The Standing Committee on Appropriations met with the Minister of Public Enterprises and the management of Eskom to consider the Debt Relief Bill.
Eskom reported National Treasury would provide R184 billion for settling debt and interest payments. The cash injection was greatly appreciated, and was subject to conditions established by the Treasury. This was expected to improve Eskom’s balance sheet and increase its financial sustainability. Eskom had concerns regarding the growing outstanding municipal debt which had increased to R58 billion, and the threat of load-shedding owing to dysfunctional power units lowering the available megawatts for winter.
The Committee had issues regarding the consequences if Eskom failed to meet Treasury's conditions, the impact of increased availability of renewable energy on its revenue, load-shedding interventions and its amelioration, Eskom’s application for exemption from reporting in regular audit prescripts, and whether South Africa still purchased electricity from neighbouring countries.
Eskom's introductory comments
The Chairperson welcomed the Standing Committee on Appropriations to a meeting with Eskom on the 2023 Eskom Debt Relief Bill.
Ms N Ntlangwini (EFF) asked why the Minister and Deputy Minister were absent from the meeting. She felt it was important for them to be present in such a crucial meeting.
The Committee Secretary said that the Minister and Deputy Minister had excused themselves from the meeting to finalise the Department’s annual performance plan (APP) to be tabled in Parliament.
Ms Ntlangwini was dissatisfied with the apology.
Mr Calib Cassim, Acting CEO, Eskom, said that the Debt Relief Bill had taken a lot of pressure off Eskom. In April, for the first time in six years, they were able to release three years of capital expenditure (capex) across the division for generation, transmission and distribution.
This had been a tremendous relief from a financial and operational perspective. It allowed the management team to focus on dealing with issues of generation and generation performance, reducing unplanned outages, and the intensity and frequency of load-shedding.
He said that the time previously spent on funding could now be focused on operational needs and the unbundling process. Eskom believed that the debt relief and the tariffs awarded by the National Energy Regulator of South Africa (NERSA) would allow them to go to year four without needing to borrow.
Eskom’s corporate plan extended this to the fifth year. He explained that if circumstances changed, they would be required to approach the Minister of Finance, the Minister of the Department of Public Enterprises (DPE) and the board. The one outstanding element to ensure financial sustainability was municipal debt and its collectability.
National Treasury (NT) issued a circular to municipalities as an incentive as part of the Debt Relief. If they increased their current account and adhered to it, that portion of the municipal debt would be written off over a three year period.
Eskom Debt Relief Bill
Mr Martin Buys, Acting Chief Financial Officer (CFO), Eskom, said that NT would provide Eskom with R184 billion in funding over the next three years. The funds would be allocated towards settling its debt and the interest payments on it. Eskom estimated that R90 billion of the funds would go towards the principle payment, and R86 billion would be for the interest payment.
Eskom’s projected total stock debt would be R356 billion at the end of the 2025/26 financial year. Thereafter, NT agreed to take over R70 billion in debt. The debt would be for principle and interest payments. NT was currently looking into solutions for the remaining residual debt.
The conditions associated with debt relief were:
- Eskom’s capital expenditure was restricted to transmission and distribution to allow for refurbishment, strengthening and expansion of the network.
- Eskom may not implement remuneration adjustments that negatively impact its overall financial position and sustainability.
- Eskom may not use proceeds to sell non-core assets for capital and operating needs.
- Debt relief may be used only to settle debt and interest payments under pre-identified instruments.
- No new borrowing during the debt-relief period.
- Positive equity balances in Eskom’s hedging instruments cannot be used to structure new debt.
Within the guarantee framework, the R350 billion debt that had been guaranteed would remain guaranteed until maturity, after which the debt relief guarantees would fall away.
Government advances through a shareholder loan
It was planned that NT would provide Eskom with the funding as an interest-free loan which may only be used for pre-existing debt and the interest on all debt. The loan would be subordinated to Eskom’s existing indebtedness before being converted into Eskom shares.
On a quarterly basis, Eskom would provide NT with a compliance report. Following this, the Minister of Finance would grant permission on whether shares would be issued and whether they would be converted into government equity. Eskom had already committed to complying with government's conditions.
