South African Government is Keen to Sell Some Coal Fired Power Stations

  • Bloomberg reports that key South African government ministers have reached a broad agreement to sell some of the state power utility’s coal-fired power plants to help reduce its debt burden, Finance Minister Enoch Godongwana said after his inaugural mid-term budget speech in parliament yesterday.
  • Eskom has an unsustainable debt burden which stood at R401 billion at the end of May. Read more.
  • Eskom effectively services debt with debt. Read more

“There’s general agreement to sell some of the coal plants,” the new Finance Minister said in an interview in Cape Town on Thursday after presenting the medium-term budget policy statement. “Broadly we’re agreed in government on that strategy.”

“Disposing of the facilities will require buy-in from Eskom management, which may resist the planned sale because of the impact it would have on the utility’s balance sheet,” said Godongwana. “They’ve got their own agenda as opposed to us,” he added.

When ask how long it will take, Godongwana replied, “this depend on to what extent we’re getting resistance. But it’s not going to be open resistance. People know we can fire them so they will find silly arguments to go around the problem because if you want to do this, you can do it tomorrow.”

“They want to take on additional debt,” Godongwana said. “I said to them: ‘for God’s sake, even if it’s clean, it’s still debt’. So for me, what is going to help you out of the problem is to sell some of your plants. I don’t want the money from that. All I want is for you to go and service your debt and reduce it, then you can start encroaching into bringing new green debt.”

Last week, South Africa’s President Cyril Ramaphosa joined other leaders in announcing a historic partnership in the form of a Political Declaration with the governments of France, Germany, the United Kingdom and the United States, as well as the European Union, to support a just transition to a low carbon economy and a climate resilient society in South Africa. Read more 

The partner countries will mobilise an initial $8.5 billion (R131 billion) over the next three to five years through a range of instruments, including grants and concessional finance, to support the implementation of the the country’s revised NDC through a just transition to a low carbon and climate resilient economy.

Author: Bryan Groenendaal

Source: Bloomberg

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