R60bn for Eskom construction

20 February 2008

Eskom will have to spend some R343-billion on construction over the next five years, with just over 70% of that amount earmarked to return three mothballed power stations to service as well as to build a number of new ones, Finance Minister Trevor Manuel told Parliament in Cape Town on Wednesday.

Delivering his Budget for 2008/09, Manuel proposed that the government provide the state power company with up to R60-billion to support the financing of the company’s capital investment programme, on terms structured to help Eskom meet its cash flow requirements.

“Eskom’s tariffs were steadily reduced in real terms during the 1980s and the 1990s, so that electricity prices in South Africa are now far lower than in any other comparable country, and well below full economic cost,” Manuel said.

As a result of its low tariff system, Eskom was not in a position to finance its major infrastructure projects, and the utility’s tariffs needed to be adjusted upwards, South Africa’s finance minister said.

“Its capital should again mainly be raised through debt, and paid for by users over the course of time through appropriately structured tariffs.”

According to the National Treasury, Eskom has 26 power stations in the country with the capacity to generate 37 761 megawatts of electricity. Due to maintenance and technical problems, only 35 436 megawatts are normally available, with peak hours taking a dedicated 2 325 megawatts daily.

The power utility’s short-term capacity expansion includes the construction of a further two gas-fired power stations in Mossel Bay and Atlantis in the Western Cape, which will add an additional 1 042 megawatts to the national grid.

“The return-to-service of previously mothballed power-stations Camden, Grootvlei and Komati will add a combined 3 677 megawatts of generating capacity by 2011, and other smaller projects will produce about 2 000 megawatts,” Manuel said.

He explained that in terms of long-term capacity expansion projects, another two major coal-fired plants, Medupi in Lephalale and Bravo near Witbank, would each cost in excess of R80-billion and have a generating capacity of 4 500 megawatts.

In his State of the Nation address earlier this month, President Thabo Mbeki said that the government would provide support to Eskom for its capital expenditure programme, as well as to implement an energy efficiency campaign.

“This situation has precipitated the inevitable realisation that the era of very cheap and abundant electricity has come to an end,” Mbeki said. “However, given our large base of installed generation capacity, for a long time to come ours will remain amongst the few economies with affordable electricity.”

Source: BuaNews