🔒 How world sees SA: Eskom throws MORE good money after bad – FT

EDINBURGH — Lengthy electricity blackouts have been a big embarrassment to the ruling ANC, says one of the world’s most influential business newspapers. The Financial Times, which has headquarters in London, is watching President Cyril Ramaphosa closely. In particular, its editors are keeping tabs on how he is faring in undoing the graft that took place under Jacob Zuma and how he is dealing with the Eskom problem. The utility giant’s coal plant projects have been flagged up as among the world’s most expensive power projects, with a big question mark over whether it might be better to shelve them rather than throw more good money after bad. Eskom’s performance is a thorny political issue as South Africa heads towards elections next month. – Jackie Cameron

By Thulasizwe Sithole

Eskom’s plans to press ahead with building giant coal stations have captured global media attention – largely because they are outrageously expensive to complete and unlikely to alleviate the country’s debt and electricity problems.

The Financial Times reports on how the struggling state electricity monopoly has said it would press on with finishing twin giant coal stations whose $20bn cost, overruns and design faults have worsened a debt crisis and severe power outages at the utility.

Jabu Mabuza, Eskom’s chairman, is quoted as saying “we will continue to fix design problems” that have plagued the Medupi and Kusile plants, rather than abandon their construction after years of waste and swelling costs that caused the utility’s debts to balloon to more than $30bn.

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The FT, which is influential among global investors, has noted that debilitating blackouts could return ahead of national elections in May.

“The outages were caused by breakdowns affecting a large portion of Eskom’s total generating capacity of more than 45,000MW. The cuts were imposed after multiple breakdowns occurred at decrepit power stations that the utility failed to properly maintain amid massive corruption scandals under Jacob Zuma, the former president.

“Eskom began building Medupi and Kusile as the world’s third and fourth biggest coal plants more than a decade ago to replace much of the country’s ageing capacity and cut the risk of blackouts from failures to meet power demand,” it tells its global audience.

Medupi and Kusile “have become notorious for the doubling of their original budgets to more than R300bn and long delays, ranking them among the world’s most expensive power projects”.

The FT recounts how Eskom is unable to service its debts on its own because of falling revenues, and received a $5bn bailout from the South African Treasury in February.

“A proliferation of flaws has also limited the output of the plants’ completed units, exacerbating recent blackouts and increasing doubts that the plants will ever live up to their planned 9,600MW capacity.”

Adding to the folly of continuing with the plants is that international investors are moving away from financing coal because of emissions-reduction targets.

Yet “there is no turning back now” from finishing Medupi and Kusile, Phakamani Hadebe, Eskom’s chief executive has said.

Eskom, says the FT, estimates that it will cost another R18bn to complete the plants. Bankers have said that Eskom would have to write off billions of dollars from Medupi and Kusile’s value if it were to try to sell them, and would struggle to find buyers given the plants’ problems.

“Blackouts have been avoided in the past fortnight as Eskom replenished diesel reserves for running expensive back-up generation,” it adds.

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