Page 14 - AfrElec Week 12 2021

AfrElec NEWS IN BRIEF AfrElec

ESKOM of overspending on projects. The utility can’t enhance payment discipline through metering
meet its costs and the country is experience the population, revenue will go up. We have
SA considers taking Eskom continued load-shedding and power outages proven that,” he stated.
due to inadequate maintenance at its ageing
Zakari said that the current administration
debt fleet of coal-fired power plants. was focused on moving from the traditional
If swapping Eskom debt for debt issued by
way of funding subsidies or using the liquidity
South Africa’s National Treasury is the SPV were deemed voluntary, it wouldn’t in the sector to fund consumption. Rather,
considering whether it would be better to be regarded as an involuntary change in he said, the subsidy budget would go into
move a chunk of Eskom’s ZAR464bn ($26.3) control, which would trigger a default. infrastructure that would ultimately lead to
of debt into a special-purpose vehicle (SPV) The SPV may be managed by the Public growth.
or have the state take over responsibility for Investment Corporation, which is Africa’s “People say if you eliminate subsidies
it directly, people familiar with the situation biggest fund manager. you are going to have poor people or the
have said, Bloomberg reported. vulnerable people pay more. But we argue that
While banks have led discussions for the the only reason the power price in Nigeria is
past few weeks over the creation of an SPV high is that we do not generate enough.
that would take over at least ZAR100bn INVESTMENT “If you generate 10 gigawatts of power, the
of Eskom’s debt, and possibly much more, tariff will be half of what it is now. Keeping
that debt would almost certainly have to be Nigeria to invest $3bn in the prices officially low is not the approach;
guaranteed by the government, the three increasing delivery power is the approach that
people said, asking not to be identified power will effectively get the same output, which is,
because an announcement hasn’t been made. making the citizen pay lower,” said Zakari.
Under the SPV arrangement, the debt The Federal Government of Nigeria plans to General Manager, Finance and
Eskom retains and any new debt it contracts spend $3bn on the energy sector in the next Management Services of the Nigerian
would be paid off first as a priority, while that 24 months and end the current electricity Electricity Regulatory Commission (NERC),
held in the SPV, which could have tenure of 10 subsidies by December 2021. Abdulkadir Shettima, said the major problem
years or more, would be last in line and would Spending is expected to increase the power within the system was non-adherence to
thus likely need to be guaranteed by the state being wheeled by the Transmission Company contractual terms.
to win investor support, they said, adding this of Nigeria (TCN) from the current 4,900MW
is something the Treasury will need to decide to at least 7,000MW.
on. Speaking during a webinar hosted by
While either option would strengthen the Abuja Chamber of Commerce and POLICY
Eskom’s balance sheet, both risk imperiling Industry (ACCI), Special Adviser to President
SA’s credit ratings by further boosting public Muhammadu Buhari on Infrastructure, Karpowership receives
debt, seen climbing close to 90% of GDP Ahmad Zakari, said that following the
by 2026 even without adding the utility’s $500mn loans the government secured preferred bidder status in
liabilities. That makes the stance of major from the World Bank earlier this year, it is
rating companies on any Eskom debt deal a expecting another facility from the African RMIPPPP
factor in the government’s deliberations, the Development Bank (AfDB), saying that the
people said. gestures are a demonstration of confidence Karpowership SA (KPSA) has welcomed the
Moody’s Investors Service already in the reforms being currently made in the announcement made by the Department
considers Eskom debt guaranteed by the sector. of Mineral Resources and Energy (DMRE)
government as sovereign debt. The collection efficiency of the Distribution appointing KPSA as a preferred bidder for
The creation of the SPV is just “a Companies (Discos), has significantly projects in the Ports of Coega, Saldanha and
complicated way of getting to the same result improved since the CBN started warehousing Richards Bay.
as moving it onto the sovereign [debt]”, the funds. Zakari explained: “With this The 49% Black-owned group will provide
said Jones Gondo, a senior credit analyst at enhanced metering on the service-based tariff, power to South Africa’s national electricity
Nedbank. we can see the Nigerian electricity supply grid under the Risk Mitigation Independent
Eskom, described by Goldman Sachs industry generating over N100bn in the near Power Producers Procurement Programme
Group as the biggest threat to the SA to mid-term. This is very impressive.” (RMIPPPP).
economy, has become mired in debt as a result “The hypothesis that we have is that if you Preferred Bidders have been selected

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