PRIVATE OPERATORSConcessions on Eskom’s coal-fired plants ‘a bold move’
Companies EditorStandard Bank backs measures announced by the National Treasury last month that could see some of Eskom’s coal-fired power stations concessioned to private operators.
The concessioning of some of Eskom’s power plants is part of conditions that finance minister Enoch Godongwana has attached to a R254bn package to alleviate the embattled state-owned utility’s R400bn debt pile — a move that frees up the utility to conduct maintenance and invest in new generation.
Business Day reported last month that the 2023 budget includes a sweeping set of conditions that will restrict Eskom capital expenditure to transmission- and distribution-related investments and could also result in coal-fired power stations being concessioned to private operators.
Standard Bank group CEO Sim Tshabalala told investors on Thursday that the move to concession some of Eskom’s ageing coal-fired power stations was the correct one.
This is as the lender said one of its main focuses for 2023 was to "capture the sustainable finance opportunity, particularly in renewables in SA.
"We are also encouraged by the structural reforms made over the past year — reforms that have been bolder and more sweeping than is sometimes appreciated," Tshabalala said in an investor call.
"One case in point is Transnet’s decision to concession the Johannesburg-Durban freight line; another is the Treasury’s requirement that Eskom concession many of its power stations. We hope that reform will continue to accelerate, particularly in the electricity and transport industries, and to strengthen the stability and capacity of local authorities."
The "Big Blue", as Standard Bank is referred to in financial services circles, has already said it will not finance new coal-fired power plants beyond 2050.
The bank said it was looking to use the "largest balance sheet in Africa" to drive SA’s and the continent’s just transition and has committed billions to be the leading financier of green energy deals.
The lender, which is Africa’s largest bank by assets, said $1.4-trillion in capital investment is required by 2030 to support Africa’s energy transition goals. The bank’s Africa portfolio spans 19 countries.
Tshabalala said the bank mobilised R54.5bn in sustainable finance solutions in financial year 2022, including R18.5bn to finance renewable energy power plants.
The lender has committed to invest R50bn in renewable energy power plant financing by 2024.
"As the largest financial institution on the continent, we are very well placed to source, to fund and to structure solutions. We aspire to be the market leader in sustainable finance in Africa — importantly this extends to funding both green and social projects," Tshabalala told investors.
"We are committed to mobilise more than R250bn of sustainable finance solutions by 2026. In 2022 we made good progress on a number of fronts. Most importantly, we mobilised R55bn in sustainable finance, 2.4 times more than in 2021."
Tshabalala also warned that it will be folly not to support transitional projects, saying this would amount to "denying Africa’s right to sustainable development".
Through the Just Energy Transition Investment Plan, R1.5-trillion will be invested in the economy over the next five years in new frontiers such as renewable energy, green hydrogen and electric vehicles, President Cyril Ramaphosa said in the state of the nation address in February.
For the plan to materialise it will need to crowd in private sector financing.
The EU, UK, Germany and the US have pledged more than $8bn for energy transition projects in SA.
Standard Bank CFO Arno Daehnke said in SA structural reform and an improvement in electricity supply could lift confidence and accelerate economic growth, job creation and social upliftment.
"We stand ready to support, among others, renewable energy and infrastructure projects," Daehnke told investors.
The country’s Just Energy Transition Plan shows that more renewable energy will be required every year to 2030 than the total constructed over the past 10 years.
Nedbank, one of the country’s largest banks, said in its results presentation it intends to disclose its fossil-fuel & energy generation pathways next year. The bank, which spent R27bn in renewable-energy financing in 2022, plans to have zero exposure to fossil fuel-related activities by 2045.
Nedbank recently appointed Daniel Mminele, whose most recent role was as head of the presidential climate finance team, as its board chair.
Fitch Solutions in a research note said while SA intends to gradually decarbonise the power sector over the next decade, the market will remain heavily reliant on coal-fired power.
The agency said it expects to see a big investment into the market’s coal-fired electricity, as Eskom is set to fast-track the construction of Kusile units.
"The fast-tracking of construction of Kusile units 1, 2, 3 and 5 by Eskom will bring online a big amount of capacity. The units combined are set to bring online over 2,800MW of capacity onto the SA grid.
"Although we believe that coal units will come online in the medium-to-long term, the utility’s goal to bring online all units within 2023 is ambitious," Fitch said.
Fitch expects solar to remain the primary source for renewable generation in SA, accounting for an annual average of 46.6% of total renewable generation between 2023 and 2032.
Welcome reforms: Standard Bank CEO Sim Tshabalala backs the National Treasury’s energy plan. Freddy Mavunda