President Cyril Ramaphosa says the independent power producer (IPP) programme is not responsible for Eskom’s financial and operational challenges and will not collapse the utility.

Responding to oral questions in the National Assembly on Thursday, the President said the IPPs would not collapse Eskom. He attributed the power utility’s challenges to a number of factors including State capture and poor maintenance.

“The severe financial and operational challenges currently being experienced by Eskom are not caused by the independent power producer programme and in particular the renewable energy projects.

“Eskom’s challenges have been driven by massive cost and time overruns on the new build programme, the effects of State capture and corruption, collapse in governance, unsustainable debt levels and poor maintenance of plants,” he said.

IPPs investing on own debt

The President said the independent power producers are investing their own debt and equity to construct the projects, including the cost of connecting these power projects to the grid.

He said the value of the 27 independent power producers agreements signed in April 2018, represented in terms of private sector investment, is R57 billion.

To date, the total value of private investment in South Africa’s renewable energy generation capacity is R202 billion.

It is expected that a total of 372 MW will be connected to the grid between now and March 2020 and that Eskom will buy electricity worth R170 million in the 2019/20 financial year.

Costs fully covered by Nersa

“These IPP costs are fully covered by Nersa, the regulator, through the cost recovery mechanism in the multi-year price determination process.

“In other words, the costs that Eskom incurs in buying electricity from the IPPs are recovered in the tariff set by the regulator.

“The costs of the most recent power purchase agreements will only be incurred when these plants are constructed and connected to the grid.

“The costs will therefore certainly not collapse the power utility,” he said.