Eskom considers selling stakes in ageing power plants

Eskom advisers are confining discussions on whether to sell stakes in the utility’s plants to aging power facilities that need to be upgraded to reduce pollution and increase efficiency, according to two people familiar with the situation.

The government hasn’t yet committed to the proposal, said the people, who asked not to be identified because the talks are private. The stake sales will likely be in plants that are decommissioned or near the end of their life, one of the people said.

Consideration is being given to “ring-fencing and selling stakes in Eskom’s non-core businesses or power stations,” the National Treasury said in an e-mailed statement last week. “The cash that Eskom would receive immediately can be used to strengthen the company’s financial position, ensuring it is able to continue to play its strategic role.”

Eskom and the Treasury are yet to specify which assets could be transferred to partial private ownership.

Stake sales in Medupi and Kusile, two coal-fired plants under construction, aren’t being considered, said one of the people, and the Treasury hasn’t yet appointed advisers for a potential transaction, the people said.

Eskom is trying to plug a R225 billion funding shortfall needed to help finance the construction of new power plants to resolve an electricity shortage in Africa’s most industrialized economy that’s resulted in regular blackouts. The government is preparing a 23 billion rand cash injection for the utility, with the first tranche due this month.

The sale of a stake in Eskom itself isn’t being considered, Eskom spokesman Khulu Phasiwe said in a statement.

Further expansion of South Africa’s power industry will involve private companies with as much as 17,000 megawatts of renewable energy commissioned by the government. Coal and gas fired-power stations will also be built by private companies.

Eskom, which provides 95% of South Africa’s electricity, approved a five-year investment program in 2007 with the construction of the Medupi and Kusile included among 11 other projects, worth more than 203.6 billion rand. The two main projects, which will have a generation capacity of more than 9,500 megawatts, are about four years behind schedule.

 — With assistance from Paul Burkhardt, Kevin Crowley and Rene Vollgraaff.

- Bloomberg