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Interview with new Eskom finance director
Paul O'Flaherty |
by Chris Yelland, managing director of EE Publishers
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 Following the public announcement of Eskom's interim results for the financial year ending 31 March 2010, EE Publishers managing director Chris Yelland posed a number of questions to Paul O'Flaherty, Eskom's new finance director, on 9 June 2010. The questions are given below.
- Is there any specific reason why this year Eskom's annual financial report was not published and available at the announcement of the annual financial results last week? When will it be available?
- With the Eskom financial year-end being 31 March 2010, should the income statement not reflect the financial year ending 31 March 2010, with the balance sheet as on 31 March 2010? In which case, why is the revised Mozal special pricing arrangement, which was only announced two weeks ago and is still subject to regulatory approval, being reported and factored in for the year ending 31 March 2010?
- What is the revised pricing arrangement with Mozal? Are they on a published tariff like other "normal" energy intensive customers? What average price per kWh is Mozal now paying, and how does this compare with other energy-intensive South African customers, and with the other special pricing deal customers (Hillside, Bayside and Scorpion Zinc). What justification is there for keeping all this a secret?
- About two years ago, Eskom was about to place orders for Nuclear 1 and 2. But the decision was deferred. Then about a year ago, Eskom was saying it needed an imminent decision on Coal 3. But then in late 2009, Eskom indicated that it will not be building Coal 3, Nuclear 1 and Nuclear 2, and these would have to be done by others. When do you think "others" will pick up this ball, and is another capacity crisis looming if this is not done now?
- Has the placement of new contracts for the construction of Kusile restarted since this was stopped in December 2008, or is this still awaiting a funding plan e.g. finding a private equity partner for Kusile?
- How long is it likely to take to find an equity partner for Kusile and close the deal, or to make another funding plan for Kusile? Six months? A year?
- You mentioned eighteen months (minimum) to close the deal on funding for Kusile! Does this mean we could be faced with a further eighteen month delay in the construction of Kusile?
- Can you give any details on this alternative or interim funding solution, or is this not open for discussion yet?
- How have the current and possible further delays in placing contracts at Kusile impacted on the overall cost and delivery time of Kusile? Have the additional costs due to the delays in Kusile e.g. cost of finance during construction, cost price escalation and exchange rate risks, been factored in to the current price tag yet?
- What is the latest revised cost for Kusile and what would be the cancellation costs? I have heard a revised price tag of R175-billion mentioned, with a figure R21-billion for cancellation. Is this correct? Is the cancellation of Kusile a possible least-cost outcome of IRP 2, or is Kusile to be taken as a given? Could Kusile be replaced with say three or four smaller base-load coal-fired stations from IPPs with lower costs, shorter lead times and lower risks for Eskom, the government and the country? I am asking if the cancellation of Kusile is still an option?
- Which contractor(s) are overall responsible for the commissioning of Medupi, or is Eskom taking on this risk and liability? Is the Medupi price tag still R124-billion excluding flue-gas desulphurisation? And is the first unit at Medupi still scheduled for April 2012?
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