Eskom Shoots Down South African Treasury’s Power Plant Sale Plan

(Bloomberg) -- Eskom Holdings SOC Ltd., the state-owned utility that supplies about 95% of South Africa’s power, rejected proposals by National Treasury that it sell some plants to reduce its debt mountain, a lawmaker said.

Eskom has turned to the government for bailouts to remain solvent as it confronts massive cost overruns at two partially completed coal-fired plants -- Medupi and Kusile -- and its other aging plants struggle to produce enough power to meet demand. The sale of the generating facilities could raise 450 billion rand ($29 billion), Treasury said in a policy paper published on Aug. 27. That’s 10 billion rand more than the utility owes.

“We have posed a question to Eskom on the sale of Kusile,” Mkhuleko Hlengwa, the chairman of parliament’s public accounts committee, told reporters in Johannesburg on Thursday after the panel visited the two plants. “The responses that we have received is that they don’t believe, on the basis of the work that they have done, that the sale of Kusile or any of their assets would be the way to go.”

Kusile is expected to be completed by 2023 at a cost of 161 billion rand, and Medupi next year or in 2021 at a cost of 146 billion rand. When the projects were first announced in 2007, it was projected that Medupi would be finished in 2012 and Kusile two years later and the combined cost would be about 150 billion rand.

“The project from inception was not conceptualized properly,” Hlengwa said. “It is evident that corruption has taken place. There’s no running away from that if you look at the cost escalations, the contract management.”

To contact the reporter on this story: Prinesha Naidoo in Johannesburg at pnaidoo7@bloomberg.net

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Mike Cohen, Hilton Shone

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