Medium-Term Budget Policy Statement; Unbundling of Transmission Division

Medium-Term Budget Policy Statement

Tuesday, 01 November 2022: Reference is made to the Medium-Term Budget Policy Statement (“MTBPS”) made by the Minister of Finance, Enoch Godongwana, on 26 October 2022.

Eskom Holdings SOC Ltd (“Eskom”) welcomes the statements made in the MTBPS relating to a prospective debt relief solution for Eskom. 

Addressing Eskom’s debt levels is a key component to the turnaround plan envisaged under the Department of Public Enterprises’ ‘Roadmap for Eskom in a Reformed Electricity Supply Industry’ (“DPE Roadmap”) and, as noted in the MTBPS, a debt takeover by Government (together with other reforms at Eskom and in the South African electricity sector) will ensure the long-term financial sustainability of Eskom.  The implementation of a debt relief solution and such reforms to the electricity sector will allow Eskom to undertake the much needed capital and investment programmes to ensure the stability and security of supply of electricity in the country without relying on further Government bailouts.

As the Minister of Finance noted in the MTBPS, the Government is working to finalise details of the proposed solution–including the quantum of proposed relief, the relevant debt instruments to be included, and the method for effecting the transaction–and it intends to provide further details in its 2023 Budget.  Eskom looks forward to working closely and collaboratively with the Government in the coming weeks in order to develop a solution that ensures Eskom is restored as a financial independent, transparent and operationally efficient company.

Eskom very much appreciates the ongoing support and cooperation of its investors and stakeholders and will engage and consult with them on the debt relief solution at the appropriate time.

Unbundling of Transmission division

In parallel with the above, Eskom is continuing to work on the implementation of the legal separation (or “unbundling”) of its Transmission division, which remains a key strategic priority and aspect of Eskom’s turnaround plan envisaged under the DPE Roadmap.

As Eskom has previously communicated, in order to give effect to the unbundling of its Transmission division, a legally binding merger agreement was entered into between Eskom and its wholly-owned subsidiary, National Transmission Company South Africa SOC Limited (“NTCSA”) in December 2021. 

The merger agreement gives effect to the transfer of the Transmission division to NTCSA subject to the satisfaction of certain suspensive conditions, which include, but are not limited to, (a) the National Energy Regulator of South Africa (“NERSA”) granting all applicable licences required in order for NTCSA to operate the Group’s Transmission division, and (b) Eskom obtaining all applicable creditor consents to the transaction.

The unbundling programme envisaged under the DPE Roadmap remains of critical importance to the long-term sustainability of Eskom’s business, and to the supply and distribution of electricity in the country, and, accordingly, Eskom will continue to engage with NERSA and the relevant creditors (as applicable) in order to satisfy those suspensive conditions and implement the Transmission unbundling as soon as possible.

Eskom will continue to communicate any material updates to the market.


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