VZCZCXRO9456
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHSA #0355/01 0531007
ZNR UUUUU ZZH
R 221007Z FEB 10
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 1304
INFO RUCPDC/DEPT OF COMMERCE WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHBJ/AMEMBASSY BEIJING 1087
RUEHBY/AMEMBASSY CANBERRA 0905
RUEHLO/AMEMBASSY LONDON 1858
RUEHMO/AMEMBASSY MOSCOW 1089
RUEHNE/AMEMBASSY NEW DELHI 0659
RUEHOT/AMEMBASSY OTTAWA 0865
RUEHFR/AMEMBASSY PARIS 1697
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHZO/AFRICAN UNION COLLECTIVE

UNCLAS SECTION 01 OF 02 PRETORIA 000355 
 
SIPDIS 
SENSITIVE 
 
STATE PLEASE PASS USAID 
STATE PLEASE PASS USGS 
DEPT FOR AF/S, EEB/ESC, OES/EGC AND CBA 
DOE FOR SPERL AND PERSON 
DOC FOR ITA/DIEMOND 
TREASURY FOR PATRICK STUART 
 
E.O.   12958: N/A 
TAGS: ENRG EMIN EINV EFIN IBRD PGOV SENV SF
SUBJECT: ESKOM PITCHES ITSELF AND THE MEDUPI POWER PLANT 
 
REF: A) PRETORIA 12 
B) 09 PRETORIA 2498 AND PREVIOUS 
 
This cable is not for Internet distribution. 
 
¶1.  (SBU) Summary: Eskom hosted foreign diplomatic missions, South 
Africa Government officials, and its own staff on February 9 at 
Medupi Power Plant.  Eskom asserted that its team is dedicated to 
keeping the lights on and fueling economic growth in South Africa, 
and that Medupi - as a key part of the strategy - will employ the 
most advanced technologies to address water, environment, and carbon 
emission challenges.  The South African Department of Public 
Enterprises and Department of Energy are working closely with Eskom 
on strategic planning to produce a comprehensive Integrated Resource 
Plan (IRP), targeted for May-June.  This is intended to clarify 
roles for the private sector, diversification of the energy mix, and 
how to follow the best Long Term Mitigation Scenarios for carbon 
emissions.  Nuclear energy and renewables will be part of the energy 
mix.  End Summary. 
 
¶2.  (SBU) Deputy Chief of Mission and Energy Officer participated in 
the state power utility Eskom-hosted visit on February 9 to Medupi 
Power Plant under construction in Lephalale in Limpopo Province. 
The delegation also toured the 1990-vintage 3800 MW Matumbi 
coal-fired power plant.  Both plants are situated near Exxaro's 
Grootegeluk coal mine. 
 
------------------------------------------- 
Eskom's Commitment to Keeping the Lights On 
------------------------------------------- 
 
¶3.  (SBU) Eskom acting Chief Executive Officer Mpho Makwana 
emphasized that the Eskom team is committed to keeping the lights on 
in South Africa (for the June-July World Cup and beyond) and fueling 
the country's economic growth.  He identified the following 
objectives for the parastatal: 
 
- Heal and stabilize Eskom after the turbulence of the power crisis 
starting two years ago; 
- Recruit new top management including a new CEO and Chairman who 
can refocus Eskom's strategic vision.  He introduced the new Chief 
Financial Officer and the new Managing Director for Human 
Resources; 
- Maximize value for the shareholder, the SAG, reducing operating 
losses; 
- Secure funding for the ambitious capital expansion program. 
 
 
Makwana asserted that Eskom is the tenth largest power company in 
the world, with the fourth largest build program.  (Note: Makwana 
told the DCM that he is looking forward to meeting the Ambassador on 
February 25.  He also mentioned having met several U.S. power 
utility executives at Copenhagen and Davos.  End Note.) 
 
