Proposal to sell coal-fired power stations shelved

Tito seems to have bowed to pressure

Finance Minister Tito Mboweni seems to have lost the battle over the future of Eskom’s coal-fired power stations after the National Treasury’s previous proposal to sell them did not make it to the updated policy document.

In a contentious economic policy paper released for public comment in August, the Treasury proposed that the debt-ridden power utility should consider disposing of its coal-fired power stations in an effort that could potentially raise about R450-billion.

The Mboweni-led department said the government could take a decision that Eskom should sell coal-fired power stations, possibly
through a series of auctions.

However, in an updated version released alongside the gloomy medium-term budget policy statement, the National Treasury seems to have backtracked after the ANC’s alliance partners expressed their displeasure at the idea.

It has instead taken aim at Eskom’s current coal-contracting arrangement and at the National Energy Regulator (Nersa).

“Consideration must be given to re-establishing the previous coal-contracting methods, where the bulk of the purchases were through the cost-plus mines, with minimal purchases on the spot market. Further, Nersa should not undermine government support to the entity,” the document reads.

Cost-plus contracts are primarily used to allow the buyer to assume the risk of the success of the contract from the contractor. The buyer promises to pay extra so the contractor can make a profit.

Eskom recorded a record R20.7-billion loss for the 2018/19 financial year largely on the surge in the power utility’s primary energy costs, which include coal, water and liquid fuels, that jumped from R85.3-billion in the previous year to R99.5-billion in the period under
review.

The Treasury paper said the integrated resources plan released by the Department of Energy and Mineral Resources last month includes new coal investments “although fossil-fuel investments are unlikely to attract funding in the near future and undermine commitments to
reduce carbon emissions”.

The department did not answer questions on whether the sale of Eskom’s aging coal stations has been cancelled or still under consideration.

Energy expert Ted Blom said it didn’t make sense in the first place to try to sell the coal power stations as they wouldn’t have attracted investors.


By Kabelo Khumalo

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