SA’s green energy push hinges on R402bn debt fix

Eskom’s transition to renewable energy ‘will be difficult, if not impossible,’ without a solution to its debt woes: deputy finmin.
Andre de Ruyter. Image: Dwayne Senior/Bloomberg

The head of South Africa’s state power utility needs to substantially reduce its R402 billion of debt to realise his vision of transforming the coal-addicted behemoth into a leading green-energy producer and create as many as 300 000 jobs in the process.

Eskom Holdings supplies more than 90% of the nation’s electricity, the bulk of it from coal, and emits more than two-fifths of the nation’s greenhouse gases. Andre de Ruyter, 53, its chief executive officer, wants to tap concessional loans from development finance institutions to finance renewable plants in exchange for accelerating the closure of some of its old, polluting power stations.


Eskom cuts debt by R82bn, reduces net loss

But persuading financiers to fund Eskom will be a tall order, given that its debt is already at unsustainable levels due to cost overruns at new plants and four straight years of losses. The government has been talking about reorganising the utility’s balance sheet for years yet has failed to take a decision, and has instead stepped in with bailouts to enable it to keep operating.

Eskom’s transition to renewable energy “will be difficult, if not impossible,” without a solution to its debt woes, according to David Masondo, the nation’s deputy finance minister. He’s suggested several options, including that foreign utilities take a stake in the utility; that its shares be listed; or that some of South Africa’s sovereign debt be scrapped in exchange for recapitalizing Eskom and ensuring that it reduce its emissions.

Debt burden

Eskom is considering investing R106 billion in renewable energy projects within the next decade and is analysing various financing options. The adverse impact on the coal-mining industry and communities that relay on it could be offset by a gain in manufacturing jobs, according to De Ruyter.

“An integrated approach to resolving the debt challenges, while exploring new and innovative pathways to fund a just transition, is required to move us forward towards a sustainable electricity industry,” Eskom said in an emailed reply to questions.

Sithembiso Garane, head of listed credit at Futuregrowth Asset Management, South Africa’s biggest specialist fixed-income money manager, said the government has indicated its commitment to keeping Eskom afloat and he’s “cautiously optimistic” a decisive debt solution will be found.

The equity injections that have been provided so far are “are barely scratching the surface when it comes to extinguishing Eskom’s solvency risk,” Garane said. “The remaining operational inefficiencies and unsustainable debt burden patently require further extra-ordinary support.”

Weaning Eskom off coal could make a significant and expeditious contribution toward global decarbonisation efforts, according to Shridaran Pillay, Africa director at risk advisory service Eurasia Group.

“What remains to be seen is if there is the political will for this transition to happen,” he said. “There is understandable reluctance to shift the debt on to the government’s books and I think that options put forward of potentially selling a stake of the utility or listing it are something that will have to be considered sooner rather than later.”

© 2021 Bloomberg


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Nothing hinders SA more than corruption, especially debt funded corruption. My God how the ANC have compromised South Africans.

Eskom should not be in the renewables business at all; they cannot even produce enough electricity by conventional methods. They are incompetent crooks and their plant should be sold out from under them and any new capacity come from completely private and competitive sources. Here endeth the lesson. Not that it will be heeded by those ANC elites with snouts deep in the taxpayer trough.

“Eskom should not be in the renewables business at all; they cannot even produce enough electricity by conventional methods.”

Sorry but I disagree, maintaining a PV plant is in orders of magnitude simpler than running a coal fired power station, ditto for wind energy.
All you need to maintain is PV plant is a : bucket, water and a mop.

Indeed all electricity generation should be in the hands of private, competing companies. Eskoms unbundling should also lead to this, although the trade unions, and the loony lefties at AIDC, the Alternative Information and Development Centre are dead against this.
The whole energy sector has to be liberalised, deregulated, and as much privatised as much as possible. Maybe the transmission part should still only for 51% be owned by govt, in a kind of public- private partnership.
The transmission company will need to considerably invest in the grid, especially to the NC, where most new generation will come from.
Only a bit more than half of Eskom’s horrendous debat is state guaranteed, maybe it is better to let it go bust.

The compromised ANC have compromised the nation into a far greater risk of crippling the economy and destroying jobs than any pandemic could ever achieve, not even a pucka one. The pandemic will pass but the ANC has entrenched itself and will perform never ending acts of insurrection if they lose at the polls.

End of comments.



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