Eskom and South Africa must brace themselves for tough measures in order to make the power supply sustainable, Public Enterprises Minister Lynne Brown said on Tuesday.
“We have to organise the country to attack these problems… Failure is not an option,” she said at Eskom’s Megawatt Park in Johannesburg.
Eskom released its interim financial results for the period ended September 30, painting a bleak picture for the state-owned company’s liquidity.
Eskom’s six month year-on-year profit was reduced to R9.3 billion, with a projected year end profit of half a billion rand.
Meanwhile, municipal debt to the power producer rose to R4 billion.
The National Energy Regulator of SA (Nersa) approved tariff hikes that would provide an additional R7.8bn for the financial year 2015/2016. In addition, government pledged a support package, which included an equity cash injection of no less than R20 billion.
Eskom CEO Tsholofelo Matona warned that the company’s bleak financial situation, coupled with the operational problems resulting in recent power cuts, meant the power producer faced “a very untenable situation”.
“We have a crisis on our hands.
“We know where the problems are… we know what some of the solutions are, but for the period ahead we are living on the edge.”
Matona said there were a number of factors that contributed to Eskom’s reduced profits, including increased coal costs, the use of more diesel in open gas turbines to support the national power grid, and declining sales volumes.
Nersa had also granted only an eight percent tariff hike, while the power producer had asked for 16 percent.
Matona welcomed government’s support package.
“We think it will help relieve our immediate financial challenges for the next three years.”
Eskom had put in place an “aggressive” savings target of R60 billion to demonstrate “we are helping ourselves”, he said.
It was also working with government to find ways to recover billions of rands of debt from municipalities, including some “extraordinary” measures being discussed, which neither he nor Brown would elaborate on.
Matona said: “Eskom has kept lights on for the longest period ever, even when conditions of the plant cannot do it. But this has become a problem now that we cannot avoid.
“We are facing the costs of having operated the plant in the way we have.
“We need this to be the problem of all of us; we need consumers to appreciate this and work with us.”
Eskom would take the opportunity to do maintenance whenever this was viable, but maintenance often led to reduced capacity.
Matona said it “pains” Eskom to implement load-shedding, but this was sometimes necessary as it had been over the last two weekends.
“When we have to reduce load [through power cuts], we protect the economy and rather focus on residential sectors.
“…When we do loadshed, it is out of responsibility to prevent a total blackout that could be catastrophic for the country and the region.”
A total blackout would take “weeks and weeks” to rectify, he said. SAPA