Eskom’s unbundling on track
‘Move will isolate costs for utility’
President Cyril Ramaphosa announced last night that troubled power utility Eskom would be separated into three entities while the government will seek “strategic equity partnerships” to help ailing state-owned entities (SOEs).
In his State of the Nation Address last night, the president said the government would immediately embark on a process of establishing three separate entities of Eskom made up of generation, transmission and distribution under Eskom Holdings.
“To ensure the credibility of the turnaround plan and avoid a similar financial crisis in a few years’ time, Eskom will need to develop a new business model,” Ramaphosa said.
The unbundling of Eskom into three entities would, Ramaphosa said, ensure that costs are isolated and each entity has its own responsibility.
“This will also enable Eskom to be able to raise funding for its various operations much [more] easily from funders and the market.”
He conceded that Eskom is in a crisis, which has great risks for South Africa.
“It could severely damage our economic and social development ambitions,” Ramaphosa told the joint sitting of parliament.
Eskom is expected to announce a loss in excess of R8bn as it grapples with the effects of state capture and a sluggish economy.
Ramaphosa said dealing with Eskom requires “bold decisions and decisive action”.
“The consequences may be painful, but they will be even more devastating if we delay,” he said.
“It is imperative that we undertake these measures without delay to stabilise Eskom’s finances, ensure security of electricity supply, and establish the basis for long-term sustainability.”
The president further announced that the government would have to look at funding SOEs through private investments and selling off nonstrength assets.
“Where SOEs are not able to raise sufficient financing from banks, from capital markets, from development finance institutions or from the fiscus, we will need to explore other mechanisms, such as strategic equity partnerships or selling off non-strategic assets,” the president said.
Ramaphosa did not say which assets would be sold.