Category Archives: DPE

Engineers want Mahlobo to cancel ‘nukes indaba’

Sunday Times, 4 December, 2017

South Africa’s top engineering academy has urged government and Eskom to put the controversial nuclear procurement programme on hold immediately‚ and also cancel a hastily convened energy conference scheduled for next week.

The South African Academy of Engineering (SAAE) has voiced “extreme concern” over recent developments in the electricity sector and stated that‚ in its opinion‚ it was not in the best interests of South Africa‚ especially the poor‚ for government to embark on a nuclear power procurement programme at this point.

The academy‚ whose members include nearly 200 eminent engineers and related professionals‚ has also urged Energy Minister David Mahlobo to postpone a major energy indaba to be held in Midrand from December 7 to 8.

Mahlobo said the indaba would provide a platform for public participation on contentious issues like the nuclear new build programme and he also signalled his intention to release government’s long-awaited integrated resource plan (IRP) before the end of the year.

But in a statement issued by academy president Trueman Goba‚ the SAAE said the indaba should be postponed to January 2018 to allow for proper planning‚ including the release of a draft IRP by the Department of Energy to allow meaningful participation by all relevant stakeholders.

“During the past six years there have been rapid and significant changes in the energy landscape with new technologies emerging and varying (falling) prices. Therefore‚ it is essential that the IRP should be regularly updated to ensure that South Africa’s power plan remains aligned with the most recent technological and pricing trends‚ while also taking account of the medium-term need to supply sufficient electricity and to replace the aging fleet of thermal power stations‚” the SAAE said.

The academy noted that earlier this year‚ a number of organisations – including SAAE and the government’s own scientific council‚ the CSIR – raised concerns about a number of aspects of the draft IRP document.

President Jacob Zuma had also appointed three different ministers of energy in a span of two years to head one of the most important ministries of government‚ while the minister of public enterprises had appointed four new chief executives at Eskom in one year.

The academy also noted that current prices of electricity from nuclear power stations were known to be higher than from many other sources.

“Therefore‚ the Executive Committee of the SAAE requests that‚ in the interest of South Africa‚ the Department of Energy should cease to run the current ad hoc processes but rather engage with relevant research groups and industry associations in a well-planned‚ facilitated and documented process to discuss and agree on the best available input parameters for the modelling of alternative scenarios for the IRP so as to ensure that there is consensus on the assumptions.

“This could be achieved by establishing a technical forum where the various research groups and industry associations meet to discuss these issues. A new IRP can only be adopted after proper consultation in an open and transparent process.”

The Department of Public Enterprises‚ as the controlling shareholder of Eskom‚ should also be tasked to resolve the leadership and governance issues at Eskom as a matter of urgency.

Here is the full article

An alarming picture emerges as Eskom’s liquidity dries up

The reports states that without any further funding, Eskom will have approximately R1,2-billion of liquid assets at the end November 2017 against a target of R20-billion, and will move into a negative liquidity position of approximately R5-billion by end of January 2018. This figure assumes the successful draw-down of R2,2-billion from development finance institution (DFI) loans and R1,3-billion export credit agency (ECA) facilities.

The report further states that the qualified audit opinion in Eskom’s 2016/17 annual financial statements relating to irregular expenditure, governance issues and changes in leadership has had a negative impact on investor sentiment, which is affecting the volume of future funding, current drawdowns and liquidity position of Eskom…

Eskom’s financial position

The report indicates that at 30 September 2017 Eskom Group revenue of R95,5-billion was R3,75-billion lower than budget.

This was attributed to lower than budgeted electricity sales volumes, the capitalisation of pre-commissioning revenue at Medupi and Kusile, and revenue of R2,64-billion deemed uncollectible at the date of sale.

Eskom indicates that average demand from key industrial customers remains low, with no recovery in demand or sales. Average demand for these customers has declined further to approximately 8200 MW during the past quarter, from an average of 8500 MW in the first quarter of the financial year, mainly due to customers’ response to higher winter electricity tariffs.

Primary energy costs were underspent by R3,87-billion across all main categories of coal, OCGTs, IPPs and international purchases.

The group’s operating expenditure (excluding depreciation and amortisation) of R25,3-billion was R4,7-billion below budget, as a result of underspend on employee benefit costs and other operating expenses.

Group capital expenditure amounted to R24,2-billion for the period, which is substantially lower than the budget of R31,8-billion due to underspend mainly at Kusile, Medupi and other power delivery projects, partially due to phasing of expenditure. Much of the capital spend shortfall is however expected to be incurred by year end.

