South Africa resurrects plan to sell coal power plants

Key South African government ministers have reached a broad agreement to sell some of the state power utility’s coal-fired power plants to help reduce its debt burden, finance minister Enoch Godongwana said.

The accord comes two years after the plan was first raised in a National Treasury policy paper, which suggested the facilities could bring in as much as R450 billion rand ($29.5 billion). Eskom Holdings’s total debt stood at 402 billion rand at the end of March.

“There’s general agreement to sell some of the coal plants,” Godongwana said in an interview in Cape Town on Thursday after presenting the medium-term budget policy statement. “Broadly we’re agreed in government on that strategy.”

Eskom supplies almost all of South Africa’s electricity, most of it from coal-fired plants that make it the world’s biggest emitter of the pollutant sulfur dioxide.

Disposing of the facilities will require buy-in from Eskom management, which may resist the planned sale because of the impact it would have on the utility’s balance sheet, Godongwana said.

“They’ve got their own agenda as opposed to us,” he said. How long this will take “will depend on to what extent we’re getting resistance. But it’s not going to be open resistance. People know we can fire them so they will find silly arguments to go around the problem because if you want to do this, you can do it tomorrow.”

Eskom declined to comment.

Godongwana suggested that selling the plants would put Eskom in a better position to finance its planned shift to cleaner energy. Eskom chief executive Andre de Ruyter last week estimated that as much as $35 billion will be needed over the next 15 years for the transition.

“They want to take on additional debt,” Godongwana said. “I said to them: ‘for God’s sake, even if it’s clean, it’s still debt’. So for me, what is going to help you out of the problem is to sell some of your plants. I don’t want the money from that. All I want is for you to go and service your debt and reduce it, then you can start encroaching into bringing new green debt.”

The South African government has said in the past that it’s been approached by investors interested in buying its coal-fired plants, without identifying them.

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South Africa resurrects plan to sell coal power plants