World Markets

South Africa's Eskom could sell coal-fired power plants -finance ministry study

Credit: REUTERS/SIPHIWE SIBEKO

South Africa's state power firm Eskom could sell its coal-fired power stations, possibly through a series of auctions, according to a policy paper published by the finance ministry on Tuesday for public comment.

JOHANNESBURG, Aug 27 (Reuters) - South Africa's state power firm Eskom could sell its coal-fired power stations, possibly through a series of auctions, according to a policy paper published by the finance ministry on Tuesday for public comment.

Eskom supplies more than 90% of the power in Africa's most advanced economy but is dependent on government bailouts. It is deep in crisis as its electricity sales are on the decline and its debt-service costs have soared.

South Africa endured some of the worst blackouts in several years earlier this year because of faults at some of Eskom's heavily polluting coal power stations, several of which are reaching the end of their commercial lives.

President Cyril Ramaphosa promised this year to split Eskom into different units for generation, distribution and transmission, as part of steps to make it more efficient.

The National Treasury, in its policy paper, said that if Eskom were to sell its coal-fired power stations through auctions, it could generate revenue of 450 billion rand ($30 billion), assuming cost-reflective tariffs.

"Eskom would sell the power station itself, all its power station-specific obligations, together with a power purchase agreement (PPA) at a predefined power station-specific tariff," the policy paper said.

Restructuring Eskom's business model could limit the fiscal and economic risk that Eskom poses, the paper said. Eskom had debt of 440 billion rand of debt, according to latest figures and a sale of its power stations could help it repay debt.

The public has until Sept. 15 to comment on the paper, which the Treasury said was an examination of structural reforms that could reverse the downward trend in South Africa's economic growth.

($1 = 15.2369 rand)

(Reporting by Olivia Kumwenda-Mtambo and Alexander Winning Editing by Susan Fenton)

((Olivia.Kumwenda@thomsonreuters.com; +27 11 595 2817; Reuters Messaging: olivia.kumwenda.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest World Markets Videos

    Reuters

    Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

    Learn More