/ 15 December 2021

Eskom moving away from monopoly it has held for 99 years, De Ruyter says

Nampak Ltd. Chief Executive Officer Andre De Ruyter Interview
Power struggle: Eskom chief executive André de Ruyter. (Photo: Waldo Swiegers/Bloomberg via Getty Images)

State power utility Eskom said on Wednesday the unbundling of its energy transmission arm, the National Transmission Company, had been successful and that it would be operational as a wholly owned subsidiary during the 2022 calendar year.  

Presenting Eskom’s interim results for the six months ended September 2021, which showed a R9.2-billion interim profit — a significant improvement from R0.2-billion in the same period last year — chief executive André de Ruyter said the state-owned entity was on track to meet the target for the legal separation of the transmission business.

He, however, cautioned that certain dependencies outside of Eskom’s control may delay the operationalisation of the National Transmission Company by the target date of 31 December 2021.

“We are steadily moving away from the monopoly position that we’ve occupied for close to 99 years now,” said De Ruyter. 

What remains is the approval of the asset transfer agreement by the treasury as per the Public Finance Management Act. After the agreement is signed and becomes legal, assets from Eskom Holdings can be transferred to the wholly owned new subsidiary, De Ruyter said.

“This is one of the most complex corporate restructuring exercises that our advisers have worked on,” he said.

Another hiccup, De Ruyter warned, may be the cancellation of the transmission licence, which is still held by Eskom Holdings. A new licence will have to be issued to the wholly owned subsidiary for it to be able to transmit its own electricity separately from Eskom.

The separation of Eskom into three units is expected to open up the generation space to allow the participation of more independent power producers.

De Ruyter said certain amendments to the Electricity Regulation Act needed to be made, adding that although these were not a prerequisite for the legal separation, they would  facilitate the operation of a more liberalised market dispensation going forward.

Eskom said it had managed to reduce its debt by R10-billion since the beginning of the financial year. The state power utility’s gross outstanding debt is now at R392.1-billion, from R463.7-billion a year earlier. 

“This significant improvement in a number of key financial indicators is an encouraging development in our efforts to turn Eskom around. This is despite navigating a challenging and uncertain operating environment and the uncertainties brought about by the Covid-19 pandemic during the first half of the year,” said De Ruyter.

The Eskom boss said there was no prospect of load-shedding during the festive season although he jokingly added: “The generation system has the habit of keeping me very humble”.

He noted that electricity demand usually drops after the 16 December public holiday “when the builder’s holiday starts”. 

“We are in good shape for the festive season, however, there is always the caveat that due to the poor reliability and predictability of our generation system, there is always a residual risk. De Ruyter added. “But where we are today, the outlook is positive.”

Anathi Madubela is an Adamela Trust business reporter at the M&G.