We are not 'dithering' - Eskom hits back at Mantashe over emergency power procurement

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Eskom's response comes after Mantashe said on Thursday that the utility was dithering over the procurement of emergency power.
Eskom's response comes after Mantashe said on Thursday that the utility was dithering over the procurement of emergency power.
  • Eskom CEO André de Ruyter denied Eskom was holding up emergency power projects, saying the utility has not yet seen any final agreements.
  • Eskom would be remiss to enter into any agreements without knowing what the commercial terms are, he said.
  • While the utility has identified a number of projects that could potentially be funded by the R131 billion in green funding announced at COP26, it is now up to an inter-governmental task team to negotiate agreements.

Eskom CEO André de Ruyter has hit back at accusations by Mineral Resources and Energy Minister Gwede Mantashe that the utility was delaying government’s procurement of emergency power, including from powerships.

"It's a bit difficult to sign an agreement when you don't know what that agreement looks like," De Ruyter told the media at a briefing on Friday. "This is not something that we are resisting, but we do have to have all the facts on the table."

The Eskom response comes after Mantashe said on Thursday that Eskom was dithering over the procurement of emergency power, including the three Karpowership projects. "They are toing and froing. They don't want this ... they don't want that. But that capacity has been released to them," Mantashe said in an interview with Newzroom Afrika.

De Ruyter, however, said Eskom was yet to have sight of the final power purchase agreement from the Independent Power Producers (IPP) Office.

"Clearly this is a key element of the commercial arrangements … and we would be remiss in fulfilling our fiduciary duties towards Eskom as a legal entity, if we were to enter into agreements without knowing what the key commercial terms are, that we are signing up for."

He added that the maximum price methodology from the National Energy Regulator of South Africa (Nersa) hasn't been finally addressed between Nersa, the IPP office and the Department of Mineral Resources and Energy (DMRE). There are some issues still to be ironed out on matters like the linking of the tariffs to currency, gas and other prices. 

Bigger challenges

Even so, De Ruyter said the emergency power projects face other, bigger, challenges. The Karpowership projects in particular have been denied environmental permits to operate at three ports. The programme is also subject to a court case brought by DNG Energy, a bidder which claims to have lost out to Karpowership as a result of tender manipulation.

The DMRE has meanwhile extended the deadline for financial close to the end of January 2022, despite Mantashe’s earlier insistence that no extensions would be granted.  

"I don't think that Eskom is - in as far as the emergency power procurement is concerned - the party that is delaying the process," De Ruyter said.

Mantashe on Thursday also highlighted that the DMRE has recently awarded bids for the procurement of 2 600 MW of green power through the fifth bid window of government's renewable energy procurement programme. 

De Ruyter said Eskom was fulfilling all of its internal governance processes in relation to the fifth round of renewable procurement, despite not yet having received final documentation from the IPP office. "We expect to conclude our internal review on this by March of 2022, which is the required date for completion from our side, according to the IPP officer’s programme milestones," he said. 

De Ruyter said Eskom has no interest in delaying new capacity from coming into the grid, but it had to be at reasonable commercial terms.

"I don't have any particular desire to be designated a delinquent director by agreeing to a contract that we haven't seen and where the commercial terms are not fully understood," he said. 

Some R131 billion in potential concessional funding for South Africa’s energy transition, as announced at the recent UN Climate Change conference (COP26), is also expected to bring new power onto the grid. 

Clear green strategy

Eskom, De Ruyter said, has a clear strategy to use such funds to assist in its decarbonisation programme and has identified a have identified a number of projects on the generation, transmission and distribution side, with the expansion and strengthening of the grid being a key initiative. 

De Ruyter stressed that the funding included Eskom, but was not exclusively for the utility.

"It is important to point out that the political announcement that was made at COP26 was an inter-governmental announcement. The process to now negotiate agreements will be led by a technical task team that is going to be driven by a number of officials from various government departments," he said.

"It is being led by a number of ministers who are involved in overseeing this process and giving the necessary guidance and Eskom, of course, looks forward to the conclusion of that process in order for us to start with this very important and urgent programme of being able to accommodate new generation capacity onto the grid."

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