Eskom plans to use economic downturn to reduce capital costs
Eskom|South Africa|Braam Conradie|Maryland
© Reuse this
Changes in market conditions present a significant opportunity for Eskom to reduce the capital costs of its new build programme, acting MD of the enterprises division Braam Conradie told delegates at the South African National Energy Association (Sanea) Action for Energy conference on Friday.
Eskom was spending R385-billion on its capital expansion projects over a five-year period, with Conradie noting that this formed an integral part of government’s response to the global economic crisis.
The power utility was planning to make good use of the economic downturn, he noted, saying that it was expecting to get better prices from suppliers and that it would also try to renegotiate certain contracts.
Eskom would look for savings everywhere, including its capital expenditure and its operating expenditure, with Conradie noting that “everything is up for debate”. He admitted that there would be some offsetting factors, such as the price of equity.
This meant that there could be some decreases in some costs and some increases in others, but he emphasised that the utility was obligated to look at every opportunity.
Conradie said that Eskom was still experiencing a funding problem and that a number of variables could impact on whether it delays any further projects.
Eskom had already delayed some of its projects, including a wind energy project, the Majuba rail project, the Tubatse pumped-storage project and its Nuclear 1 project, owing to the economic environment.
He explained that Eskom obtained its funding from three sources, namely debt, equity and tariffs. The extent to which it would be able to close its funding gap with the contribution from these three sources would be a key consideration in deciding if any other projects had to be delayed.
Everything was a trade off between what it could afford and what it could not afford, he noted.
The average wholesale price of electricity was 16c/kWh in the previous financial year, while the cost of producing electricity at its new Medupi and Kusile power stations would be at least three times that amount.
The utility would have to fund these higher costs somehow.
Conradie asserted that ultimately all these costs would have to be funded through tariffs, saying that debt and equity would only provide additional time for tariffs to be increased.
Eskom has made an application with the National Energy Regulator of South Africa (Nersa) for an interim tariff increase of 34%.
Public hearings on the matter would be held on Monday and Tuesday.
Edited by: Mariaan Webb
© Reuse this
Canadian clean energy fuel cell specialist Ballard Power Systems on Thursday announced that it had signed a nonbinding memorandum of understanding (MoU) with European bus manufacturer Van Hool, in support of the manufacturing and further deployment of zero-emission...
Following Cabinet approval this week, the Department of Communications (DoC) on Friday published South Africa’s long-awaited broadband plan to close the nation’s broadband gap. The much-revised National Broadband Policy, Strategy and Plan, also known as ‘South...
Consulting engineering firm GIBB on Thursday announced its proposed acquisition of a major interest in architectural firm Stauch Vorster International to create a multidisciplinary firm that would have the ability operate in a range of public, commercial and...
Recent Research Reports
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
Road and Rail 2013: A review of South Africa's road and rail infrastructure (PDF Report)
Creamer Media’s Road and Rail 2013 Report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Liquid Fuels 2013 (PDF Report)
Creamer Media’s 2013 Liquid Fuels report examines South Africa’s liquid fuels market, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing,...
Projects in Progress - Second Edition (PDF Report)
Creamer Media’s second Projects in Progress supplement considers some of the major project developments under way, including high-profile energy and transport projects, as well as a few of the lower-profile public and private developments.
What remains apparent is...
Water 2013: A review of South Africa’s water sector (PDF Report)
Creamer Media’s Water 2013 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Canadian Mining Roundup for June 2013 (PDF Report)
The June 2013 roundup includes details of the development of TSX-V-listed Aldridge Minerals’ flagship Yenipazar polymetallic project, in Turkey; the Canadian Nuclear Safety Commission’s renewal of Cameco’s uranium mining licence pertaining to the Cigar Lake...
This Week's Magazine
MUD, SWEAT AND GEARS Mitsubishi is slowly gaining ground again following the discontinuation of the popular Colt bakkie
Mitsubishi Motors South Africa (MMSA) has introduced a 4x2 derivative of its Pajero Sport sports-utility vehicle (SUV), which will give it access to a substantial slice of the full-size SUV market, where it will compete with the likes of the Ford Everest, Chevrolet...
DIKOBE BEN MARTINS Ensure that South Africa can compete with the rest of the world
South African Energy Minister Ben Martins has affirmed that the government wants the country to be globally competitive in the nuclear sector. "Our responsibility has always been ... to ensure that, in nuclear energy, South Africa can compete with the rest of the...
LAP OF LUXURY The many safety and ride-comfort technology features explain why the S-Class is often used as a chauffeur-driven vehicle
Mercedes-Benz South Africa (MBSA) president and CEO Dr Martin Zimmermann describes the new S-Class as “a special place to be”, with the car creating a sense of “wellness” once you are seated inside the German brand’s flagship model. It is difficult to argue...
Water scarcity and water-quality issues are broadly recognised and understood in most political, business and civil organisations in South Africa, but solving water issues will require wide and continuous action in catchments and municipalities by organisations and...
MAKING PROGRESS The crane and gantry are in position for the pipe-jacking operation
Work is well under way on the R212-million Imvutshane dam, 30 km north-west of Stanger, in KwaZulu-Natal, which is a key link in supplying people in rural Maphumulo with a reliable source of safe drinking water.