Most of Eskom’s R439bn debt to be allocated to generation unit

South Africa’s plan to split state power utility Eskom into three units envisions most of its R439 billion ($23.6 billion) of debt being allocated to the generation business, which utilised most of the money.

About R40 billion of debt will be held by the transmission unit, which is expected to be established this year, and R30 billion by the distribution unit, with the balance going to the generation division, Eskom said.

“These numbers will change constantly as debt is settled,” the utility said in a reply to questions.

Eskom is in dire financial straits because it isn’t generating enough income to cover its operating costs and service its loans. Acute breakdowns of its poorly maintained coal-fired plants have set back efforts to restore it to profitability and resulted in record national electricity shortages.

The government in February agreed to give Eskom three annual advances totaling R184 billion through March 2026 to repay maturing debt and cover interest costs, a move aimed at safeguarding its financially sustainability. Plans to separate the businesses to make them easier to manage have lagged behind target.

Kusile and Medupi, Eskom’s newest power stations, have been plagued by strikes, mismanagement and equipment defects, resulting in a succession of delays that have exacerbated rolling blackouts. Both facilities were approved in 2007 and scheduled to reach completion within eight years at a total cost of R163 billion, but the likely final price tag has since ballooned to about R464 billion including interest costs, and neither plant is running at full capacity.

The creation of a standalone transmission company will still require operating licenses from the regulator and the consent of lenders, processes that could be finalized by the end of August, Rand Merchant Bank analysts said in a note on Thursday.

“The debt allocation is based on where it was raised,” they wrote.

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