The debt-to-equity ratio would immediately improve and deleverage Eskom’s balance sheet. Eskom had made assumptions on what the tariffs would be for the 2026 financial year. If it failed to follow the conditions for a quarter, it would be given a further quarter to correct the conditions. If this did not occur, the loan amount from that quarter would be converted into a loan with market rights, which Eskom would have to settle.
(See presentation for benefits to Eskom.)
Ms Tryphosa Ramano, Chairperson: Investment and Finance Committee, Eskom, confirmed that Eskom had released the long-lead capex items for a period of up to five years. This was part of the debt relief programme, which relieved Eskom from financial difficulties.
Eskom's focus was on generation capex to secure reliability. From a compliance perspective, this was being monitored by the International Finance Corporation (IFC) to ensure that it was done appropriately.
Eskom noted that the R78 billion which had been targeted would be received only around June. Eskom felt they were sorted in terms of liquidity for the moment.
(See attached for full presentation)
Mr H Mmemezi (ANC) appreciated the presentation for the hope it provided. He said that historically, the government had provided many bailouts to Eskom with little materialising in return. He recognised that Eskom had made a difference in many rural areas. He asked that it provide clarity on the previous unsuccessful bailouts and whether they could provide assurance for future financing.
He hoped that Eskom would comply with the conditions, as previously they were not honoured.
Ms T Tobias (ANC) said that the capex was a well-thought-out turnaround strategy for the entity. She noted the increasing municipal debt, and felt it was imperative that municipalities pay this. On debt-to-equity, she asked whether the debt relief would transfer to equity for government, to benefit NT and the fiscus.
On hedge funds, she asked if this instrument provided a good yield, and whether Eskom would be prepared to lower debt relief in favour of using hedge funds to service debt and provide liquidity. Would needs be revised as and when there were changes?
Mr Z Mlenzana (ANC), referring to justifications for the debt relief programme, highlighted the claims that loadshedding may be reduced. He asked for further clarity on what “freeing up cash” meant.
He noted that when the President declared the state of disaster for electricity, loadshedding had decreased. However, once the state of disaster was lifted, loadshedding increased. He asked whether this was related to the availability of electricity and the need to “free up cash.”
On the reliability of Eskom’s compliance, he noted the many interventions from the Committee to assist Eskom financially. He asked what the guarantee would be that it would comply with the conditions. He also asked what the consequences would be if they failed to comply following receiving the financial assistance.
On Eskom’s application for exemption, he noted previous concerns regarding this exoneration from audit prescripts. He asked whether Eskom was trying to run the entity as an independent business whilst being heavily reliant on government. Could it justify the need for exemption?
He said that once the application had been rejected, they were told that the community was given from 11 to 21 April to provide technical submissions. He felt that this was malicious compliance due to insufficient time.
He felt doubtful that they could assure the South African electorate that there was transparency and accountability from Eskom.
Mr A Sarupen (DA) said that the presentation lacked an analysis of past bailouts, and noted that since 2019 there had been bailouts of R20 billion. Eskom had met the conditions established by the Minister of Finance, but the conditions had failed to yield any meaningful improvement in its financial and operational performance. He felt this was because the conditions were weak.
He asked what Eskom was doing to demonstrate improved financial operational performance and what guarantee could be given to the Committee and South African citizens.
He said that Eskom may use the new cash flow only for operational expenditure relating to transmission and distribution. He asked where financing would come from to cover costs for improving generating capacity.
The Chairperson welcomed the Minister of Public Enterprises to the meeting.
Ms Ntlangwini appreciated the Minister’s presence. On the conditions, she felt that Eskom had delivered this presentation before. She asked how the bailout would help to alleviate loadshedding in the country. What would the implication of not being able to invest in new green fuel generation products be on energy generation?
Regarding Eskom’s application for exemption, she asked what the Department knew about the matter, and whether they had been complicit in applying for the exemption.
Mr A Shaik Emam (NFP) felt Eskom was known for not meeting many conditions. What would the process and consequences be if Eskom did not meet the conditions? He questioned whether Members were aware of the extent of the problem faced by Eskom before agreeing to meet the conditions.
He mentioned issues such as the lack of skills, ageing infrastructure, additional increases in demand, sabotage and evergreen contracts. He felt it was important that Eskom present a plan to deal with these challenges. In light of these unaddressed concerns, he feared that the bailout would force taxpayers to bear the brunt.
