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Public Enterprises Minister Pravin Gordhan has criticised Eskom's "elongated" restructuring timeframes and has called for greater urgency and drive from the utility in completing the remaining processes required to enable the independent grid company to begin trading.

Eskom has indicated that the National Transmission Company South Africa (NTCSA), the first of three subsidiaries under the yet-to-be-formed Eskom Holdings scheduled to be operationalised, will begin trading from the start of its new financial year on April 1.

The State-owned utility provided the updated timeframe to Engineering News after the Energy Regulator confirmed that it had approved the transfer of the remaining two licences from Eskom to NTCSA, which was regarded as a key milestone for ensuring its full operationalisation.

However, in a presentation to the Select Committee on Public Enterprises, the Department of Public Enterprises (DPE) indicated that government believed there was potential to expedite the process and for the NTCSA to begin trading on November 1 instead.

The restructuring was severely lagging the initial December 2021 deadline set for the legal separation of Eskom's generation, transmission and distribution divisions.

"When we have reviewed the progress in recent times, we have brought to the attention of the board of Eskom that we believe that the timelines of the internal teams of Eskom are far too elongated.

"They seem to lack urgency and the necessary drive to complete as many processes as possible during this administration," Gordhan told the committee during a virtual meeting.

He also stated that government was no longer referring to the restructuring under way at Eskom as "unbundling", owing to the term's association with sale or privatisation processes, stressing that all three subsidiaries would remain State owned.

DPE's Donald Nkadimeng confirmed that a series of actions and approvals were still required before the NTCSA could begin trading, including:

the appointment of an independent board, which was said to be close to approval;

lender consent, which was initially anticipated by the end of August, but currently expected by the end of September;

the transfer of servitudes from Eskom to NTCSA;

the transfer of 2 000 staff members;

a refinement of the Eskom memorandum of incorporation;

The designation of the NTCSA as the buyer of electricity, which required the National Energy Regulator of South Africa's (Nersa's) concurrence with a Department of Mineral Resources and Energy determination in this regard;

The conclusion of Eskom Holdings Generation as well as the independent power producer licences amendment to allow for NTCSA as the buyer of their electricity;

the signing by National Treasury of a Government Support Framework Agreement with the NTCSA; and

the completion of the lodging of the NTCSA with the Companies and Intellectual Property Commission.

Despite the extensive nature of outstanding conditions, Nkadimeng indicated November 1 as being the department's "aspirational" timeline for the NTCSA to begin trading.

He also indicated that the DPE wanted the entire restructuring process to be completed by the end of March, including the operationalisation of the National Electricity Distribution Company of South Africa, which would also require licensing by Nersa, the separation of the Generation Division, and the establishment of a new holdings company, or Newco.

The departmental timelines, Nkadimeng confirmed, were not in line with Eskom's internal timelines, but reflected the DPE's view that the process could be expedited.

"Eskom provided their timelines, and we have since indicated to them that there is a need for them to review their timelines," he said.

Eskom expects the remaining suspensive conditions required for the operationalisation of the National Transmission Company South Africa (NTCSA) to be met by the end of its current financial year and for the entity to commence trading from the start of the new financial year, which begins on April 1.

Commenting on the decision of the National Energy Regulator of South Africa (Nersa) to approve, on September 14, the two additional licence applications required for the independent operation of the NTCSA, Eskom said the approvals marked "a significant milestone in the legal separation process of the Transmission Division".

The Energy Regulator, which is Nersa's highest decision-making body approved a five-year trading licence and an import and export licence, having already approved the transfer from Eskom to the NTCSA of the 25-year transmission licence in July.

The State-owned utility added that the NTCSA's operationalisation was also subject to the satisfaction of suspensive conditions, which include, but are not limited to:

Eskom obtaining all applicable lenders consent;

The appointment of the NTCSA board;

Nersa's concurrence on the Department of Mineral Resources and Energy's buyer assignment of NTCSA and related activities to be concluded by government; and

The fulfilment of outstanding legal requirements, on which Eskom did not elaborate.

"Eskom is projected to finalise all activities by the end of quarter four of the current financial year and commence trading in the new financial year," the utility said in response to an Engineering News enquiry.

NTCSA will be a wholly owned subsidiary of Eskom Holdings and will be the first unbundled entity, with work also under way to separate the generation and distribution division.

In his separate response to the licence approvals, Public Enterprises Minister Pravin Gordhan said the five-year trading licence empowered NTCSA to buy and sell electricity from Eskom power stations, as well as independent power producers.

The approval of the import and export licence, meanwhile, would facilitate electricity trade conducted through the Southern African Power Pool, as well as wheeling on behalf of cross-border utilities.

