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Energy & Environment

Sunday, 24 July 2011 22:27

Sappi leading the way in power self-sufficiency

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Sappi is adding its voice to an increasing number of business leaders asking Eskom and government to consider all options to make it economically viable for companies already producing their own power to increase output in order to assist in rectifying the current problems with South Africa's electricity supply.
“The ongoing national energy crisis is impacting the economy with far-reaching long-term effects and could impact the confidence of overseas investors”, says Ralph Boëttger, CEO of Sappi Limited, adding, “Independent electricity generation is already taking place at companies such as Sappi who are then able to feed the grid. Incentives to make additional generation economically viable could be given to them in order to stabilise the energy supply”

“We are generating almost 50 percent of the electricity we use as a company and in some cases we have mills that are able to produce over 100 percent of their own electricity requirement”, says Boëttger.

Not all industries would be in a position to follow Sappi’s example, but those that do are able to lessen the load on the national grid and continue production even if limited.

“The pulp and paper process produces significant amounts of energy and for some years now at Sappi, we have been selling power back to Eskom, albeit on a limited basis”, continues Boëttger.

According to media reports the number of Eskom employees has been halved in the past 15 years, laying off mainly the “grey beards” a term used for skilled older Afrikaner men and the parastatal has admitted that it is now woefully short of the skills needed to provide the country with power for the next eight years.

Subsidies by Government to Companies such as Sappi to increase their power production capabilities, though not completely resolving the current crisis, would reduce the load on Eskom.

Economically the power outages are going to affect production, which in turn will lead to a reduction in profits and a reduction in taxes being paid to the Government.

The 20 billion rand kitty currently held by the treasury will quickly be depleted when massive reductions in tax revenues take effect. Subsidising or privatisation can contribute to economic growth far more substantially than Eskom and can alleviate a situation that Eskom has admitted it can't rectify alone before 2015.The cost of subsidies would need to be measured against the loss of tax income normally generated by companies over the five to eight year period.

Presently Eskom reports to the department of public enterprises, while the electricity policy is determined by the department of minerals and energy. This constellation is widely considered as ineffective and not conducive to dealing with the present crisis.


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