Sivi Gounden, former director general in the Department of Public Enterprises, is likely to lead the Batemans group in the acquisition of an empowerment stake in Eskom when it becomes available in the next few years.
The question of who is in the vanguard in contending for the stake gained renewed focus last week when Eskom released its results for the past year. Minister of Public Enterprises Jeff Radebe and Eskom CEO Thulani Gcabashe restated their commitment to selling off 30% of Eskom’s electricity generation business to private players, 10% of it to empowerment players.
Gounden is chairperson of electricity industry supplier Batemans South Africa. His CEO will shortly be the outgoing head of the National Electricity Regulator, Xolani Mkhwanazi. Their combined policy and industry expertise makes for a strong alliance.
In an interview with the Sowetan earlier this year, Mkhwanazi confirmed Batemans was the project manager and consultant to the Coega industrial development zone in Port Elizabeth.
Batemans has also been reported as having an interest in purchasing some of Eskom’s mothballed stations.
Comment could not obtained from either Gounden or Mkhwanazi.
The Mail & Guardian has also picked up indications that Nomazizi Mtshotshisa, chairperson of Telkom, could lead another private grouping with its sights on Eskom. It is not clear in what capacity she would do this. On Thursday, Mtshotshisa was said to be in New York and not taking calls.
This week Eskom confirmed its intention to revitalise three mothballed power-plants, with the aim of meeting the country’s energy needs. It is estimated that South Africa’s excess generation will run out in 2007.
The process will culminate with the commissioning of a new power station, the country’s first in 20 years, to come on stream in 2011. The process will cost R6-billion in this financial year and R50-billion over the next five years.
Gcabashe confirmed that the parastatal was thinking of ways of bringing in empowerment players at the level of the recommissioned stations. “The trouble is in energy, when you look for a partner, you need someone who will bring expertise, capital or both,” Reg Rumney, a director at the BusinessMap Foundation, told the M&G this week.
Rumney noted that the identity of the buyer would depend on whether the government insists on a black-owned company with a 50% black holding, or an “empowered” concern with a 25% holding.
The latter could open doors for players like Siemens, who already have an empowerment holding, or the ABB group, which Rumney said was currently “active” in seeking out investment opportunities.
In 2001 BusinessMap released a report on the restructuring of the electricity supply industry, which made it clear that at the time there were no clear contenders for an empowerment stake in Eskom.Â
The report valued a 30% stake in Eskom at between R18-billion and R30-billion. This means an empowerment player would have to raise between R6-billion and R10-billion — half the total value of last year’s empowerment deals. Â
Rumney suggested a joint venture between a foreign player and a black company as an option, but warned that this was “perilously close to fronting”.
The supply industry restructuring will run alongside changes in transmission and distribution. In transmission, Eskom will form a subsidiary that will hold ring-fenced transmission assets that will eventually become a stand-alone public company. In distribution, it will cede its assets to regional distributors, or Reds, in a process to be overseen by the Electricity Distribution Industry Holdings Company.
It remains to be seen how Eskom will be compensated for these assets, whose depreciated value is in excess of R15-billion of total assets worth R96-billion. If Eskom is not adequately or fairly compensated, it could affect its rating in the international financial market, where Gcabashe confirmed the utility would be raising R50-billion.
This year’s capital expenditure will be met from cash from operations, which last year stood at R13,8-billion, and the local market. The strong cash flow comes from results described by Gcabashe as “robust” and which led Radebe to describe Eskom as “the jewel in the crown of state-owned enterprises”.
Net profit for the year fell to R3,5-billion, from R3,7-billion the year before. The fall was due to an impairment provision of R803-million, made as a possible write-off in telecoms investments in the second national operator and Mountain Kingdom Communications in Lesotho.
Eskom paid the government a dividend of R569-million, up from R549- million last year. Departmental figures show Eskom accounts for more than 50% of all the government’s dividend receipts. Eskom estimates it will generate an additional 1 000 megawatts a year for the next 10 years.