Gordhan to unveil plans for restructuring Eskom
A special paper on the future of Eskom and the electricity industry will be released by public enterprises minister Pravin Gordhan on Tuesday to provide the framework for the huge bailout expected in the medium-term budget policy statement on Wednesday.
The plan is an essential component of persuading credit ratings agencies and investors that the government does indeed intend to restructure Eskom into a sustainable company and not throw good money after bad.
Moody’s Investors Service, which has previously said the bailout will not be enough and a credible plan for the future is required, is due to make a rating decision on November 1.
The department of public enterprises, which had previously promised the paper would be ready by mid-September, said it will “set out in detail a comprehensive road map for Eskom in a reformed electricity supply industry”.
Various parts of the government — the department of public enterprises, the Treasury, the department of energy, the Eskom chief restructuring office and President Cyril Ramaphosa’s sustainability task team, headed by UCT professor Anton Eberhard — have been intensely exploring and debating the mechanics of both the split and the debt bailout since February, when it was announced by the president.
The decisions made this week will have a fundamental effect on the speed with which the split proceeds, which in turn will demonstrate whether the government has an urgent commitment to liberalise the energy market and allow competition from independent power producers, or plans to opt for the slower “functional unbundling” that is favoured by the Eskom board.
The key decision will be whether all three parts of the business — generation, transmission and distribution — remain companies under Eskom Holdings for the foreseeable future or whether the transmission company is spun off into an independent buyer of energy from multiple sources.
The medium-term budget policy is expected to provide clarity on how the Eskom bailout will be structured. The company requires R250bn of debt relief to be sustainable. Among the big decisions are whether the full amount is shifted to the government balance sheet or whether other financial engineering options can be used that could lower the total costs for the government.
Meanwhile, the National Union of Mineworkers (NUM), which held a national executive meeting at the weekend, announced on Monday that it would march on Luthuli House to object to the splitting up of the state power utility, which it said marked the beginning of a process “for Eskom to be milked of millions by independent power producers”.
The union said it had realised that “by shouting at Eskom board and management, we are barking up the wrong tree”.
“The real culprit is the ANC government — our own government that we put into power — that is now in the business of destroying jobs in order to appease the so-called ratings agencies and investors.”
The NUM, which is the largest trade union at Eskom, says it objects to the unbundling as this will increase the power utility’s costs rather than reduce them, and would not solve the company’s problems.