Africa|Business|Coal|Efficiency|Energy|Financial|Indaba|Joburg Indaba|Maintenance
Africa|Business|Coal|Efficiency|Energy|Financial|Indaba|Joburg Indaba|Maintenance

Eskom implementing five-step turnaround plan, says De Ruyter

André de Ruyter

André de Ruyter

Photo by Creamer Media's Donna Slater

8th October 2020

By: Tasneem Bulbulia

Senior Contributing Editor Online


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As part of State-owned utility Eskom’s turnaround strategy, it is implementing five urgent and interdependent priorities, Eskom Group CE André de Ruyter told delegates on the second day of the virtual Joburg Indaba on October 8.

Firstly, the utility is aiming for operational stability, which would considerably reduce the risk of load-shedding, he stated.

He said that, by April 2021, Eskom was expecting to see the benefits of enhanced maintenance and, by September 2021, would have considerably reduced the risk of load-shedding.

He emphasised that the risk would not be eliminated entirely, but would be reduced.

Secondly, the utility was undertaking actions to improve its income statement, which De Ruyter said was under immense pressure.

He noted that Eskom’s revenue challenges were the result of lower sales volumes, which decreased by 1% a year over the past decade, as well as the non-cost-reflective tariff increases granted by the National Energy Regulator of South Africa (Nersa).  

De Ruyter stressed that, without cost-reflective tariffs, Eskom’s business efficiency efforts would only be beneficial in the short term. Therefore, the utility had reviewed various revenue decisions by Nersa through the High Court.

De Ruyter noted that this was the only course of action left to Eskom in this regard, but called for appropriate legislative changes to allow for a less adversarial approach to resolving these differences.

He highlighted that, in its appeals for cost reflective tariffs the utility was not looking for tariffs to subsidise its inefficiencies and was, therefore, seeking to manage its costs properly and in a disciplined manner.

This included renegotiating coal contracts where suppliers’ profit margins are above the market norm and undertaking various legal measures to recover debt owed to the utility.

Thirdly, the utility was undertaking focused actions to address its balance sheet.

De Ruyter said its internal financial modelling shows that Eskom can only achieve independent financial sustainability if its debt balance is reduced to R200-billion. With the utility’s debt at R488-billion as at end March, he indicated that there was still a long way to go to reach this target. 

While he indicated that the equity assistance received from the National Treasury was indispensable, he noted that a structural solution was needed and, therefore, Eskom was encouraged by the positive progress made at the National Economic Development and Labour Council in this regard in the recent past.

Fourthly, Eskom had started the process of restructuring into three divisions − generation, distribution and transmission.  

De Ruyter informed that divisionalisation was the first step of this process.

He highlighted that notable progress had been made on the 2019/20 targets of this phase towards the legal separation of Eskom’s three main business, in line with government’s ‘Roadmap for Eskom in Reformed Electricity Supply Industry’, released in October 2019.

De Ruyter also noted that Eskom was accelerating it efforts to establish a separate legal entity for transmission. It had approached the Department of Public Enterprises and the Treasury for the necessary approvals under the Public Finance Management Act to create a new wholly-owned subsidiary under Eskom Holdings for this purpose, he noted.

The Integrated Resource Plan of 2019 calls for the Single Buyer Office to be reconfigured in accordance with the divisionalisation efforts.

As such, the office is being restructured into a central purchasing authority, with new inputs around rules and processes, to ensure greater transparency and efficiency, said De Ruyter.

Fifthly, he noted that Eskom was undertaking an organisational culture change, including restructuring staff and rooting out corruption.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online


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