Gordhan also confirmed that the NTCSA would operate the transmission system and perform the roles of transmission network service provider, system operator, transmission system planner, and Grid Code secretariat.

He did not provide any update on the appointment of the board, however.

The National Energy Regulator of South Africa (Nersa) has approved the two licence applications required for the operationalisation of the National Transmission Company of South Africa (NTCSA), which is in the process of being established as an independent unbundled division of Eskom Holdings.

The approvals of the trading, as well as the import and export licences were made by the Energy Regulator, Nersa's highest decision-making body, at a special meeting held on September 14.

The decisions follow on from the Energy Regulator's approval of a 25-year transmission licence for NTCSA, which was confirmed on July 27.

At the time, the decision to grant only one of the licences required raised concern that the unbundling could be further delayed, given that all three licences had to be transferred from Eskom for the NTCSA to be operationalised.

The licences formed part of three outstanding conditions for operationalisation, with the other two being that of lender consent for the separation of the NTCSA from Eskom and the establishment of an independent board.

Eskom has confirmed that it has been in dialogue with lenders over securing their consent for the unbundling and the allocation of debt to the separate entities of generation, transmission and distribution, while Public Enterprises Minister Pravin Gordhan is said to be in possession of names for possible appointments to the NTCSA board.

Nersa said that NTCSA had been granted a trading licence for a period of five years, as a transitional arrangement ahead of the amendment of the Electricity Regulation Act, as well as price review processes.

Parliament's Portfolio Committee on Mineral Resources and Energy has officially invited public comment on the Electricity Regulation Amendment Bill [B23 - 2023], which includes proposed amendments to the 2006 Act.

One of the amendments relates to the assigning of duties, powers and functions to the Transmission System Operator (TSO) to the NTCSA, as well as a definition of the role of the TSO.

The five-year trading licence empowers NTCSA to buy and sell electricity from Eskom power stations; independent power producers (IPPs) under section 34 determinations including cross-border electricity imports; and IPP generators under the Eskom Holdings programmes, such as short-term power purchases only to Eskom Distribution.

The approval of the import and export licence, meanwhile, will facilitate electricity trade conducted through the Southern African Power Pool (SAPP), as well as wheeling on behalf of cross-border utilities.

"The approval will enable the continuation of import and export activities presently fulfilled by Eskom Holdings.

"Imports and exports are transacted based on power purchase agreements and power sales agreements entered into with cross-border utilities, cross-border generators, as well as via the SAPP competitive markets.

"The transmission network operated by the NTCSA will be used for import and export activities," Nersa stated.

The Energy Regulator also confirmed its approval of Eskom's Standard Offer Power Purchase Agreement and its Emergency Power Procurement Programme Power Purchase Agreement.

Gordhan welcomed the granting of the two additional licences, describing it as a "critical milestone in Eskom's restructuring and in the operationalisation of the NTCSA", but made no reference to the pending appointment of a board.

He confirmed that the NTCSA would operate the transmission system and perform the following roles, including: Transmission Network Service Provider, System Operator, Transmission System Planner; and Grid Code Secretariat.

"The granting of these licences means that the NTCSA is ready to get down to business and bring a much-needed overhaul of our electricity industry," Gordhan said.

Eskom has confirmed that problems in the diesel supply chain last week meant that it did not operate its open-cycle gas turbines (OCGTs) as "hard" as it would have done normally in a context where the utility was resorting to Stage 6 loadshedding.

Head of generation Bheki Nxumalo did not offer any details on the nature of the supply-chain problems during a weekly update on the Energy Action Plan.

He insisted, however, that the problem was temporary and was neither the result of insufficient budget nor a spill over from a dispute that certain bunkering fuel suppliers were currently having with the South African Revenue Service.

"There has been some industry issue with the value chain on the supply of diesel to the country, because all our main suppliers didn't have enough," Nxumalo reported, stating that these suppliers had since indicated that deliveries would resume from September 18.

The lack of delivery had resulted in lower diesel reserves in Eskom's storage tanks and a higher utilisation of the pumped hydro schemes, and had also necessitated the implementation of Stage 6 loadshedding to ensure that adequate system reserves were maintained.

Eskom's daily system reports indicate that no electricity was produced from the OCGTs during the evening peak on either September 14 or 15, when 6 450 MW and 3 885 MW of loadshedding was being implemented respectively.

Earlier in the week, up to 17 Eskom and independent power producer (IPP) OCGT units were deployed in an effort to offset the rise in unplanned coal breakdowns and to reduce the intensity of loadshedding.

