South Africa is asking independent power producers to lower electricity costs as part of the rescue of Eskom Holdings SOC Ltd, the debt-stricken state utility.<\/p>\n
Renewable energy project developers will discuss potential solutions ahead of follow-up talks with the government on Friday.<\/p>\n
The independent power producers and coal companies met with state officials last week, which resulted in an agreement \u201cto make a contribution to the economic turnaround with a consideration to cost reduction,\u201d the Department of Mineral Resources and Energy said by email.<\/p>\n
The meeting was \u201cvery positive\u201d and involved a request around working together to lower electricity prices, Terence Govender, chairman of the South African Renewable Energy Council, said on Monday. The group asked developers and lenders of the first three rounds of projects for South Africa\u2019s program to buy electricity from private renewable producers, for a meeting on Wednesday, he said.<\/p>\n
Eskom, seen as the biggest threat to South Africa\u2019s economy with at least R450 billion ($30 billion) in debt, is due to get a new chief executive officer by the end of October. The government is also set to release a plan to save the business after already earmarking R128 billion in bailouts over three years to help it meet expenses.<\/p>\n
The utility\u2019s primary energy costs increased by 17%, due to higher coal charges and increased production from independent power producers in its most recent financial year. While the renewable IPPs accounted for 4.8% of total production, it made up 22% of total costs, according to an Eskom presentation.<\/p>\n
In February, then energy minister Jeff Radebe said the government had no intention of renegotiating its contracts with the renewable IPPs. That wasn\u2019t specifically raised in the recent meeting either, according to Govender. \u201cThe government is saying: \u2018You tell us what you can do,\u2019\u201d he said.<\/p>\n
Gwede Mantashe, the minister for minerals and energy, and Department of Public Enterprises Minister Pravin Gordhan attended the meeting last week that also considered unemployment and the security and reliability of electricity supply.<\/p>\n
\u201cAt the moment we are far from a conclusive outcome that can provide specific answers,\u201d the Department of Mineral Resources and Energy said. \u201cWe have started on a positive note.\u201d<\/p>\n
Ratings agency Fitch meanwhile, affirmed Eskom Long-Term Local Currency Issuer Default Rating (IDR) of ‘BB-‘, with a negative outlook.<\/p>\n
“Fitch has simultaneously maintained the National Long-Term Rating at ‘A(zaf)’ and the National Short-Term Rating at \u2018F1(zaf)’. The rating agency has also affirmed the government-guaranteed local currency senior unsecured debt ratings at ‘BB+’, in line with the rating of South Africa (BB+\/Stable Outlook).”<\/p>\n
Fitch noted that while Eskom still faces financial and operational challenges, the explicit government support is positive and a mitigant to Eskom\u2019s liquidity challenges.<\/p>\n
“We know what needs to be done and our focus is on how we together with our key stakeholders and shareholder can execute our plans,” said Eskom\u2019s acting group chief executive, Jabu Mabuza.<\/p>\n