FirstRand CEO Alan Pullinger has weighed in at the energy crisis at Eskom, saying that they should sell two of their biggest coal-fired plants to repair their finances
The CEO of South Africa’s biggest bank, according to its market value, has given his opinion on what Eskom should do to relieve some of the financial strain it currently finds itself enduring.
Alan Pullinger spoke to Bloomberg recently and revealed that the Medupi and Kulise plants, which have yet to be finished after 10 years of construction and R292.5 billion to build, are ‘shiny new’ assets that would attract private investors.
The plants had been scheduled for completion in 2015 already, despite ample time and funding going into the projects.
Pullinger said that there are large energy investors from both SA and abroad who would jump at the opportunity.
The CEO said that the sale of the plants could face difficulties imposed by the government, who could attach conditions to the sale. An example of the potential conditions would be banning job cuts at the power entity.
Pullinger also suggested that Eskom should split into two parts, separating the generation of power from its transmission. He said that this would encourage independent producers to feed into the grid.
However, the government has not shown much interest in privatising the company. Many of Eskom’s other plants are outdated and expensive to operate.
“There is no way for Eskom to grow into its debt,” Pullinger said. “It’s got to be fixed,” because Eskom’s woes and the lack of reliable energy supply are “a massive constraint to growth.”
Eskom currently poses the biggest credit risk to the country, with over R400 billion in debt alone. In a desperate attempt to pay for maintenance at some plants, the entity has implemented load shedding across the country.
With the emergence of solar panels and other alternative power sources, Eskom has seen a decline in sales as consumers turn to more stable options.
Darias Jonker, director for Africa for the Eurasia Group shares Pullinger’s opinion on a restructuring at Eskom to try and regain some stability. He said that the current proposal for Eskom to transfer R100 billion of its debt to the government would result in rating downgrades for the country.
Any asset sales by Eskom would likely be opposed by labour unions, who have publicly stated their opposition to privatisation.
“Eskom is pushing the government towards a fiscal crisis either way, and this is likely to happen sometime between 2022 and 2026, and thus could coincide with the 2024 election,” Jonker said.
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