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Eskom remains in danger reform plans remain unclear
SOUTH AFRICA
THE South African government will “soon” choose a permanent CEO for Eskom and will “shortly” reveal its latest reform plans for the util- ity. South African President Cyril Ramaphosa said on October 21 that Eskom’s financial situa- tion as “untenable,” but he was unable to provide any new details on the government’s intentions for Eskom.
“The sheer scale of Eskom’s debt is daunting,” Ramaphosa said. “Further bailouts are putting pressure on an already constrained fiscus.”
Recent power cuts in South Africa have again brought into focus the government’s lack of any clear reform plan for troubled utility Eskom.
The utility last week put in place a series of rolling black-outs, known as load-shedding, in order to protect the national grid from a major imbalance between supply and demand
The power cuts were blamed on coal supply problems at the Medupi power plant. Plant man- ager Rudi van der Walt left early last week, while other staff at the plant were dismissed by Eskom generation head Bheki Nxumalo for negligence.
“These outages threaten South Africa’s fragile growth profile,” Siobhan Redford, a Johannes- burg-based analyst at Firstrand Bank Ltd., said in a client note.
“Clarity and certainty on plans for Eskom — both in terms of financing needs and returning to a more sustainable power generation profile — are vital in boosting the confidence of both
domestic and offshore investors.”
Meanwhile, the government did announce
last week its revised Integrated Resource Plan (IRP).
The plans calls for 1,500MW of new coal gen- erations over the next 10 years, with 2,500MW hydro 6,000MW solar PV, 14,400MW wind, 2,088MW storage and 3,000MW gas.
On-site generation is to be encouraged by removing some regulatory requirements for projects between 1MW and 10MW.
The government will urgently begin the emergency procurement of 2,000MW to plug the current supply gap that resulted in the recent power cuts.
Eskom has debts totalling ZAR450bn ($30.5bn), and is surviving on hand-outs from the government in order to meet operating costs.
Although the government has agreed in prin- ciple to take on some of Eskom’s debts, it has yet to give any details, and has only announced that it will break up the company into transmission, generation and supply businesses.
These concerns come as Moody’s is set to review the status of the country’s last investment grade credit rating on November 1. Any lowering would lower the country’s rating to junk status.
So far this year foreign investors have sold off ZAR25bn ($1.7bn) of the country’s bonds, and the rand has fallen by 4.6% over the last six months.™
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w w w . N E W S B A S E . c o m Week 42 23•October•2019