SA should consider capitalising Eskom again – CEO

Eskom CEO says if tariffs are low, government should consider increasing recapitalisation.
Eskom CEO Phakamani Hadebe also says there's no need to consider 'functionally unbundling' or splitting the power utility. Picture: Moneyweb

South Africa should consider increasing capitalisation of power firm Eskom due to lower electricity tariffs, the utility’s chief executive officer said on Monday.

Eskom CEO Phakamani Hadebe also told a mining conference in Cape Town that there was need to consider “functionally unbundling” or splitting of the power utility.

Read: Eskom sees R20bn FY loss, seeks higher tariffs

“If tariffs are low then government in one way or another should be willing to increase its recapitalisation” he said.

Read: Mines will bleed jobs if Eskom gets its 15% increase

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Can someone explain how splitting Eskom into 3 units will create value?

The CEO of Eskom has zero experience in the management of a utility. Think about that for a little while.

I think Eskom should start by collecting revenue directly from consumers. All these municipalities not paying Eskom after selling pre-paid electricity is unforgivable. These same municipalities that say pre-paid electricity makes up an important income stream are clearly not applying the tariffs collected for what it was intended. As I understand it those tariffs on our pre-paid electricity is to ensure the maintenance and deployment of electricity at a municipal level, clearly in most instances it is being used to prop-up the shortfall in their budgets for their wage bills.

Lemon. A great example of the sum of the parts being greater than the whole is the British Gas experience and it is taught in many MBA courses. BG was inefficient for the same reason that Korean Chaebol and Japanese Kierutsu are in efficient: vertical integration and captive markets. British gas was broken up a number of companies dealing with exploration, production, pipelines and retail. These companies were free to deal with whomever they wanted. A couple of years later strange things had happened: each company had forged its own alliances but not necessarily with each other. Gas prices fell and the value of the separate entities summed, rocketed. Eskom must be privatised and split into power generation, power transmission (grid) and retail divisions. Competition must be encouraged (IPP). Corrupt municipalities must no longer retail electricity. If people don’t pay then the individual is cut off not the town.

Thanks.

For it to make sense they will have to somehow improve the sum of the free cash flow from the 3 entities to more than it is now. This would require an about turn in policy, which flies into the face of everything the ANC is about, most critically relinquishing access to large budgets and controlling how they are spent.

To think he gets paid megabucks to sprout this words of wisdom Must be the tie.

It is wrong color for the ruling party. I wish we had a culture for promoting people with appropriate skills and experience for their positions. All these commissions going on at the moment involve people who almost in all instances do not have the required skills and or experience for their positions, but they know the right people though.

….my, my my….the commies looking to wmc to save their thieving buttts…again.

I suggest some vigorous credit control, debt collection and operating efficiency reviews before presenting your begging bowl Hadebe!

Brilliantly said! Yes, now suddenly corporate business is not Govt’s enemy… 😉

What is the difference between re-capitilisation and a cash bail out, or a massive selling price increase?
Whichever option you choose will be more money from the customer and the tax payer into a deep dark Eskom hole!
Get your business in order, manage your costs properly and run a profitable, competitive, productive business.

End of comments.

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