Page 16 - AfrElec Week 03 2023

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Eskom, treasury row over diesel

funds amid energy crisis

SOUTH AFRICA SOUTH Africa’s embattled national power “Eskom has an existing fundraising plan
utility Eskom is trying to resolve a behind-the- which it is executing including private placement
scenes dispute with the National Treasury over rolls, but this still brings them, including NT
much-needed diesel funds amid a worsening bailouts, to low single-digit cash levels at the end
domestic energy crisis, News24 reported on of the year,” Montalto said as quoted by News24.
January 17. “As such, there is absolutely no liquidity or
Power cuts, known locally as load shedding, ‘extra’ or ‘new’ funding to pay for diesel. I think
have escalated since last Tuesday (January 10) many people don’t quite realise how low year-
when Eskom implemented its worst-ever rolling end cash levels are going to be and this is indeed
outages (Stage 6) for 8-12 hours a day for house- why more bailouts may be needed in the next
holds and businesses until further notice. fiscal year,” he added.
The only immediate way to reduce load Credit analyst at Nedbank Corporate and
shedding is for Eskom to burn diesel to power Investment Banking (CIB) Jones Gondo said
its open-cycle gas turbines (OCGT), writes it was unrealistic to think that Eskom would
News24. All other possible solutions would take physically have cash available due to the rollover
at least 18-24 months. because the entity has so many competing needs;
During meetings with political parties, especially considering the severity of its negative
organised labour representatives and busi- cash flow position.
nesses, chaired by President Cyril Ramaphosa In an update on the power system for the next
on Monday (January 16), the key message from 24 hours, Eskom announced that it had been
the Eskom board was that load shedding is here able to procure an additional 50mn litres of die-
to stay for the next two years. sel, which “will be utilised sparingly to manage
A steady supply of diesel would reduce the pumped storage dam levels and to limit the
load shedding by two stages. However, Eskom amount of load shedding during the day,” says
announced in December that it had run out of News24.
money to buy diesel and had already overspent Burning diesel to power OCGTs comes at an
its diesel budget. enormous cost, with 50mn litres costing around
In the meantime, News24 has learned of a ZAR1bn. However, economists agree that it is
recent decision by the Public Investment Corpo- always less than the cost of unserved energy to
ration (PIC) to roll over ZAR13bn ($758mn) of the economy. If Eskom spreads the 50mn litres
Eskom debt when it becomes due on 25 January, over time and runs the turbines six hours a day,
as confirmed by the PIC on Monday. it will last for 13 days.
The PIC decision has led to the Treasury’s Gondo said that it appeared that Treasury was
expectation that Eskom will now have available attempting to impose some discipline on Eskom
cash to buy diesel with the money allocated by by playing hardball with funding for diesel. This
the Treasury for debt servicing. But Eskom said was unrealistic, he said, given the state of Eskom.
that it did not have spare cash and that the PIC “The consequence for the economy of not
rollover had already been figured into its plans. providing funding for diesel is more damaging
“The rollover is in the process of being exe- than the cost of paying for it,” he was cited by
cuted,” Eskom said in response to questions on News24 as saying.
Monday. On January 17, the National Energy Crisis
“However, both the equity from Treasury and Committee (NECCOM) begins a three-day
the rollover of Eskom’s redeemable debt with the meeting to deal with the load shedding crisis.
PIC form part of Eskom’s annual borrowing pro- Among the top priorities is solving the diesel
gramme for the financial year ending 31 March problem, reports the media agency.
2023. Accordingly, neither source represents Other measures that will be on the agenda
additional liquidity with which to purchase will include a feed-in-tariff for domestic users to
diesel.” sell power back to the grid and the possibility of
According to Peter Attard Montalto, a lead “demand-side measures”, which would entail a
analyst on capital markets at Intellidex, Eskom’s price structure that penalises users for exceeding
funding plan would leave it with almost no cash certain limits on consumption.™
at the end of March 2023.

P16 www. NEWSBASE .com Week 03 18•January•2023