Ramaphosa announces Eskom to be unbundled into 3 entities

The three separate entities will deal with generation, transmission and distribution under Eskom Holdings.

Picture: EWN.

CAPE TOWN - President Cyril Ramaphosa has announced that in order to turn around embattled state power utility Eskom, three separate entities will be established to deal with generation, transmission and distribution under Eskom Holdings.

He made the announcement during his State of the Nation Address on Thursday evening.

"To bring credibility to the turnaround and to position South Africa’s power sector for the future, we shall immediately embark on a process of establishing three separate entities – Generation, Transmission and Distribution – under Eskom Holdings.

"This will ensure that we isolate costs and give responsibility to each appropriate entity.

"This will also enable Eskom to be able to raise funding for its various operations much easily from funders and the market.

"Of particular and immediate importance is the entity to manage an independent state-owned transmission grid combined with the systems operator and power planning, procurement and buying functions.

"It is imperative that we undertake these measures without delay to stabilise Eskom’s finances, ensure security of electricity supply, and establish the basis for long-term sustainability."

The president stated that security of energy supply is an absolute imperative.

"Eskom is in crisis and the risks it poses to South Africa are great.

"It could severely damage our economic and social development ambitions.

"We need to take bold decisions and decisive action.

"The consequences may be painful, but they will be even more devastating if we delay.

"In responding to this crisis, we are informed by the need to minimise any adverse economic cost to the consumer and taxpayer.

"As we address the challenges that face Eskom we will ensure that there is meaningful consultation and dialogue with all key stakeholders.

"We will lead a process with labour, Eskom and other stakeholders to work out the details of a just transition, and proper, credible and sustainable plans that will address the needs of all those who may be affected.

"As we address the challenges that face Eskom, we also need to safeguard our national fiscal framework, achieve a positive impact on our sovereign credit rating, and pay attention to the rights and obligations of Eskom’s funders.

"Eskom has come up with the nine-point turnaround plan which we support and want to see implemented.

"In line with this plan, Eskom will need to take urgent steps to significantly reduce its costs.

"It will need more revenue through an affordable tariff increase.

"We need to take steps to reduce municipal non-payment and confront the culture of non-payment that exists in some communities.

"It is imperative that all those who use electricity – over and above the free basic electricity provided – should pay for it.

"Government will support Eskom’s balance sheet, and the Minister of Finance will provide further details on this in the Budget Speech.

"This we will do without burdening the fiscus with unmanageable debt.

"To ensure the credibility of the turnaround plan and avoid a similar financial crisis in a few years’ time, Eskom will need to develop a new business model.

"This business model needs to take into account the root causes of its current crisis and the profound international and local changes in the relative costs, and market penetration of energy resources, especially clean technologies.

"It needs to take into account the role that Eskom itself should play in clean generation technologies."

Earlier this week he told delegates at the Mining Indaba in Cape Town that the government would not allow the state-owned power utility to fail.

“The other important infrastructure challenge that you are all concerned about is the security and affordability of energy supply. We have been giving detailed attention to the crisis and challenges that our electricity company Eskom is facing.

“Eskom is currently facing some significant operational, financial and structural challenges. Its contribution to the health of our economy is just far too great for it to be allowed to fail.”

The ailing company supplies more than 90% of South Africa’s power, but it's drowning in R420 billion of debt.

In January the president announced a task team to help stabilise the cash-strapped power utility whose problems with infrastructure maintenance have led to load shedding.

READ: President Ramaphosa’s Sona 2019 full speech

State of the Nation Address... by on Scribd