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Eskom serious about municipal debt, says De Ruyter as arrears keep growing

Photo: Gallo Images/Reuters

Photo: Gallo Images/Reuters

  • Municipal debt remains a thorn in Eskom’s side, with arrears swelling by 26%.
  • Eskom’s plant performance for the financial year 2020 decreased, partly due to a reliability maintenance programme.
  • Eskom has also lost capacity at Unit 1 of Koeberg due to a faulty breaker, but it is due back online by Saturday.

Municipal debt remains a thorn in Eskom’s side, with
arrears swelling by 26% to over R35 billion. Since financial year-end,
municipal debt has increased to R39 billion, the power utility’s CEO Andre de
Ruyter said on Tuesday.

Speaking during the state-owned energy company’s financial
results announcement for the year ended March 2021, De Ruyter said it was a
priority to solve the impasse with the biggest offenders.

“… A solution to non-payment by certain
municipalities is a priority for the political task team led by Deputy
President [David] Mabuza,” he said.

Eskom is also working on rolling out Active
Partnership Agreements with some municipalities to contain debt.

These agreements have been implemented at two
municipalities – Msunduzi municipality
Kwa-Zulu Natal and Raymond Mhlaba municipality in the Eastern Cape. Eskom is
working on similar agreements with three other municipalities.

The power utility was unable to conclude an
agreement with Maluti a Phofong, the biggest debtor owing it R5.9 billion, De
Ruyter said.

But, he added, there were positive developments.

“All in all, I think the municipalities have
proven to be very receptive to this concept of active partnering, which is
intended those municipalities to enable them to collective revenue within
municipal boundaries to ensure Eskom’s account gets paid as well.

“Since we started with this concept nine
months ago, we have made considerable progress.”

According to Eskom’s presentation, negotiations for
active partnering agreements are underway with 45 municipalities.

However, as the power utility battles various
legacy problems, the risk of load shedding also remains. As it continues to catch
up on overdue maintenance, rolling blackouts are expected to continue, said Eskom
Chief Operations Officer Jan Oberholzer.

Responding to questions on how effective the
reliability maintenance programme had been, Oberholzer noted that it had
impacted plant performance – with the Energy Availability Factor (EAF) reduced
to 64.19%.

Units need to be taken offline for extended periods
of time for the maintenance programme, he explained. “The results,
although minimal … will take some time. This is not a once-off exercise, this
an ongoing process,” he said.

Oberholzer likened it to maintaining a motor
vehicle. “We will see a small improvement, we believe, towards the end of
the financial year in terms of EAF. But it is an ongoing process, and for some
time, the risk of load shedding will remain,” said Oberholzer.

Oberholzer also gave an update on Unit 1 at Koeberg
nuclear power station, which lost capacity on Monday.

“Yesterday at 16:30 we had a reactor trip of
920 MW at Koeberg Unit 1. That meant we had less capacity for evening peak,”
he said. However, Eskom managed to meet demand on Monday night, using open
cycle gas turbines. The cause of reactor trip was detected – a faulty breaker.

Oberholzer said he received feedback at 18:00 on
Tuesday that the required replacement had been done. Tests and analysis are
underway to make sure everything is safe and in working order before the unit
can be returned to service.

“We trust that by Saturday, we will be able to
successfully return Unit 1 at Koeberg to service,” he said.

As per the financial statements, Eskom recorded a
net loss after tax of R18.9 billion, mainly because of debt servicing costs of
R31.5 billion, which obliterated its operating profit of R5.8 billion. Eskom
managed to reduce its debt burden by R81.9 billion to R401.8 billion.

“The single biggest factor from constraining
Eskom from being financially sustainable is the debt burden we carry,”
said De Ruyter.

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