[ad_1]
Andre de Ruyter, CEO of Eskom, in January 2020.
Gallo Images / Business Day / Freddy Mavunda
- Many credible financial institutions want to support Eskom’s just energy transition, says CEO Andre de Ruyter.
- The CEO said Eskom is currently considering a concessional financing plan, on the condition that the utility reduce its carbon footprint.
- De Ruyter says Eskom has also engaged with communities that would be affected by the energy transition.
Eskom CEO Andre de Ruyter says green financing could help address Eskom’s debt problems.
On Thursday, the CEO was speaking during a briefing on the quarterly status of the system. The energy company has been struggling with operational and financial challenges. You have had to implement load shedding as several of your units undergo much-needed reliability or long-term maintenance, and you expect the risk of load shedding to persist in the short term until the maintenance schedule is completed. complete in winter 2021.
Weighing its debt load of R480 billion, De Ruyter said that through the separation, Eskom expects to have the majority of the debt owed by the generation entity to transmission and distribution entities each with a quarter. However, this decision still requires a lot of work, as Eskom must ensure that it will not default on existing loan agreements.
During a question and answer session on the potential for green financing for the energy company in the future, De Ruyter said that green financiers were willing to support Eskom’s just energy transition, which would include renewable energy generation. “The appetite to support Eskom in these efforts is certainly there.” However, he noted that there is a reluctance from green financiers to lend to a company with a high carbon footprint like Eskom.
“We are in the process of developing a solution, we are talking to various players in the space, which will likely involve making concessional financing available, discounted financing to help us with our debt burden and interest burden,” said De Ruyter . The financing would be available against Eskom reducing its carbon footprint, he explained.
Eskom is currently unable to carry out a large new-build renewable campaign, so it is attracting private capital to make these investments. “We have to seize this opportunity to reduce our carbon footprint so that we can address the R 480 billion in debt that we have.”
“We have received commitments, written expressions of interest from some of our existing sponsors who clearly have their skin in the game when it comes to Eskom. They have a keen interest in ensuring that Eskom is successful in the future. They are prepared to provide us with funding. under favorable conditions based on the accelerated introduction of renewable energies “.
This is similar to a recommendation for a climate-linked blended funding mechanism made by Eskom’s Sustainability Task Force, which was appointed by President Cyril Ramaphosa in 2018, Fin24 previously reported.
Eskom is in the process of finalizing the appointment of financial advisers to assist with the green financing solution. Eskom has launched a market investigation in order to appoint a panel of financial advisers, one of the requirements for the appointment would be experience in the field of green finance, explained De Ruyter.
Financial advisers would help restructure the green finance transaction, which would be complex given Eskom’s situation. De Ruyter said that this knowledge is necessary because there are only a few international precedents available, which cannot necessarily be applied to the Eskom situation. “We have a very large coal fleet that will remain in operation for an extended period of time. We are not going to transition en masse in a very short time to renewable energy. We have some complexities that will need to be addressed.”
Intellidex head of capital markets research Peter Attard Montalto pointed out that green financing would not actually reduce the size of Eskom’s debt burden, but instead would be a cheaper form of financing. “It does not solve the problem at the end of the day. (The debt) will be cheaper but it will have to be paid at the end of the day,” he said.
Just transition
De Ruyter explained that the transition to renewable energy not only made sense in response to climate change, but also as a business case given that the cost of renewable energy technologies had dropped substantially.
However, De Ruyter noted that the transition must be fair. “We have to take care of the citizens involved in the coal mining value chain, so that they are not left in the lurch,” De Ruyter said.
“We seek to reuse power plants to create long-term sustainable jobs for those communities where power plants and coal mines are reaching the end of their useful lives.”
– Andre de Ruyter
Eskom has engaged with communities on the issue.
“The first round was a bit bumpy, but the second round has been much more positive as communities are beginning to appreciate the fact that there is a future after the power plant is retired,” De Ruyter said.
He added that the Just Energy Transition Office established earlier this year has done extensive modeling of the system to understand future system requirements.
“We are in the process of developing financial and business plans to support the required investments. We are continuously engaged with development finance institutions eager to help us,” said De Ruyter.
