Power sector challenges

By Nokwanda Mngeni

Eskom needs more water to generate more electricity

Refer to the article “Jitters over Eskom money troubles” (The Independent March 8) that mainly covers implied financial troubles in South Africa emanating from the awarding of a lower tariff than requested for by National Energy Regulator of South Africa (NERSA).

In the article, the statement “which makes it easy to see why the Eskom South Africa’s problems can trickle into Uganda” is misplaced. It relies on a number of other errors in the story that we would like to clarify.

The electricity sub-sector in Uganda has been on a back foot since 2004/2005, when demand started catching up with supply. The drought that the region experienced at the time and the cut back of water releases led to a sharp drop in power production.

Eskom has had the challenge of convincing the water regulator, the Directorate of Water Development (DWD) that the water releases had, and still have no effect, on the lake levels but to no avail. Meanwhile we still had to comply with our water permit.

This challenge prompted the introduction of the thermal generators, small hydro power plants, and co generators which helped fill the supply gap. But it meant a change in the tariff.

Eskom has been working with the Uganda Electricity Transmission Company Ltd (UETCL) to reduce the impact of load shedding by releasing more water during peak periods and less off peak. A number of release regimes have been employed in this regard.

During trying times, either financially or otherwise, Eskom has consistently released as much water as has been allowed. This happened during the Commonwealth Heads of Government Meeting (CHOGM) 2007, the 2010 FIFA World Cup, during 2011, and more pertinently at the present time.

Both the full commissioning of the Bujagali Hydro-power dam and the water release regimes have reduced load shedding quite considerably. The release of more water, driven by UETCL through the Energy Ministry, did not only reduce load shedding but also cash flows.

The story written by The Independent correctly states installed capacity at the power plants as 380 megawatts, with 180 at Nalubaale and 200 at Kiira. However, the available capacity, which is tested annually, is what translates to declared and dispatched availability.

The testing results are dependent on water availability, which in turn is determined by the water abstraction permit issued by DWD. This renders the installed capacity irrelevant, given that the permit only enables Eskom Uganda to generate a maximum of 230 megawatts at the current lake levels, which factor is properly captured in the Power Purchase Agreement through the annual capacity tests.

Energy generation is dependent on the capacity tests referred to above. Whilst it is true that the generation output decreased from 2005 to 2006, this does not imply reduced performance from Eskom as water availability is an external factor.

Eskom has not only delivered as per our mandate, but have delivered outside this when expressly required to do so.

It is also worth noting the difficulties and challenges under which Eskom Uganda operates the power stations, which have to do with the age of the power station/Dam.

There are active cracks in the concrete and support structures caused by Alkali Aggregate Reactions (AAR) and Alkali-Silica Reactions (ASR) that have to be managed in order to ensure continued production from the facilities.

Evidence has shown that there is continued concrete expansion due to ASR causing tremendous stress to the superstructure roof trusses and columns.

Despite these difficult conditions, Eskom Uganda continues to find optimal ways to operate the stations and generate the dispatched amounts of power each day.

Since commencement of operations in April 2003, we have injected USD $12.4million worth of investments into Nalubaale and Kiira Hydro plants.

Most of this funding has been largely raised through retained earnings with minimal parental loan facility support. Current investment obligations over the remaining 10 year concession period amount to over USD $30million of which approximately 70% shall be financed from internally generated finance without parental support. There should, therefore, be no fears regarding financial difficulty spill over from the parent company.

Eskom operates and maintains the two power plants in Jinja, and the supervision of the Uganda Electricity Generation Company Ltd (UEGCL) which is also responsible for hydro power development. UEGCL bills Eskom for two components: plant use and administration costs.

That said, Eskom Uganda Ltd (EUL) has to date met all its contractual obligations as per the concession agreements and made further investment into the power plants. We have been and still are there for Uganda when the going was tough, and we have consistently delivered.

Should we have made improvements to the plant capacity? The low hanging fruit is the water releases. Without increasing the water releases, whatever plant or capacity improvements would yield no results.

Finally, our concession agreements still have ten years to go, and we are committed to not only delivering the value we always have, but to continuous improvement.

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Nokwanda Mngeni is the CEO of the electricity generation firm, Eskom Uganda Ltd