Zola Tsotsi’s mission impossible to save SA from power shortage

2015-04-12 15:00

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Confidential letter shows Eskom’s former chair sponsored three sets of business interests

Eskom chairperson Zola Tsotsi, who recently resigned from the utility’s board, was on a mission of his own to save South Africa from its crippling power shortage.

It turned out to be mission impossible.

His schemes mostly involved promoting potential private power producers while showing little regard for Eskom’s internal processes or interests, according to one Eskom executive.

This allegation seems to be supported by a letter Tsotsi wrote to Energy Minister Tina Joemat-Pettersson asking for permission to “immediately” carry out three plans to add power to the grid.

Tsotsi’s letter, dated February 10, which City Press has a copy of, urges Joemat-Pettersson to expedite three contracts with three specific independent power producers (IPPs).

He asked that the minister authorise Eskom to “engage and conclude all required measures to enable speedy implementation of these projects”.

In all cases, Tsotsi seems to have made up his mind about the suppliers Eskom should use. The plans, however, range from unlikely to impossible.

Eskom told City Press on Friday that letters between the parastatal and the minister were confidential and it could not comment “on the existence nor the contents of the alleged letter”.

However, an Eskom executive, speaking on condition of anonymity, said the letter was just another example of Tsotsi “running amok”.

According to the executive, Tsotsi was constantly overstepping his mandate as nonexecutive chair by promoting one or other plan from an outside business interest.

» The first plan punted to Joemat-Pettersson was to restore the 500MW Ingagane Power Station in Newcastle, which was mothballed two decades ago.

Five years ago, there was a proposal to sell Ingagane to a private company, which would invest $2.5?billion (R30?billion) to get it running.

But by all accounts, that deal fell through. When City Press’ associate paper The Witness visited the station in January, cranes were stripping the plant for spare parts and scrap metal.

Seemingly unaware of this, Tsotsi told Joemat-Pettersson “we believe this project must be advanced”.

According to Tsotsi, a power-purchase agreement needed to be concluded with the preferred bidder from 2010, the Southern Africa Power Consortium.

Asked whether Ingagane might still be returned to service, Eskom told City Press that recommissioning the station was “not an option that is currently being considered”.

»?Tsotsi’s second plan to save the grid involved an ambitious proposal Eskom had apparently received from a company called Phambili Mzantsi to “add up to 1?000MW within the space of a few months”.

Phambili represented co-generators and had a plan to “aggregate the power of co-generators into the electricity grid”, Tsotsi told Joemat-Pettersson.

“Eskom is keen to engage this group pending authorisation from the minister,” he wrote.

According to Tsotsi, this was a “viable supply-side initiative” in the short term.

City Press could not find any trace of the company.

Sisa Njikelana, chairperson of the SA Independent Power Producers’ Association, said he had also never heard of the company. As much as 1?000MW in co-generation also seemed unlikely to materialise in a few months, he told City Press.

While South Africa was estimated to have the potential for far more co-generation, there were many regulatory issues that needed to be ironed out first, he added.

“It could be done by a group of companies. You’d need to be the size of an Eskom, or half an Eskom. You can’t have a little-known company do such a massive thing.”

As things stand, South Africa has about 1?000MW of co-generation power – produced by large companies whose industrial complexes produce heat and gasses that can be used to produce electricity.

Eskom told City Press it had no need for an aggregator of co-generation power.

The utility recently renewed all its contracts for IPP power, including all available co-generation power.

»?Lastly, Tsotsi told the minister a “real and swift” solution would be to order seaborne power stations from the Turkish group Karadeniz.

The letter was written a week after the company’s powerships – giant generators on converter cargo ships – received coverage in the local media.

Eskom used one of the company’s floating power stations in 2006 to make up for the shutdown of the Koeberg Nuclear Power Station that year.

In his letter, Tsotsi is enthusiastic about Karadeniz.

The company pitched Eskom a plan involving one 500MW powership within six months and another 500MW ship every four months thereafter.

“Our assessment of their proposal is it is sound and represents a real and swift option to augment our supply options,” said Tsotsi.

Karadeniz confirmed it had reached out to Eskom with a proposal.

This week, Eskom was less enthusiastic. It acknowledged that Karadeniz had approached it, but said many similar companies were also knocking at the door.

“As there are a number of potential suppliers of powerships, barges, containerised generators and fuel suppliers, it is necessary to ensure a fair and transparent engagement. As the right with regard to the procurement of power rests with the department of energy, they have all been referred to the anticipated gas-fired power procurement programme,” said Eskom.

Unlike the Ingagane and Phambili plans, the powership option seems to be one Eskom takes seriously.

Eskom, along with other state-owned companies such as Transnet, PetroSA and the Central Energy Fund, has been looking into this option.

Eskom has “identified potential port facilities and the transmission requirements for any harbour or containerised options in preparation for any such responses”, the parastatal said.

The Eskom executive said not one of Tsotsi’s proposals was discussed with the executive committee, but he instead sought to bypass the board by taking his proposals directly to Joemat-Pettersson – in contravention of all of Eskom’s tender requirements and commercial processes.

Tsotsi could not be reached for comment.

Municipalities to face big power cuts

Eskom ups the ante

Eskom is escalating Treasury’s crackdown on defaulting municipalities by threatening “a regulated interruption” of power supply to the 20 worst defaulters in the country.

While stopping well short of cutting their supply altogether, Eskom’s plan is to indefinitely subject them to load shedding during peak demand periods between 5pm and 9pm on weekdays. This would happen every day from June 5, according to Eskom’s statement.

The 20 municipalities are largely in Mpumalanga and the Free State, and are responsible for providing more than 500?000 households and businesses with electricity.

Their collective current arrears to Eskom is R3.68?billion, the bulk of the total R4.5?billion owed by municipalities nationwide.

This represents power bills not paid within the stipulated 30 days. Another R4.5?billion is owed, but is no longer current.

Eskom said it would still give the public an opportunity to make written representations about the plan.

The move follows Treasury’s plan to stop its transfer of funds to a larger group of defaulting municipalities who owe Eskom and the country’s water boards billions.

Treasury begged Eskom to refrain from cutting power, City Press reported last week.

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