Eskom mid-term results and update on unbundling and security of electricity supply; with Deputy Minister

Meeting report

Chairperson’s opening remarks

The Chairperson welcomed everyone to the joint meeting of the Portfolio Committee on Public Enterprises and Select Committee on Public Enterprises and Communications. The Chairperson of the Select Committee was no longer a Member of Parliament, and so not available to co-chair the session. The Chairperson also welcomed the Deputy Minister to the meeting. He had received an apology from Minister of Public Enterprises, Pravin Gordhan, who was attending a Cabinet meeting.

The meeting would receive a briefing from Eskom on the mid-term results and an update on the unbundling and security of electricity supply.

Deputy Minister’s overview

Mr Phumulo Masualle, Deputy Minister of Public Enterprises, said energy security was a critical element for the economic recovery and reconstruction that was championed by government. However, challenges had been experienced in that regard with respect to the responsibility of Eskom and other stakeholders. The report would present an analysis of the performance of Eskom from generation right up to availability.

There had been continuous engagements with the Department of Mineral Resources and Energy (DMRE) and other government entities. Alternative energy sources were being pursued so that the situation could be augmented enough to be able not to frustrate the efforts towards economic regeneration. The board of Eskom would provide a report on the performance indicated in the interim results, as well as projections on transformation within Eskom.

Eskom interim results and update on unbundling and security of supply

Prof Malegapuru Makgoba, Chairperson of the Eskom Board, said that the company was becoming increasingly stable and the atmosphere at the entity was very different compared to the previous two years. The atmosphere was very peaceful, welcoming and engaging, and people were working very hard to try and bring security. Andre de Ruyter had recently completed two years as chief executive officer (CEO), which was an important record since the period when Brian Dames was CEO. The record reflected the instability that had existed at Eskom, but the CEO had worked hard with his executive team to stabilise the entity and bring a new culture, which was being embraced by all the staff. From the perspective of the Board members, things were positive and all stakeholders were working collectively with the same vision and mission to try and stabilise and secure the electricity and energy supply of the country.

He valued the interactions with the Portfolio Committee, because it provided necessary checks and balances while guiding Eskom to keep to its commitment of serving in the interests of the public and the nation as a whole.  

Mr De Ruyter said that the report covers two areas -- the interim financial results for the year and update on unbundling, and the performance of generation in particular, and electricity security in South Africa.  

He highlighted some key points;

-Generation performance had been disappointing: even though there were fewer gigawatt hours (GWh) and the volume was better, there had been more days of load-shedding. That remained a key focus area where performance did not meet up with the requirements and expectations of South Africa.
-Transmission and distribution continued to perform well and excellent progress had been made on the new build programme of the five operational units at Madupi now consistently performing at the required design levels which were set when the plant was conceived.

-There were improvements from an environmental perspective: emissions per megawatt hour (MWh) produced had consistently reduced, but Kendal remained a problem area.
-Headcount continues to decline from a high of 48 628 in 2018: this was achieved not through forced retrenchment, but through voluntary severance packages, as well as natural attrition.
-Net profit after tax increased to R9.2bn for the first half.
-Sales volumes had increased upon the emergence from the Covid lockdown, which was also aided by a tariff increase.
-Debts were reduced by 15%, and though the balance sheet remained stressed, there was progress recorded in reducing the debts. It was grateful for government support to the tune of R31.7bn, which remained an essential part of the financial sustainability of Eskom going forward.
-Forecast of R9.1bn for the full financial year which ends 31 March 2022.
-There was progress on the legal separation.

(See attached document for further details)

Discussion

Mr S Gumede (ANC) said that the presentation showed positive trends, which was also confirmed in the opening remarks by the Chairman of the Eskom Board. However, though there were seeming improvements, and progress could be seen on paper, in reality there appeared to be a decline. He asked if both situations could be reconciled and results implemented, or if the reports were speculations of expected improvements.

He asked for the CEO’s comment on the various accusations about the activities of thugs, mismanagement of funds, and the assertion that Eskom took advantage of government on the grounds that it would remain funded.

He asked if unplanned maintenance could be programmed, due to the challenges associated with unplanned maintenance or any other activities that were not planned for.

Referring to the projection on the alternative energy sources, when could it be said that due to the presence of independent power producers (IPPs) there would be enough energy to keep the country running?
 
