Eskom CEO says unbundling the utility will make it sustainable

'Currently Eskom is borrowing money to service its debt. That means it is critical for us to deal with our cost issues,' says Phakamani Hadebe (Delwyn Verasamy/M&G)

'Currently Eskom is borrowing money to service its debt. That means it is critical for us to deal with our cost issues,' says Phakamani Hadebe (Delwyn Verasamy/M&G)

Decisions that need to be taken at Eskom might end up being painful, but they have to be taken, the power utility’s chief executive, Phakamani Hadebe told delegates at Mining Indaba 2019 on Monday.

Of his appointment as Eskom CEO, he told delegates that nothing prepares one to deal with an institution where there are severe governance issues, low staff morale and financial institutions unwilling to lend you money – especially for coal-related projects.

Apart from access to finance being one of Eskom’s main challenges, according to Hadebe, the other is operational in nature.

“Currently Eskom is borrowing money to service its debt. That means it is critical for us to deal with our cost issues,” he explained.

“Eskom cannot do this by itself. We need tariff increases that are above inflation.
Our discussions with government are already quite advanced. We cannot expect government to come to our help if we cannot demonstrate that we can also do our bit from our side.”

Hadebe said Eskom is just too big. To make it sustainable one needs to think about unbundling it — separating out sections like generation and distribution, in his view.

“That is what we are discussing with government and the special Eskom task team. South Africans should take comfort from the fact that we are discussing these challenges and we are looking at solutions that have been put on the table,” he said.

“Once we have decided on the solutions, then the next challenge will be executing on these and I think we are more than able to do that.”

As for environmental issues, Hadebe said that while it is of importance, the truth of the matter is that coal would still be needed as a back-up to renewable energy.

Currently, Eskom still has about R36-billion in its budget to spend on environmental issues.

READ MORE: No end to Eskom bailout furore

In his view, the coal industry in the country as a whole, however, needs to be clearer about what it plans to do about addressing environmental issues.

“Yes, South Africans have a reason to complain about Eskom’s problems, but if government is willing to recapitalise us, we could make Eskom sustainable,” said Hadebe.

In his view, it is also important to engage with other countries in order to ensure that Eskom can survive for another 95 years. The power utility is, therefore, indeed talking to about seven other Africa countries in this regard. Hadebe said coal will be part of these dealings.

“South Africa cannot afford to have a failed Eskom. We have to focus on getting our energy availability up from the current [estimated] 72% to 80%,” he said.

“Of course those who did wrong at Eskom in the past must pay the price, but that is for the law enforcement agencies to deal with. We at Eskom must now focus on moving forward.” — Fin 24

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