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Send  Share  RSS  Twitter  27 Aug 2009

POWER SUPPLY: Cape Concerns About Eskom


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THE shocking losses reported by Eskom  were the result of years of bad management for which South Africa would pay dearly,” said the Cape Chamber of Commerce.

In the five years before the blackouts started Eskom made a profit of R33.5 billion and most of that money went to the government in taxes and dividends instead of being used to improve maintenance, train staff and preserve coal stocks,” said Albert Schuitmaker, Director of the Chamber.

Instead we have a picture of declining reserve margins of electricity while the stocks of coal were run down to the point where the country was plunged into darkness. Eskom produced some great balance sheets, but it is now clear that they concealed more than they revealed.”

Schuitmaker said it was not surprising that rebuilding coal reserves had been expensive. “It had to start buying coal at the height of the commodity boom when it was more profitable for mining companies to export their coal than sell it to Eskom at the kind of prices prescribed in their old long-term contracts. Desperate customers always have to pay more and Eskom was in a desperate situation after the failure of its procurement policy.”

Huge bonuses were paid to a handful of top executives, based on financial results rather than on how well they were caring for the country’s electricity infrastructure .

Schuitmaker said some people were trying to blame the National Energy Regulator for limiting electricity tariff increases in the boom years “but how could NERSA approve bigger price increases when Eskom profits were R9.458bn in 2007, R6.647bn in 2006,  R7.786bn in 2005 (a 15-month financial year), R5.276bn in 2003 and R5.454bn in 2002? In the three years from 1999 to 2001 the profits totalled R6.442bn.”

The Chamber would like to believe that Eskom had learned from the crisis but there was reason to have serious doubts. “The independent power producers are claiming bitterly that they cannot get answers from Eskom on arrangements to buy the power they produce. We need those IPP firms but Eskom’s inability to make decisions will drive them away,” Schuitmaker said.



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