No quick fix for Eskom crisis: expert

Energy expert, Chris Yelland says that power utility, Eskom, has no single solution to its problems.

Speaking on PowerFM, Yelland underlined the depths of the parastatal’s financial woes.

Eskom admitted last week that financial issues are partly responsible for the country’s rolling blackouts.

“Eskom does have financial issues. It is true that we are having financial crunch and we are currently in discussion with government to get us out of this financial difficulty,” spokesman Khulu Phasiwe said.

Yelland said that Eskom is using as much as R1 billion worth of diesel on a monthly basis. “Its not in the budget, they (Eskom) have run out of budgeted cash.”

Should funds dry up, Eskom would stop using its open cycle gas turbines, according to the analyst.

That, he said, would take 2,000 megawatts of power, approximately 5% of the country’s generation capacity, off the grid “and push us into immediate load-shedding”.

Eskom supplies 95% of the country’s power.

Yelland said that he expected government to stump up the required funds for Eskom, because the consequences, the cost to the economy, is even higher.

He said that Eskom needs to address three areas, namely financial sustainability, operational sustainability, and environmental sustainability, arguing that the parastatal does not have “a single solution to these problems”.

On a financial level, the energy expert said that the diesel was only one of several problems, with the group announcing that it has an immediate cash flow need of R50 billion as announced by its financial director towards the end of 2014.

“They also have a R225 billion funding shortfall for the period that ends 31 March 2018 – in the next three years. That is the financial hole that they find themselves in,” Yelland said.

He noted that the response from government has been threefold: that they will provide a R20 billion cash injection; convert a R60 billion loan made several years ago, to equity; and authorise Eskom to raise R250 billion of debt.

“This is hardly a solution as Eskom is already over indebted,” Yellend said, stressing that this would wreak havoc on its balance sheet, and push up costs for the parastatal, which will then be passed on to the customer.

He said that the impact of further cost increase would reduce sales which would be devastating for the group.

He said that an interim plan, ahead of the next budget speech “doesn’t seem like much of a plan at all”.

“There is no quick fix,” Yelleand said.

On Friday, Eskom implemented stage one of load-shedding for the first time in 2015, citing “high electricity demand and the unavailability” of some generating units.

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No quick fix for Eskom crisis: expert