What could have caused the decrease of 3% in residential debt, considering that it was always claimed that the residential users were always in arrears, and there were no indications of other businesses owing Eskom? What was the plan or the strategy towards collecting the arrears that were still owed by communities?

Mr Gumede congratulated Eskom on the ongoing unbundling process. It was evident that deadlines were being met. He asked for a report on the projected total benefit upon completion of the unbundling process.  

The report stated that if the community's electricity use exceeded or came close to 28 000MW, the country would be in danger. What precautions were Eskom taking to ensure that the country did not fall into this pitfall, where demand exceeded the 28 000MW?. There was currently a gap of 4 000MW from the 28 000MW limit. This was very minimal, and there had been an increase in electricity consumption after the lockdown. What measures were in place to ensure that even though the gap of 4 000MW was consumed, the country would not face any disaster?
 
Mr G Cachalia (DA) said the Eskom team needed to be complimented under the circumstances in which they operated, and for making significant progress that had not been witnessed in a long time. However, while the progress recorded was applauded, it was not sufficient. The financial improvement, for example, seemed to be largely dependent on tariff increases, which impacted affordability, and this was not satisfactory. Availability was also impacted by the current challenges and would be impacted further by the growth of the industrial and mining sector. The baseload, as explained on slide 11 of the presentation, accounted for 106GWH of the 118GWh, and the challenge lay with that number. There were a few gaps such as supply, demand and management, which were not addressed in the presentation. Storage management was also not addressed and was a very key area that was being addressed elsewhere.

There was a need for clarity on what could be done regarding the cost and debt implications, and how they would be met internally by Eskom.  Over what periods could the gaps in terms of government securities and bailouts be filled by Eskom and the IPPs, and how could access to the grid be accommodated?

Timelines should be set out for the short, medium and long-term imperatives that address the mentioned issues and the gaps that exist. Part of the gaps include aspects of the energy mix, the key costed imperatives required, and the preferential procurement implications or Public Finance Management Act (PFMA) constraints. The timelines should specify the lines of action and the expected outcomes, the costs, the risks and the current situation. When the timelines were available, then the challenges could be clearly identified and the possible alternatives and the strategy explored to adopt to address them.

Mr M Nhanha (DA, Eastern Cape) observed that based on the opening remarks of the Eskom Chairperson, there had been great improvements since the departure of the former CEO. This proved that race did not necessarily play a part in one's quest to make a contribution to the development of one's country. All South Africans should be treated as South Africans, regardless of race.

It had been widely reported that there was an exodus of qualified engineers and skilled people leaving Eskom. If this was true, to what extent did this hamper Eskom’s mandate to deliver energy for the country. Were there plans in place to address the negative impact that this might have on the energy security of the country?

Malawi was recently hit by heavy floods, and its electricity generation capacity to a large extent had been washed away. Was Eskom working and assisting the neighbours in its recovery? If so, what risk did South Africa face when a helping hand was lent to its neighbours?

Loadshedding posed problems for everyone in the country and several reasons had been adduced for this, such as tripped generators. In an event where human errors were identified at Eskom, did the personnel undergo disciplinary proceedings so as to deter would-be offenders in the future?

Ms C Phiri (ANC) observed that on municipal debt, there had been no report on Maluti-A-Phofung municipality, which was Eskom's largest defaulter. The entity had not agreed to the terms of the proposed partnering agreement and had taken the matter to court. What were the points or items of disagreement, and what reasons had been given for the disagreement?

What was the timeframe or the time duration for the repair of the Koeberg nuclear plant, and what was the cost for repairing the plant at Medupi? The report had stated that the repair of the Medupi Unit 4 would minimise the problem of loadshedding, which was a general concern.

In the State of the Nation Address (SONA), the President had mentioned the issue of transmission and the unbundling process. Could Eskom confirm if they achieved their targets in these areas? Had they completed the legal processes of the transmission, and had they commenced with the electricity trading between divisions as projected?

The report stated that Tutuka, Kendal and Duvha power stations contributed about 46% of the high plant loss, with boiler, turbine, draught plant and generator being the largest component of their loss. The nine-point recovery plan showed that unclaimed loss remained a big challenge. Did Eskom have the capacity to address the cause of plant loss that was responsible for the declining energy availability factor?

