Metro reaches R100m write-off deal
NEARLY R100-million owed by some of Nelson Mandela Bay’s biggest employers for unpaid electricity bills and interest on the accounts will be written off by the municipality.
The council has approved a deal involving 13 high-energy users that only R45.9-million be recovered from the businesses over a period of six months.
The agreement reached is part of a bid to save thousands of jobs, ensure the companies’ doors remain open and attract more investment. Council gave city manager Mpilo Mbambisa the go-ahead on Thursday to sign an out-of-court settlement with the companies.
The negotiations with the high-energy users group were discussed behind closed doors at a council meeting.
According to the document discussed, the total arrears for the 13 companies by June last year was R149.5-million.
This was because some of the 13 companies involved had paid only 76% of their bills since 2011. But others, although they had joined the lawsuit against the metro, the Department of Energy, and the National Energy Regulator of SA (Nersa), paid their accounts in full.
The council item states: “The outcomes of the negotiated settlement with the high-energy users will ensure that the [municipality] will recover R45.9-million in the 2014-15 financial year . . . as a result of servicing of arrears payments over a period of six months.
“The NMBM [is] to approve that all interest of R44.686-million – as at the end of January 2015 – on the overdue accounts be written off on the accounts under consideration.
“The NMBM [is] to approve R48.399-million to be written off as irrecoverable debt owed between 2011-12 to 2014-15 financial years as validated by the due diligence conducted on the audited financial statements of the companies under consideration.”
It states further that “the NMBM will recover millions in unquantifiable annual revenue from the directly affected 3 799 ratepayers whose jobs will be retained as a result of the settlement and multipliers of thousands of jobs in the supply industries to these companies”.
Councillors who were in attendance at the confidential session said concerns were raised about the special tariff structure to be formulated for high-energy users in the glass, foundry and agroprocessing industries for the 2015-16 financial year.
While some councillors said the recommendation was approved, others said it was agreed that all companies will pay the same tariffs.
Chief financial officer Trevor Harper refused to comment as the matter was still confidential.
According to the council document, all the companies involved in the dispute against the city started paying their accounts in full from November last year.
The 13 companies, with the Nelson Mandela Bay Business Chamber as a 14th applicant, went to court in 2013 complaining that they could not afford electricity prices which were 35% higher than if they received electricity directly from Eskom.
They appealed to President Jacob Zuma for a tariff that was globally competitive and attracted business. The president instructed the municipality to negotiate out of court.
The companies are Autocast SA, Borbet SA, Shatterprufe, Gillet Exhaust Technologie, Visteon SA, Coca-Cola Fortune, Natstan Wire, Crown Chickens (Sovereign Foods), Weir Heavy Bay Foundry, S&N Rubber, Johnson Controls Automotive, CRH Africa and MW Wheels SA.
The council item states there is a need for the metro to concede on certain issues.
“The overall financial analysis clearly indicates that there is a need for the NMBM to concede on certain financial aspects in order to retain jobs and assist the companies considered in this due diligence to improve investment and grow the automotive sector and related industries as anchors of the NMBM economy.
“The NMBM has to consider foregoing revenue as a result of a reduced tariff or discounted tariff giving due consideration that a reduced/discounted tariff is likely to benefit more than the number of companies currently engaged in negotiations . . .”
Municipal spokesman Roland Williams said he was unable to provide details without council’s permission.
However, he said: “We are able to confirm that the city manager’s office has been negotiating with the high-energy user group since September last year.
“The intention and context of such negotiations is, firstly, to express our appreciation of big business contributing to the regional economy and sustain jobs, juxtaposed with the paying of fees for municipal services rendered at the rates decided upon by council when it approves its budget every year.
“We are happy to report that the negotiations thus far have been amicable and in the collective best interests of council and the residents we serve.
“Following the tabling of a report in committee at last week’s council meeting, we are confident that this matter will reach finality very soon and that such finality will be a win-win situation.”
Autocast SA executive director David Mertens, who is also the spokesman for the high-energy users, said they were waiting for feedback from the municipality before they could comment on the matter.
They would be able to comment in the near future.
The business chamber also said it was not able to comment.
On Thursday, mayor Danny Jordaan said: “Significantly, we are today putting in front of you for approval the agreement with the high-energy users relating to the settlement of the case regarding our budget and the payment of electricity tariffs.
“This agreement puts to bed a difficult chapter in our history, during which we have learnt some important lessons.”
He said he looked forward to a far more cooperative relationship between the users and the council in the future “as we tackle these thorny issues”.