ESKOM’S HITCHES
…Plans for separate power transmission firm hobbled by debt burdens
JOHANNESBURG- South Africa’s plan to create a power trans mission company that will attract the invest ment needed to strengthen the national grid has been hobbled by its restrictive debt arrangements with parent Eskom Holdings, two people familiar with the situation have said.
Under the plan to sepa rate the unit, which Eskom presented to its creditors on June 10, the national pow er utility will extend a R39.9 billion loan to the National Transmission Company of South Africa (NTCSA).
That funding will be guar anteed by the NTCSA’s assets if Eskom, which is R396 bil lion in debt, doesn’t meet its own obligations.
Eskom’s board will also approve an annual borrow ing plan for the transmission company that will take the form of inter-company loans, the utility said in its presen tation. Additional borrowing will need to be approved by Eskom.
The plan protects Eskom’s creditors by ensuring that NTCSA can’t ignore its obliga tions to the utility while pay ing its own debts.
Still, it hampers the trans mission company, which will derive revenue by charging separate tariffs, from form ing partnerships with private companies to strengthen and expand the grid, said a cred itor and an adviser familiar with the terms, who spoke on condition of anonymity be cause the discussions aren’t public.
“The subsidiarisation of NTCSA is the first step in the total unbundling of the electricity industry,” Eskom said in a response to queries. It didn’t answer questions as to whether the arrangement was temporary or whether it would inhibit partnerships with private developers.
Informal approaches have been made to Eskom and the Department of Public Enterprises, which oversees the utility, to see if they would reconsider the structure, the creditor and adviser said. The department referred queries to Eskom.
“Creditors at the Eskom holdings level don’t want to lose the security,” said Vuyo Ntoi, co-managing direc tor of Old Mutual’s African Infrastructure Investment Managers, which has invested in renewable energy plants in South Africa. “It will be a chal lenge if the transmission com pany can’t take on additional debt.”
Eskom has previously esti mated that R180 billion needs to be invested in transmission and distribution networks to take advantage of the coun try’s renewable energy potential.
The grid needs to be ex panded in the Northern Cape, an arid province with almost uninterrupted sunlight, and in the Eastern Cape, which is suited to wind power plants.