R343 billion planned for Eskom's generation projects

Finance Minister Trevor Manuel in his Budget Speech 2008 told Parliament, Wednesday, “Over the next five years Eskom's capital expansion plans will amount to R343 billion, with about 73% earmarked for power generation projects.

“The return-to-service of previously mothballed power-stations, Camden, Grootvlei and Komati, will add a combined 3,677 megawatts (MW) of generating capacity by 2011 and other smaller projects will produce about 2,000MW.”

He explained that in terms of long-term capacity expansion projects, another two major coal-fired plants, Medupi in Lephalale and Bravo near Witbank, will each cost in excess of R80 million and will have a generating capacity of 4,500MW each.

According to the National Treasury, Eskom has 26 power stations in the country with the capacity to generate 37,761MW of electricity. Due to maintenance and technical problems only 35,436MW is normally available with peak hours taking a dedicated 2,325MW daily.

The state power utility's short-term capacity expansion includes the construction of a further two gas-fired power stations in Mossel Bay and Atlantis will add an additional 1,042MW into the grid.

SA electricity cheap?

Footing the bill for Eskom's infrastructure investment projects, Manuel said: “Its capital should again mainly be raised through debt, and paid for by users over the course of time through appropriately structured tariffs.

“Eskom's tariffs were steadily reduced in real terms during the 1980s and the 1990s, so that electricity prices in South Africa are now far lower than in any other comparable country, and well below full economic cost,” the finance minister said.

He explained that Eskom as a result of its low tariff system was, therefore, not in a position to finance its major infrastructure projects, and that they needed to be adjusted upwards.

Manuel therefore also proposed that government provide Eskom with up to R60 billion to support the financing of the company's investment programme, on terms structured to assist them in meeting cash flow requirements.

“The Minister of Finance will provide more information in the Budget speech on the support that the government will provide for the energy efficiency campaign and to Eskom in its build programme,” President Thabo Mbeki said earlier this month, delivering the State of the Nation Address.

South Africa has been hit by load shedding as the energy utility Eskom struggles to balance the demand and supply for electricity.

“We face an emergency but we can overcome the problems in a relatively short period,” said Mr Mbeki to Parliamentarians.

“This situation has precipitated the inevitable realisation that the era of very cheap and abundant electricity has come to an end. However, given our large base of installed generation capacity, for a long time to come ours will remain amongst the few economies with affordable electricity.”

Article published courtesy of BuaNews