Poor governance – a core issue highlighted in the report

The report highlights that the audit qualification in Eskom’s 2016/17 financial statements relating to irregular expenditure, governance related issues and continuous changes in executive management has had a severe impact on Eskom’s ability to raise funding in the domestic and foreign markets and has also resulted in delays in drawdowns on existing facilities.

Eskom says this will have a negative impact on financial sustainability and its status as a going concern.

The report identifies that in order to improve both liquidity and execution of funding initiatives, it is critical that governance related issues and investigations are resolved, and that stability returns within Eskom’s board and executive management.

Investors indicate that they are heavily reliant on these issues being resolved before any firm commitments on funding will be made.

Rating agencies have also indicated their deep concerns regarding governance and leadership at Eskom, and are closely monitoring the execution of the funding initiatives. Any further downgrades would exacerbate the current situation and put at risk the execution of Eskom’s funding plan.

Note: This article is a collaboration between EE Publishers and Fin24.

Here is the link to the article

State Capture Inquiry Day 1: Unpacking looting at Eskom

Fin24,  Matthew le Cordeur, 17 October, 2017.

Parliament’s public enterprises committee has started its first state capture inquiry, starting with allegations of corruption and capture at Eskom.

SA cannot afford new nuclear – Eberhard

South Africa cannot afford to build a new nuclear fleet, Professor Anton Eberhard told Parliament’s state capture inquiry into Eskom on Tuesday.

“From my research, a new nuclear fleet would be extremely difficult to finance with our current fiscus status,” he said.

President Jacob Zuma reshuffled his Cabinet on Tuesday, placing a new minister in the Energy portfolio for the second time this year.

This time, David Mahlobo was made Energy Minister. As State Security Minister, Mahlobo was part of Zuma’s visit to Russia in 2014, where reports alleged he signed a secret nuclear energy deal with Russian President Vladimir Putin.

With Zuma’s future uncertain, analysts believe the president is eager to push through the programme, which had been suspended by a court this year.

Eberhard said there has been a 400% electricity price increase over the last 10 years, which is highly unusual. “This has had a serious impact on the economy,” he said.

“The increases are mostly due to Medupi and Kusile, which has added massively to Eskom’s finance costs. An increase in coal costs are also contributing to this.

“The price should not have been much more than inflation,” he said. “If you look at renewable IPPs, there has been a 78% decrease in solar PV prices in last five years. This points to the fact that Eskom’s price increases are out of synch.”

Here is the link to the full article – and there is lots more!

Eskom considers relaunch of pebble bed modular reactor programme

EE Publishers, 14 August, 2017.

(Ed, note: This is unbelievable! Perhaps it is a joke? Just the sort of project to strengthen one’s balance sheet!)

This article outlines Eskom’s approach in the development of the advanced high temperature reactor (AHTR) programme, commonly known as the pebble bed modular reactor (PBMR) restart. The proposed AHTRs are intrinsically safe, modular, efficient and modern gas-cooled reactors which are deployable in even the remotest areas of the country.

The technology base for these reactors, although in research stage, is relatively established with potential commercialisation within the next few decades. Eskom’s approach is to develop a 100 MWth/50 MWe “proof of concept” machine, based on the key lessons from the PBMR, with energy storage capability tailored to customer needs. The research effort is primarily hinged on the PBMR technology with advances in Generation IV reactors.

(Ed. note: Evidently Eskom failed to learn the key lesson of their first PBMR attempt – DONT DO IT! Ir would be interesting to find out where the funding is coming from.)

Read the full article here and hope that good sense prevails

Brown instructs Eskom board to rescind Molefe reappointment

Daily Maverick, Wired World, NEWS24, 31 May, 2017

(Ed. note: Here we go again, and we didn’t have to wait for the weekend revelations this time!)

Cape Town – Public Enterprises Minister Lynne Brown has ordered the Eskom board to rescind the reappointment of Brian Molefe as chief executive on Wednesday.

Brown has asked the Eskom board to provide her with two names from the Eskom executive to become acting chief executive. She will announce who that acting CEO will be within 48 hours’ time, she said.

“We met with the Eskom board today,” she said at a media conference in Cape Town. “Collectively, looking at all the facts… I directed Eskom to rescind the decision to reappoint Mr Molefe.”

This follows the announcement by the inter-ministerial committee that it concluded that Brown should order the board to rescind the reappointment.

“It will be in best interests in government, Eskom and the country that the Minister of Public Enterprises directs the board to rescind the re-appointment of Mr Molefe,” said inter-ministerial committee convenor Justice Minister Michael Masutha on Wednesday in Cape Town.

The decision by the Eskom board to grant Molefe early retirement and then the decision to reappoint him were two mistakes that could have been prevented, the committee found.

“Both mistakes could have corrected administratively and not by the board reinstating Mr Molefe,” said Masutha.

Here is the full article