State looking to create power generation entity 'outside of Eskom'

Minister of Mineral Resources and Energy Gwede Mantashe told reporters on the sidelines of the Investing in African Mining Indaba in Cape Town that the government hoped to create a new power generation entity distinct from Eskom.

His remarks came after his opening address at the indaba on Monday morning, where he said government would give the green light to mining companies to generate energy for self-use without a license. They would be able to sell electricity if they were successful in getting a licence.

The comes as Eskom announced on Monday that load shedding would continue until at least Thursday morning. The state-run power utility has about R450bn of debt, and is not earning enough from electricity sales at current prices and volumes to pay off the interest on the debt. 

Mantashe told reporters during a briefing after his address that he had invited investors to either partner with the government or invest on their own in the creation of an alternative power generation entity.

"By this time next year we hope we can say we have a site for energy generation outside of Eskom. We want people to sell energy through transmission. We want to take the pressure off of Eskom," said Mantashe.

The venture should ideally be a partnership between the government and private investors, and use a range of technologies, including gas, solar power and clean coal, Mantashe told reporters. The idea of establishing another power producer was based on a model used in the Netherlands, and should increase competition and help drive down energy prices, he said.

Industry should be able “to buy power from other sources,” Mantashe said. “We want to take the pressure out of Eskom.”

The minister did not provide much detail about the scope of new entity. Asked by reporters for more information, Mantashe said the entity would depend, in part, "on the appetite of investors".

Andrew Lane, energy, resources and industrials leader for Deloitte, said in a statement that while the minister was not clear about whether the second generating company would be state or privately owned, the announcement was positive. 

"He did highlight that [the creation of the second company] was to address power constraints within the country, and was part of his vision to get back to a surplus of energy supply for the industry and the country, and address the issue of pricing by adding competition,” said Lane. 

Member of Parliament for the DA, Kevin Mileham, told Fin24 that he was concerned by statements attributed to Mantashe that the government is looking to set up an alternative electricity generation entity.

"This is madness. Instead of making the South African electricity supply sector more competitive, government is seeking to extend its monopoly over electricity generation," said Mileham.

Mileham said the DA was committed to a competitive electricity generation sector to ensure secure, cheap and competitive energy. He said the party already had draft legislation which would facilitate this.

The indaba will continue until Thursday.

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