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Eskom to transfer R39.9bn loan to transmission unit

Government guarantees will remain in place.
Image: Waldo Swiegers/Bloomberg

Eskom Holdings SOC Ltd said it will give the transmission unit that it’s transforming into a separate entity a R39.9 billion loan to make sure it can complete projects and be financially viable.

The loan will be guaranteed by the transmission unit’s assets with Eskom’s creditors able to call on them if the utility doesn’t pay them, it said in a presentation to creditors on Thursday. Government guarantees will remain in place. The company will be known as the National Transmission Company of South Africa, or NTCSA.

Eskom’s board will approve an annual borrowing plan for the transmission company and this will come in the form of inter-company loans, the utility said. Any borrowing over and above the plan will need to be approved by Eskom.

The South African state power utility, which is R396 billion in debt, is separating into transmission, generation and distribution units that will operate as separate entities in a bid to improve its operational and financial performance. The company has subjected South Africa to intermittent power outages since 2008.

The transmission unit, which will be the first business to be separated, will take control of employees, contracts and assets when all conditions are met including obtaining licenses from the national power regulator.

Transmission network

Its purpose is to act as a national transmission network operator and a system market operator, allowing it to take in electricity from Eskom and privately run power plants as well as channeling imports from countries such as Mozambique.

The company is expected to buy 218 000 gigawatt hours of power annually, with 77% of that coming from Eskom power plants, 19% from independent generators and 4% from imports. In turn it will export 5% of the 212 000 gigawatt hours it expects to sell and the rest will be sold within South Africa.

As of last year it had 33,158 kilometres of transmission lines and 154 500 megavolt amperes of transformer capacity. Eskom has previously said it may need to spend an additional R180 billion to strengthen and expand its transmission and distribution networks.

Separate tariff

The company’s assets and liabilities will match at R80.5 billion each and will include a R20.8 billion equity injection from Eskom, according to the presentation. From later this year the regulator will be asked to determine a separate transmission tariff, which will provide the company with revenue, while Eskom will still use a generation and distribution tariff.

“The resulting specific transmission tariff should be sufficient to enable NTCSA to run its operations in a manner that is cost efficient,” Eskom said in the presentation.

The inter-company loan consists of R17.7 billion to complete transmission projects while R22.9 billion will go into a general pool of funding. The rest, R700 million, is in the form of a derivative for risk management.

The company is forecast to break even around fiscal 2025 and make net income of more than R5 billion in fiscal 2027. A target of the third quarter of this year has been set for obtaining creditor approvals and licenses from the regulators to allow the separation to go ahead.

© 2022 Bloomberg

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This guy is in arrears on his mortgage. He will never be able to service the loan, so he follows Eskom’s example. He subdivides his property and transfers the mortgage loan to the garage. The bank has already repossessed his car anyway. He lived happily and debt-free ever after.

Only in ANC SA I think Sensei. What is next? Well, the garage can still raise its mortgage further and has no history of financial mismanagement, unlike the house so more is borrowed on the garage. This allows the same contractors who destroyed the house’s financial position to now start working on the garage.

Brace ourselves?

If Transmission is the entity buying both Eskom and IPP energy then they should also be transferred the pumped hydro storage units for them to run grid response. It does not make sense to keep pumped storage under Eskom Generation as it is storage, not generation in any event.

In effect Transmission will now also be the one selling to the councils and metros. Not sure how this all is going to work for Eskom Distribution. Does it buy from Transmission and then sell to for example Sasol and the large users like the mines?

Prediction Engine : we will all end up paying more but Eskom Dsitribution clients will still pay far less.

This exercise should have moved Eskom Distribution infrastructure located within urban planning zones to the metros and council. It is senseless to have a large industrial suburb like Montagu Gardens in the Cape on Eskom but people in the same street sometimes have City of Cape town service and tariffs.

Johan see it for what it is !!!
3 Boards instead of 1, at least 25% more jobs created and most important each of them can blame the other and no one will know who is at fault !!
Russian Maskirovka par excellance !!!!!!!!

End of comments.

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