Eskom CEO André de Ruyter said on Tuesday that he hopes to revise his initial timetable for the unbundling of Eskom and accelerate the process of splitting the company into three parts.
Unbundling Eskom into standalone subsidiaries for generation, transmission and distribution is seen by the government as key to the utility overcoming its operational and financial difficulties and restructuring the energy sector.
A roadmap published by the department of public enterprises in October 2019 set a timeline for the split that stated the most urgent project — a separate transmission company to act as operator of the grid and a market buyer — would be set up as a division by December 2020 and be fully legally separate by December 2021.
But in June De Ruyter said he has pushed out the timeframe for unbundling by at least two years and no longer has a firm target date for the full legal establishment of the three subsidiaries. The divisionalisation of the generation and distribution parts of the business was set to take place by 2022 and the legal separation some time after that.
His comments raised concern, especially among proponents of electricity market liberalisation. The establishment of a separate grid operator and market buyer for electricity is a key part of making room for private-sector power producers to enter the market.
Speaking at the Cape Town Press Club on Tuesday, De Ruyter said that a plan is soon to be put to the board accelerating these timelines. He said his initial plan was based on a careful mapping of all the requirements, including legislative and regulatory changes necessary, but as the unbundling is a key part of enabling future investment in energy capacity, this is being accelerated.
“We are making good progress towards legally separating Eskom into generation, transmission and distribution. We are working hard to put forward a plan and a proposal to pull back the two-year timeline and achieve these objectives sooner,” he said.
The unbundling of Eskom and the attraction of new investment into the electricity sector is an important pillar of the growth strategy tabled by finance minister Tito Mboweni a year ago, and endorsed by the cabinet. Mboweni hinted strongly when he presented the supplementary budget in June that continued financial support to Eskom is contingent on it going ahead with the unbundling.
He said SA needs to “shift away from the electricity supply system that was introduced in 1923, when George V, the [British] Queen’s grandfather, was the King of what was known as the Union of South Africa. The past few years have shown the inefficiency of this archaic system. Provisional allocations to Eskom were made on the understanding that the government’s electricity roadmap would be implemented.”
In the 2019 budget, Mboweni made provisional allocations to support Eskom of R23bn a year for the next 10 years. Amortised over 10 years the full package amounts to R150bn in 2019 prices.
Government’s financial support is aimed at helping Eskom service its R450bn of debt, which it is unable to do from its own revenue flows. De Ruyter said Eskom “is very grateful for the continued equity support”, however, the debt remains “a conundrum that needs to be resolved”.
He added that Eskom is looking at ways to reduce the cost of its debt, but the overall restructuring is “a national issue that needs to be addressed”.
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