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Eskom is firing on all cylinders to split into three units, MPs hear

Eskom is on track to unbundle. File: Bloomberg

Eskom is on track to unbundle. File: Bloomberg

Published Sep 21, 2023


Eskom was firing on all cylinders to unbundle and is aiming to establish and get operational the Distribution and Generation subsidiaries by March 2024, the portfolio committee on Public Enterprises was told yesterday.

Last week the Energy Regulator of SA (Nersa) approved that the National Transmission Company of South Africa (NTCSA) be issued with two outstanding licences.

Eskom has projected that its unbundled, wholly-owned transmission subsidiary will start operating as a full subsidiary on November 1.

A Department of Public Enterprise (DPE) team led by Minister Pravin Gordhan told the portfolio committee on Public Enterprises yesterday that it was also miles ahead on the establishment of the Distribution division, including: seeking lenders’ consent, fulfilling Public Finance Management Act (PFMA) requirements, establishing an interim board and registering the company.

Part of the requirements for the Distribution division is the debt compliance of municipalities. Municipalities’ R63 billion debt to Eskom presents an Achilles heel for the restructuring, which will require local authorities to be financially stable enough to pay their bills.

National Treasury is working on slashing at least a third of this debt to Eskom as the utility’s unbundling process speeds ahead, with Distribution the next point of call.

There will be qualifying criteria for the largesse as municipalities will still be required to buy and sell electricity from the distribution division and that entity will be required to keep their current accounts up to date for a 12-month period.

Eskom, which has been granted its own R254bn debt relief plan by the government, is looking at means of ensuring municipalities will have capacity to service their debt and obligations in the new structure it is spearheading for the restructuring of the utility.

The Generation division, Parliament was told, would not present as many processes as it would remain embedded in the Eskom Holdings structure. It will not have to follow PFMA approvals and other processes.

Giving an update, the DPE said the due diligence for the Transmission business had been completed, the merger agreement between the NTCSA and Eskom had been signed and was to be implemented by December 2023, the existing memorandum of Incorporation was being refined to include amendments, all PFMA approvals had been obtained and service contracts between NTCSA and Eskom were in place.

On the labour front, staff transfer issues had been sorted with the extensive consultations conducted at the Restructuring Consultative Forum (RCF), Eskom had appointed a neutral independent chair to oversee the RCF process and had completed the Transmission National Forum (TNF) engagement on business separation.

With the distribution, Eskom was at an advanced stage of obtaining lenders’ consent for the unit to split out.

Deeds office had agreed with Eskom’s position regarding the transfer and endorsement of servitudes to the NTCSA, while the notarial deed of cession had been finalised and would be signed closer to the merger implementation date.

Agreement between NTCSA and Eskom for operations on shared servitudes was in place.