The Chairperson welcomed Ms T Mamorobela (ANC), Limpopo) who was replacing the former chairperson of the Select Committee.

Ms T Modise (ANC, North West) asked how much Eskom had recovered from the municipalities to date, and which were still owing it money.

How much electricity on the Eskom grid was produced by independent power producers? Was loadshedding due to technical glitches, inadequate coal supply, scheduled maintenance, or all of the above? If it was due to technical glitches or inadequate coal supply, why was it a recurring problem?

Ms O Maotwe (EFF) said that contrary to the report of the Eskom chairperson, the CEO had been appointed over three years ago, and since his appointment, a disastrous operational performance had been witnessed. There had been 30 days of loadshedding in the financial year 2018/19, which had increased to 46 in 2019/20, and increased again to 47 days in 2021. The financial year 2021/22 was already at 51 days, and the CEO was being paid R5.6m a year. She asked why the CEO was being paid so much money when he was unable to positively address the challenges and add value to the entity.

In respect of the IPP’s bid Window 1 project, Eskom buys solar photovoltaic (PV) at R4.02 per KWh and sells at R1.24 cents. With the 3.3 and 3.5 projects, Eskom buys at R5 per KWh, and sometimes at R6, but sells it at R1.34. There had been a Cabinet decision to support Eskom and the National Energy Regulator of South Africa (NERSA) on the renegotiation of these contracts, and it was almost three years since that agreement -- what was the progress on reducing the exorbitant IPP contracts because they were really taking money from Eskom?

Regarding employees' salaries, in the 2021 financial year, Eskom had been granted a 15.06% tariff increase by NERSA and had consequently made R9.2 billion in profits according to the interim results. Why then did Eskom decide to unilaterally impose a 1.5% salary increase at the bargaining unit, despite the significant revenue increase, and why were the cost containment measures focusing so much on employee benefit costs, and not other cost drivers such as IPPs, coal, diesel, open-cycle gas and turbines?

Ms Mamorobela appreciated the welcome extended to her. She said Eskom was a daily challenge affecting communities, and they needed to urgently understand what the challenges were. Parliament had to provide explanations to the community for failed services and explore all available avenues to address the challenges the community faced in respect of service delivery.

Ms V Malinga (ANC) said Eskom had spent R16.1bn on open cycle gas turbines (OCGTs) to meet the peak demand, and the diesel used to run the OCGTs accounted for 7.4% of total costs. However, OCGTs were responsible for only 1% of the total GWh produced? Was this financially sustainable in the long run, and what were the cost advantages of using OCGTs as opposed to importing electricity from neighbouring countries like the Congo and Zambia, or for peak load management?

She believed that the discussions on Eskom were referring to the fourth unit that was now operational. How was that going to be sustainable, due to the upcoming winter season? Would there be loadshedding in the near future?

Ms J Tshabalala (ANC) said President Ramaphosa had announced in the SONA that government had intentions of revitalising some of the old power plants, but Eskom’s liquidity constraints and procurement challenges had resulted in delays in the release of capital funds and the procurement of long lead items. This had led to the deferral of projects, which had thereby exacerbated operational challenges. How would Eskom address liquidity constraints and procurement challenges in order to re-power some of the old power plants?

Referring to uncollected debts, she said that apart from the municipalities, two large customers owed Eskom amounts in excess of R100 million, with combined debts of R785 million. Who were these customers and what was Eskom doing to enforce payment of the combined debt?

Eskom had a municipal debt management strategy that sought to assist municipalities in a debt crisis situation. Maluti-A-Phofung, which was the utility's largest defaulter, had not agreed to the terms of a proposed partnering agreement. What was the partnering agreement, and what were the reasons it had refused to agree to the proposal?

On the energy availability factor, the report showed that Tutuka, Kendal and Duvha power stations contributed about 46% of the high and plant loss, and that boiler, turbine, draught and generator failures were the largest component of this loss. The nine-point recovery plan for the Majuba power station showed that unplanned losses remained a big challenge to address. Did this mean Eskom did not possess staff capabilities to address the causes of the unplanned losses that were responsible for the declining energy availability factor?

The Medupi and Kusile power stations had failed to achieve the desired levels of performance and reliability due to a combination of plant design, operational and maintenance inefficiencies. This was disappointing, considering that both government and Eskom had invested billions of rands in the building of these power stations. When would Medupi and Kusile stations start contributing value for money?

