Much cheaper than Eskom

I am outraged! It is laughable. But sad at the same time, because it is your money in the end. I am going to try and spell it out for you as absolutely best as I can, the difference between a private business and a State Owned Corporation. This has to do with something that is really important to all of us, and in particularly if you happen to live within the borders of this great country of ours. Power. For the people. Of the electrical kind. Eskom released results yesterday, for their year to end March 2013. First difference, as a listed entity accountable to shareholders (of all sorts) you are obliged to meet parameters that the exchange has put in place to report within 3 months of your reporting period end.


Here are the Annual Financial Statements for the year ended 31 March 2013. The Financial Director, Paul O'Flaherty, has resigned over at Eskom, some suggest that he might be the fall guy, perhaps the pressures of the job got to him. I have absolutely no insight into that whatsoever, but it must be an incredibly tough gig. But money is money, and when the state and by function their citizens are funding a State Owned Enterprise accountability is all the citizens ask for.


It is perhaps a coincidence that Sasol yesterday inaugurated a gas fired power plant at the same time as the Eskom results. The media release is here: South Africa's first gas-fired power plant fully operational. Some interesting points. Firstly, the project cost 1.5 billion Rands. The plant on average produces above its operational capacity at 152MW (since it became operational at the end of last year). So, quite easily I can work out cost per megawatt of output, by dividing the one by the other. 9,868,421.05 ZAR. And another point worth noting, as Sasol do in the release: "Gas powered plants require less time to build and install, taking between 20 to 30 months, opposed to the 40 to 50 months required for a coal power plant and 60 to 80 months for a nuclear plant."


And Medupi? Well, we were told that is was going to cost 105 billion Rands. And when finished, the plant will have maximum capacity of 4,788 megawatts. Cost per megawatt? 21,929,824.56 ZAR. 122 percent more than the Sasol plant. Which also took shorter. Fair enough it is a small scale plant and both have different energy inputs with variable costs, but all we want is value for money delivered timeously. Again, I am no engineer, the closest thing I ever came to that was creating amazing lego contraptions out of old style blocks. The kids of today have all the fun!


There are a few things that I must concede. I have no insight into economic policy of the upper echelons in government and how individuals who form it have themselves been shaped by the ugly events of South Africa's past. Today is a particularly historical day in our chequered past, it marks the 50th anniversary of the arrest of 19 folks at Liliesleaf Farm, not too far from where I sit. Arrests of Govan Mbeki, Walter Sisulu, Nelson Mandela and many other famous South Africans took place that day. Those men gave up a large portion of their lives that day as free citizens in their country of birth. So I concede that the overwhelming feeling that the state can provide the best possible services to the people, because there is a genuine care about the have-nots, might not be shared by business. But surely at the end of the day, everyone wants electrification at the lowest possible cost to the tax payer.

The end user probably doesn't care who supplies the electricity. And greater competition will result in a lower price to the end consumer. Unfortunately (with my capitalist hat on always) the state will proceed along this path. Perhaps in decades time with the private sector supplying more power to the grid it will become more fragmented as the state sells off portions, floats the business (Eskom) publically as perhaps economic decisions trump ideology. That would be best in the long run.