Eskom debt relief report expected by year-end, MPs hear

A report on how to deal with Eskom’s group debt burden of around R440bn is expected by year-end, the department of public enterprises told members of Parliament on Wednesday during a briefing.

The department’s Deputy Director General, Makgola Makololo, was briefing the oversight committee on public enterprises on its Special Paper on Eskom, which was was released by Public Enterprises Minister Pravin Gordhan in October ahead of the mid-term budget.

The plan outlines time frames for the unbundling of the power utility into three entities – generation, transmission and distribution – as the country’s overall energy sector is restructured in an effort to make it more competitive.

Gordhan said at the time that Finance Minister Tito Mboweni would make announcements on dealing with Eskom’s debt, now at 10% of SA’s nominal GDP.

However, when he delivered his second medium-term budget policy statement in late October, Mboweni said there would be no debt-relief for Eskom until Treasury observes progress in reforms at the entity.

‘Eskom is a business’

“Once I am convinced that the Eskom board and management has made an irrevocable commitment to implement government’s decisions and there is enough progress, we will negotiate the appropriate size of debt relief.

“Eskom is a business and should be run that way,” said Mboweni at the time.

On Wednesday Makololo said that Eskom’s Chief Restructuring Officer, Freeman Nomvalo, was considering the different options to “fundamentally” deal with Eskom’s debt so that the struggling power utility could be unbundled into three entities.

“We expect the CRO to give a final report by the end of this year. And that announcements will be made by the finance minister, when he is satisfied that there is progress in dealing with the fundamental issues around Eskom,” she said.

Mboweni, she said, must be satisfied that there has been progress in dealing with fundamental, operational and structural issues at the power utility.

Makololo added that while the market is seeking answers on how Eskom’s debt will be dealt with, from government’s perspective the restructuring of the utility also has a lot to do with the restructuring of the energy sector so it is “repositioned for growth and expansion”. The newly appointed CEO, Andre de Ruyter, will be a key driver of the restructuring process, she said.

Parliament recently approved a special appropriation bill for Eskom to receive an additional R59bn over the next two years. The president must sign the bill. The funds are part of the R230bn Treasury has allocated to Eskom over the next 10 years, as Fin24 previously reported.