Eskom can’t ditch renewables – Treasury

There was no indication “whatsoever” that Eskom might force Treasury to foot the bill for R200 billion in renewable energy investments, said Treasury director-general Lungisa Fuzile.

Eskom has grown increasingly vocal about its opposition to the renewable energy independent power producer procurement programme (REIPPPP).

Recently, the company’s head of generation, Matshela Koko, said Eskom should be relieved of the most expensive among its power purchase contracts with renewable projects – and Treasury should instead pay for them.

This would activate an otherwise “risk-free” R200 billion contingent liability on Treasury’s books. A contingent liability is defined as a potential liability that may occur, depending on the outcome of an uncertain future event.

“I know of nothing whatsoever that suggests they will migrate to being actual liabilities,” Fuzile said at the media briefing this week preceding the mini budget address.

Sitting alongside Finance Minister Pravin Gordhan, Fuzile dismissed fears that Eskom’s stated opposition to the REIPPPP could hurt the budget. Regarding the renewable power projects already built, “there are binding contracts on all parties – on the independent power producers to generate and on Eskom to buy”, said Fuzile.

“If there is a failure [in terms of these contracts], it triggers the guarantee and it becomes an actual liability.”

Deputy Finance Minister Mcebisi Jonas added that Eskom had no choice but to honour its contracts. “Policy is made by government, not by state-owned entities (SEOs).”

Asked about Eskom’s stated nuclear plans, Jonas said: “Whatever happens, it will happen in a way that does not undermine the interests of the country.”

Gordhan answered questions on the risks posed by SEOs by saying: “Nothing must happen in any of these entities that puts an additional burden on the fiscus.”

In the mini budget document are warnings against the risk of overinvestment in electricity, creating expensive idle capacity – and recommendations that the expansion of energy generation be guided by the Integrated Resource Plan.

It also celebrates the REIPPPP as “an example of the kind of partnership needed for national development”.

“Everything is, for now, guided by the 2010 resource plan. We all know that a review and possible revision of that plan is quite advanced. Only then [when the review is done], when targets get reset, will we have a new policy,” said Fuzile, adding: “It is not ideal that we are still operating on the basis of a 2010 resource plan. There have been technology changes, cost changes … The best thing is regular updates.”