He asked whether Eskom knew of and understood the real problems, and whether there had been consensus with the relevant Ministers on how to approach and eradicate these problems. He asked if Eskom had not reached this stage in their planning. If so, he questioned what they would do to sustain themselves.
Regarding shares, he said that Eskom wanted to manipulate its finances to encourage lenders to invest money, as they were good for purpose, and asked whether this was fraud. He said that load-shedding for half the day decreased Eskom’s revenue capacity. He questioned whether Eskom considered that there would be a drastic reduction in their revenue due to insufficient capacity.
He said as many municipalities were looking into renewable energy, there would be a decreased demand from Eskom. What would the impact of this be? Resolving these issues would take a minimum of five to ten years. Would Eskom consider building new coal-fired power stations, given the abundance of coal in the country?
On purchasing electricity from neighbouring countries, he asked which countries, how much they intended to buy and whether South Africa still supplied certain neighbouring countries with power.
Mr O Mathafa (ANC) asked whether there were any particular process reforms that Eskom planned to introduce. He asked specifically concerning procurement and project planning, considering the conditions which may affect its operational competencies. He asked this in light of the fact that funds may be withheld for a particular quarter if they failed to meet conditions. Given this, he felt it was crucial that internal structures be strengthened. He asked which investment programmes the cash would be used for, and how they would assist in handling load-shedding.
Commenting on the application for exemption, he said the notice from the Minister had followed multiple Committee sittings, engagement with the Auditor-General of South Africa (AGSA), and a publicised uproar from stakeholders and the public. He asked what justification Eskom had to still want to be exempted from reporting on irregular expenditure in its financial statements.
He considered that Eskom was stating that the loans could be converted to equity, whilst busy with a process of unbundling to become three separate companies. He asked how the conversion of shares would impact the entity’s equity value and what Eskom’s plan would be to deal with this challenge going forward.
Mr X Qayiso (ANC) said that Eskom had attracted concerns from rating agencies and had negatively impacted the financial growth of the country. He appreciated the NT’s intervention, but noted the many challenges the entity faced. He asked whether Eskom had taken measures to revamp the administration to realise their mandate. This was because he felt the financing was insufficient to effectively address the issues. He stressed that the conditions and plans presented by Eskom must be in capable hands to avoid ending up in the same circumstances.
He asked how the issue of renewables was tracked, and whether there were measures in place to ensure long-term relief. Concerning remuneration and wages, he asked how this issue was relevant to the concerns of the meeting.
The Chairperson said that Eskom should appreciate the funds provided by government, considering that the country was running at a deficit. Due to its importance, he reminded the entity that many other challenges in the country had been postponed to provide this funding.
Regarding the interventions, he asked what exactly was being promised to South Africans. Relating it to the claims of decreased load-shedding, he asked whether South Africans could be promised that Eskom would not go beyond Stage 4 load-shedding, provided the interventions were successful.
He asked what Eskom thought about the condition on expenditure limited to transmission and distribution. Did this mean Eskom was unable to invest in renewables themselves? If so, he asked why, as it would render the entity dependent on third parties for renewable generation. He asked the Minister what informed this condition.
He acknowledged Eskom’s prior bailouts. He asked what options were available, in light of Eskom’s potentially failing to meet the conditions and requiring further government interventions.
Mr Pravin Gordhan, Minister of Public Enterprises, agreed that Eskom needed a change of mindset to ensure serious concern for the issues raised in the meeting and throughout the country. There must be a palpable impact on loadshedding.
He felt that Eskom should not abuse the situation in any way. The oversight Department and the government as a whole must diligently monitor its performance. Eskom must also ensure maximum transparency regarding its performance.
He said that energy security would not come solely from Eskom. The key challenge was how the integrated energy plan would be practically implemented with the various mixed energy forms that it contained. He urged Members to consider the reliance on the current megawatts available within Eskom and related generation facilities, as well as the renewables invested in by various sections of the private sector.
