South Africa\u2019s government, business groups and labor unions said they have agreed on a pact to turn the country\u2019s debt-stricken state-owned power utility around and increase electricity output to address rolling blackouts.<\/p>\n
The accord, a copy of which was seen by Bloomberg, calls for Eskom Holdings SOC Ltd\u2019s R488 billion ($30 billion) of debt to be reduced and for adequate resources to be \u201cmobilized\u201d to ensure it becomes financially sustainable – but is scant on detail on how this will be done.<\/p>\n
\u201cFinance mobilized will provide investors with appropriate long-term, stable and reliable social and financial returns,\u201d the National Economic Development Council said in the plan, which was agreed Tuesday.<\/p>\n
The plan makes no mention of a previous proposal for the Public Investment Corp, which manages the pensions of state workers and has assets of 2.1 trillion rand, to take over part of Eskom\u2019s debt. Institutions that make funds available must do so within the mandates and risk-mitigation processes can\u2019t be compromised, it says.<\/p>\n
Greatest threat<\/strong><\/p>\n Eskom, which provides about 95% of the nation\u2019s power, isn\u2019t selling enough to cover its costs – a legacy of years of mismanagement, inadequate maintenance and overruns at its two newest plants. The utility\u2019s inability to supply sufficient electricity has curbed growth, with Goldman Sachs Inc describing it as the greatest threat to the economy.<\/p>\n The company is at the forefront of a group of South African state-owned companies to have run into financial distress and are now in need of funding. The National Treasury said in July it would also \u201cmobilize\u201d more than R10 billion of funds for bankrupt carrier South African Airways, though the financing has yet to be delivered.<\/p>\n The pact commits the government to removing all regulatory obstacles that hinder companies from generating their own electricity, while businesses agreed to implement projects to add 2,500 megawatts of supply within two years.<\/p>\n The government also agreed to buy an additional 2,500 megawatts of emergency power, 500 megawatts more than previously announced.<\/p>\n Eskom was given the green light to renegotiate overly onerous contracts with coal suppliers and independent producers of green power that supply the national grid as soon as possible.<\/p>\n That process will ensure \u201can outcome that is sustainable for suppliers, ensures a fair return, is affordable to Eskom and is within the confines of the law,\u201d according to the pact.<\/p>\n Other highlights:<\/p>\n\n
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