comments from fapa on eskom’s rca applications · ferro alloy producers association * * * * * * *...

Comments from FAPA on Eskom’s RCA applications

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Presented by: Dr Jurg ZaaymanChairman: Ferro Alloy Producers’ Association

FAPAFERRO ALLOY PRODUCERS ASSOCIATION

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Eskom’s ZAR 66,7 Billion RCA applications

Nothing different from

Eskom’s application for a DEATH SENTENCE

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FAPA members cannot exist without Eskom

And

Eskom cannot afford to loose more baseloadcustomers like FAPA members

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FAPA members are the Smelters of Chrome,

Manganese and Silicon Alloys


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The whole SA Ferro Alloy

Industry faces extinction

because of too high electricity

prices

A number of smelters have

closed down resulting in a large

number of direct and indirect

Job Losses

More smelters will close down

if this RCA application is

approved

Currently we have Surplus Electricity supply (Excessively High Industrial Tariffs)

More than 80% of worlds’ reserves of Manganese and Chrome

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FAPA Strongly Opposed to this

Outrageous RCA application

•ZAR 66.7 Billion equals a once off 33% Tariff Increase(200TWh sales) - even if implemented over a few years it willcripple the economy

• It totally defeats the purpose of a Multi Year PriceDetermination

• If any of this RCA is allowed Eskom will not change –Eskom need to change if they want to survive in a rapidlychanging environment

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FAPA Strongly Opposed to this

Outrageous RCA application

•Eskom made a profit of ZAR1.6 Billion over the period

•Most of this application is based on sales that did notrealize – Eskom will suffer even more sales losses

•Eskom is loosing their most important customers first

•Large amounts of job losses has already occurred

•Eskom already entered into a utility death spiral

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Eskom price Increase 27.5% 31.3% 24.8% 25.8% 16.0% 8.0% 8.0% 12.7% 9.4% 2.2% 5.3%

SA Average CPI 10.0% 7.3% 4.1% 5.0% 5.8% 5.8% 6.1% 4.5% 6.6% 5.6% 5.8%

Eskom price c / kWh 26 33 44 53 61 65 70 78 85 87 91

Electricity price at CPI 26 28 29 30 32 34 36 37 40 42 44

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10

20

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40

50

60

70

80

90

100

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

Price c / kWh

Electricity Prices and Percentage Increases

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Eskom Tariffs are too High

250% over 10 years

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Eskom Tariffs are too High

Smelters in Norway, Finland and France pay

30% less than SA smelters for electricity

Smelters in China pay 10% less for electricity

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Eskom has entered a

Utility Death Spiral

Source: Eskom

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Eskom has entered a

Utility Death Spiral

Eskom’s Growth Expectations / Targets not realistic

Solar and Wind Generation is already cheaper than Eskom’s

Lowest Day time Tariffs (Payback on PV > 10 MVA < 5years)

More and more people are going partially or totally off the grid

This trend will increase rapidly with the development of lower

cost storage solutions e.g. Batteries

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Lower sales 67% of RCA

170

180

190

200

210

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230

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Actual vs Forecast Sales Volumes

Actual Standard Tariff Sales Volumes (TWH) Forecast Sales Volumes

Source: NERSA

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Lower sales 67% of RCA

Since 2011 actual annual sales were decreasing – why use the

forecast ?

Everybody were asked to reduce their electricity consumption

by 10%

Everybody were told to use less electricity and become more

energy efficient

Eskom could not reach the forecast – even if they wanted

because there were constant Load shedding and load

curtailment.

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A number of Smelters Closed Down Recently

Eskom are loosing their most ValuableCustomers the Baseload Consumers

TATA, ASA, IFM, Machadodorp and Hernic in BR

Various Mn Furnaces ~ more than 60% capacity not in use

~ 2 439 GWh/a

Only Smelters with access to low cost ore are surviving

Most Smelters will not survive if ore is used at Market prices

We are destroying value by smelting which encourages the

shut down of smelting capacity and increased export of

unbeneficiated ore

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Low cost to provide smelters with electricity

Eskom make their biggest profits with Smelters

Higher voltages, Less distribution and Maintenance

costs

24/7 consumers of electricity with the ability to shift load

to assist Eskom in managing peak consumption periods

Why are Smelters Important

to Eskom and the Economy ?

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20 000

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34 000

36 000

38 000

23:00 02:00 05:00 08:00 11:00 14:00 17:00 20:00 23:00 02:00

MW

Summer & Winter load profiles

Typical Winter Day Typical Summer Day

Source: Eskom

Because of smeltersclosing

Peak is getting steeper.

Difference between peak and offpeak is growing ~ 13 000 MW

Eskom face Extreme

Technical challenges

Smelters reduce load during

winter eveningpeak ~ 700 MW

Winter peak is a problem with more

units in cold reserve

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20 000

22 000

24 000

26 000

28 000

30 000

32 000

34 000

36 000

38 000

23:00 02:00 05:00 08:00 11:00 14:00 17:00 20:00 23:00 02:00

MW

Summer & Winter load profiles

Typical Winter Day Typical Summer Day

Source: Eskom

Smelters consume electricity 24/7

Eskom loose sales with

baseload reductions

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Conclusion

• Eskom tariffs are already too high and we will see

numerous job losses if the RCA’s are approved

• Eskom’s sales will decrease at a much faster rate

with higher tariffs

• Eskom should start with drastic cost savings to turn

themselves and the economy of the country around

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Questions ?

comments from fapa on eskom’s rca applications · ferro alloy producers association * * * * * * *...

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