"It's not that no OCGTs were run - both Eskom and IPP OCGTs did run last week. Although we didn't run them as hard as we normally do under normal circumstances," Nxumalo revealed.

Electricity Minister Kgosientsho Ramokgopa confirmed an overall poor operational performance for the period from September 11 to 15, indicating that the average available capacity fell to about 26 700 MW, while the average unplanned breakdowns rose to above 16 500 MW.

This, together with planned outages of above 4 800 MW, resulted in Eskom implementing high stages of loadshedding of between Stage 4 and Stage 6 during the week when average peak demand was about 29 000 MW.

OUTLOOK UNCERTAIN

Neither Nxumalo nor Ramokgopa provided an immediate explanation for the current divergence in messaging between those being provided during the weekly briefings and Eskom's own Weekly System Status Report.

Until the most recent return to Stage 6 loadshedding, the weekly briefings have emphasised improvements in unplanned outages, admittedly only when compared with the low base of May, when the average unplanned breakdowns stood at above 17 300 MW. In addition, stress has been placed on how this performance will improve once the three Kusile units were reintroduced using temporary stacks.

Year-on-year figures indicate that the breakdown performance has not improved and that breakdowns during 2023 have remained above the 15 000 MW threshold set for keeping loadshedding to a minimum.

In addition, Eskom's own Weekly System Status Report for Week 36 points to the prospect of unplanned outages remaining at 16 000 MW until September 2024, which suggests that the system will continue to have at least a 2 000 MW shortfall for every week of the coming 52 weeks.

Ramokgopa said greater clarity would be provided when the summer plan was released, with a provisional date of September 26 having been set for its publication.

He then went on to criticise "commentators" for pointing out that unplanned outages are higher in 2023 when compared with 2022.

"Yes, it will be, because if you do a year-on-year [analysis] you would have the benefit of the three units of Kusile. Now they are out and, therefore, it's going to be higher."

For any improvement, the Minister was continuing to place significant store on an earlier-than-planned return of the Kusile units, as well as the synchronisation of Kusile Unit 5.

He said Unit 3 was now...

Despite the loss of the Russian battery export market, as well as the poor performance of wiring harness maker Hesto, Metair still managed to chalk up a healthy increase in profit for the six months ended June 30.

Operating profit for the period was up 124%, to R324-million, compared with the same period last year, while the company also saw a 31% rise in revenue, to R7.6-billion.

The increase in operating profit was owing to stronger South African vehicle production, which created higher demand for Metair's products, as well as higher profitability from battery producer Mutlu, in Türkiye.

Vehicle production in South Africa rose by 11% during the period, to around 293 000 vehicles, with volumes at the group's major customers showing a 21% improvement.

Metair is an international manufacturer, distributor and retailer of energy storage solutions and automotive components.

Incoming CEO Sjoerd Douwenga said this week that Hesto suffered a R711-million operating loss in the six months under review, with the company heavily affected by a sudden facelift to the Ford Ranger implemented by the auto maker in the second quarter.

Douwenga was, however, still pleased with the contract to supply Ford, as Metair went from zero business with the Pretoria-based plant to billions in revenue.

He expected Hesto to return to profitability in the second half of the financial year, owing to improved efficiency and product repricing.

Within Metair's energy storage business, efforts were being made to replace a loss of 1.1-million units in battery exports to the US and Russia.

The European Union earlier this year implemented sanctions on the export of batteries to Russia, driven by this country's invasion of the Ukraine.

Metair owns battery businesses in Romania and Türkiye.

Douwenga noted that the Metair team was hard at work to replace these export losses, while it was also focused on expanding its battery storage and solar system solution businesses.

He added that Metair was ready for the rollout of new-energy vehicles (NEVs), be it hybrids, battery electric vehicles or hydrogen vehicles.

"We expect a significant change in technology to hit us in the next two to three years, leading to 2030."

Douwenga said he had "high confidence" in Metair's ability to adapt along with local vehicle manufacturers, as well as in the fact that the group's companies supplied mostly products that also featured in NEVs, such as wiring harnesses, lighting, plastic products and suspension systems.

He also believed that local vehicle plants were receiving sufficient warning from their parent companies before they migrated to NEVs, which should allow Metair a cushion period to gear up for whatever products these vehicles required.

"It has been a tough six months, but the outlook is really positive," noted Douwenga.

He added that the group would revisit the 15 companies in its structure, in an effort to optimise and de-risk the business.

Engineering News editor Terence Creamer discusses the various grid-related funding proposals and delivery mechanisms being considered by South Africa and what this could mean for adding much-needed electricity supply.

