May the high court in Pretoria redeem Africa’s electricity powerhouse from being sunk by the wave of apparent greedy profiteering

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It is astounding to say the least, that the African National Congress Government could be found to be autocratically insisting that the world’s 4 largest power utility, Eskom, must summarily sign its own writ of bankruptcy through Power Purchase Agreements (PPAs) with Renewable Energy Independent Power Producers (REIPPs).

 

Any reasonable person would find that the runaway costs of REIPPs, at a whopping R34 billion for the 2018/19 financial year, following NERSA’s recent decision for a electricity tariff increase of 5.23% instead of the 19.9% applied for by Eskom, is the proverbial albatross on the neck surely bound to sink Eskom.

 

It defies all logic that, with Electricity supplied by REIPPs constituting almost 30% in Eskom’s Primary Energy Costs but accounting for a measly 5% in Eskom’s Electricity Sales, REIPPs could be promoted with such fanatical zeal by the Government of the day without due regard to South Africa’s Constitutional conscripts.

 

Ordinary citizens would be outraged to learn that Eskom’s Primary Energy Costs, as per its audited annual financial results and NERSA are at R0.32/kWh, whilst the cost of renewable electricity which Eskom is forced to purchase from REIPPs averaged R2.08/kWh for the financial year ended 31 March 2017.

 

This is prodigious theft and a socioeconomic disaster times bigger than the Arms Deal!!

 

Meanwhile, for ordinary citizens, energy poverty is on the increase due unaffordable electricity costs and the environmental degradation is frighteningly high with countless ill health cases as more & more poorer households resort to burning lower quality bituminous coal for their domestic heating needs.

 

How can a society that lays claims to being free in a democracy tolerate this level of colossal looting by the greedy profiteering privateers???

 

The seemingly undue pressure brought to bear on the Government by the privateers and banking oligopolies must thoroughly be investigated. According to Prof Anton Eberhard et al report of May 2014 titled; ‘South Africa’s Renewable Energy IPP Procurement Program: Success Factors and Lessons’, –

 

“The large South African commercial banks – Standard, Nedbank, ABSA, RMB, and Investec – have dominated REIPPPP lending.

 

Their relative share of commercial and overall debt financing is shown in Figure 4 of the report.

 

Nedbank has been involved in the most projects (23) followed by Standard (17), ABSA (14), RMB/First Rand (11) and Investec (4).

 

These banks have all played lead debt arranging roles, although not for all deals, and in a number of projects, have also participated as co-senior lenders or as providers of subordinated mezzanine debt.

 

Debt tenors are around 15 to17 years (from COD) and spreads over JIBAR are between 310 to 400 points (risk premium 250, liquidity 120, and statuary costs 30 points).

 

Nedbank and ABSA, between them, were involved in the majority of projects in Round 3.

 

Some project sponsors have complained that there has not been enough competition between the banks, and premiums have not fallen as much as would have been expected as banks became more familiar and comfortable with the REIPPPP process.” –

 

NUMSA, TransformRSA and Coal Transporters Forum, together with all patriotic R.E.T forces in our land, are indeed confident that the High Court in Pretoria will, on Tuesday 27 March 2018, find it all together fitting and proper to bring about the timely and necessary demise of the grossly erroneous policy of REIPPs which carry a serious threat of plunging the Republic of South Africa back to the pre-industrialisation age.

 

By Tshepo Kgadima

Tshepo Kgadima – Independent Political & Economic Analyst. Picture Credit: facebook.com