Eskom’s diesel lifeline comes with a big catch

South Africans might end up footing the bill for Eskom’s new diesel purchase, while recently acquired reserves are expected to dry up soon, says energy analyst Clyde Mallinson from Virtual Energy and Power.

On Thursday (24 November), Eskom downgraded load shedding to stage 3 during the nights through the coming weekend. The lowering from stage 4 to stage 3 was said to be “courtesy” of new diesel reserves making it to the utility.

Speaking to 702, Mallinson said that Eskom’s new deal with PetroSA will ultimately fall on the taxpayer. He said that PetroSA is essentially now supplying diesel to Eskom on a credit basis.

Not being able to pay up, the analyst said that Eskom will likely approach the National Treasury and say that it has run up an IOU and say, “either you pay us to pay them, or you pay them directly.”

Eskom recently received a major lifeline from PetroSA in the form of 50 million litres of diesel to keep its open-cycle gas turbines running (OCGT). The company’s OCGTs are meant to be run only during peak energy demand periods when the normal coal stations cannot handle the surplus.

Eskom has fallen reliant on their consistent running and recently ran out of money to purchase diesel, already way over budget. Mallinson said that the 50 million litres would not last very long.

The energy analyst said that Eskom’s actions indicate a ‘throwing down of the gauntlet’ after it had previously warned the National Energy Regulator of South Africa (Nersa) that it would stop burning diesel due to a lack of funds.

“In the past, when Eskom overspent their budget on diesel, they got rapped on the knuckles by Nersa, which said, ‘you didn’t prudently spend your money, you should have gotten more energy out of the coal stations’,” said Mallinson.

Public enterprises minister Pravin Gordhan said that he is in further conversation with the minister of finance, Enoch Godongwana, to discuss a more permanent funding solution as a primary matter of urgency.

The power utility’s chief operating officer, Jan Oberholzer, reported that Eskom had spent more than R11.2 billion on diesel this year to the end of October. This figure has since shot past R12 billion in November.

If no money can be found to buy diesel, Professor Anton Eberhard from the University of Cape Town’s Graduate School of Business said that Eskom would be at risk of a full-scale system collapse.

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