Businessman Jonathan Oppenheimer says investment in SA’s energy generation is not coming through because the environment is unattractive to investors.
Concern that government will be unable to attract private investment in its ageing coal-fired power stations has also been expressed by Futuregrowth, one of SA’s biggest institutional investors in the bond market.
Oppenheimer, in an interview with SAfm on Friday, said there was no injection of capital into the country other than in financial markets.
“Right now, other than in the financial markets, we need to find something we can invest in,” said Oppenheimer. “Nobody wants to invest in energy generation because the environment is unattractive. When was the last time a wind farm was built in SA? When was the last large solar system put in place in SA and connected to the grid?
“What we need is a space which is super exciting, super dynamic, super enabling and full of opportunity ... We have the people but right now we don’t have the capital going into the real economy.”
Oppenheimer’s father Nicky is one of SA’s richest people. His views on the lack of investment in energy generation come at a time when Eskom is battling to power the economy.
Olga Constantatos, head of credit at Cape Town-based Futuregrowth Asset Management, said it was concerning that there had been little progress on Eskom’s debt-relief plans announced in the February budget.
Constantatos in particular flagged the mooted concessioning of Eskom’s coal-fired power stations without clear support from the private sector. She also said the coal fleet review, which was meant to be published by midyear, had not happened, stoking further angst in the investor community.
“We also have questions about the plan to concession these power stations, specifically: how this fits in with the government’s Integrated Resource Plan, which anticipates the decommissioning of Eskom’s coal fleet over a particular time frame,” she said.
“We also have questions on whether this plan aligns with government’s [Conference of the Parties (COP)] commitments and the Just Energy Transition financing possibilities; and whether there is demand for such assets, particularly with banks and institutional funders increasingly committed to decarbonising their funding books and plans to achieve net zero emissions by specified dates.”
Concern about whether government can attract private investment in Eskom’s fleet has also been raised by asset management firms and banking groups.
Stanlib CEO Derrick Msibi told Business Day in July that SA’s energy crisis is unlikely to be solved without asset managers mobilising funds, but there is little appetite to fund coal projects.
“It is highly unlikely that the asset management industry in SA will fund new coal projects as a result of most of their ESG [environmental, social and corporate governance] thrusts and commitments. I am not aware of any ESG-conscious asset management firm in SA that can reconcile sustainability and/or ESG commitments with funding new coal projects; even so-called clean coal is questionable from an ESG point of view,” he said.
Investec CEO Fani Titi told Business Day in May that Eskom would struggle to source funding from major financial institutions to extend the life of its ageing coal fleet when there are viable cleaner energy alternatives.
Groups such as Standard Chartered and Allan Gray have also shot down the idea of mobilising private capital investment in Eskom’s existing coal plants.
Futuregrowth, which has more than R200bn in assets under management, has become increasingly critical of the finances and governance of SA’s embattled state-owned companies.
At risk
Constantatos said the much-heralded Eskom debt-relief plan announced in February is at risk of stumbling at the implementation phase. In particular, she said the reliance on finding a debt solution for the utility would be difficult, with defaulting municipalities posing the biggest risk.
“And while some forward momentum is (finally) taking place to address the many problems at Eskom, the debt-relief plan — a cornerstone of Eskom’s return to sustainability — is at risk of failing if we do not see meaningful and urgent implementation of some decisions and actions that may require political fortitude and involve some difficult trade-offs,” said Constantatos.
“Six months after the long-awaited announcement of Eskom’s debt-relief plan, our fear that decisionmakers may stumble on the execution of the plan is on the way to being realised. We deserve better.”
SA’s municipalities owe Eskom R63.2bn, up nearly R7bn since the budget was presented in February.
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