Supplementary Budget 2020

Five key decisions expected soon that could change Eskom forever

Government has been promising for months to fix Eskom, which is drowning in debt, made record losses and is reliant on government bailouts to remain solvent. While little tangible progress has been evident so far, several key decisions are due to be taken this month.

Here’s what to watch out for:

1. Appointment of new chief executive officer

The utility, which provides about 95% of the country’s power, has been without a permanent CEO since Phakamani Hadebe quit in July. The post has been temporarily filled by its chairman, Jabu Mabuza, who has said his replacement will be named by the end of the month. Among three candidates shortlisted are former LNG Canada CEO Andy Calitz and Jacob Maroga, who was Eskom CEO from 2007 to 2009.

Read: Eskom’s CEO shortlist includes a former CEO, Shell exec - sources

2. Release of policy paper

Public Enterprises Minister Pravin Gordhan is overseeing the drafting of a special policy paper that will spell out the government’s envisioned future for Eskom. It’s likely to flesh out a proposal to split the utility into generation, transmission and distribution units under a state holding company. The paper could be referred to cabinet as soon as October 16, and will be released by the end of the month.

3. Debt Re-organisation

Eskom owes R450bn and isn’t generating enough cash to pay the interest. The utility’s management told investors in August that its chief restructuring officer, Freeman Nomvalo, would submit a report to the cabinet by the end of last month recommending how the debt should be reorganized. One of four options was to move most of the debt onto the government’s balance sheet while the others weren’t disclosed, according to investors who spoke on condition of anonymity. The government and Eskom declined to comment on that process, or whether it will be incorporated into the policy paper. Gordhan has said investors will be consulted on any reorganisation.

Read: 'I won't fail to try' says Eskom boss as financial performance slides

4. Finalisation of energy blueprint

The Integrated Resource Plan, which has been years in the making and maps out South Africa’s energy mix for the next decade, is due to be discussed by the cabinet on Wednesday and then released for public comment, according to Mineral Resources and Energy Minister Gwede Mantashe. A March draft envisions the nation’s electricity output capacity rising more than 40% to 78,344 megawatts by 2030. The bulk of that is to come from renewable sources.

Read: Mantashe confident South Africa will have a new energy plan by next week

5. Mid-term budget

The government has allocated R128bn to Eskom over the next three fiscal years so it can continue to pay its bills. Finance Minister Tito Mboweni will spell out where the money will come from when he releases his mid-term budget on October 30. The National Treasury has already signaled to government departments that they will have to drastically cut costs. Additional bailouts for Eskom are unlikely. The Treasury has set 28 conditions for Eskom to secure the aid, including that it provide daily updates on its cash position, strengthen its board and provide clarity on the costs and benefits of two new power plants.

Read: How Medupi and Kusile are sinking South Africa

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