South Africa should hold off on transferring assets from Eskom to a separate transmission company until the government addresses risks to the State power utility’s finances and its lenders, according to its chairperson.
While Eskom’s board backs the creation of an independent transmission system operator (ITSO) that would oversee the wholesale electricity market and provides fair access to the grid, it only wants the company to have to cede ownership of the transmission infrastructure once key financial hurdles have been cleared, Mteto Nyati said. He warned that the transfer could trigger change-of-control provisions in lending agreements, give rise to accounting complications and unsettle bondholders.
“Our preferred route is the ITSO operating independently and then later on you can transfer the assets if you still wish to,” he said in an interview in Bloomberg’s office in Johannesburg on Wednesday, adding that the correct sequencing of reforms will be key to a successful energy market overhaul.
Eskom, which supplies the bulk of South Africa’s electricity, has been dogged by years of mismanagement and financial losses, and its inability to meet demand led to rolling outages that hobbled the economy.