He explained that renewables would make a difference only during morning and evening peak hours if it was accompanied by battery storage. There had been recent progress, where requests for proposals (RFPs) had been issued in relation to Eskom’s project on battery storage. The critical question was how 4 000 to 6 000 megawatts could be added to the system to provide Eskom with the opportunity to undertake necessary maintenance.
He felt it was important that all of the resources in Eskom and society were broadly mobilised to ensure that the maintenance -- notwithstanding the unreliability factor of the plants -- was being undertaken with diligence and at the magnitude required.
Mr Mpho Makwana, Acting Chairperson, Eskom board, said the entity had adopted the approach of creating an enabling environment to fix it. This ensured the various power stations were maintained, allowing them to operate more predictably. He said that maintenance programmes' short-circuiting had resulted in frequent outages due to tripping units and dysfunctional boiler units.
The board was tasked with fast-tracking the operationalisation of the transmission company board and its executives. Currently, there was a board in the process of finalising interviews for the board of directors that would assume office. The hope was that the process would be concluded by the third quarter and the company would be operational.
The board had approved their overall strategy, called Eskom 2035. Since the beginning of April, executives have begun to implement the strategy. The strategy included Eskom’s generation turnaround plan, with the help of the National Energy Crisis Committee (NECOM), led by the President. There had been extensive consultations through stakeholder engagements with the President, the Minister of Public Enterprises and other Ministers in the NECOM.
Eskom had committed in the turnaround programme to drive improvement in the energy availability factor. This would be done by ameliorating load-shedding by ensuring that from March 2023, Eskom would drive its energy availability factor (EAF) to 60%, 65% by March 2024, and to 70% by March 2025. Once there was a consistent performance of between 65% and 70% EAF, there would be stability in terms of minimising loadshedding.
Eskom was in the process of strengthening management. They hoped there would soon be engagement with Mr Bheki Nxumalo, who had just been appointed the new Group Executive for Generation. He would have more information on what had been done to improve challenges such as boiler trips and other parts which could be locally manufactured within the Eskom Rotek Industries.
Eskom had an upcoming engagement with Minister Gordhan to give a progress report on the search for the Group chief executive officer (CEO). They had a short list and were about to start conducting interviews before making a recommendation to the Minister, in line with their Memorandum of Incorporation (MOI). The soonest a candidate could assume office was dependent on the candidates themselves.
On assurances that things would be done differently, Mr Makwana said that they would make due appreciation for the R254 billion provided. Eskom had a dedicated technical committee on the board to ensure regular oversight and support to management to create stability in the generation division.
Eskom had had its first oversight meeting with the Ministry of Finance. The Ministry had indicated that they wanted to engage with the entity quarterly to ensure that commitments for turnarounds and deliverables were complied with. Mr Makwana believed that the board was agile, active and engaged in ensuring they were fully committed to rendering the requisite support to executives.
He said the microgrids solution was being piloted in the Free State. A comprehensive business plan would be submitted to the board later in April. The microgrid solution proved to be an important mechanism to ensure the opening up of the grid by fast-tracking the transmission company board. This would enable additional megawatts to be added to the grid through increased generation. Following this, entities could directly on-sell onto the grid, which would be in line with the three separate companies.
The microgrid solution had a ratio of almost 1:50 homes, with the ability to insulate the poor from the difficulties of loadshedding. If this was rolled out aggressively, it would greatly assist indigent South Africans.
He said Eskom would provide a comprehensive written response to questions on different actions taken to eradicate corruption, on restoring the integrity of the corporate culture at Eskom, and on how returns on equity would be generated.
Ms Ramano said that a key issue Eskom focused on was assurance. They had the audit and risk committee and an investment and finance committee, both of which formed part of the level of defence, from an assurance point of view to the board, that all conditions in the Debt Relief Bill were adhered to.
She said the conditions were not unusual. Non-compliance with funding conditions would be monitored by committees. The committees met monthly to deal with issues on investment purposes, such as releasing capex for the programmes embarked on by Eskom, and were capable of delivering on their mandates. On the capital allocation framework, the committee must ensure that the capex allocated meets the various criteria on their level of importance. This included safety, compliance and stability of the fleet by ensuring energy availability. The processes were in place for this, and they were in the process of improving internal controls.
