Eskom could sell some coal-powered plants to raise R450bn

An electricity pylon (iStock).
An electricity pylon (iStock).

South Africa could dispose of some of Eskom's coal-fired plants and allow households to sell electricity back into the grid as part of a restructuring of the state-owned power utility.

The stations could be sold through a series of auctions and would include related staff contracts, coal-supply contracts and environmental obligations, according to an economic policy paper the National Treasury released for public comment on Tuesday. The plan could raise R450bn, the Treasury said, citing an independent study.

The disposal of coal plants would be tied to a power-purchase agreement at a pre-defined, station-specific tariff, according to the paper.

Details of the proposal give another glimpse of the many options being considered to get Eskom back onto a sustainable footing and start reversing the damage the indebted company’s finances have brought onto the economy and the nation’s budget.

President Cyril Ramaphosa said in February Eskom would be split into transmission, generation and distribution businesses. The utility told senior managers last week that will take long as three to five years.

Selling plants may be opposed by labor groups, including the National Union of Mineworkers, that see privatisation as resulting in job losses.

“Our thinking as the NUM is that the selling of power stations or whatever will not help Eskom,” Paris Mashego, the union’s energy coordinator, said by phone. Selling the plants to private investors also wouldn’t solve the issue of emissions that it’s trying to reduce, he said.

Solar panels

The move to allow non-state entities to become power producers would signal a new commitment for investment in the sector. The pace of private renewable projects stalled after the government signaled a preference for nuclear energy, but deals were signed last year and the Department of Energy has said more would be welcome.

“Eskom’s unwillingness to sign independent power-purchase agreements with bidders in the past” has undermined investor confidence, the Treasury said. Enabling the independence of the single buyer’s office “will ensure the sustainability of independent power producers,” it said.

The option was also proposed on a smaller scale. The government would avoid large capital spend on power infrastructure if the system would allow households and business to sell excess electricity generated through solar panels back into the grid, Treasury said.

The government is giving Eskom a R128bn bailout over the next three years to keep it afloat and has appointed a chief restructuring officer to oversee the unbundling of the company, which doesn’t have a permanent chief executive officer yet.

“While Eskom’s pressing short-term operational challenges have abated somewhat, another crisis is on the horizon,” the Treasury said.

ZAR/USD
17.63
(-0.04)
ZAR/GBP
23.01
(-0.05)
ZAR/EUR
20.79
(-0.01)
ZAR/AUD
12.62
(-0.03)
ZAR/JPY
0.17
(-0.01)
Gold
2034.21
(+0.05)
Silver
28.28
(+0.09)
Platinum
961.50
(+0.38)
Brent Crude
44.55
(-1.53)
Palladium
2166.01
(+0.63)
All Share
56757.73
(-1.56)
Top 40
52435.65
(-1.72)
Financial 15
9897.96
(+0.10)
Industrial 25
74671.49
(-1.98)
Resource 10
58948.78
(-1.89)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 931 votes
It depends on how the funds are used.
74% - 6246 votes
No. We should have gotten the loan elsewhere.
15% - 1285 votes
Vote