No load shedding this winter, Eskom insists

Eskom acting CEO Phakamani Hadebe yesterday gave assurances that Eskom is addressing coal shortages at seven of its 15 coal-fired power station and there would not be load shedding this winter.

He also confirmed Eskom was resuming its investment in cost-plus mines, scrapping a decision by former CEO Brian Molefe to phase out its agreements with these dedicated mines.

Cost-plus mines are each tied to a specific Eskom power station, which is designed to use the type of coal produced at the mine.

Eskom and mine owners enter into a long-term agreement in terms of which Eskom supplies capital for mine development and expansion in exchange for security of supply at a small margin. Eskom has oversight over the operations to ensure prudency of cost.

For a number of years, Eskom failed to invest the required capital in such mines and in 2015, Molefe announced a policy change away from the cost-plus model. But that left Eskom vulnerable, as its power supply is dependent on investment decisions by private mine owners who do not necessarily base such decisions on its needs.

Without long-term coal supply agreements, the utility is over-reliant on short-term contracts, which cost much more.

The under-investment and the failure of the Gupta-owned Tegeta mines to comply with their contractual obligations for delivery, have resulted in a coal shortage at seven of Eskom’s 15 coal-fired power stations.

Hadebe said the coal supply at Komati power station was back to the required 20 stock days and the supply at one of the other six should be normal in a few weeks.

Eskom hoped to restore supply to the other five power stations to acceptable levels later this year.

Tegeta stopped supplying Hendrina power station in March and Eskom is negotiating with the Tegeta business rescue practitioners to resume at least some of its contracted 8.5 million ton annual supply obligation. Hadebe said the problem came at short notice.

Eskom had completed a probe after coal stock levels at Hendrina last year were found to be much lower than records showed. Staff at the power station and in Eskom had been suspended.

Eskom’s turnaround is well underway – Hadebe: 

• Increased frequency of coal stock checks over the whole coal-fired fleet.
• Contracted 84% of coal needs to 2025 and issued a tender for 100 million tons for the next four years. These bids are being evaluated. Following a request for proposals negotiations, will also start to secure the coal supply for Kusile for the next 60 years.
• Operationally Eskom is doing reasonably well with an availability factor of 78%, Hadebe said.
• Since January, Eskom had secured R43 billion in funding. Investors were positive and the utility believed it would secure all funding required for this year. It hoped to issue a R12 billion bond in the international market in July or August.

Long-term coal contracts is the only way

Eskom has no choice but to change its strategy and revert to long-term agreements with cost-plus mines, an energy expert says.

However, an even better option would be to reduce their over-dependence on coal in order to cut back on environmental pollution and carbon dioxide emissions, Chris Yelland said.

Eskom had learnt from its failure to capitalise the cost-plus mines, which resulted in declines in several areas, and have realised it needs to be more circumspect.

He believed Eskom’s statement that there is a low probability of load shedding, and that Eskom and not the taxpayer would take the financial strain to ensure this. – Chisom Jenniffer Okoye