Despite the successes in 2020, the fact remained that the trend line of the electrification connections had decreased in 2021. Why did the electricity connections not increase rapidly enough to keep up with the demographic growth of 2021, particularly in the rural areas?

What was the progress on the legal separation? The National Transmission Company of South Africa (NTCSA) had been incorporated as a wholly-owned subsidiary. When did Eskom plan to appoint the permanent directors, and would the workers in the NTCSA undergo retraining to manage the renewable energy sector?

The high court judgment had allowed Eskom to increase tariffs by 15.06% for the financial year ending 31 March 2022. Ironically, sales volumes for residential use had decreased by 3% between September 2020 and September 2021. How would Eskom balance the need to secure a sound financial position while protecting consumers within their households' income, avoiding energy injustice and inequitable access to affordable electricity?

The number of employees at Eskom had been reduced from 48 628 in 2018 to 44 325 in 2021 due to natural attrition and voluntary severance packages (VSPs). However, a 2016 World Bank report had indicated that the level of employees at Eskom was 66% higher than the estimated optimal level. What was the optimal level of employees currently at Eskom?

Mr F Essack (DA) introduced himself as a new Member of the Committee. He was excited to be part of the Committee, and he looked forward to participating fruitfully and adding some value. He said that most issues of concern had already been raised, such as the procurement and stockpiling of coal, and other challenges that Eskom would need to have to contend with in the winter months.

Eskom responses

Prof Makgoba said the main purpose of the presentation had been to discuss the separation, or the unbundling, of Eskom, and its finances and operations. Eskom had presented a very honest report and welcomed comments received.

On the legal separation, it was not only Eskom that was supposed to deliver. There were multiple stakeholders with other obligations. Eskom had presented on the part it played as required in the separation process and on its delivery, and even though the operations at Eskom posed difficulties, progress was being recorded.

On the difference between what was on paper and what was on the ground, the presentation had shown that one could predict the finances -- these were recovering and it was easy to measure them. However, the issue of loadshedding was what people felt on the ground, and this was being positively addressed. A progress report would be provided in a couple of months on the status of operations. Things had been done properly in a systemic approach to deal with this issue in the long term.

Timelines and costing were very important in managing any project, and Eskom should prepare them. However, it was controlled and reported to many departments and had to include the necessary stakeholders' input in the planned processes.

Mr De Ruyter had been appointed as CEO of Eskom on 6 January 2020, and not three years ago. His achievements included changing the executive of Eskom, including more black people in the executive than before, and controlling the costs at Eskom. He had taken the issue that was of national interest in the SONA of the President -- the unbundling of Eskom. Staff had been reduced from 48 000 to 42 000, and recently to about 41 000, without forced retrenchments. The finances of Eskom were improving, and the representativity and structure of the entity were changing. All these were evidence of a measurable turnaround.

The exodus of skills at Eskom had taken place during the period of state capture. It had decreased, and the board and Exco were developing a plan to deal with the skills issue, which would also assist in the unbundling process and the replacement of skills at the entity.

Disciplinary measures were imposed all the time, and reports could be provided to that effect. When the third part of the state capture report was released, a document would be produced to indicate the disciplinary processes and the court cases that had been reported either to the South African Police Service (SAPS) or the National Prosecuting Authority (NPA) in order to change the culture at Eskom, which was also part of the turnaround.

The operational performance of Eskom was of concern to everyone, and both the executives and the Board were trying to deal with it. However, though everyone wanted to get rid of loadshedding, there had been a 15-year period of neglect of a plant that could not recover so quickly. Eskom’s approach must be systematic, slow and deliberate.

Mr De Ruyter agreed that in terms of the decline in its available service, Eskom’s operational stability needed to be improved upon. However, the improvement would be done against the backdrop of having to continue to take significant capacity offline to conduct maintenance in order to improve the overall predictability and reliability of the generator fleet. While the programme of so-called reliability maintenance was being carried out, the risk of load-shedding was unfortunately and unavoidably increased due to reduced capacity. Failure to carry out this reliability maintenance would lead to an increase in the risk to unmanageable proportions and the risk of significantly worse loadshedding. There was a need for urgent intervention and reliability maintenance.

