A generator could clinch the sale in the Western Cape
News > news - 07 Apr 2006
The recent unannounced and lengthy Eskom power-cuts in the Western Cape, and the prospects of more to come countrywide during the next few years, give properties with adequate provision for emergency back-up power and uninterruptible power supply (UPS) an edge in the marketplace, according to an article in the Rode Online Property Newsletter for April.

It is only a matter of time before business tenants wake up to the reality that power cuts are not yet a thing of the past and start demanding power back-up assurances from landlords before they are ready to sign leases, predicts Erwin Rode, CEO of Rode & Associates property valuers and economists.

“Buildings that can be marketed as having adequate power back-up provision, will in the foreseeable future have a competitive edge that is likely to attract business tenants away from buildings without such provision,” suggests Rode.

Several tenants’ meetings to discuss emergency power back-up have been arranged at office buildings in the Broll portfolio, according to Anita Hechter, head of the Western Cape region of Broll Property Management.

Henry Truter, director of facilities at Rennie Property Management, says that while the buildings under its management do currently have emergency power provision to keep lifts and stairwell lights operational, they do not have sufficient provision to guarantee continuous power supply to office tenants for their PCs and other office equipment in times of power outages.

“We are busy consulting with our business tenants about the capacity they would require to keep essentials such as servers operational during power cuts, so that we can determine whether we would be able to install sufficient emergency power supply facilities”, says Truter.

While the majority of business tenants in the Western Cape seem not to have grasped the fact that power cuts are likely to occur again during the coming winter months – and possibly beyond – Eskom is at last owning up to that likelihood. Eskom general manager Andrew Etzinger told Rode Online that Eskom will this week be launching an offer to all non-residential property owners in the Western, Eastern and Southern Cape of a 100% refund of all upfront capital expenditure that would be incurred in implementing Eskom-approved energy-saving projects before 1 June – a narrow window of opportunity for the region’s business buildings to become the most energy-efficient in the country.

Etzinger says the offer may be extended beyond that date, but for now the focus is on reducing demand as much as possible before the onset of winter.

Etzinger explains that Eskom has identified 200 energy-saving specialist companies countrywide and has met with their representatives to request their co-operation with Eskom’s demand-side management (DSM) division in prioritising energy audits for non-residential property-owners in the Western, Eastern and Southern Cape, and to help facilitate the implementation of as many demand-side reduction projects in the region as possible before 1 June.

For Rennie, Eskom’s incentive scheme comes at an opportune time as it already has energy audits scheduled for most of its office and commercial buildings in the Cape region. Truter says Eskom’s offer has motivated Rennie to fast-track its energy audits to see how many of its buildings can be made more energy efficient, particularly in terms of energy-efficient lighting, air-conditioning, and other cooling and heating systems, fast enough to qualify for the capital expenditure refunds.

Property-owners in the Cape will be further encouraged to make use of this opportunity to make their buildings more energy efficient by case studies indicating that savings that impact significantly on the bottom line, can be achieved. The management of a high-rise office building in Johannesburg of approximately 70.000m² has, for instance, found that an Eskom DSM intervention to improve the building’s lighting and air-conditioning efficiency has resulted in an annual cost saving of 15%.

Truter also welcomed an additional announcement by Eskom that a fuel and maintenance subsidy scheme is also being introduced for buildings that install Eskom-approved power generator sets, or gensets as they are generally known. He says the subsidy incentive could help to make genset installations affordable to buildings that previously could not afford the running costs.

Hechter says an urgent meeting has been called to discuss Eskom’s offer as it certainly makes the introduction of urgent measures to reduce energy demand more feasible. She says, however, that the finer details of exactly how the refund scheme will operate, will determine its success.

“Landlords will not be willing to make the capital outlays without written guarantees that the money will be refunded expediently, because they would simply not be able to carry the cost of paying unbudgeted overdraft interest on loans to raise the necessary funds.”

The fact that the Eskom offer would enable property management companies in the Cape to achieve significant cost savings as a result of greater energy efficiency without any capital outlay costs, strengthens the case of forward-looking property managers to justify the expenditure for the installation of standby gensets for emergency situations, says Erwin Rode.

He sees power shortages as a factor that will affect properties countrywide for up to eight years, as it would take at least that long for Eskom to bring new power stations on line. Until then it would be realistic to expect the threat of unexpected power cuts to remain, considering that Eskom has virtually run out of spare capacity at a time that the economy is growing at about 4-5% per annum.
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