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dam-l SA power co. Eskom to be reshaped/LS
>From Business Day 5/4/2000
05 April 2000
Eskom to be reshaped
By Robyn Chalmers
Government proposes moves to break up the utility and restructure the
electricity supply industry
ESKOM is set to be broken up and restructured to allow for competition in
SA's power market within three to five years, but government has ruled out
any immediate privatisation of the R70bn utility.
Speaking at the release of Eskom's 1999 financial results yesterday, Public
Enterprises Minister Jeff Radebe outlined government's proposal on reshaping
the power supply industry, but said no final decision had been made.
Radebe's plan encompasses a mixture of continuing state ownership and the
gradual introduction of private sector competition to the power market by
unbundling Eskom.
A final model for Eskom will be released by the end of April following talks
with stakeholders.
Eskom's top management broadly welcomed government's proposals yesterday,
having made their own submission to Radebe last month.
An international workshop on restructuring the electricity market has been
held for the past two days. This will give pointers which could be
incorporated into a new framework for SA.
"The rapid changes in the political and economic context of the (power)
industry worldwide raise questions about the continued ability of SA's
monopolistic electricity industry to meet customers' electricity needs in
the future," said Radebe.
Two key new initiatives announced by Radebe relate to the generation and
transmission sectors.
He suggested that as a first phase of restructuring generation, Eskom's 24
power stations, which analysts value at about R100bn, should be separated
into a number of independent competing generation companies owned by the
state. Competition should then be phased in.
On the R20bn transmission network, Radebe said this should remain at least
partially in the hands of the state, but could become a separate independent
transmission company. The introduction of an equity partner to the company,
or an initial public offering, may be on the cards in the future.
Progress has already been made on reshaping the distribution sector. This
involves merging the distribution functions of Eskom with local authorities
to form regional electricity distributors. As an interim step, Eskom's
distribution division will form part of a holding company for the entire
distribution sector, to be called EDI Holdings.
On the potential sticking point of the generation reshape, Eskom CE
designate Thulani Gcabashe said the utility supported government in its
long-term ambition of achieving competition in power generation. "But we
believe that during that transition we need to maintain one generation
company."
Gcabashe said financial backers would prefer to see a strong balance sheet
that a unified Eskom could offer in order to get funds at more competitive
rates.
Eskom chairman Reuel Khoza said: "We welcome competition but we need to
maintain one strong generation company so that the industry as a whole
maintains its viability."
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Lori Pottinger, Director, Southern Africa Program,
and Editor, World Rivers Review
International Rivers Network
1847 Berkeley Way, Berkeley, California 94703, USA
Tel. (510) 848 1155 Fax (510) 848 1008
http://www.irn.org
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