There was no intention on the part of Eskom management to take advantage of government. Regular engagements were held with National Treasury, and there was no free flow of money into Eskom’s coffers.  A very constructive and collaborative relationship existed with Treasury, and he was grateful that it was always working with Eskom to find solutions.

The capacity shortfall experienced by Eskom was largely a question of how soon it could add additional generation capacity to the grid. There was a need to expedite new capacity additions, predominantly through procurement which was conducted by the IPP office run under the auspices of the Department of Mineral Resources and Energy. Eskom itself had very limited means of procuring additional energy. One of the key enabling levers to accelerate the addition of new capacity, was to unbundle Eskom, and this had been a key strategic imperative for the board and for management so that it could attract more private sector investment into electricity generation without the fear of unfair competition with Eskom generation. Eskom had recently announced through the Minister of Public Enterprises that land would be made available in Mpumalanga for leasing to investors in generation capacity to connect to the grid. Once more capacity was put on the grid, then the gap of between the 4 000MW to 6 000MW, estimated as holding back the required electricity supply in the country, could be addressed. Grid access remained one of the key constraints to adding to this capacity, and the estimate was that an addition of 8 000 to 10 000 kilometres of new transmission line would be needed over the next ten to 15 years at a cost of about R118bn. This would take considerable time to complete, hence the need for an assessment of available grid capacity in order to allow IPPs to connect to the grid until the new capacity could be added.

The total outstanding debt by top customers was R259m, while the total overdue debt stood at R50.815m. The commercial overdue debt was quite small, the bulk of it related to municipalities. Maluti-A-Phofung, in particular, continued to increase. It was now almost R7bn, and the debt kept rising. On the reason for the failure of the partnering agreement, he said Eskom was very prepared to assist the municipality through an active partnering programme, to conduct audits, to ensure that revenue was collected, to invest in maintenance, upgrade equipment and ensure that municipal distribution in Maluti-A-Phofung was conducted in a solid business-like way. However, Eskom required that the proceeds of payment and the collection of electricity accounts be paid into an Eskom bank account, but the municipality insisted that it wanted control of its bank account. Unfortunately, based on previous payment patterns experienced from that municipality, Eskom regarded this as a deal breaker and was not willing to entrust the revenue received to the municipality while bearing the burden of investing in capital and operating their distribution system.

With regard to tariff increases, Eskom was very aware of the negative impact that above-inflation tariff increases had on the economy, households, business and industries. Unfortunately, due to a number of adverse tariff decisions which had been successfully challenged in court, Eskom was now in a position where it needed to play catch up, as there was a backlog of just under a cumulative R380bn in revenue that needed to be recovered. It was not coincidental that the amount of revenue in arrears that was due to adverse tariff decisions was very close to the total outstanding debt of Eskom. If Eskom had had cost reflective tariffs, it would not be in the untenable debt situation in which it currently found itself. While Eskom empathised, cost reflective tariffs were one of the key levers that it had to consider in order to make it financially sustainable.

The short, medium and long-term imperatives formed a very rich topic to be discussed in a different meeting. There were ongoing strategic deliberations at Eskom relating not only to the addition of new transmission distribution and generation capacity by Eskom but also by private investors. There were also ongoing discussions on how to pivot from very large reliance on an aging and unreliable fleet to a cleaner and greener electricity supply industry as part of the just energy transition. These plans were in place. There were continuous engagements and discussions with the Eskom board on this matter which would inform the strategy and execution. The funds made available at the Conference of the Parties (COP) would hopefully also play a key role in unlocking the implementation of the strategy. Eskom was very keen to engage with the Portfolio Committee in this regard, but time had not allowed it to explore this important issue.

Mr De Ruyter confirmed that skills were leaving Eskom, and they included not only technical skills but also some business and financial skills. Eskom was a very good school to learn skills, so its most talented employees were very sought after, not only locally but internationally. Eskom needed to work on strategies of not only retaining these skills but also ensure that it recruited and trained its staff to the point where it could replenish the skills that could not be lost. He, and Ms Elsie Pule, the Group Human Resources Executive, were engaged in discussions, and he would be at the Eskom Academy of Learning to develop a strategy in conjunction with her to improve on its training efforts, which had been neglected. Though training had not received the necessary attention, it was very much top of mind of the Board, which was putting quite a lot of pressure on the executive to elevate the importance of its people and skills on a continuous basis.

