPs

Eskom keen to renegotiate PPA contracts with IPPs

In a briefing yesterday, Eskom’s CEO, André de Ruyter, advised that the utility had made progress in its operational stability but that it would continue to seek a renegotiation on tariffs from independent power producers.

The Eskom CEO advised that the utility will seek to renegotiate power purchase agreements as these have not been sustainable for the utility.

De Ruyter pin-pointed those in Bid Round 1 and 2 of the renewable energy independent power producer procurement programme.

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He said that the renegotiation of IPP contracts had emerged following an analysis of the contracts, stating that he believed “there are opportunities for us to engage with those IPPs with a view to reducing the net cost to the South African electricity consumer”.

De Ruyter added: “I think that there is an opportunity for us to request IPPs to look at potentially refinancing. We think that some of the financing arrangements are potentially suboptimal and that there are opportunities to lower the financial cost and thereby also reduce the costs paid by Eskom to those IPPs.”

The CEO advised that initial conversations have transpired and that he was “cautiously optimistic” that an acceptable outcome would be secured. “…that serves the needs of the country, but also serves the needs of the investment community by allowing adequate investment certainty on these projects.”

However, any renegotiation will be seen as controversial since the 20-year PPAs were the outcome of a competitive bidding process.

Maintenace key to system stability

According to De Ruyter, the state-owned utility’s reliability maintenance project has ensured a stable power generation.

“We have seen some improvements. The fact that we achieved 30,000MW of availability last night [Wednesday, 20 May] without using any diesel is testament to the fact we are seeing a turnaround in our generation system,” he said.

However, he acknowledged that the generation system is not yet at the desired reliability and predictability levels.

To facilitate reaching sustainable performance levels, Eskom launched a reliability maintenance project earlier this year. “We have resourced that [maintenance] programme from internal resources and we are making good progress to address the maintenance backlog.”

De Ruyter added: “We have also approached the market to procure electricity from those producers that can sell into the grid.”

Nicolette Pombo-van Zyl
As the Editor of ESI Africa, my passion is on sustainability and placing African countries on the international stage. I take a keen interest in the trends shaping the power & water utility market along with the projects and local innovations making headline news. Watch my short weekly video on our YouTube channel ESIAfricaTV and speak with me on what has your attention.