- Independent energy expert Ted Blom says Eskom will never get R450 billion by selling its coal stations to independent power producers, as a new Treasury proposal suggests.
- Eskom needs to find ways of escaping its R440 billion debt pile.
- What Eskom really needs to do is cut down on staff for a start, Blom says.
The National Treasury may hope Eskom can raise R450 billion by selling off its existing coal-fired power stations, but that’s just not realistic, independent energy expert Ted Blom says.
“R450 billion is a bullshit number,” Blom says.
A discussion statement released by the National Treasury this week used that number as one of the ways Eskom could escape its crippling R440 billion debt, if it sells its coal stations to independent power producers (IPPs) that would then take over their running, and sell electricity back to Eskom.
For R450 billion, Blom says, you could pretty much replace Eskom’s existing fleet of power stations with a brand new one. Placing that kind of value on stations that are in several cases old and decrepit amounts to grossly inflating their value.
“The paper makes a whole lot of assumptions. To value an old, stuffed-up fleet, which is only half working, at R450 billion is preposterous. It’s not even worth half of that,” said Blom.
At best new owners may be willing to pay R1, he believes, plus take on the liabilities associated with the stations, including existing employment and supplier contracts.
All the R450 billion number does is mislead South Africa into thinking its coal plants are attractive assets to investors like the Public Investment Corporation, he argues.
“Even if you look at Eskom’s average profitability over the years that it made profit, it would take 100 years to return that money to the pensioners.”
Despite his deep reservations about the price the power stations could fetch, Blom described the Treasury paper, “Economic transformation, inclusive growth, and competitiveness: towards an economic strategy for South Africa“, as a breath of fresh air for the energy space.
“It seems to me they have quite an open mind as to what the alternatives are [for Eskom], including mentioning households selling power to the grid as well as recognising municipal revenue dilemmas,” says Blom.
Instead of trying to sell off power stations for more than they are worth, here’s how Blom would like to see Eskom cut its cost.
- Cut off corrupt shot-term coal purchase agreements, which he says costs R40 billion a year.
- Shed the 35,000 extra staff at Eskom – and save R31 billion a year.
- Allow competitive bidding across all forms of power generation – without giving renewable sources preference, and reduce costs by R50 billion a year.
- Clamp down on spending at Medupi and Kusile, which have now cost R297 billion more than they should have, and counting.