London - State power firm Eskom believes its expansion plans will redress years of underinvestment, but it says voluntary efficiency savings are key to it getting through the 2010 World Cup without power cuts.
Eskom produces around 95% of South Africa's electricity. But consumption has risen far faster than generating capacity since the demise of apartheid in 1994, and in January power cuts including to the key mining sector dented confidence in the economy.
"Our key target is to make sure we have enough spare capacity in the system for the 2010 World Cup," Eskom chief executive Officer Jacob Maroga told Reuters in an interview in London on Tuesday.
"Part of that is increasing supply but a very important part is also helping boost efficiency to control demand. South Africans will have to learn to save electricity."
The World Cup is seen as a key challenge for South Africa, which has seen investors recently selling off its currency and other assets on worries over the presidential succession as well as inflation and a wide current account deficit.
Maroga said just as important as keeping lights on during the tournament itself was ensuring enough supply for the construction sector ahead of 2010.
Eskom says it aims to get economy savings of 10% from all users, from township dwellers who have only recently been linked to the electricity system to mines and aluminium smelters.
Economies ranged from large-scale mines instituting changes in procedures to distributing lower energy lightbulbs to poorer consumers, he said.
"But we have no way of forcing them," he said.
He said Eskom would again look at buying back power from heavy industrial users such as aluminium smelters run by mining giant BHP Billiton - a plan explored last year but which industry sources said was axed for being too expensive.
Maroga said the key problem was that a decade ago Eskom had a spare capacity of around 27%, easily allowing it to deal with supply disruptions. Now, that is only 6% although the firm would like to increase it to 15%.
"We are well below what we require," he said. "If you look at our expansion plans, it is almost like adding an entire second new business ... but also, we have stabilised since January."
Better government response
Eskom aims to spend about R350bn over the next five years and roughly double its capacity over the next decade and a half, a spending spree that will include a R60bn soft loan facility from South Africa's Treasury.
Expansion could include further nuclear power plants additional to its Koeberg plant in the Western Cape, he said, as well as hydroelectric and more coal powered stations.
"We are seeing much greater response from government," he said. "The initial response from government was that they wanted us to find the money for our own balance sheet."
It will also include tapping international capital markets, including likely issuing a dollar Eurobond this year which Maroga said would likely roughly equal last year's €500m issue.
Through working every part of the generation system as hard as possible - at considerable cost given rising coal and diesel prices - Eskom has avoided a repeat of January's widespread power cuts although it has left itself expecting a R3bn loss in the current year.
For the first quarter of the year, it had instituted rolling power cuts known as "load shedding" but he said it had not had to do so since April despite the onset of South Africa's winter season when power demand is usually highest.
South African consumers were currently paying some of the lowest energy bills in the world, he said, and that must change.
"Clearly, we want tariffs (to) move towards the economic generating cost of electricity," he said.
An original plan from South Africa's energy regulator to increase fuel prices by 1% over inflation had been unsustainable, he said. Over the next three years, on an annual basis, he would like to see a much sharper price increase year-on-year.
That would likely provide further upward pressure on inflation, which food and fuel prices have pushed to its highest level in more than half a decade at 10.9 percent in May.
Maroga said South Africa had ceased selling electricity to troubled northern neighbour Zimbabwe "several months ago," but said there was no political motive in this.
"It is simply a contractual issue," he said. "They had been paying for their electricity in advance. They simply stopped making new orders."