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Sep 19, 2007

Foreign landowners stymie transmission strengthening, says Eskom chief

Eskom CEO Jacob Maroga speaking at the South African Institute of Electrical Engineers about transmission challenges and the need for a price increase (19/9/2007)
© Reuse this The heated debate over the foreign ownership of South African land took a somewhat surprising new turn on Wednesday, with the head of the State power utility suggesting that foreign ownership of large tracts of land is constraining its ability to secure the servitudes necessary to strengthen the transmission network.

Speaking at the South African Institute of Electrical Engineering's inaugural breakfast briefing at Woodmead, north of Johannesburg, Eskom CEO Jacob Maroga indicated that the acquisition of land and servitude rights had emerged as a major challenge.

This issue, together with delays in environmental impact assessment (EIA) approvals, had also emerged as a possible constraint to the delivery of a R150-billion, five-year investment programme aimed at increasing generation capacity and strengthening the transmission and distribution systems.

"Timelines are tight," Maroga warned, pointing out that Eskom was aiming to spent some R15,5-billion on its long-distance transmission lines up until 2012, including the addition of new lines linking into the R78-billion Medupi power station, being constructed near Lephalale, in the Limpopo province.

He indicated that one of the biggest challenges for its transmission business was the securing of servitudes and the timeous delivery of EIA records of decision.

"The issue of foreign land ownership, for some, is a nationalistic thing. For us, it is a big issue, because in some areas, especially in Lephalale, we have to cross new game farms owned by very important people living abroad. They didn't buy it so that they can see ugly transmission lines on their farms. That becomes a problem," Maroga asserted.


The remarks follow a recent acknowledgement by the utility earlier this month that plans for the introduction of an additional 1 050 MW of open-cycle gas-turbine (OCGT) capacity by the winter of 2008 had been thwarted by delays in the finalisation of the EIA.

Envisaged was the addition of five 150-MW units for the 600-MW Ankerlig station, in Atlantis, raising that station's capacity to 1 350 MW by the winter of 2008. And, a smaller expansion plan had also been approved for Mossel Bay, where an additional two 150-MW units were to be added to the 450-MW Gourikwa OCGT facility, raising that plant's capacity to 750 MW by the winter of 2008.

The utility had hoped to have completed the construction and commissioning ahead of an anticipated record demand peak of 38 600 MW, which would be well above the 36 513 MW demand record set on July 5, this year.

But as a result of EIA challenges, Eskom admitted that it would not be able to deliver the new capacity within its budgeted timeframes and that the generation system, which was operating within a tight reserve margin framework of between 8% and 10%, would be vulnerable to increased interruptions next year.

Maroga's statements also follow closely on the release of a report by a panel set up specifically to investigate the appropriate policy response to the increasing tendency for foreigners to buy land in South Africa.

The panel's report is currently out for public comment and includes the following recommendations: the compulsory disclosure of nationality, race and gender; a possible temporary moratorium on the sale of State land to foreigners; a possible prohibition on foreign ownership in certain classified areas; the harmonisation of laws affecting land-use planning and zoning; the establishment of an interdepartmental oversight committee to monitor foreign land-ownership trends; and measures to deal with fronting.

However, Maroga stressed that the servitude acquisition issue was but one of several challenges associated with the group's accelerated capital programme.


He again indicated that the correct pricing of electricity was probably the biggest challenge to the sustainability of its build programme, which could involve the doubling up of Eskom's generation capacity to nearly 80 000 MW by 2025.

He said he was optimistic that its approach to the National Energy Regulator of South Africa (Nersa) to reopen the three-year tariff declaration early to allow for a material increase in the tariff structure was being given a fair hearing.

Earlier, a Nersa report described Eskom's application for changes to prices and the rules governing the that determination as "valid in broad terms".

The utility had proposed that Nersa change its rules to allow a flow through of primary-energy costs; to compensate for the accelerated capital programme; and to facilitate a reopening of the multiyear price determination (MYPD).

The prevailing MYPD allowed for a 5,1% increase for 2005/6, 5,9% for 2006/7, and 6,2% for 2008/9.

Eskom wants an early adjustment of 18% for 2008/9, followed by 17% in 2009/10, having warned that South African electricity consumers could face an even more dramatic 30% step change if the adjustment was disallowed.

Nersa would hold public hearings into Eskom's application on November 22 and make a final determination by December 20.

Edited by: Terence Creamer
Creamer Media Editor
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