Mr Cassim said that the difference with these conditions was that NT also did an independent review of power stations. NT would have a separate report drafted by consultants who assessed power stations on their performance and what still needs to be done to improve the EAF. Eskom felt this was the biggest difference between these conditions and the previous ones.
He believed Eskom was capable of complying with the conditions in terms of debt relief, especially considering the economic impact of failing to do so. This did not stop them from releasing the cash in advance, as it would reflect as a loan in the event that conditions were not met. Eskom appreciated that the Debt Relief Bill afforded them an opportunity to rectify transgressions in the following quarter if conditions were not met.
On the application for exemption, he said that the amount of their disclosures in terms of the Public Finance Management Act (PFMA) had increased over the years. In March 2022, it was sitting at R65 billion. The intention was to report the same level of information in the integrated report, rather than in the annual financial statement (AFS). The reason for this was to avoid the number of waivers required for loan agreements if they still had a PFMA qualification. It also allowed them to work with the shareholder ministry, NT and the AGSA, to resolve issues surrounding the PFMA during the three-year window.
Mr Cassim agreed that municipal debt remained a key risk. In their corporate plan involving assumptions to not borrow, Eskom had not built any improvement into the current account payment rate. If this improved, Eskom would be in a better financial situation going forward. He believed that many conditions had to be met before municipal debt could be written off in their accounts.
On investing in generation, he confirmed that they could not do any new building and may not invest in renewables in terms of the conditions. Eskom hoped to invest in renewables in the future, but this would have to be linked with what the Integrated Resource Plan (IRP) dictated regarding renewables and the allocations that would go to independent power producers (IPPs) and Eskom.
On investing in coal, he said they would always need a base load, and their current fleet would go another 45 to 50 years with the new plants. From a country perspective, he felt that Eskom needed to transition to renewables with fuels such as gas. He believed that pump storage would be a useful technology as they transitioned and decarbonised going forward.
Regarding the impact of self-generation on demand and sales, he said that it would not have an impact in the immediate term, as it took 24 months for these projects to come online. Although there would be a reduction in demand in three to five years, he viewed this as beneficial as it would create room for reserve capacity, and they would still be running cheaper power stations.
On the impact of the state of disaster on load-shedding, he said it allowed them to proceed with the recovery of temporary stacks. It was key to have these units operational by the end of December, providing 2000 megawatts.
The state of disaster ending had not directly impacted load-shedding, which was linked to the unreliability of plants. Eskom must try to keep their unplanned breakdowns to 15000 megawatts or less to see an improvement in the intensity and frequency of load-shedding.
The Debt Relief Bill required Eskom to focus on the networks as well. Increasing transmission capacity in areas where the grid was constrained as soon as possible was important. The inability to allow IPPs to be connected because of transmission constraints was a key challenge that had to be resolved. Eskom must focus on turning around the performance of its generation fleet.
The Debt Relief Bill allowed for capex to be released in advance, which had a great positive impact.
Mr Cassim felt confident in the abilities of the executive, although he acknowledged that it would be a difficult 12 months ahead.
Mr Buys said that previously Eskom’s cash from operations had been insufficient to service Eskom’s debt. This has led to increased borrowing to service debt and roll out capital programmes. Now that debt servicing would come from NT, Eskom’s cash from operations would be freed up to be used for the capital programme.
Through the capital programme, money would be invested into transmission. Eskom would have to strengthen and expand the network, as well as in the distribution environment. Once this was done, money would be allocated to generation for the existing fleet.
These allocations would allow them to repair the necessary outages, do the work required to comply with environmental legislation, and continue conversion of the flue gas desulphurisation FDG plant. This would allow Eskom to do the capital programme.
Eskom predicted that the R35-R40 billion available for capex at the end of the financial year could build up slightly over the five year period. It was hoped that by the end of the five years, there would be R55 billion in capex. This would allow Eskom to address challenges.
Mr Buys said Eskom would use the hedge funding specifically around the debt relief programme itself, to ensure that it was used only for this purpose.
Regarding unbundling in the context of transmissions, he said they had previously internally allocated loans to generation, transmission and distribution. This process would continue with the unbundling. If any debts settled were related to transmission, they would ensure the benefits flowed through the transmission.
