/ 30 April 2004

Halt called to SNO spending

Eskom Enterprises, the Eskom subsidiary that undertakes a range of strategic investments, will not increase its stake in the second national operator (SNO) after preparing to write off R649-million in lost investments, acting CEO Duncan Mbonyana said last week at the unveiling of Eskom’s annual results.

Eskom Enterprises holds 15% of the SNO, with Transnet’s Transtel holding an equal stake. Empowerment group Nexus holds 19%. A further 26% is held in equal parts by initially rejected bidders Communitel and Two Consortium, while the remaining 25% has been warehoused.

The possibility of Eskom Enterprises taking a higher stake arose after Nexus chairperson Kennedy Memani, accused Communitel and Two Consortium of holding the process to ransom by demanding a larger stake and potential control of the venture.

This raises the option that Eskom Enterprises and Transtel could be offered part of the warehoused 25% and lead the project because of their cash, expertise and clout.

But Mbonyana said the company would not raise its stake because of the Eskom group’s focus on meeting the country’s energy needs. It is to spend R6-billion this year, and R50-billion in the next five years.

Having already spent R748-million on the SNO, Eskom has made a provision to write off up to R649-million.

Eskom has also provided for a R154-million write-off in its investment in Mountain Kingdom Communications, a fixed-line operation in Lesotho. This was because of “disagreements in interpretation of licence conditions” with Lesotho’s regulator, said group CEO Thulani Gcabashe.

On the SNO, Gcabashe expressed confidence that warring factions would tie down a shareholder agreement and clinch the licence. He was later reported as suggesting this would happen in the first half of the year.

In 2002 Eskom Enterprises’s profit fell from R108-million to R9-million. Last year it recorded a net loss of R719-million owing to the investment write-off provisions.

Without these it would have made a profit of R84-million, said Mbonyana. He added that a range of investments across Africa were beginning to show positive returns.

Eskom Enterprises also houses the controversial R10-billion pebble bed modular reactor project, intended to produce nuclear energy to generate electricity. Gcabashe confirmed that the search for investors continues.

Eskom has spent more than R1-billion on the project, and 35% of the funds, or R3,5-billion, is required from outside investors.