South Africa’s Power Utility Gets the Green Light to Sign off PPA’s With Independent Power Producers

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In a surprise move, South Africa’s beleaguered Minister of Public Enterprise, Miss Lynne Brown, gave the newly elected Eskom Board the go-ahead on Friday 2nd February 2018 to sign Power Purchase Agreements with Independent Power Producers.

The move, initiated by the new Eskom Board under Jabu Mabuza, signals Eskom’s intent on getting the countries Renewable Energy Program back on track. On 11th January 2018, the board submitted an application to Miss Brown which was made under Section 54 of the Public Finances Management Act. The Act allows Eskom to purchase additional energy from renewable sources.

South Africa once had one of the most successful renewable energy auction programs in the world. Under Browns tenor as Minister of Public Enterprise, the countries renewable energy program was halted when she approved the permanent appointment of Mr Brian Molefe as Eskom CEO in September 2015. At the time, Molefe announced that the program was unaffordable and refused to sign off on Power Purchase Agreements. Both have been instrumental in lobbying for Zuma’s 9.6 Gigawatt nuclear build program to go ahead.

Brown’s sudden turnaround on renewables is an indication that she now takes instruction from Luthuli House under the newly elected ANC president, Cyril Ramaphosa. It marks a distinct departure from the direction under Zuma. The news has stirred cautious optimism in the market. The new Eskom Board faces challenges on many fronts and whilst they have been given permission to sign PPA’s, it does not mean that all 27 approved projects will be signed.

The PPA’s drafted in 2015 with Independent Power Producers will need to be updated. The astute new board needs to ensure that signed PPA’s are affordable plus meet the countries socio-economic and environmental challenges.

The initiative will go some way in restoring local and international investor confidence however; the damage wrought by the likes of Zuma, Brown and Molefe has been brutal over the past three years. It will take time before real confidence is restored in both Eskom and the country’s Renewable Energy Independent Power Producer Program.

Author: Bryan Groenendaal


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