Where did Eskom's R1 trillion go?
Eskom wants consumers to cough up more for electricity‚ but a lobby group has raised questions about how the power utility has spent hundreds of billions in funding.
Eskom is seeking a 20% tariff increase from the National Energy Regulator of South Africa (Nersa).
Nersa starts its public hearings into in the proposed tariff increase in Pretoria on Thursday.
The Organisation Undoing Tax Abuse (Outa) this week revealed to parliament’s public enterprises portfolio committee how the power utility should be relying on its own capital expenditure budget and government for its money and not ordinary South Africans to float it.
Finance Minister Malusi Gigaba earlier this month indicated that government was considering granting Eskom a favourable loan or possible bailout.
Outa energy specialist Ted Blom said they revealed to parliament that Eskom had a qualified audit of R3-billion in irregular expenditure without any supporting documentation.
“Eskom uses the SAP accounting system‚ which requires full supporting documentation and authorisations before processing can take place.
“Explanations are needed as to how the R3-billion was processed without the documentation. Either there is a magic password which allowed this or there is an old cheque book lying around. Either way‚ Eskom’s chief financial officer‚ Anoj Singh‚ must explain.”
Blom described the electricity tariffs the average four-person household was paying as “daylight robbery”.
“There are three cost drivers to the power utility. They include the financing costs of money borrowed‚ their power plants and the operations‚ which involve buying coal and paying salaries.”
He said only Eskom’s operations were subjected to inflation.
Therefore‚ said Blom‚ increases should only be a third of inflation‚ as two thirds of its costs were fixed.
He said on the assumption that Eskom was efficient in 2005‚ and the monthly cost for electricity for an average four-person home was R160‚ the cost now for electricity‚ based on an annual escalation of a third of CPI‚ would be R290 for an average four-person household.
Blom said compounding Eskom’s financial problems was the building of the Medupi and Kusile power stations.
“In Eskom’s 2005 annual report its chairman and director’s statements said the then five-year capital expenditure would be R93-billion.
“In 2008‚ when we saw the first quote for Medupi it was R32-billion. India built a carbon copy plant for R35-billion.”
He said Medupi’s costs escalated to R91-billion by the time the board approved its construction.
“Because of delays it’s now running at a cost of R145-billion‚ Kusile’s costs standing at R160-billion.”
Blom said Eskom recently announced that they need to borrow R325-billion over the next five years to finish off the two stations.
Medupi and Kusile‚ “which divided by two‚ means they will cost R165.2-billion to build‚ plus the current costs of R145-billion and R160-billion.”
He said that equated to each power station costing R300-billion‚ 10 times the original cost of each.
“For that price we could have had another 20 such power stations.”
He said the money Eskom raised between 2005 and 2017 through government equity injections‚ loans from pension funds‚ asset managers‚ international financial institutions‚ and bond markets amounted to over R1.2-trillion.
“With R93-billion spent on capital expenditure‚ they still have access to R1-trillion. We must question why they want an increase and what have they done with the money they raised.”
He said Nersa should‚ and could‚ dramatically reduce the electricity tariff.
Energy analyst Chris Yelland said Eskom’s 2016 reported irregular expenditure of R348-million had risen to R3-billion in 2017.
“These only account for those where there is no supporting documents. This directly affects customers through tariff price increases.”
He said Nersa was the final safety line for South Africans.
Yelland said in theory Nersa could reduce Eskom’s tariff increase to way below what it was asking for.
Nersa spokesman Charles Hlebela would only say that Eskom’s application would be considered in terms of the law.
Eskom spokesman Khulu Phasiwe said they would respond to allegations in parliament and not through the media.
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