Unbundling at Eskom by 2022
TRIAD: TRANSMISSION, GENERATION, DISTRIBUTION Govt allocates R31.7bn to stabilise utility as it splits into three entities.
State-owned power utility Eskom is expected to complete its unbundling into three divisions by December 2022, according to National Treasury.
The separation of the transmission division is expected to be completed by December this year, while the separation of the generation and distribution divisions is expected to be completed by December 2022.
The government allocated Eskom R56 billion for 2020/21, of which R6 billion of the equity allocations had been provided by September 30, 2020.
Eskom has been allocated a further R31.7 billion for 2021/22 by the government. The funds are meant to stabilise the utility while the government restructures it into three separate entities under Eskom Holdings SOC Ltd.
The unbundling will be overseen by Eskom CEO, Andre de Ruyter, along with the directors-general of National Treasury, the department of mineral resources and energy, and the department of public enterprises.
Revised business models
Eskom began implementing revised business models for each division and appointed divisional boards at the end of March last year. These boards are accountable for strategy, business performance and functional compliance.
The restructuring is in line with its turnaround plan which was approved by the department public enterprises in 2019. The beleaguered entity has, over the past decade, consistently relied on government support and borrowing to run its operations. It does not generate sufficient revenue to meet its commitments, which include high levels of debt and debt-service costs.
The poor performance of Eskom’s plants, which subsequently requires the utility to implement frequent power cuts, continues to constrain economic recovery.
This was shown in 2020 when Eskom implemented load shedding for 52 days despite there being reduced economic activity due to the Covid-19 lockdowns.
Although the government plans to bring in private partners for electricity generation to supplement power generated by Eskom, load shedding is expected to continue well in 2022.
The Treasury says the Independent Power Producer (IPP) Office within the mineral resources department is in the process of evaluating bids for 2 000 megawatts of emergency power from IPPs to plug into the electricity supply shortfall.
The department is also expected to initiate a fifth bid window to buy 2 600 MW of wind and solar power from IPPs.
Projects are expected to generate power from July 2022.
In the coming weeks, the Treasury says the government will initiate the procurement of 11 813 MW from IPPs, including 6 800 MW to be generated from renewable energy sources.
The procurement of power from IPPs is expected to cost the government R200 billion and the total value of the signed agreements to procure renewable energy from private partners is expected to amount to R176.7 billion by March.
Bids from independent power producers evaluated