South Africa’s Eskom launches inquiry as utility struggles to combat power shortages

The announcement on 12 March by Eskom chairman Zola Tsotsi follows severe power shortages that have hit the country for more than a year. Tsotsi said Eskom’s board “deemed it prudent to seek an independent view of the status of, among other things, the poor performance of generating plants”.

Tsotsi said there was “no malice behind the inquiry” but that an interim chief executive and other executives “will be put in place over the course of the duration of the inquiry, which will be carried out by an independent body”.

Eskom said that one of the current non-executive board members, Zethembe Khoza, has been asked to take over as interim chief executive while the inquiry takes place.

The inquiry will consider the “poor performance” of electricity generating facilities, “delays in bringing new generating plants plant on-stream, high costs of primary energy (and) cash flow challenges”, Eskom said.

South Africa’s public enterprises minister Lynne Brown said she welcomed Eskom’s decision to launch the inquiry but said she was concerned “about the instability at power plants, the financial liquidity of the utility, the unreliable supply of electricity and its dire impact on the economy”.

Last September, South Africa’s government announced a package of support to fill a “funding gap” for Eskom, which the National Treasury said was “facing significant challenges that threaten its sustainability”. The Treasury said Eskom would be raising additional debt in the region of 50 billion rand (ZAR) ($4bn), over and above original plans to raise ZAR 200bn ($16.1bn).

According to the Treasury (2-page / 128 KB PDF), while higher debt levels would have “a negative impact” on Eskom’s balance sheet, “it is necessary to reduce the immediate impact on electricity consumers”.

The first of six units of South Africa’s Medupi coal-fired plant, the first power station that Eskom has built in 20 years, generated its first power earlier this month as authorities continued to combat power outages. The first of the plant’s six generating units, which each have an electricity generating capacity of 794 megawatts (MW), had been scheduled to start delivering power to the national grid on 24 December 2014.

Once complete, “Medupi will be the fourth-largest coal power station in the southern hemisphere and the largest dry-cooled power station in the world”, Eskom has said. However, South Africa’s government has continued to express concern about the “disruptive effect” power outages are having on households and businesses.

“The lack of sufficient capacity to meet the country’s energy needs remains a challenge and all attempts are being made to ensure that we overcome the tight energy situation,” the government has said.

Up to 95% of South Africa’s electricity is currently generated by coal-fired power stations and the country is among the world’s top 25 producers of greenhouse gases, according to government figures.

As of November 2013, South Africa was rated as the 12th most attractive investment destination for renewable energy, according to the government, which has approved an additional 17 renewable energy projects since 2013.