Events and Special Reports

Eskom informs lawmakers it will not meet DPE`s unbundling timeline

Eskom informs lawmakers it will not meet DPE`s unbundling timeline
Mining News Pro - In a presentation to lawmakers on Wednesday, Eskom indicated that it would not meet the unbundling timetable outlined for the vertically integrated power utility by the Department of Public Enterprises (DPE) in a policy paper released in October, titled a ‘Roadmap for Eskom in a Reformed Electricity Supply Industry’.

In an update on the restructuring under way at Eskom, CEO Andre de Ruyter showed participants to the briefing a table outlining ‘Roadmap Deliverables’, which indicated that the final timeframe for the complete legal separation of Eskom’s generation, transmission and distribution businesses was still to be confirmed.

By contrast, the DPE roadmap envisaged that the transmission unit would be legally separated by December 2021, while the unbundling of the generation and distribution units would follow in December 2022.

The table also distinguishes between the ‘Roadmap Timeline’ and the ‘Eskom Timeline’ and includes a note stating that the Eskom Timeline would be used as the “baseline going forward”.

A second footnote adds that implementation of legal separation would follow divisionalisation and that a number of the processes required for legal separation are outside of Eskom’s control.

De Ruyter reiterated Eskom’s commitment to the unbundling of the utility as part of the “optimisation” of the business, but also highlighted the complexity of the process.

Public Enterprises Minister Pravin Gordhan also emphasised the complexity of the restructuring, which he said required that Eskom “moves with caution”.

De Ruyter insisted that significant progress had been made with the first phase of the restructuring, which involved divisionalisation of the business into three entities and the establishment of divisional boards.

The three boards, which had already met twice, were made up of internal Eskom candidates and MDs had been appointed to lead each division. The generation division was headed by Bheki Nxumalo, transmission by Segomoco Scheppers and distribution by Monde Bala.

Each division was already managing separate income statements, and, in time, separate balance sheets would be created so that each division could take its share of the utility’s debt, which currently stood at above R450-billion.

“We are not going slow by divisionalising. This approach allows us to prototype and road-test the three different divisions before we go to a legal unbundling and that will de-risk the legal restructure and legal separating programme,” De Ruyter argued.

Gordhan said that government had not yet settled on a solution for Eskom’s debt, and that deliberations had been delayed by the Covid-19 pandemic.

He said the issue would receive serious attention again in the coming weeks as the country began to ease its Covid-19 lockdown restrictions.

Various options would be considered, including the inputs contained in a report prepared by the Chief Restructuring Officer Freeman Nomvalo.

The debt-relief proposal made ahead of the lockdown by the Congress of South African Trade Unions was also under consideration and could be included in a framework agreement on Eskom that was under deliberation at the National Economic Development and Labour Council (Nedlac).

He anticipated that the Nedlac stakeholders would finalise the framework agreement in the coming weeks.

De Ruyter said that addressing the group’s R450-billion debt remained challenging and that it was, thus, not yet in a position to apportion debt to the various divisions.

“While we have finalised the income statements and also the cashflow statements [for the divisions], we have not as yet finalised the balance sheets . . . We need to consult with our lenders in this regard.

“Clearly, when we go through a corporate reorganisation effort such as the divisionalisation programme there are concerns that can be raised by lenders and they are very important stakeholders to us and, therefore, we need to bring them on board,” De Ruyter told the lawmakers present in the virtual meeting.

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