In its almost 100-year existence, Eskom has perhaps never faced such an existential crisis as now. In the short term, the operational woes that have emerged recently, resulting in the return of load-shedding, will be eased when maintenance is completed.
But load-shedding is likely to persist unless the issue of the company's balance sheet is addressed by its shareholder, the government. Eskom, which provides more than 90% of SA's energy, survives only to pay off its debt, which has rocketed from R40bn to more than R400bn in just over a decade.
If costs continue to rise and its bottom line doesn't improve through higher demand and tariffs, Eskom's debt could climb to R600bn over the next three years.
While state capture has been a central narrative around Eskom during former president Jacob Zuma's tenure, fuelling a crisis in confidence in the institution and by extension SA, the root cause of the company's woes can be traced to the administration of former President Thabo Mbeki.
A former executive said Eskom's troubles stemmed from a policy decision by Mbeki's government that prevented Eskom from building new capacity. The decision was subsequently reversed but because Eskom had not made provision, the cost of new power stations was absorbed into the business. "Later we saw that operationally the money for the new build became a problem . That's one of the strategic errors of the past that caused many issues. The capture and Gupta issue are also part of it," the executive said.
The Guptas played a central role in choosing executives at Eskom and so got preferential treatment for their companies, in particular their coal business.
Tegeta, at the time owned by the Guptas, reneged on its coal commitments to Eskom, and the then Eskom CEO Brian Molefe stopped investment in cost-plus mines. These mines were historically built with Eskom support on condition that the coal would be supplied at cost with a modest margin on top.
Eskom CEO Phakamani Hadebe told Business Times: "If we continued to invest in cost-plus mines, we wouldn't be here. The relationship with the coal industry is broken, and was further affected by the preferential treatment of Tegeta. This was all avoidable."
Given the focus on the build programme, maintenance of infrastructure slipped. As a result, Eskom is battling to keep ailing power stations, some more than50 years old, operating. Maintenance over the past five or six years has been insufficient and has been about "bandaging the problems", Hadebe said.
Now Eskom finds itself in a debt trap, with chair Jabu Mabuza saying this week that the utility planned to ask for a R100bn bailout from the government.
The government's guarantee portfolio totals R670bn, of which Eskom holds R350bn - it has R14bn left.
Pravin Gordhan, public enterprises minister, said: "There's nothing definite about any amount of money. The money question will be entertained in the context of [a] roadmap for the next five years."
But if the government did agree to a bailout it would send SA's debt-to-GDP ratio to levels that would trigger further downgrades by rating agencies, raising borrowing costs and weakening the rand.
Finance minister Tito Mboweni told Bloomberg that Eskom should raise money as the state's resources were limited.
The Government Employees Pension Fund (GEPF), whose funds are administered by the Public Investment Corp, this week said it had an appetite for Eskom's bonds.
Principal executive officer Abel Sithole said: "I don't think that the GEPF can just stand by ... To simply say 'let Eskom fail', I think, doesn't understand the impact that will have on the economy. If the government came to me or the GEPF or any investor and says, 'We will issue a bond because we need to refinance Eskom, we'll give you a guarantee, and we'll give you a good coupon, the duration of this bond is suitable for your liabilities,' yes, thank you very much, we will take them."
The National Treasury did not respond to requests for comment.
S&P Global Ratings this week warned of the possibility of an Eskom default on debt repayments in the next six months if debt-raising initiatives failed.
Gordhan said Eskom's debt restructuring was "an issue that is being discussed in government" and would be finalised "sometime in the new year". He added the government and Eskom were in "serious conversations" with the international and domestic financial sector so that "working capital doesn't become an issue in the immediate term".
But even if Eskom were to raise the required debt, the question is how it would sustainably service its debt costs, with revenues unlikely to climb significantly in the foreseeable future through a rise in tariffs or demand. The Treasury sees SA growing at 0.7% this year, rising to 1.7% in 2019 and 2.1% in 2020.
The decision that needs to be made is what equity-type investment in Eskom the government will be comfortable with.
The separation of Eskom's businesses has been mooted. The former executive said there would be interest in the utility's business from foreign companies, such as those running power utilities internationally that might want to expand.
Gordhan said there was no plan to partially privatise Eskom.
Mabuza said a review of Eskom's structure had begun. "We are approaching this organisation on the basis that we must functionally separate these various areas: generation, transmission and distribution - see them for what they are, so that we can in each one tell where inefficiencies are [and] how to bring efficiency."
He said this would help to answer questions from the National Energy Regulator of SA about "how much it costs to produce a megawatt of energy".
On unbundling some of Eskom's assets, Mabuza said: "We don't own the asset. Only the owner of the asset can decide how it wants to deal with it. Ours is to manage and operate it."
Heading towards elections next year and leading a party beset with divisional politics, it's unlikely that President Cyril Ramaphosa will make a call about the utility's future and the private sector's role. The solution for Eskom lies with the shareholder. The board's competence, or lack thereof, according to some of its fiercest critics, is but a sideshow.
speckmana@sundaytimes.co.za..