Good news for Eskom’s big turnaround plan

Power Utility Eskom has announced that the World Bank has granted its consent to the proposed legal separation of the Transmission Division from Eskom Holdings to the National Transmission Company South Africa (NTCSA).

“The World Bank’s consent marks a significant milestone in advancing our turnaround plan and contributing towards a sustainable resolution of the country’s energy crisis,” said Eskom.

However, this consent is subject to certain conditions, including confirmation that all the necessary suspensive conditions required to operationalise NTCSA have been met.

With the NTCSA having obtained licences for the operation of a transmission facility, as well as an electricity Trading and an Import/Export licence from the National Energy Regulator of South Africa (Nersa), obtaining the remaining financial creditor consents is one of the final outstanding conditions to the implementation of the legal separation of Transmission, said Eskom.

The NTCSA applied for a trading licence to buy and sell electricity from Eskom power stations, independent power producers (IPPs) under section 34 determinations, including cross-border electricity imports and IPP generators under the Eskom Holdings programmes, such as short-term power purchases only to Eskom Distribution exclusively.

The term of the NTCSA’s trading licence will be five years as a transitional arrangement to allow for transition from the exclusive trading arrangement and incorporation of changes that may emanate from the ERA amendment and price review processes. This will enable the Energy Regulator to review the licence conditions after five years.

The import/export licence followed a similar application process.

“We are hopeful that the remaining consents will be granted as soon as possible so that we can finalise this process,” said Eskom’s Acting Group Chief Executive, Calib Cassim.

The legal separation of Transmission is a strategic objective and key aspect of Eskom’s Turnaround Plan envisaged in the Department of Public Enterprises’ “Roadmap for Eskom in a reformed electricity supply industry.”

Additionally, it is essential to allow much-needed new grid access, encourage investment in the generation sector, and through that, help the country improve its security of supply, Eskom added.

The World Bank also recently approved a $1 billion (approx. R19 billion) Development Policy Loan for South Africa.

“This substantial financial support demonstrates the World Bank’s broader commitment to assisting the country and Eskom in promoting long-term energy security,” the power utility said.

The new Eskom

Eskom is currently in the process of being split into three companies that cover its main operations: Transmission, Distribution and Generation.

Under the proposed structure of the ‘new’ Eskom, a new holding company (dubbed NewCo) will operate with three subsidiaries that function independently.

• Generation: Eskom Holdings Generation (current Eskom)
• Transmission: National Transmission Company of South Africa (NTCSA)
• Distribution: National Electricity Distribution Company of South Africa (NEDCSA)

The NTCSA was incorporated in 2021, and while Nersa approved the licence to operate the transmission system within the boundaries of South Africa, this excluded the trading and import/export applications.

However, with the licences having been granted and consent given for the legal separation of the Transmission Division from Eskom, the last step is to set up the NEDCSA.

Progress on the distribution company has been slow, but this is expected to be up and running in 2024.

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