The South African government has outlined a bailout plan for the national power utility Eskom and will inject ZAR69bn (approximately US$5bn) over the next three years to help service its debt and free up cash for current operations. However, the government will not support the company's debt on the long run in order not to over-burden the South African economy with an unmanageable situation and is looking for alternative solutions.
Indeed, it is considering renegotiating the former 20-year power purchase agreement (PPA) schemes signed between 2011 and 2012, i.e. during the first two phases of the country’s renewable procurement programme known as REIPPP (Renewable Energy Independent Power Producer Procurement Programme). Between the first and fourth rounds (2011 and 2016, respectively), renewable tariffs have collapsed, from ZAR4.02/kWh (US$29c/kWh) to ZAR0.96/kWh (US$7c/kWh) for solar PV, and from ZAR1.67/kWh (US$12c/kWh) to ZAR0.76/kWh (US$5.5c/kWh) for wind.
However, the plan triggered an uproar and the South African wind association (SAWEA) estimates that the renegotiation of the terms agreed with successful bidders of the first two rounds would be a breach of contract. Other actors of the domestic renewable market pointed out that it would damage investors' confidence in the domestic renewable sector.
These two proposals are meant to relieve the financial pressure on the state-run power utility Eskom, which is struggling to solve its financial issues and recently announced plans to reshuffle its structure into three separate entities with one specific segment each: power generation, transmission and distribution.