South Africa • R21.95 (incl. vat) - Watt Now Magazine

WWatt EnergyEskom’s funding plans questionedEskom’s ambitious plans to spend up to R720-billion onproviding new or improved electricity infrastructureover the next 25 years and more may be in dangerafter rating agency Standard & Poor said that it wasdowngrading its rating of the electricity utility to ‘credit watchwith negative implications’.The organisation says that Eskom’s full capital expenditureplans have not been defined and it doubts that Eskom will be ableto undertake the capital expenditure programme using only debtfunding.Eskom recently applied for a substantial tariff increase to fundexpansion but this was turned down by the National ElectricityRegulator which cut the proposed hike of 18,7 percent to just14,2 percent, which is still considerably higher than South Africa’sofficial inflation rate.Eskom initially planned to spend R150-billion over the next fiveyears to improve power generating capacity and said that aboutR100-billion of this amount would be financed by debt. However,since the initial announcement Eskom has said that its five-yearcapital expenditure plans will now cost about R300-billion.While admitting that the capital expenditure had increased,Eskom has not said how it plans to fund the five-year programme.It seems likely that the government will have to step in to providesome of the funding to the electricity utility, which is owned by theDepartment of Public Enterprises.According to the Department, funding options being consideredinclude external borrowing, consistently high price increasesover the next five years, injections of capital for the shareholder,the provision of government guarantees and partnerships withindependent power producers.Meanwhile South African President Thabo Mbeki has publiclyapologised to all citizens saying that while Eskom had warned theCabinet that it needed to build new power stations, governmenthad stopped the expenditure programme believing at the time thatit was unnecessary.Mbeki conceded that the government was wrong and thatit should have heeded Eskom’s warning and invested in newgenerating capacity several years ago.Power cuts are commonplace throughout South Africa thesedays. Eskom dislikes the term power cuts and uses instead itseuphemism of ‘load shedding’ to explain that it cannot meetdemand for power and so shuts down the supply to selected regionsthroughout the country usually for a period of about two hours.In a separate development, Eskom has confirmed that it isconsidering building several new nuclear power plants to boostsupply to the national grid by about 20 000 MW. French company,Areva, which built Koeberg, and American company Westinghousehave been asked to submit bids for a new nuclear power stationthat will have twice the capacity of Koeberg.Eskom is hoping to start construction by 2010 and have thenew plant working by 2016. Five coastal sites are undergoingenvironmental impact assessments and the most suitable site willbe used for the new nuclear plant. The sites being investigatedare:• Brazil near Kleinzee and Schulpfontein near Hondeklipbaai onthe Northern Cape’s west coast.• Duynefontein and Bantamsklip near Pearly Beach, east ofGansbaai on the Western Cape’s coast;• Thyspunt near Oyster Bay, west of Cape St Francis on theEastern Cape’s coast.The new nuclear capacity includes plans to build the first pebblebed modular reactor. Once the technology is proven and workinganother 24 of these smaller generating units will be installedaround the country to provide an additional 3 960 MW of power.February 2008 50