Five key things to watch for as SA acts to fix Eskom

Several key decisions are due to be taken this month.
Eskom chairman Jabu Mabuza has said that a permanent CEO appointment will be announced by the end of October. Image: Moneyweb

South Africa has been promising for months to fix Eskom, the state power utility that’s drowning in debt, made record losses and is reliant on government bailouts to remain solvent. While little tangible progress has been evident so far, several key decisions are due to be taken this month.

Here’s what to watch out for:

1. Appointment of new chief executive officer

The utility, which provides about 95% of the country’s power, has been without a permanent CEO since Phakamani Hadebe quit in July. The post has been temporarily filled by its chairman, Jabu Mabuza, who has said his replacement will be named by the end of the month. Among three candidates shortlisted are former LNG Canada CEO Andy Calitz and Jacob Maroga, who was Eskom CEO from 2007 to 2009.

2. Release of policy paper

Public Enterprises Minister Pravin Gordhan is overseeing the drafting of a special policy paper that will spell out the government’s envisioned future for Eskom. It’s likely to flesh out a proposal to split the utility into generation, transmission and distribution units under a state holding company. The paper could be referred to cabinet as soon as October 16, and will be released by the end of the month.

3. Debt reorganisation

Eskom owes R450 billion and isn’t generating enough cash to pay the interest. The utility’s management told investors in August that its chief restructuring officer, Freeman Nomvalo, would submit a report to the cabinet by the end of last month recommending how the debt should be reorganised. One of four options was to move most of the debt onto the government’s balance sheet while the others weren’t disclosed, according to investors who spoke on condition of anonymity. The government and Eskom declined to comment on that process, or whether it will be incorporated into the policy paper. Gordhan has said investors will be consulted on any reorganisation.

Read: Two mammoth power plants are sinking Eskom and South Africa

Eskom’s risk premium eases as Treasury offers bailout conditions

4. Finalisation of energy blueprint

The Integrated Resource Plan, which has been years in the making and maps out South Africa’s energy mix for the next decade, is due to be discussed by the cabinet on Wednesday and then released for public comment, according to Mineral Resources and Energy Minister Gwede Mantashe. A March draft envisions the nation’s electricity output capacity rising more than 40% to 78 344 megawatts by 2030. The bulk of that is to come from renewable sources.

5. Mid-term budget

The government has allocated 128 billion rand to Eskom over the next three fiscal years so it can continue to pay its bills. Finance Minister Tito Mboweni will spell out where the money will come from when he releases his mid-term budget on October 30. The National Treasury has already signalled to government departments that they will have to drastically cut costs. Additional bailouts for Eskom are unlikely. The Treasury has set 28 conditions for Eskom to secure the aid, including that it provide daily updates on its cash position, strengthen its board and provide clarity on the costs and benefits of two new power plants.

© 2019 Bloomberg L.P.

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All 5 are like shuffling the deck chairs on the Titanic. Here are just three tips: (1) Get rid of the 30,000 unnecessary employees who are just there to buy votes for the ANC. (2) Get tough on municipalities like Soweta who don’t pay for electricity and get non-payers off. (3) Appoint some people with real skills at Eskom even if they are white.

“…several key decisions are due to be taken this month”

Eskom management / Govt leadership trying to pre-empt MOODY’s November decision, to create the mythical impression that “active steps” are to be taken.

‘Jnrb’ above already states what real reforms are required (and it also does NOT ONLY apply to Eskom, but applies to any SOE & lame duck municipality alike).

Here are the 2 required steps.

1 – let Eskom power generation sink and issue it’s debt on a 99 year bond inflation + 2%.

2 – allow private energy companies to compete for power generation.

Cuts escoms life line, Abscond from the GRID

I have done that, but Eskom still sucks my taxes. On the bright side, at least the electricity is free.

Lots of plans about making plans. But no action here.

End of comments.

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