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Johannesburg - The strong performance by the rand over the past few months is of almost no benefit to Eskom.
That’s despite the fact that Eskom will be importing equipment to the value of nearly R90bn over the next seven years as part of the group’s extended building programme.
The company said that its hedging activities in the foreign-exchange market mean that it is difficult to derive any benefit from the strong rand.
Eskom’s capital-building programme over the next seven years will cost the company up to R300bn.
Eskom spokesperson Hillary Joffe said that about 30% of this will be spent on imports.
Joffe said it was standard practice for Eskom to hedge against future exchange-rate fluctuations when new contracts are signed, so as to protect the company especially against sharp falls in the value of the rand.
“In the case of the four biggest building projects that Eskom is involved in at present, Medupi, Kusile, Ingula and their associated power networks, the import percentage is closer to 39% of the total expenditure.”
Medupi and Kusile are two new coal-fired power stations that Eskom is putting up in Limpopo and Mpumalanga respectively. Ingula is a hydroelectric power station in KwaZulu-Natal.
In January, the rand reached its highest level in three and a half years against foreign currencies like the US dollar, even trading briefly at R6.55/dollar, a level last seen in 2007.
In 2010 alone, the rand strengthened by 10% against the US currency. Highs were also recorded against the euro and sterling. This situation is traditionally very good for importers.
Joffe said that unfortunately most of Eskom’s biggest overseas purchases have already been fully contracted at exchange rates that are hedged.
Joffe says that the greater majority of Eskom’s imports are in euros, with a small portion that is exposed to the dollar.
Meanwhile, Eskom says that the heavy rain of the past few days in Mpumalanga and Gauteng has had some impact on its power-supplying capacity.
Joffe said that the rain is making it increasingly difficult to get the required quantities and quality of coal to some of Eskom’s power stations. The weather is also making the handling and combustion of wet coal more difficult at power stations.
“There are four or five power stations which, because of this situation, are not operating as efficiently as they could.”
In 2008, wet coal contributed to the load shedding that paralysed South Africa for nearly three months. However, at that time the problem was aggravated by the fact that the supplies of coal at power stations were very small.
Eskom runs 27 – largely coal-fired – power stations in South Africa, and many of them are situated in the rain-affected Mpumalanga.
This region has had more than 50mm of rain in certain places in the past few days.
The national power network is under even more pressure because Eskom is also involved in intensive maintenance work at some of the power stations, which further limits the provision of electricity.
Eskom will address the media later today about the power situation.
- Sake24
For business news in Afrikaans, go to Sake24.com.
