Fin24 Speaks Live | Eskom CEO André de Ruyter on his first six months at the power utility | Fin24

De Ruyter says Eskom is also looking to reduce procurement costs – primary energy costs.

Power stations are normally built near coal mines, but as the life of the station progresses coal is exported elsewhere over long distances which carries costs. Coal also becomes more expensive to extract. 

The world of international coal exports has also changed – the EU market to which SA used to export to has somewhat disappeared, said De Ruyter. The competitive forces have also changed. 

De Ruyter says the first and most important priority is to stabilise the balance sheet, this means paying down high interest debt.

Debt servicing costs amount to between R28 billion to R29 billion, which negatively impacts Eskom’s profit line.

De Ruyter says that there are now 44 000 people employed at Eskom and the number is reducing.

About 36 000 to 38 000 members of staff would be the right number – this was the case in 2014, before governance at the entity became “a bit weaker”, says De Ruyter.

De Ruyter says Eskom debt is among the biggest challenges it faces.

“Addressing the R450 billion worth of debt is going to require a multi-pronged approach. I do not think there is one silver bullet that is going to fix the Eskom debt challenge.”

This includes ensuring operational stability (when there is load shedding, Eskom cannot sell power to generate revenue), Eskom must resolve its disputes with the National Energy regulator of SA to ensure cost-reflective tariffs, and Eskom must be able to collect the debt owed to it by municipalities. “If we can collect those debts, it will make a difference.”

Treasury’s allocations have also helped Eskom’s balance sheet.

Eskom is also embarking on a cost-cutting strategy – so that it can live within its means. “We are managing our costs very tightly.”

De Ruyter says load shedding is something Eskom wants to avoid.

But some units need to be taken offline for maintenance, if this does not happen it will compromise the system and increase the risk of load shedding, and “severe” load shedding. 

De Ruyter says to catch up on the maintenance backlog, it will take from 1 July to roughly the end of August 2021.

During this period, when carrying out the “reliability maintenance”, the risk of load shedding will still remain. 

De Ruyter says short-term maintenance does not require plants being out of service for extended periods.

Long-term, intensive maintenance is planned to be implemented from 1 July.

On Covid-19, De Ruyter said the pandemic led to a significant drop in demand. 

Eskom then decided to implement short term, corrective maintenance – meant to fix known faults of the system.

Derby asks to what extent illegal connections are to Eskom.

De Ruyter explains that there are a number of factors at play- such as economic hardships brought on by Covid-19 which has led to an increase in illegal connections.

The second factor is that electricity networks have not been planned for increasingly dense populations – such as people renting out rooms in their backyards.

The fact that we have had the coldest winter in 10 years is another factor. 

De Ruyter addresses the power outages in Gauteng:

Load shedding is implemented across the country when there is greater demand for power, than that which the generating assets can provide.

Load reduction is introduced at a local level to safeguard distribution assets – such as green transformer boxes from blowing up as a result of becoming overloaded by illegal connections.

Speaking to Fin24 editor Ron Derby, De Ruyter says the first six-months have been a “huge education” for him.

He was “pleasantly” surprised by the calibre of people working at Eskom, they had been notably demoralised by events at the power utility over the past 10 years.

De Ruyter said he learnt that a lot of “catch up” work had to be done to address the backlog in maintenance.

“The foundations are there, but there is work to do to shore them up and to provide that base on which the SA economy can grow.”

Over the weekend, Eskom reintroduced load shedding in Gauteng, due to network disruptions caused by illegal connections. 

Eskom has said illegal connections and overloading in the high-density areas of Gauteng caused the outages.

André de Ruyter officially took the helm at Eskom in January, and over his first six months he has had to overcome a load shedding challenge at the start of the year,  tackling debt owed by municipalities, as well as lead the utility through an ongoing restructuring process.

Eskom so far has been able to reduce its probability of load shedding in winter from 31 days to just three.

The Covid-19 pandemic has also presented the entity an opportunity to roll out short-term maintenance. Long term maintenance which requires longer shut down periods of plants is expected to resume after lockdown.

Covid-19 has also had the drawback of reducing Eskom’s prospects of raising revenue. The Department of Public Enterprises now expects Eskom to record a loss of R16 billion this year.

Furthermore, the pandemic has also delayed work on a solution for Eskom’s R450 billion debt burden, according to Public Enterprises Minister Pravin Gordhan. De Ruyter however has assured that the power utility will not be in need of any more bailouts this year. 

The restructuring of the utility into three entities – generation, transmission and distribution will be instrumental in helping Eskom deal with its debt, according to De Ruyter.