Eskom’s quest for a R72 billion injection over the next five years to upgrade over 2,890km of extra high-voltage lines and 60 transformers has hit a snag as the power utility does not inspire the confidence of international funders.
ESKOM’S quest for a R72 billion injection over the next five years to upgrade over 2 890km of extra high-voltage lines and 60 transformers would hit a snag as the power utility does not inspire the confidence of international funders.
Eskom’s managing director for transmission, Segomoco Scheppers, said the entity is placing a strong focus on the implementation of these projects over the next five years.
“The analysis carried out reflects a requirement of close to R72.2bn will be required to expand and strengthen the transmission grid over the next five years,” he said.
“This requires that some challenges beyond Eskom’s full control, such as the lead time to obtain servitudes, among other relevant authorisations, as well as the resource capacity in the country, be urgently addressed.
“The next five years are very critical for security of supply. If the TDP 2022 (Transmission Development Plan) requirements to deliver an adequate transmission network capacity by 2027 are to be met, a significant investment of R50.8bn is required for new capacity expansion projects to meet the reliability requirements, connection of new generation capacity and loads, as well as to acquire servitudes. A further R21.4bn is required to refurbish the existing asset base and procurement of production equipment.”
Eskom had previously engaged international funding facilitator Lazard as its financial adviser and ENSafrica and White & Case LLP as its legal advisers in connection with Eskom’s turnaround plan.
The TDP Forum is held annually as part of Eskom’s transmission licence requirements issued by the National Energy Regulator of South Africa (Nersa), which requires Eskom to publish a TDP every year.
Energy analyst Ted Blom said despite a new board including people with engineering expertise, it would be a hard sell to convince funders on its aspirations.
He said Eskom’s R1.7 trillion debt obligations made it difficult for new funders to get a buy in on the utility.
Blom said Eskom needs urgent restructuring other than to try and continue as a going concern with rampant corruption across the regulatory and operational fraud incidents.
“If Eskom can default on one debt, it can default on a lot more others. Debt security or any other financial obligations under a scenario where funders see no possibility of debt recovery, and most of Eskom’s debts are under one technical default or another, the South African government guarantees that. The full independent audit of Eskom must be conducted immediately,” Blom said.
Andre Pillay, group treasurer at Eskom, said the entity was working on a new corporate plan that will provide direction on how the company is expected to look going forward and what its role will be in both the domestic and continental energy markets. The review of the corporate plan is expected to be completed by the end of this year.
“We remain committed to executing our approved borrowing programme,” he said.
“Eskom plans to raise an amount of R72bn in the current financial year, of which 23% (R16.4bn) has already been secured, and the company is at advanced stages of ensuring that the funding requirement for the current financial year is fulfilled in a timely manner,” Pillay said.
He said the merger agreement gives effect to the transfer of the Transmission division to the new wing, NTCSA (National Transmission Company of South Africa), subject to the satisfaction of certain suspensive conditions, which include, but are not limited to, Eskom obtaining all applicable creditor consents.
– BUSINESS REPORT
