Eskom CEO says entry of IPPs onto grid to cost R18 billion

Andre de Ruyter, Eskom’s chief executive officer, has said that while he favours letting companies generate their own power there will be significant initial costs if they are to sell their excess generation into the South African grid.

Frustrated by regular power cuts, mining and industrial companies have been pushing the government to allow them to build their own power plants to ensure security of supply. They also want to sell surplus power to other customers.

Eskom, the indebted state power utility that De Ruyter took leadership of this month, will eventually be split into generation, transmission and generation divisions, the government has said.

“There is an amount of about R18bn that needs to be invested in order to accommodate the entry of independent power producers into the grid,” he said in an interview with Business Day TV. “Now somebody needs to pay for that and it can’t be Eskom without recovering that cost in one way or another.”

The entry of private power producers into the industry would give Eskom the ability to carry out more maintenance on its aging plants, he said. They could also replace plants that are due to close.

There is a “need to crowd in private capital particularly into the generation sector where a number of Eskom assets are reaching the end of their lives and they need to be retired,” he said. “Eskom doesn’t have the balance sheet to build additional capacity and we think that its time that we structure the electricity industry in such a way that we encourage private investment, particularly in generation.”

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