Thursday, April 18, 2024

Eskom

Eskom Hld SOC Ltd or Eskom is a South African electricity public utility. It was established in 1923 as the Electricity Supply Commission (ESCOM) and was also known by its Afrikaans name Elektrisiteitsvoorsieningskommissie (EVKOM). Eskom represents South Africa in the Southern African Power Pool. The utility is the largest producer of electricity in Africa, and was among the top utilities in the world in terms of generation capacity and sales. It is the largest of South Africa’s state owned enterprises. Eskom operates a number of notable power stations, including Matimba Power Station and Medupi Power Station in LephalaleKusile Power Station in WitbankKendal Power Station, and Koeberg Nuclear Power Station in the Western Cape Province, the only nuclear power plant in Africa.

Websitewww.eskom.co.za

The company is divided into Generation, Transmission and Distribution divisions, and together Eskom generates approximately 95% of electricity used in South Africa, amounting to ~45% used in Africa, and emits 42% of South Africa’s total greenhouse gas emissions. By releasing 1.6 million tons of sulphur dioxide into the air in 2019, Eskom is also the largest emitter of sulphur dioxide in the power industry in the world. In 2019, it was announced that Eskom was to be split up into three distinct nationally owned entities due to huge debts and poor reliability of supply.

At the 2021 United Nations Climate Change Conference, a deal was announced for developed countries to fund South Africa’s transition from coal power to renewable energy. However, employment in the mining sector threatens this transition.

History

Prior to the establishment of Eskom, the provision of electricity was dominated by municipalities and private companies. The city of Kimberley was one of the first users of public electricity when it installed electric streetlights in 1882 to reduce crime at night.[12]: 5 [13] This was followed by Cape Town in 1895 with the construction of the Graaff Electric Lighting Works to power 775 street lights.

Eskom was founded by the Electricity Act of 1922 which allowed the South African Electricity Control Board to appoint Hendrik Johannes van der Bijl as chairman.[14] The company changed its name by combining the two acronyms in its previous name (ESCOM and EVKOM) in 1987 to become known as Eskom.

The Electricity Act stated that Eskom could only sell electricity at cost and was exempted from tax with the firm initially raising capital through the issuing of debentures, later issuing state-guaranteed loans instead. The coal-fired Congella Power Station in Durban and Salt River Power Station in Cape Town were the first power stations built by Eskom, both complete in mid-1928

One of Eskom’s first power plants was a coal-fired 128 MW station in Witbank, completed in 1935 to provide power to the mining industry. The plant was built and run in partnership with the privately owned Victoria Falls and Transvaal Power Company, which owned a number of other power plants across the country. Thanks to state support, Eskom was able to buy out the Victoria Falls and Transvaal Power Company in 1948 for £14.5 million (roughly equivalent to £2.55 billion in 2017). Following World War 2, South Africa experienced power shortages that led to Eskom negotiating power saving agreements with the mining industry in June 1948.

First expansion period: 1960-1994

From 1960 to 1990 Eskom increased its installed power production capacity from 4,000 MW to 40,000 MW so as to keep up with rapid economic growth in the 1960s and 70s. During the same period, Eskom established a nationwide 400 kV power network. During this period the company built a number of large standardised coal-fired power plants that could produce power at very low cost due to the large economies of scale. These plants were known colloquially as “six-packs” for the 6 large generator units they were designed to accommodate.

In 1974 the company was instructed to start work on Koeberg nuclear power station to both provide power to Cape Town and help facilitate the South African government’s nuclear program.

In 1981 Eskom was involved in one of its first large financial scandals when its Assistant Chief Accountant was caught embezzling R8 million from the company (equivalent to roughly R164.37 million in 2018).

During the 1970s the company controversially sought to increase electrical tariffs to help pay for its large expansion plans. Due to its financial situation, the government appointed Dr. W.J. de Villiers to chair a commission that recommended a number of financial and organisational changes for the company to adopt. This led to the company abandoning its no-profit objective and to raise funds by taking out international loans. The number of Eskom employees was also reduced from 66,000 to 60,000 in the late-1980s.

Restructuring efforts

Eskom’s sales have been declining by about 1% per annum. The less it sells, the higher the tariff it wants, and the less it sells – the utility death spiral.

Rod Crompton, Adjunct professor African Energy Leadership Centre Wits Business School, University of the Witwatersrand

In December 1998, a white paper prepared by the Department of Minerals and Energy recommended that the government restructure Eskom into separate generation and transmission businesses. Although the report predicted that this action would improve power supply and reliability, it was never enacted.

In February 2019, these plans were resurrected during the State of the Nation address. President Ramaphosa announced that the government would be splitting Eskom up into three new state-owned entities focusing on generation, transmission and distribution. This was done so as to better manage the serious operational and financial problems facing the company. By the time of the speech Eskom had a total debt burden of R419 billion (US$30.8 billion) and was entering a death spiral whereby there was not enough revenue to make debt repayments.

In a February 2019 briefing, the Department of Public Enterprises stated that Eskom was “technically insolvent” and would not be able to operate past the next three months if it did not receive additional loans. Finance Minister Tito Mboweni then announced in his 2019 budget speech that government would be providing a R69 billion rand (US$5 billion) bail-out to Eskom over a three-year period so as to stabilise the company’s serious financial situation.

Transmission

The transmission entity would be given its own board, by 31 March 2020 in which the transmission legal entity would be responsible for hearing legislative amendments in accordance to government law. This new transmission entity would involve up to 6,000 people that are responsible of setting up thousands of miles of “wires” and transmission lines that would ensure electricity from the power stations to where power is needed. As part of the Transmission Development Plan (TDP) for 2020–2029 Eskom has plans to increase its transmission infrastructure by approximately 4,800 km of extra high voltage transmission lines, and over 35,000 MVA of transformer capacity over the next 10 years. This new outline of reconstructing Eskom comes from new regulatory guidelines from the National Energy Regulator of South Africa (NERSA) to publish an annual TDP report.

COSATU response

In response to feared job losses resulting from the breakup the trade union COSATU organised a national strike and called for a moratorium on retrenchments in the private and public sectors. This caused to the apparent abandonment of the government’s company breakup and restructuring plan. In July 2019 the outgoing Eskom CEO announced that Eskom had entered a “death spiral” and highlighted the need for the company to restructure. Following the appointment of André de Ruyter as Eskom CEO trade unions National Union of Mineworkers and Solidarity stated that they would fight any government restructuring efforts that might result in job losses.

In December 2019 COSATU suggested that money be used from the Public Investment Corporation (PIC) to reduce Eskom’s debt from around R450 billion to more manageable levels. In return COSTATU proposed a number of conditions that included keeping workers employed. The trade union Solidarity was strongly apposed to the COSATU proposal arguing that it put the pensions of public employees at risk. The country’s second biggest trade union, the Federation of Unions of South Africa, was also skeptical of COSATU’s proposed plan.

Job losses

Between 2020 and 2021, two thousand employees lost their jobs at the power utility. 6000 more jobs are reportedly at risk in order for the company to continue operating

Eskom

By Wikipedia Contributors Container: Wikipedia Publisher: Wikimedia Foundation Year: 2023 URL: https://en.wikipedia.org/wiki/Eskom

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