André de Ruyter has a plan for Eskom; will it work?

The government is going to realise sooner or later that only the private sector can bring an end to load shedding – Roger Lilley, independent energy analyst.

Top story brought to you by Lulalend.

FIFI PETERS: Tomorrow is going to be an interesting day for Eskom. It is planning to host global investors in a call, to update the investment community on the transmission unbundling. That is according to a statement that was issued by Eskom yesterday on the JSE. It’s going to be a private call, so not everyone can be on it. Similar to the one that took place on February 18, it will be exclusively for Eskom investors.

Read: Eskom: De Ruyter has a plan up his sleeve

To talk to us a little bit more about what might be said in that call we are joined by Roger Lilley, an independent energy analyst. Roger, thanks so much for your time. Any idea what you think Eskom will be saying to global investors tomorrow about its transmission unbundling?

ROGER LILLEY: Good evening, Fifi. Thank you for inviting me to your show and good evening to all your listeners. This is all going to happen behind closed doors, so we’re not sure exactly what’s going to be said. Obviously Eskom has a funding shortage. It needs money in order to be able to continue to develop the system.

Remember, the more independent power producers that come on stream, the stronger the infrastructure to carry the electricity across the country needs to be.

That really is the whole point. The question is how that is going to be sold to international investors, because Eskom doesn’t have a very good balance sheet – it has already an enormous debt load, so I’m not sure how they’re going to sell this. It is really going to be interesting to see what is indeed said.

FIFI PETERS: I do know that Eskom does come to market. It has couple of bonds that are trading on the JSE. But to the point around the funding shortage that you made reference to, do you think that there is a possibility that Eskom could ask for money?

ROGER LILLEY: I think that’s the whole point of this investor meeting. It’ll be interesting to see what they will use as collateral. In other words, what’s the payback?

I think the only way that they can do that is by assuring the international community that the R311 billion that’s been offered at COP26 will indeed be used to fund the transition away from coal and other fossil-fuel power.

That’s going to be the driver. I think that’s going to be the lever that they will use. They will say ‘This money has being made available to us. We promise we are going to use it for this purpose.’

As I said to you, part of funding or part of rolling out a new independent power infrastructure means that you’re going to start injecting power into parts of the grid – which it wasn’t ever designed to accept. So obviously work is going to have to be done to strengthen that to redesign certain sectors of it in order to make it work properly. That’s really where I think Eskom is going to work this all going forward.

FIFI PETERS: Sure. In terms of guarantees, I wonder how putting forward the government having its [Eskom’s] back could be interpreted, given that the government’s balance sheet has been looked upon favourably by ratings agencies of late. But I guess we’ll have to wait and see on that front.

In terms of the independent power producers, though, we also had some good news coming out of Nersa this week, I think just yesterday, in terms of the applications that were approved by the energy regulator. So Eskom is going into this meeting with that in hand. I’m wondering what you think of that, and how the international community will think.

ROGER LILLEY: I think the international community will be very encouraged by that because, despite some of the roadblocks that have been thrown in the way of certain independent power-producing programme actual rollouts, we have seen a very successful programme happen in this country since 2014. Unfortunately we’ve had cases, historically we’ve had people at Eskom who have tried to roadblock some of those for their own purposes.

We are not a hundred percent certain of the agenda of our current energy minister, because he seems to be saying one thing and doing something else simultaneously, so we are not sure quite where that is.

But when the international community looks at what’s really happening on the ground we see, for example, this great big project that Scatec has just launched, 560 megawatts of power coming on stream soon, the big advantage of independent power producers is twofold.

Scatec’s Kenhardt solar venture will be ‘one of the largest in the world’
Load shedding all but a certainty until these things happen …
These charts show the Eskom crisis has been two decades in the making

Firstly, it’s in the private sector, which means that you don’t have all these delays and red tape. Usually it’s done very cleanly and transparently.

Secondly, it’s so quick to build. In under two years we have from nothing to power.

The government can’t do that. They just fall over their own feet. They just can’t do that, and you certainly can’t do that with coal. You certainly can’t do that with nuclear.

So the independent power producers are the way forward. The reality is, and I think the South African government is going to realise that, sooner or later, the private sector are really the only ones who are going to get us out of this fix. They’re the only ones that are going to actually bring an end to load shedding. It won’t be the current structure.

FIFI PETERS: Roger, we’ll leave our speculative discussion on Eskom’s private meeting that will be taking place tomorrow. Hopefully we’ll have a bit more meat to chew on following that meeting, and hopefully we’ll have something in terms of outcomes that were discussed. But thanks so much for filling us in nonetheless. Roger Lilly is an independent energy analyst.




You must be signed in and an Insider Gold subscriber to comment.


What makes Eskom think the R300 billion is theirs to spend?

The other countries will give the money indirectly. So Eskom or IPP projects apply for loans and get a part of the interest cost offset as annual deductible from the R300 billion over the loan term. The projects must stand on their own due diligence and feasibility.

End of comments.



Subscribe to our mailing list

* indicates required
Moneyweb newsletters

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.

Follow us:

Search Articles:
Click a Company: