Eskom is keen to woo private partnerships

2009-10-10 13:11

POWER utility Eskom is keen to have private players participate in its expansion projects, but tariffs would still need to rise substantially to encourage that investment.

The utility is battling to raise some of the R385 billion it needs to pay for new plants to power the economy and said it would rely on an increase in tariffs, borrowing and government loans for support.

Eskom has been criticised for fuelling inflation fears by raising tariffs by as much as 31.3% this year and 27% last year. The utility has another application pending with the regulator, asking for rises of up to 146%.

“We are in such an urgent need of money we would be delighted with anybody who comes in with a chequebook.

“But I can’t see why someone would come into a business that is selling its product at currently between half and two-thirds of the cost,” Eskom chairman Bobby Godsell said on Friday.

Due to a government policy of underpricing power to attract large-scale industrial investments to the country, South Africa has been cushioned by one of the world’s cheapest tariffs, with a kilowatt hour produced by the utility costing on average 33c.

Godsell said independent power producers had so far proposed to generate electricity at a cost of ­between 75c and 120c, without ­taking the cost of distribution and transmission into account.

“We have the cheapest electricity in the world, but we just happen today to be out of stock,” he said.

Eskom’s new projects will add some 18 000 megwatts (MW) to the country’s capacity of about 40 000 MW.

Godsell said the utility planned to expand capacity by a total of 52 000 MW to meet rising demand, but that may change depending on how growth in demand pans out.

Eskom has been rationing power since early 2008 when the country’s grid nearly collapsed, forcing mines and smelters to shut for days and costing billions of dollars.

Godsell said the country needed to invest in diversifying the energy mix to nuclear and solar and away from coal. Coal-powered stations supply some 90% of the country’s power. – Reuters

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