(Reuters) - The South African government plans to split loss-making state power utility Eskom into three units to boost efficiency, following years of electricity cuts which have stifled Africa’s most industrialized economy.
Below are key facts about Eskom, its financial problems and the planned reforms.
GENERATING CAPACITY AND SHORTFALL
Eskom is in the top twenty power utilities worldwide in terms of installed generation capacity, but it has struggled to meet demand, with several bouts of severe power cuts between 2007 and 2019.
The utility has total nominal capacity of around 44,000 megawatts (MW), with 36,500 MW of that coming from 15 coal-fired power stations.
Established in 1923, Eskom also operates Africa’s only nuclear power plant at Koeberg near Cape Town, as well as open-cycle gas turbines, hydropower facilities and a wind plant.
It generates more than 90% of South Africa’s power and, according to the utility, 40% of the electricity on the African continent.
But power generation has been hurt in recent years by repeated faults at its fleet of aging coal power plants, as well as problems at two new mammoth coal plants, Medupi and Kusile.
Eskom is scrambling to finish those plants, which have been hit by cost overruns and long delays.
DEBT, LOSSES AND BAILOUTS
Eskom is struggling to service 440 billion rand ($30 billion) of debt, which it ran up due to surging salary, fuel and debt-servicing costs, as well as mismanagement and corruption scandals.
It made a 20.7 billion rand net loss in the year to the end of March and expects another 20 billion loss in the current 2019/2020 financial year.
The government has promised to inject 59 billion rand into the utility over the next two financial years, in addition to 230 billion rand of bailouts spread over the next decade.
Analysts have said even those bailouts aren’t enough to make Eskom sustainable in the long term.
An outline of the government’s reform plan announced on Tuesday did not give details of further debt relief, but officials say Finance Minister Tito Mboweni could give more information on Wednesday.
The government says it will split Eskom into three entities, generation, transmission and distribution, to boost efficiency, though it was not immediately clear how that would be achieved without a resolution to its debt and loss-making problems.
It says it will prioritize setting up a separate transmission unit within an Eskom holding company by March 2020 and complete the legal separation of all three entities by the end of 2022.
The aim is to create greater transparency over performance, give management focus and minimize corruption.
The utility employs more than 46,000 people, which many analysts consider excessive.
It is not clear whether the government’s overhaul plan will lead to large-scale job losses, a politically sensitive issue in a country where unemployment is running at 29%, an 11-year high.
Compiled by Emelia Sithole-Matarise; Editing by Jan Harvey
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