Government together with the JSE will host a seminar for funders interested in investing in the strengthening of Eskom’s transmission grid later this month. This was announced by Electricity Minister Kgosientsho Ramokgopa on Sunday, during his weekly update on the implementation of the electricity crisis plan.
Any new Eskom debt must however align with government’s R254 billion debt relief package that came with strict conditions regarding new debt, he said.
Finance Minister Enoch Godongwana announced during his budget speech in March that the government would take over more than half of Eskom’s mountain of debt, provided the utility complies with strict conditions. The money will be spread over three years, with R78 billion provided in 2023/24, R66 billion in 2024/25 and R40 billion in 2025/26.
That is expected to restore Eskom’s balance sheet and set it on a path of sustainability.
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According to Ramokgopa, while the Eskom Debt Relief Act does not allow the utility to take on new debt, it provides for exemption by the minister of finance from any conditions.
An explanatory note published by National Treasury earlier however made it clear that network investment can proceed.
“Eskom has been limited to capital investment for existing generation maintenance and outages and minimum emissions standards, flue-gas desulfurisation and investment in the strengthening, refurbishment, and expansion of the networks. Funding for the completion of Kusile and Medupi and any other capital expenditure required for the maintenance of the existing fleet will be from Eskom’s internally-generated funds,” the note read.
Ramokgopa mentioned several prospective funders, including the New Development Bank and the R8.5 billion green funding that was pledged by the Just Energy Transition Partnership at COP26 late last year. He said after the seminar with the JSE a submission will be made to cabinet.
This may presumably lead to the issuance of debt instruments listed on the JSE.
How Eskom will manage new investment while busy with unbundling that requires consent from existing lenders, is not yet clear.
After unbundling, the network will be managed by the National Transmission Company of South Africa (NTCSA), which will be a subsidiary of Eskom Holdings, which will hold the debt.
The enactment of the Electricity Regulation Amendment Bill, which provides for the new market structure, has however been delayed in parliament and it is doubtful whether the parliamentary process will be finalised before the national and provincial elections next year.
Energy regulator Nersa has approved the operating licence for the NTCSA, and will at the end of September consider the trading and import and export licences that it also needs.
In another development, Eskom recently awarded grid access to an additional 27 projects that jointly represent 3.2 GW of new generation capacity in the Eastern, Western and Northern Cape in accordance with its new grid access rules that were adjusted after an industry uproar in July.
The utility confirmed that eight projects lost their grid access or saw their applications rejected. It is not clear which these eight are.
The industry was shocked when 23 wind failed to achieve preferred bidder status in the sixth bid round of government’s Renewable Independent Power Producer Programme (Reippp) in December last year, because there was no grid capacity left in the Eastern, Northern and Western Cape where the projects were planned.
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This came after President Cyril Ramaphosa scrapped the licensing requirement for independent power producers and those aimed at private offtakers crowded out the projects in the Reippp programme.
Eskom then published “interim” grid access rules to give preference to projects that were shovel ready and prevent “grid hogging” by others that were not ready.
G7 Renewable Energies, the developer of two wind farms near Sutherland in the Karoo, went to court to stop the implementation of the new rules as it feared losing its entitlement to grid access. The company said the award from Eskom was imminent, but a change from the earlier first-come-first-serve approach to shovel-ready, may see it losing out.
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Several industry players confirmed that the new rules from Eskom would require much bigger investment before knowing whether it would have grid access, which would increase the risk and discourage investors.
Eskom has now, after engagement with industry facilitated by the Energy Council and National Energy Crisis Committee, adjusted the rules to the satisfaction of industry and G7 has withdrawn its court application.
Some of the adjustments include:
- Water use licences (WUL)
The requirements to have a WUL in place has been relaxed, with applicants only needing to show they have applied.
- SA Civil Aviation Authority (SACAA) approval
The requirements to have a Civil Aviation Authority approval in place has been relaxed with applicants only needing to show that they have applied.
- Land rights
The original requirement for ownership or leases has been relaxed, by also allowing options to purchase or lease the land required for the generation facility to qualify. In addition, it is not required to have permission in place from the minister of agriculture, forestry and fisheries for subdividing or leasing a portion of agricultural land in terms of the Subdivision of Agricultural Land Act.
- Measurement data
Applicants must now show only one year of on-site measured resource data (previously two), while satellite data is acceptable for solar technologies as an alternative.
If more projects meet all the readiness criteria in a certain region than available grid capacity allows for, Eskom clarified that applications will be awarded based on who applied first.
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