He said they would submit their compliance report once they received the loan. If the Minister was satisfied, he would instruct Eskom to issue shares to the government. Through this, government would receive the equity. This would reduce Eskom’s debt while increasing equity. Over time, the balance sheet would strengthen.
Mr Bheki Nxumalo, Group Executive: Generation, said that debt relief had had a positive impact. He reported that the board had provided planning for the next three years on all major upcoming outages. He had established the generation team to focus on planning for the next 36 months. This would allow them to continue to observe the current crisis, as well as future impacts. The generation team and government structures involved had provided great support to ensure that, from a planning point of view, the same mistakes would not be repeated.
On loadshedding, he said there was an immediate issue within the next six months, which concerned sufficient energy for winter. There were three units as down, as well as the Koeberg unit. This had placed Eskom on a bad footing, as there was a decrease of 3 000 megawatts off the grid which would have to be balanced.
Mr Nxumalo said they were continuously working on planning and support stations, such as deploying head office teams to ensure speedy recovery. They were receiving support from the industry, based on their needs, which would be finalised at a meeting later in the week.
In a meeting the following week, Eskom planned to address some of the key equipment suppliers such as turbines, generators and boilers. Some suppliers had already deployed their staff to sites. This presented difficulties, as they started winter with a very low reserve.
He said the focus was on recovering the current generation fleet. Eskom appreciated all the support to minimise the impact of loadshedding over the next six months.
Mr Nxumalo said that Eskom Rotek Industries was responsible for maintaining all the generators and turbines in the generation fleet. The available capex afforded this subsidiary company a timely opportunity to refurbish the spares, especially major components. There was currently a team from the generation committee working with Eskom and Rotek industries to make sure there was a focus on the planning and execution of current outages.
Outages would also be addressed at the meeting with the industry. The duration spent working on units had to be considered. They hoped to reduce the time working on units while still executing things safely.
Units that had not been maintained for over 100 days would be looked into to see if the maintenance could be better planned. Eskom hoped to execute the same scope more broadly to improve the time spent on units.
He felt confident with the support provided by government and the board. They felt prepared to take ownership and execute their mandate. They engaged with all their organised labour the following day to ensure they were fully committed to recovery. They had many capable hands in the generation fleet.
On resources, Mr Nxumalo said that they would outline to the board’s technical committee where the gaps were and how they intended to address them. This included "crowd-sourcing" -- getting people "out there" to support them -- which had a specific general manager appointed who understood operational generation. He said feedback indicated that crowd-sourcing had improved after this appointment.
Mr Monde Bala, Group Executive: Distribution, said that Eskom had embarked on a "microgrid journey." It had been deployed at Swartkop Dam, where 39 homesteads were powered, and another 151 homesteads in the Northern Cape. It had further deployed an additional 16 microgrids. This financial year, Eskom planned to manufacture 100 of these units for deployment. It was finalising conversations with the Department of Mineral Resources and Energy (DMRE) to fulfil the rollout as part of the electrification programme. The goal was to connect areas far from the grid with microgrids. Eskom was in discussions with the Department of Health (DoH) to mitigate against load-shedding, utilising the same technology.
Minister’s closing remarks
Minister Gordhan agreed that Eskom must learn from bailouts and the impact of state capture on state institutions. As the 100% owner of Eskom, the state must take responsibility by finding ways to roll back some of the financial and operational effects that had historically impacted the institution.
The DPE would ensure that the Eskom accounting authority made the necessary efforts to comply with the conditions. In instances of challenges, they would engage with NT on the matter.
On the exemptions, the Minister said that in 2018/19, there had been insufficient clarity from the Accountant General on how to deal with irregular expenditure incurred during the previous five or six years. He said the backlog in irregular expenditure was a technical issue. They hoped to get clarity on the matter in the coming weeks.
Regarding improved financial and operational performance from the government allocation, he said that debt from previous years remained a growing concern. This was a critical auditing issue going forward.
On the operation side, he concurred that losing units and delays in bringing in additional units had contributed to a narrow reserve margin, with a very high unplanned capability loss factor (UCLF), resulting in load-shedding. If these factors could be controlled in the coming months, there would be an immediate improved performance. As a country, one had to find ways, such as using gas, to add megawatts to the energy system to ensure the energy security required.