Regarding assistance to Malawi, he said Malawi was not a customer of Eskom. They were not part of the power pool countries in the Southern African Development Community (SADC) region with whom Eskom traded on a regular basis. No request for assistance had been received, and if such a request were made, possibly through the Department of International Relations and Cooperation (DIRCO), Eskom would consider it.

On human error and disciplinary processes, it was Eskom’s belief that human error often was not solely due to individuals making an error, but rather due to broader systemic issues related to inadequate training, inadequate management, and inadequate supervision. Usually, these errors were eliminated not by punishing the employee who had committed the error, but by addressing the broader systemic issues in order to prevent a recurrence, rather than resorting to disciplinary action.

On transmission and the unbundling process, the National Transmission Company South Africa SOC Limited was established as a legal entity on 17 December. The asset agreement was signed, and Eskom was now in a position to commence trading. The proxy for an electricity market was already operational and was already in place, but Eskom was awaiting the transmission licence. Because this was a new legal entity, it had to get a new licence. It could not simply commence operating, so that was the major outstanding item, in addition to the lender consent.

On municipal debts, there was a list of top 20 debtors owing a really significant amount of money totalling R44 to R45 billion. This was a major problem that Eskom was trying to address through the political task team under the leadership of the Deputy President. It was a cause for concern that Eskom had to absolve the cost of supplying electricity to these municipalities. However, it had been interdicted by a court order from cutting off supply to these defaulting municipalities. Therefore, one of the key enforcement levers with industrial customers was not available to it.

The root cause of loadshedding was largely linked to the lack of reliability and predictability of Eskom plants. Inadequate coal supply had by and large been addressed. The average coal inventory was currently at about 47 days, which was well in excess of the minimum requirement as stipulated in the grid code, so coal supply should not be an issue. There had been a recent interruption of coal supply at Majuba which was due to interruptions on the coal line operated by Transnet. Transnet freight rail did not have enough diesel locomotives available, and the electric locomotives had been unable to operate due to a cable theft on the overhead line, and that had prevented Eskom from supplying Majuba with adequate coal.

Mr De Ruyter also confirmed that IPP power procured under bid window 1 and 2, in particular, were significantly more expensive. They were legacy contracts that could not simply be terminated. Significant loans were taken out by investors on the back of Eskom contracts also underwritten by National Treasury guarantees. If Eskom were to renege on those contracts, then National Treasury would have to pay the difference. Eskom could not simply unilaterally amend them. However, at the time when the bid windows were issued, they were regarded as world-leading, Eskom was recognised internationally for putting in place this IPP programme and providing the opportunity for a new industry to arise. The IPP’s costs were regarded by NERSA as a pass-through cost to the final consumer. However, NERSA sometimes did not allow the rest of Eskom’s costs to be entirely cost reflective, and that was where the discrepancy lay.

With regard to employee salary increases, Eskom had experienced successive above inflation wage increases for its bargaining unit. This obviously had a compounding effect. Eskom was also one of the few entities in South Africa that did not retrench or reduce salaries during the lockdown. It had been able to keep all its staff employed during that time, and given the constrained financial environment, where the alternative was to approach the taxpayer for bailouts, implementing an increase of 1.5% was in fact a responsible move by management. This was bearing in mind that management itself had not had an increase for some four years. The matter was currently before the Commission for Conciliation, Mediation and Arbitration (CCMA), and Eskom would abide by the outcome of that process.

On the importation of electricity from the Democratic Republic of Congo (DRC) and Zambia, Eskom was not connected to the DRC. However, with Zambia, when there was surplus hydroelectricity available from time to time from the Kariba hydro-electric scheme, they did make electricity available for sale to Eskom. The import of electricity from Zambia was unpredictable, however, and depended on the needs of Zambia.

At Kusile, Eskom had managed to beat the time for synchronising the unit to the grid by about six months. The unit was currently delivering 740MW to the grid. It was still being tested, and engineers were running through a battery of tests before the unit was declared to be in commercial operation. Once that happened, it could be relied on, and the probability of it being in place by winter of this year was very positive.

On energy transition and possible delays, Eskom needs to fund all of it, and that was why the COP26 money was so important. Caution had to be exercised, however, so that more debts were not incurred. Eskom was presently interacting with Mr Daniel Mminele, who was appointed to head up the climate funding negotiations on behalf of South Africa, and Eskom enjoyed a very cordial and constructive relationship with him and his team. It looked forward to being allocated sufficient funds while bearing in mind that it needed to be financially responsible as well.