--------------------------------------------- 
Medupi Superlatives - We Are Still About Coal 
--------------------------------------------- 
 
¶4.  (SBU) With this visit, Eskom sought to show that its capital 
expansion program is on track and represents rands well spent. 
Medupi will be the first new baseload plant in twenty years; next 
door's Matimba was one of the last big ones to come on line in 1991. 
Q The first units of Medupi's 4800 MW capacity will come on line in 
2012, aimed to alleviate Eskom's vexing capacity shortfalls.  Medupi 
will incorporate state-of-the-art features and meet sustainability 
objectives: 
 
- Use super critical combustion, employing high temperature, high 
pressure technology to augment efficiency; 
- Minimize and conserve use of water by employing enhanced 
dry-cooling features (it will be the largest dry-cooled plant in the 
world at completion.) 
 
PRETORIA 00000355  002 OF 002 
 
 
- Ensure highest environmental standards, including protecting 
plants, snakes, and even a large Baobab tree; 
- Adopt flue-gas desulphurization to reduce harmful SOX and NOX 
emissions (although thereby increasing water consumption); 
- Employ other technologies to improve combustion efficiency; and 
- Assure jobs, skills development, and social programs in the 
locality. 
 
In the local language, Medupi means "the rains that soak the parched 
lands", (thereby bestowing economic relief). 
 
----------------------------------------- 
Commitment to Strategic Planning, Carbon 
Emissions Mitigation, And Diversification 
----------------------------------------- 
 
¶5.  (SBU) SAG Public Enterprises Deputy Minister Enoch Godongwana, 
Eskom's senior guest, emphasized the importance of the Integrated 
Resource Plan (IRP) strategic planning, which would support new 
build, diversification of the energy mix, and integration of 
long-sought Independent Power Producers (IPPs) in his presentation. 
He asserted that the IRP would identify a sustainable road map, 
consistent with Long Term Mitigation Scenarios (LTMS) for carbon 
emissions, including ramping up renewable energy.  The Deputy 
Minister said the solution cannot be Eskom alone; Eskom is good at 
big coal and will keep utilizing South Africa's ample coal reserves 
for the foreseeable future.  He stressed that Eskom cannot continue 
to serve as both referee and player under the new system. 
Godongwana noted the steady - almost revolutionary - change in the 
ruling party's thinking that now was committed to procuring private 
equity (albeit minority) for the next mega coal plant Kusile.  "We 
will consider all options," he said.  "We need private equity, 
expertise, and best practices."  (In a separate conversation, DPE 
Deputy Director General: Energy Chris Forlee told DCM he was 
optimistic about the IRP process which had support at the highest 
levels.) 
 
¶6.  (SBU) Department of Energy Deputy Director General Ompi Aphane 
amplified the SAG's commitment to formulating and implementing a 
robust IRP vision, carrying out an appropriate LTMS, diversifying 
the energy mix, and introducing alternate players through IPPs.  In 
addition, he voiced the SAG's intent to advance nuclear energy, 
clean coal technology, renewable energy, and carbon capture 
readiness.  He noted the importance of Eskom's proposed 
cost-reflective tariff increases to underpin a new market approach. 
The regulator NERSA recently completed public hearings and will rule 
in the next month on Eskom's 35 percent per annum for three years 
rate increase requested.  Eskom's new Chief Financial Officer noted 
the importance of the SAG financial support, as well as a 
contribution of multilateral banks to the capital expansion 
program. 
 
------- 
COMMENT 
------- 
 
 
¶7.  (SBU) While the Medupi visit was part of an Eskom public 
relations campaign, the event was useful in illuminating its 
approach in coordination with the SAG.  The pending World Bank loan 
Qapproach in coordination with the SAG.  The pending World Bank loan 
to complete Medupi was the elephant in the room.  Eskom appears to 
be successfully putting in place clean energy and carbon mitigation 
offsets consistent with SAG commitments and objectives.  Even as it 
diversifies energy sources and puts in place clean energy and 
conservation measures, South Africa will continue to depend on coal 
as a major energy source, including likely additional coal-fired 
power plants beyond Medupi and Kusile. 
GIPS