Eskom’s current debt is R350-billion, and it needs to raise a further R150-billion over the next three to four years. This is almost certainly impossible, even with a government guarantee. It would appear that Eskom cannot stay afloat without a gargantuan bailout by the South African government.
NERSA’s low electricity price increase announced in December 2017 has passed most of the responsibility for funding Eskom from the electricity customer to the taxpayer and the fiscus. It’s been widely reported that Eskom would have already run out of cash without an emergency bridging loan by the PIC of R5-billion in early February 2018 and a further R15-billion by the end of the month.
But there is a simple way to stabilise electricity prices, cast off Eskom’s crippling debt and boost South Africa’s credit rating, while maintaining public sector control of critical assets in the electricity sector.
The Eskom generation fleet consists of 15 coal-fired power stations. They all have a limited lifetime, and were built to serve the country and economy before being retired and replaced. Scheduled decommissioning dates start soon, and end in 2050 or later. Given that these assets were meant to be extinguished over time for the common good, we can choose to do so in the most beneficial manner. The value of the power stations does not stem from their steel and metal, but from the fact that they are able to produce electricity over the residual lifetime of the plant. If we can manage to sell the Eskom coal fleet at the “net present value” of this residual lifetime value, we will be able to raise enough money to pay back the Eskom debt. This can be done as described below.