Non-municipal customers that owed Eskom included Transnet, which owed R365m, and Electricidade de Moçambique (EDM), which owed R420m.

On the legal separation, Eskom had identified a short list of candidates for the permanent board members. This was being considered by the Eskom board. Once the board was satisfied, it would obtain the concurrence of the Department of Public Enterprises as its shareholder, and should then be in a position to make announcements in that regard. Eskom staff were being retained for renewable energy, and it was in the process of establishing a training facility for this purpose at the Komati power station, which was the first of Eskom’s power stations to be repurposed and repowered. Eskom was collaborating with the National Union of Mineworkers, as well as with the wind and solar energy associations, to ensure that the curricula used were appropriate.

With regard to the World Bank, its report had been discredited for relying on incorrect data and incorrect benchmarks. The optimal headcount was in the region of 38 000 to 39 000, but as Eskom repurposed and repowered, it would also need staff to operate those facilities. Eskom was quickly approaching a level of stability in the area of its overall headcount.

Mr Jan Oberholzer, Chief Operating Officer, Eskom, referred to Koeberg's life extension, and said unit number two, comprising of two units of 930MW each. would be taken off line for purposes of refuelling maintenance after over 454 days of operations. The original steam generators also needed to be replaced with three new steam generators. This was a massive project, and it was the first time in Koeberg’s history of 36 years that such a huge project would take place. There were some challenges, but a contractor from France was partnering with Eskom in this regard. The project was necessary to extend the life of Koeberg by another 20 years. There were plans to take the second unit, unit number one, off line later in the year or next year, and refuel, do normal maintenance and also replace the steam generators. The replacement of the steam generators on both units was important, and a requirement to extend the life of Koeberg by another 20 years.

There were other life extension projects that needed to be done, and these would take place over the next two years upon obtaining licence approval by mid-year 2024. There was progress in this regard, and Eskom was engaging with colleagues to check their progress.

Eskom had also established a very positive relationship with the national nuclear regulator and respected its role of oversight in ensuring that the prescribed regulations were followed. Unit number one was online, and it was producing about 905MWh. It was at full load and was performing extremely well. The specific date for the return would be fully ascertained in a couple of days.

At Medupi 4, the final investigation would be completed by the end of March. There had been preliminary investigations, the strategy had been submitted to the board and been approved, and the return to service date would be only in August/September 2024. It was really a challenge for Eskom not to have 720MW available for the next two and a half years.

There were significant challenges related to the Tutuka, Duvha and Kendal power stations. The challenges included the unavailability of some of the units, and some of the cooling towers were not working. At Tutuka specifically, there were six cooling towers, and only two of them had been fixed. It would take a few years to do the maintenance and refurbishment on the other four cooling towers, and until then the power station would not be reliable. Eskom therefore needed to invest and fix those cooling towers going forward. At Kendal, although the performance had improved over the last number of months, it was still running with unavailability and huge partial load losses because of emission environmental challenges. At Duvha, there were only three units operating out of five units. The board had decided not to invest any money to refurbish unit number 3, so operations were continuing without that unit.

There were also significant challenges at the rest of the power plants which had unfortunately been neglected over a number of years. The three power stations were receiving the necessary attention on a daily basis. The power stations were reviewed every Monday and Friday morning at 5am, to ascertain their performance.

Chairperson’s closing remarks

The Chairperson thanked Eskom board and the executives and said that the Committee was coming closer to achieving its objective. Load-shedding was a major problem, and the sooner it was resolved the better. From the reports received, there had been progress on the part of the executives, under the leadership of the board, in improving the quality and availability of electricity to South Africans, and this also had a lot of consequences for the economy. The questions from Committee Members showed that there were concerns about the sustainability of the reported progress. The Committee would continue to review closely and supervise the work of Eskom.

He added that he had forwarded complaints received to the CEO, and was still expecting responses to those complaints so that proper responses could be given to the citizens that were complaining, particularly because they were not clear on the role of most role players in the energy sector. He affirmed that he would always applaud progress when it was seen, but he would not relent in addressing problems when they arose
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The meeting was adjourned.