Eskom blows its annual budget on diesel in six months, as it spends R7.7bn to keep lights on

ESKOM’S financial troubles will worsen this year as the struggling power utility has burnt more than R7 billion worth of diesel, more than half of its annual budget, to keep the lights on in just six months.

This is an admission made by Eskom chief operations officer Jan Oberholzer on Monday as he warned that the utility had overspent on its open-cycle gas turbines (OCGT).

Oberholzer said they were not proud of the overspending, nor did they have the money to continue financing it.

He said Eskom was looking at the outlook for the remainder of the year, and over the weekend he had an engagement with the chief financial officer, Calib Cassim, about these fiscal concerns.

“We are finalising what the year end forecast will be, but we are way over what we estimated the expenditure will be. So we have spent R7.7 billion for the first six months. That was a whole year’s budget,” he said.

“So we have got R350 million left of the original year’s budget and we are only midway through the year. It is a serious concern, so we are going to overspend.

“And it’s really a tough place where we find ourselves. You don’t have money and you need to utilise your emergencies because you do not have the capacity to supply the demand of the country.”

Eskom’s deteriorating finances come as the power utility is trying to respond to an intensified period of power cuts as rotational load shedding up to stage 4 has been implemented in the past week.

Oberholzer described it as a “disastrous week” after 42 units tripped, which took away around 24,000MW of generation capacity.

Eskom has lost 5,431MW – just under 11% of capacity – to planned maintenance, while another 15,760MW of capacity is unavailable due to breakdowns.

Oberholzer said there had been a number of comments around why the country continued experiencing load shedding in spite of President Cyril Ramaphosa’s emergency energy plan.

In July, Ramaphosa announced the removal of the licensing threshold on embedded private generation, doubling of energy bid window 6 to 5 200MW, incentivising rooftop solar and grid connections, and a renewed push to improve Eskom plant reliability, among other interventions.

"This is going to take time to implement,” Oberholzer said. “For the next 12 months we may not see the benefits yet. Until then we need to rely on the coal fleet.”

Eskom’s severe power cuts have already seen sectors on the production side such as manufacturing, agriculture, mining and domestic trade performing poorly, costing the economy billions of rand in lost activity.

South Africa’s real GDP contracted by 0.7% quarter-on-quarter in the second quarter, from downwardly revised 1.7% growth in the first.

Investec chief economist Annabel Bishop said the underperforming power stations causing unplanned outages would cost the economy dearly and weaken the rand further.

“For South Africa, frequent load shedding this year adds to risks of a weaker growth outlook, as does slowing global growth. The current load shedding is due to some unplanned outages as well as scheduled maintenance,” Bishop said.

“These factors all add a weak underpin to the rand and the domestic currency is not expected to return to R15/USD in the remainder of this year.”

The rand firmed at R17.09 against the US dollar yesterday, the highest level in two weeks, amid a weakening greenback and a slight improvement in risk sentiment.

BUSINESS REPORT