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Special Paper on Eskom Released

October 29, 2019

Department of Public Enterprises

29 October 2019

The Roadmap for Eskom in a Reformed Electricity Supply Industry has been released.

The Special Paper on Eskom emphasizes that the restructuring of Eskom into three subsidiary businesses – generation, transmission and distribution – is necessary to reduce the risk that Eskom poses to the country through its dependence on bail outs and inability to supply the economy with adequate power.

A capable, transparent, accountable, competitive and world class Eskom needs to emerge from the reforms.

The special paper, inter alia, outlines actions to overcome the current crisis at Eskom and set it on a new path of sustainability; sets out the required key steps in transforming the electricity supply system; addresses steps to restore Eskom’s finances, including government support; identifies measures to reduce the cost structure of Eskom to facilitate affordable electricity and details the Eskom restructuring process.

“The Eskom that shall emerge will be characterised by optimised operations, restructured finances, a sustainable business model, and an environmentally responsive electricity system.”

The special paper also points out that Eskom will “implement appropriate controls to ensure that the recent incidences of irregular, fruitless and wasteful expenditure are a thing of the past”.

As part of the reform process, alternative economic activities shall be developed and implemented to assist communities dependent on the power stations and associated coal mines.

According to the executive summary, actions to put Eskom on a new path include immediately setting up a subsidiary for Transmission within Eskom Holdings and to complete the current planning for the establishment of the generation subsidiaries; Eskom to appoint an executive to drive the implementation of the above plans; strengthen the existing Eskom transformation team with the necessary skills; establish a separate Eskom transformation unit reporting directly to the Board; strengthen the Board and appoint a new CEO in the coming weeks; radically improve operations, including maintenance of generation plant through strict oversight and consequence management and introducing radical cost saving initiatives including renegotiation of coal and IPP contracts.

The paper focuses on Eskom challenges, moving Eskom from crisis to stability, Eskom financial sustainability, governance, implementing a “just transition” and implementation of roadmap.

Eskom’s reform will be based on three steps, namely, functionally separating Generation, Transmission and Distribution; a Transmission Entity to be set up within Eskom as a separate entity and intervention to address the utility’s financial stability.