Eskom can’t ditch renewables – Treasury

There was no indication “whatsoever” that Eskom might force Treasury to foot the bill for R200 billion in renewable energy investments, said Treasury director-general Lungisa Fuzile.

Eskom has grown increasingly vocal about its opposition to the renewable energy independent power producer procurement programme (REIPPPP).

Recently, the company’s head of generation, Matshela Koko, said Eskom should be relieved of the most expensive among its power purchase contracts with renewable projects – and Treasury should instead pay for them.

This would activate an otherwise “risk-free” R200 billion contingent liability on Treasury’s books. A contingent liability is defined as a potential liability that may occur, depending on the outcome of an uncertain future event.

“I know of nothing whatsoever that suggests they will migrate to being actual liabilities,” Fuzile said at the media briefing this week preceding the mini budget address.

Sitting alongside Finance Minister Pravin Gordhan, Fuzile dismissed fears that Eskom’s stated opposition to the REIPPPP could hurt the budget. Regarding the renewable power projects already built, “there are binding contracts on all parties – on the independent power producers to generate and on Eskom to buy”, said Fuzile.

“If there is a failure [in terms of these contracts], it triggers the guarantee and it becomes an actual liability.”

Deputy Finance Minister Mcebisi Jonas added that Eskom had no choice but to honour its contracts. “Policy is made by government, not by state-owned entities (SEOs).”

Asked about Eskom’s stated nuclear plans, Jonas said: “Whatever happens, it will happen in a way that does not undermine the interests of the country.”

Gordhan answered questions on the risks posed by SEOs by saying: “Nothing must happen in any of these entities that puts an additional burden on the fiscus.”

In the mini budget document are warnings against the risk of overinvestment in electricity, creating expensive idle capacity – and recommendations that the expansion of energy generation be guided by the Integrated Resource Plan.

It also celebrates the REIPPPP as “an example of the kind of partnership needed for national development”.

“Everything is, for now, guided by the 2010 resource plan. We all know that a review and possible revision of that plan is quite advanced. Only then [when the review is done], when targets get reset, will we have a new policy,” said Fuzile, adding: “It is not ideal that we are still operating on the basis of a 2010 resource plan. There have been technology changes, cost changes … The best thing is regular updates.”

Read Fin24's top stories trending on Twitter:

ZAR/USD
16.97
(+0.37)
ZAR/GBP
21.20
(+0.23)
ZAR/EUR
19.16
(-0.00)
ZAR/AUD
11.82
(+0.07)
ZAR/JPY
0.16
(+0.34)
Gold
1775.36
(+0.01)
Silver
18.08
(+0.45)
Platinum
818.00
(+1.22)
Brent Crude
42.85
(0.00)
Palladium
1928.99
(+0.75)
All Share
55065.72
(+1.00)
Top 40
50673.07
(+0.98)
Financial 15
10270.72
(+1.19)
Industrial 25
76898.89
(+0.45)
Resource 10
50952.54
(+1.62)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1622 votes
I am taking a hit, but should be able to recover in the next year
23% - 2129 votes
My finances have been devastated
34% - 3191 votes
It's still too early to know what the full effect will be
25% - 2315 votes
Vote