Date: Feb 26, 2019

The assertion that Eskom incurs losses as a result of its independent power producer (IPP) programme is misleading and false, energy minister Jeff Radebe said on Sunday.

The IPP programme has been criticised by trade unions, the EFF and former Eskom officials who claim that the costs are responsible for the financial crisis at Eskom, which is unable to service its debt of more than R419bn.

Radebe said on Sunday that the renewable energy IPPs were cost-neutral to Eskom as the cost was passed on to the consumer.

“The assertion therefore that Eskom incurs losses as a result of the independent power producer programme is without foundation, misleading and false.  Since 2013, Eskom has not incurred a cent in buying electricity from the independent power producers which they have not been able to recover through the tariff allowance,” the minister said.

He said a peek at the financial statements of Eskom reflects that, after deduction of the cost of electricity bought from the IPPs the earnings before interest, tax, depreciation and amortisation (ebitda) margin was positive. After the first renewable energy projects came on stream in 2013 Eskom presented an ebitda of R26bn, nearly twice the earnings of the previous year, said Radebe.

“This points to one thing: Eskom’s financial problems are mostly related to the cost increases, including the increased interest during construction, associated with the delay of the new-build projects Medupi, Kusile and Ingula.”

Radebe emphasised that the cost of buying from the IPPs is included as an expenditure before the calculation of the ebitda number. This means after all operational costs have been paid, including the electricity from the IPPs, but before the payment of interest.

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