Eskom's financial woes deepen as new plant repair bill mounts

2019-01-28 15:26 - Paul Burkhardt, Bloomberg

South African power utility Eskom is facing a mounting repair bill at two new coal-fired power stations that are still under construction, compounding its already dire financial situation.

While President Cyril Ramaphosa has said a plan to stabilise Eskom will be finished soon, the utility appears to be making little headway in reining in its unsustainable debt and bringing spiraling costs under control.

The new Medupi and Kusile plants are a major contributor - their construction is running years behind schedule and they are expected to cost more than R292 billion, roughly double initial estimates.

Fixing problems that have arisen during construction of the new plants will cost an estimated R2bn, the utility said in an emailed response to questions. That’s up from a R1.5bn bill disclosed by Chief Executive Officer Phakamani Hadebe at a November 16 briefing.

There have been defects in the plant that grinds the coal, the boilers and the control system running the operations, and steps are being taken to get the contractors to pay for as much of the repair work as possible, according to Eskom.

The problems at Medupi and Kusile have contributed to an increase in unplanned and planned plant outages and resulted in emissions limits being exceeded, it said.

“It basically comes down to the contractors” and the fact that they are inadequately supervised, said Mike Rossouw, an independent energy adviser. “The big issue revolves around the availability of the installed fleet,” which should be over 80%, he said.

Eskom said in November that its plant availability is below 74% and isn’t set to improve until after March.