An assessment by two leading European transmission system operators (TSOs) of an Eskom-generated grid analysis shows that the capacity of the existing Western Cape grid to host variable renewable generators could be doubled under a scenario where no more than 10% curtailment is implemented.

Curtailment involves the active reduction of output from wind and solar plants in response to system security needs or temporary transmission capacity constraints and is widely used by system operators to facilitate the introduction of renewable generators in a context of grid constraints.

The assessment of the potential for curtailment to unlock capacity on the Eskom grid ahead of the deployment of new physical assets in line with the State-owned utility's Transmission Development Plan has been undertaken by the Elia Group.

Comprising two leading TSOs in the form of 50Hertz of Germany and Elia of Belgium, and which also offers consultancy and engineering services, the Elia Group validated studies developed internally by Eskom to calculate the economic value of curtailment relative to grid strengthening.

The analysis indicated that curtailment of up to 10% offers more economic value than new investments, primarily where wind technology is the source of the variable renewable electricity. It also shows the solar typically paired better with batteries than curtailment, owing to the fact that, unlike wind, all solar plants are generally producing at the same time.

Presenting its findings to South Africa's Presidential Climate Commission, Elia Grid International's Georgios Papaefthymiou reported that about 4 GW of additional renewables capacity could be connected to the Western Cape grid "almost immediately" and that more than 90% of the electricity that these plants would produce could be safely integrated into the grid.

He also argued that the Eskom system operator, which was dealing with significant daily variability mostly from its unreliable coal fleet but also from utility and rooftop renewables generators, was well equipped to immediately implement a curtailment framework involving congestion management and redispatching.

The assessment comes as South Africa is seeking ways to address the mismatch between the relatively rapid pace at which new renewables generators can be built and the far longer time it takes to add new transmission infrastructure.

The issue came to the fore during South Africa sixth renewables bidding round when none of the wind projects vying for an allocation of 3 200 MW, many of which were proposed for development in the Western Cape, could be selected as preferred bidders based on Eskom's assessment that the grid capacity had been absorbed.

The development immediately sparked debate about the possible benefits of implementing a curtailment framework given the cost of not introducing much-needed generation at a time when South Africa was experiencing extreme levels of loadshedding.

While limited curtailment is already being implemented, Papaefthymiou believes an updated framework will not only enable the immediate deployment of "several gigawatts of renewable energy even in grid constrained areas", but could be implemented soon.

In addition, he argued that the economic case is strong, as every kilowatt-hour produced by new renewable plants will not only reduce loadshedding, but also displace far more expensive electricity, such as that being produced by open-cycle gas turbines.

"Even if the effective cost of the renewables plant rises by roughly 10% due to deemed energy during periods of curtailment, their cost will be something like 5 to 50 times cheaper than the alternative marginal generation source, being diesel, and the cost of unserved energy," he explained.

Papaefthymiou also stressed that curtailment was international best practice in grid planning and operations and had proved to be a highly effective way of ensuring stable grid operation in a context of rising renewable penetration rates.

While the cost...

Cabinet was consulted on the updated Integrated Resource Plan (IRP) for electricity during its meeting on September 13, but the document will be further consulted and revised before it is released for public comment.

Minister in the Presidency Khumbudzo Ntshavheni stressed in her post-Cabinet briefing that the document would undergo various iterations and that consultations with the executive represented only the first part of that iterative process.

"So, it came to Cabinet through the relevant Cabinet committee . for the Ministers to make inputs and as the consultation continues and is concluded it will then be returned back to Cabinet for Cabinet to approve the consultation with the public," she explained.

Ntshavheni denied that the intention had been for the document to be approved for public comment, as consultations with "other sectors" besides Cabinet would have to be undertaken ahead of its public release.

"When that phase is done, they will return back with a revised version, which will then be approved for public comment," she said, without providing any specific timeframes.

In late August, Mineral Resources and Energy Minister Gwede Mantashe revealed that he intended to personally present the "IRP 2023" to a Cabinet committee meeting during the first week of September, which was being held to prepare for the document's possible presentation to Cabinet on September 13.

He indicated his desire that the updated IRP should be finalised during 2023 and also confirmed that he was obliged to take the update through a public consultation phase once he had received approval from Cabinet to do so.

Mantashe did not offer insight into the the draft document's contents, nor its authors.

However, he did confirm that it would be broken into two phases, with the first phase outlining electricity generation allocations to 2030 and the second phase covering the period beyond 2030.

Wilson Bayly Holmes-Ovcon (WBHO) is back, "and we are back on a very strong footing", says CEO Wolfgang Neff.

"We had an exceptional year in a difficult period."

The construction group on Wednesday released its results for the financial year ended June 30.

