Afrique du Sud : January 13, 2010

South Africa’s electricity price increases, driven by escalated demand for power, are heavily influenced by Eskom’s electricity generation expansion projects.
Two new coal-fired power stations are being erected with one pump storage facility also under construction.  Together these essential projects cost billions of Rands and in cost, constitute about nine times the size of the Gautrain project - an alternative public transport system begin developed in the Gauteng area.

Although largely funded by the Government and in-house, Eskom cannot bear the burden of its multi-billion rand capital expenditure program and is actively seeking private investment for any shortfall in funding.  It is not the first time private investors have been sought.  In 2003, the government decided that future power generation capacity would be divided between Eskom (70%) and independent power producers (30%).  However, with several years down the road, there is little to show for this government decree.

With Eskom’s plan to elevate pricing from 33c/kWh to just over 1R/kWh by 2011, private investors may start to find the South African market more to their liking.  At this stage, the Kusile project has been delayed by more than a year leading to Eskom’s latest tariff increase being scaled back from 45 percent to 35 percent.  Eskom is also very dependant on their energy conversation scheme (CPC) to assist with the management of demand and supply issues.