Eskom CEO is against rush for unbundling power utility

·        The new chief executive of South Africa’s power utility
Eskom, Andre de Ruyter has cautioned against the early unbundling of
the loss-making company and underlined that  the risks associated with
the process need to be assessed and managed properly

·        The South African government earlier wanted to set up a
transmission unit within Eskom by the end of March 2020 and complete
the legal separation of all three units in 2022.

The new chief executive of South Africa’s power utility Eskom, Andre
de Ruyter has cautioned against the early unbundling of the
loss-making company and underlined that  the risks associated with the
process need to be assessed and managed properly.

President Cyril Ramaphosa announced last year that Eskom would be
unbundled into units for generation, transmission and distribution, as
part of plans to restructure the power utility.    The South African
government earlier wanted to set up a transmission unit within Eskom
by the end of March 2020 and complete the legal separation of all
three units in 2022.

However, the CEO has a different take now. He said while Eskom was
committed to a restructuring of the power industry as set out in the
government paper, the utility wanted to carefully manage risks
associated with the process.

The rush to full legal separation from day one creates a number of
risks – transfer of assets etc. Also, the lenders will be concerned
about assets that they have loaned money against since  there could be
capital gains tax  on these assets that could cost them a lot of
money.

The government paper prepared before his joining the power utility had
set out that Eskom could relinquish its near-monopoly and compete with
independent power producers (IPPs) to generate electricity at least
cost. However, the new CEO cautioned that there is a lot of planning
that needs to go into the unbundling and restructuring of Eskom.
Eskom supplies more than 90% of South Africa’s power, but its
coal-fired plants struggle to meet electricity demand. The utility
implemented severe nationwide power cuts last year and in this month,
which  have pushed back the economy and  exerted pressure on
Ramaphosa.