Neff said he was "very relieved" that Australia was now firmly in the rear view mirror, with the group exiting the market Down Under following a disastrous roads project.

WBHO is now active in the local, rest of Africa and UK markets.

The proof of WBHO's return to health could be found in its order book, which was up 43% for the year ended June 30 compared with the previous year, at R32.6-billion.

"We believe the group is set well for the short to medium term," said Neff.

The order book was boosted by private sector renewable energy projects, projects in the rest of Africa, as well as a surge in roads projects.

The pipeline in terms of projects by independent power producers (IPPs) "is huge; it sits at R45-billion", commented Neff. "In my view there will not be enough contractors to do that work".

The R45-billion refers to projects WBHO have identified as contracts it is likely to bid on, with work to start in the next 24 months, and specifically under the heading 'energy infrastructure'.

The group's total pipeline is valued at R212-billion.

More evidence of WBHO's return to steady footing could be found in the fact that it added 2 750 jobs in the year under review.

WBHO saw revenue for the year increase by 38% to R24-billion, with operating profit before nontrading items at R1.1-billion, up from R859-million.

Around 66% of revenue came from South Africa, 13% from the rest of Africa and 21% from the UK.

In terms of operating profit, 70% flowed from South Africa, 20% from the rest of Africa and 10% from the UK.

Russell-WBHO acted as a drag on UK profit, with WBHO's total UK business showing a 26% decline in operating profit, to R117-million.

All other business units reported a healthy increase in operating profit.

Looking ahead, Neff said the UK market was stabilising after a period of high inflation, while WBHO would continue to diversify into new African territories to support regional growth.

New National Treasury director-general Dr Duncan Pieterse reports that recommendations arising from a joint review by the National Treasury and the Presidency regarding the configuration of government and its programmes could be made ahead of the November 1 Medium-Term Budget Policy Statement (MTBPS).

Pieterse, who took up the position on September 1 having previously been the deputy director-general for asset and liability management, told editors on Tuesday that work on the "reconfiguration of the State" has been ongoing since President Cyril Ramaphosa initially announced the review in his 2018 State of the Nation Address.

While the reconfiguration has been flagged several times thereafter, there have been few visible developments, with new Ministers having been introduced to Cabinet following the most recent reshuffle in March.

"That [reconfiguration] work has continued, and the outcomes of that work will be announced either at the time of the MTBPS, at the latest, or even sooner," Pieterse reported, while refusing to be drawn on the details.

A recent Sunday Times report indicated that the reconfiguration could result in the cutting of several programmes to sustain the R350 a month social relief of distress grant, amid a weakening revenue collection outlook. The report also stated that it could result in the long-awaited reduction in the size of Cabinet, which is widely regarded as bloated.

"What that [review] is really about is about identifying the areas in which the way the State is organised is no longer fit for purpose, and that includes both the structure of the State but also includes the various programmes," Pieterse explained.

A failure to reconfigure the State and cut inefficient programmes, he added, would result in either higher taxes or increased borrowings, or both, with media reports indicating at the National Treasury is already considering an increase in the Value Added Tax rate to address part of the shortfall that is arising because of prolonged low growth and exacerbated by loadshedding and the collapse in freight rail services.

Pieterse confirmed that there had been an underperformance in revenue collection relative to the forecast provided in the February Budget and also revealed that government's borrowing programme had been ramped up since August to compensate.

He is, thus, having to lead a rethink at the National Treasury on what will constitute a credible fiscal framework in the context of lower-than-forecast revenue, increased borrowings and continued low growth.

"We started heading in the direction [of a credible fiscal framework], I would say, over the last two or so years, and then of course this year we've had an underperformance in our revenue collection, which has meant that we have to think very differently now about what a credible fiscal framework looks like."

Besides the traditional tools of adjusting debt, taxes and spending, Pieterse said the National Treasury was also looking at other measures to strengthen the fiscal framework over the medium term.

He did not provide details, but these are likely to focus primarily on growth-enhancing reforms, such as those envisaged for the electricity and freight logistics sectors, which are aimed at facilitating an injection of private investment and skills.

VGBE REPORT ON ESKOM COMPLETE

In the electricity sector, where Eskom is being supported by a R254-billion debt relief package, Pieterse expressed optimism that a VgBE-led review of the utility's coal fleet will make concrete recommendations on how to improve skills, maintenance and procurement outcomes.

The report would be shared with Finance Minister Enoch Godongwana this week and the National Treasury would then decide on how best to communicate the findings within and outside of government and Eskom.

While the scope of the study did not initially include the prospect of prolonging the life of certain coal stations, Pieterse indicated that it would make high-level inputs in this regard.

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