Mantashe Forging Ahead With Plans for Gas Powered Eskom 2

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  • Internationally repsected news agency, Bloomberg, reports that South Africa is forging ahead with a plan to create a new state-owned power company by converting three coal-fired plants into gas-burning generators to ease the nation’s energy crisis.
  • The proposed new company, dubbed Generation 2, will take over the three plants that are set for decommissioning, according to Energy, Minerals and Resource Minister Gwede Mantashe. Mantashe’s plans which is facing alot of critisism, envisages the new utility taking over the aging Hendrina, Grootvlei and Camden power plants, which have a combined generation capacity of 4,800 megawatts.

South Africa’s energy minister dismissed the notion that renewable electricity can bring an end to years of load shedding, pointing to Europe’s pivot back to the use of fossil fuels as evidence of the constraints of using green energy.

Solar and wind plants could be used to supplement coal, gas and nuclear power generation, but had limitations when it came to meeting South Africa’s needs, such as supplying mines, Mineral Resources and Energy Minister Gwede Mantashe said. Read more

“The excitement of moving from coal to renewables is becoming a myth, many think that renewables are the so-called saviour, and we know that it is not. Germany has learnt that painfully, ” said Mantashe.

“If we re-purpose them into gas power stations, we will save a lot of life in South Africa in terms of energy,” Mantashe said in an interview in his office in Pretoria, adding that it was “urgent” to create the company. The ministry plans to invite engineering firms to study the plants and offer advice, he said.

Since the Independent Power Procurement Office (IPPO) was seconded to the Central Energy Fund in 2017 and then purged in 2019 to fall under the Department of Mineral Resources (DMRE), the ability of the country to procure new generation capacity has declined dramatically.

Mr Gwede Mantashe was appointed Minister of Mineral and Energy Resources in May 2019. That same year Mantashe was credited for promulgated the country’s Integrated Resource Plan (IRP) which seeks to procure 35348MW of a mix of generation technologies by 2030. The following year he gazetted a Sector 34 determination to procure 11813MW of power by 2022.

Since Mantashe’s appointment, three energy procurement programmes have been implemented namely; the Risk Mitigation Independent Power Producer Programme (RMIPPPP) which seeks to procure 2000MW of new generation capacity (launched in September 2020), and the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Bid Window 5 which seeks to procure 2500MW of new generation wind and solar capacity (launched in April 2021). A third procurement programme, REIPPPP Bid Window 6 which seeks to procure 2600MW of solar and wind capacity, was launched in April this year.

In total, 7100MW is to be procured under the three programmes yet to date only 150MW ( 3 x 50MW projects) has reach financial close and is expected to feed electrons into the grid at the end of Q4 2023.

South Africa is in a massive energy crisis. Rotational load shedding is getting worst and the cost to the economy is a massive R950 million a day. According to a report presented by the University of Capetown, 5GW of renewable energy were rolled out prior to 2021, the country would not be experiencing loadshedding. Read more

“This idea is never going to happen,” said Peter Attard Montalto, head of capital markets research at Intellidex. “The plants in question are tied into advanced funding plans with the World Bank and other funders, who would pull out under this new proposed structure. There is no agreement in government on this at all, and a new state-owned entity would not get funding from the National Treasury, nor from the market.”

The idea of setting up a new power utility “proves beyond any doubt that President Cyril Ramaphosa’s government is completely out of touch and clueless on what needs to be done to address the electricity crisis,” said Ghaleb Cachalia, the main opposition Democratic Alliance’s shadow minister for public enterprises.

Almost a third of Eskom’s plants will reach end-of-life as early as 2023. To replace the plants and add capacity needed to meet rising demand will take years and cost more than 1 trillion rand ($71 billion), according to government estimates. The utility is effectively paying debt to service its R396 billion debt. Read more

Mantashe expects money for the new power generation company — labeled Eskom 2.0 by the local media — to come from the state, the market and investors. “Money follows ideas,” he said. “If you come up with a sustainable proposal, and it makes sense, investors will come.”

If the proposal is approved, the government will invite engineering, procurement, construction companies to participate. The cost of converting the plants would be determined at that point, said Maduna Ngubeni, the department’s head of projects.

South Africa’s Minerals and Energy Minister, Hon Gwede Mantashe. Credit: Werner Beukes/SAPA

About Gwede Mantashe

Mantashe and his family are implicated in a string of corruption scandals. Mantashe’s daughter received R1 million in illicit Eskom money. His wife’s business received a R639 million catering contract for the still incomplete Kusile coal power plant project that has been riddled with corruption and cost overruns. His foundation is also embroiled in corruption scandals over millions in irregular payments.

In the country’s Commission of Inquiry into Allegations of State Capture, it was revealed that Mantashe received security upgrades to his three homes from the now defunct company, Bosasa. The commissions chair, Justice Raymond Zondo, said there was no evidence of contracts being awarded due to Mantashe’s direct interference, but there were “reasonable grounds for suspecting that Mr Mantashe accepted or agreed to accept gratification” from a company (Bosasa)  that wanted business from the state and that further investigations had a reasonable prospect of making prima facie findings of corruption against Mantashe. Mantashe of course, denies all charges. Read more

It is also important to recall that during Zuma’s ten year presidency, Mantashe was a key figure in the project to shield him from accountability. As secretary general of the ANC, he instructed members of Parliament to always side with Zuma or face discipline. As such, he was a key enabler of corruption during the Zuma years.

Author: Bryan Groenendaal


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