Eskom signs its own death warrant

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Corporates are dropping Eskom by the droves

Up to now we’ve all been living with Eskom’s woes.

But corporates are planning for life after Eskom.

You see, back in June 2021 government announced the threshold for self-generation had increased to 100MW.

And according to Nersa spokesperson Charles Hlebela in a Sunday Times interview “There is a lot of interest expressed with the increase of the registration threshold to 100MW”.

Six plants capable of producing over 1MW are set to go online in 2022, with the largest expected to have a capacity of 10MW.

Pan African Resources, a gold miner has in fact planned to increase the size of its 10MW solar farm to 26MW. SAB even announced it is switching to renewable energy to brew its Castle Lite range – and this should be implemented by 2025.

In 2021 alone, 3 469 MWh was generated at SAB’s biogas facilities and 9 537 MWh through its solar photovoltaic systems.

At the same time, banks are now starting to offer clients financing to go off-grid.
Investec plans to offer its private banking clients funding to install solar panels and battery storage systems in homes, bolstering its own green credentials and providing a power solution in a country regularly hit by electricity outages.

The offering, which follows a pilot program for 1,000 customers in South Africa, will allow clients to tap unutilized home-loan facilities or have money re-advanced to them to put in place the systems that can cost about $10,000 (about R155 000), or significantly more depending on the size of the property.

Other listed companies are also taking advantage of the trend.

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Another company that’s taking advantage is Ellies

it is bringing solar installations to homes of people like you and I. Without the need to fork out R100,000 or R200,000 in cash.

You see, Ellies has partnered with a company called The Rental Company. The Rental Company is a specialist asset funder.

Basically, consumers would contact Ellies for a solar installation, Ellies designs it, and then ropes in The Rental Company to help you finance it.

Think of it like car finance.

Ellies would come and install the solar plant on your home’s roof. You get financing for the system through The Rental Company. They have security – in that if you don’t pay they can seize the assets. But the fact is that if the system replaces your Eskom bill – you would’ve paid for electricity to Eskom anyways.

So, paying for the solar system isn’t a new expense – it just substitutes the
Eskom bill for an asset finance deal.

This means that Ellies can reach a lot more households with the finance option than it would’ve been able to reach if you’d have to pay the R200,000 or whatever upfront.

This also means that Ellies moves up the value chain.

Instead of simply supplying a solar panel to someone, it becomes a full-service supplier. It does design of the system, installation and aftersales service.

In fact, according to the company sales for the month of November 2021 reached R147 million, representing a 38% increase on the prior November, and is the highest sales for any single month over the past 24 months. December 2021 has to date continued on that trend. And it achieved this thanks to Eskom’s failings to provide us with power.

With Eskom’s split – the opportunity for private power producers will open up

Now that Eskom is splitting off its transmission business from the rest, the opportunities will start opening up for private power producers. Municipalities like Cape Town and Johannesburg are already exploring options to buy electricity from private producers rather than Eskom.

I suspect we’ll see more and more private power producers (and not just solar and wind either) listing on the JSE in coming years…

Here’s to unleashing real value

Francois Joubert
Editor, Red Hot Penny Shares

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