Minister Gordhan said there was an understanding of the problems at Eskom, and agreed that there must be a balance between using coal and addressing climate change issues. Coal would still be used in the country in 40 years, though concern must be given to reducing emissions.
The limitations on investing in additional generational capacity had been a condition established by NT. Eskom would have to be cognizant of any changes, as the government would have to review this position going forward. He said it was important to acquire a balance between financial stability and producing the required megawatts.
Corruption was still a concern at the power station and corporate levels. There were people in management who needed to be assessed, based on their dubious activities. The Minister and the board would be responsible for engaging with these individuals. Corruption had particularly affected procurement at the power station and corporate levels.
Regarding rating agencies, Eskom was currently at a sub-investment grade. However, the ambition was that over the next few years, it had to become an investible entity. It was in the process of engaging with unions on the issues of wage negotiations.
Minister Gordhan said that the country’s fiscal deficit and the socioeconomic commitments that Eskom had to the population must be considered in light of the measures of support granted. He looked forward to the 18-month to two year plan to be executed. This would have to be synchronised with the crisis committee which was working to improve Eskom's performance, increasing megawatts on the system and other measures that were part of the crisis plan.
The Chairperson asked whether any megawatts would be sourced from the parallelisation of generation, especially in the private sector.
The Minister said that megawatts coming in from renewables were already in place. The challenge was the limitations on solar and wind power sourcing. In the absence of battery storage, solar and wind could not be used during peak periods. He felt that a comprehensive solution would include extending renewables, utilising gas as a step-down from coal, and increased storage capacity for renewables.
Eskom had a pump storage project in mind, which would take a further five to six years. He pointed out that not all megawatts from the renewable system were usable -- only a third or less was utilisable.
Mr Mlenzana read a public comment to the Minister. He said that from the Fourth Parliament, the government had instructed Eskom to keep the lights on at all costs. This had thereby forced them to stop maintenance and defer everything else, in compliance with this instruction. This had been done without a promise of what would happen after the World Cup. Parliament and public representatives had failed to oversee the government and hold the executive accountable for unbecoming decisions.
The Minister responded that 2010 had been when state capture began. The country had made special arrangements to keep the lights on. However, substantial maintenance at Eskom plants had not occurred in subsequent years. They were run at an extraordinarily high level. Eskom was suffering the consequences of this in the current year. The government and Eskom executives were trying to overcome their legacy, meet the country's requirements, and ensure energy security for the future.
Mr Mlenzana referred to the technical comment by the public, and asked whether the timeframes were realistic and whether they could be justified.
The Chairperson said the question was better directed to NT, who had set the timeframes.
Ms Ntlangwini expressed concern regarding the promises Eskom had made in the meeting. She hoped that especially commitments regarding loadshedding were upheld due to their impact on businesses and households.
She commented that the Minister had been in tenure when state capture had happened, and had provided Eskom with a bailout when he was the Minister of Finance. She felt it was outdated to constantly refer to state capture and play the blame game.
The Chairperson asked if Eskom was worried that the developments on solar panels would negatively impact its revenue. In the President’s 2020 economic recovery plan (ERP), he called for transformation and inclusion to address the economic exclusions of the past. He asked how transformative Eskom would be in ensuring that previously disadvantaged people benefited from the entity.
Mr Cassim said that solar would result in some loss of revenue.
Mr Buys responded on Eskom's interaction with neighbouring countries, and said their major contract was with Cahora Bassa to import electricity. Sometimes electricity was imported from neighbouring countries such as Botswana and Zambia, within available means. Eskom was trying to enter into more firm contracts to ensure greater energy procurement.
He confirmed that solar panels would have an impact on revenue. However, this would avoid the costs of running expensive plants, thus improving the bottom line. Over the long term, Eskom expected a reduction in demand due to rooftop panels and other technical solutions.
Mr Makwana said that Eskom would provide a comprehensive report on its procurement programmes and updates on its organisational transformation.
The Chairperson accepted the request to submit a comprehensive response. He said that the issue of transformation and the economic emancipation of previously disadvantaged people was paramount. It must be reported on through an ongoing process.
He wished Eskom’s board and executives well in executing their debt relief plan.
Adoption of minutes
The minutes of 18 and 19 April were adopted.
The meeting was adjourned.
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