New Eskom CEO warns against hasty unbundling of firm
President Cyril Ramaphosa announced last year that Eskom would be split into units for generation, transmission and distribution, as part of plans to overhaul South Africa’s power sector
JOHANNESBURG – The new chief executive of South Africa’s power utility Eskom said on Sunday that a plan to split the loss-making company should not be rushed, because risks associated with the process need to be assessed and managed properly.
President Cyril Ramaphosa announced last year that Eskom would be split into units for generation, transmission and distribution, as part of plans to overhaul South Africa’s power sector and open the industry up to more competition.
A government paper showed in October that Pretoria plans to set up a transmission unit within Eskom by the end of March 2020 and complete the legal separation of all three units in 2022.
But in an interview with eNCA television on Sunday, Andre de Ruyter said while Eskom was committed to a restructuring of the power industry as set out in the government paper, the utility wanted to carefully manage risks associated with the process.
“What we are careful of is with a precipitous unbundling to create risks that may end up causing us to have a less stable system,” said de Ruyter, who took charge of Eskom on 6 January.
“For us to rush into full legal separation from day one creates a number of risks - transfer of assets, our lenders will be concerned about assets that they have loaned us money against, there could be capital gains tax events that could cost us a lot of money,” he added.
The government paper had set out a vision for a restructured electricity supply industry, where Eskom could relinquish its near-monopoly and compete with independent power producers (IPPs) to generate electricity at least cost.
One or more Eskom generation units will be created to compete with IPPs and the distribution model will be reformed so more power can be procured from small-scale producers.
“There is a lot of planning that needs to go into the unbundling and restructuring of Eskom. We need to be quite careful on how we implement this not to precipitate all of these risks that we first need to understand, assess and manage them properly,” de Ruyter said.
Eskom supplies more than 90% of South Africa’s power, but its creaking fleet of coal-fired plants struggle to meet electricity demand.
The utility implemented severe nationwide power cuts in several bursts last year and sporadically earlier this month. The power cuts have pushed the economy to the brink of recession and piled pressure on Ramaphosa, who came to power with a pledge to revive investor confidence and lift economic growth.