List Eskom on the JSE – Chris Yelland

Chris Yelland, energy analyst and MD of EE Business Intelligence, said listing Eskom’s generation division on the Johannesburg Stock Exchange (JSE) after its unbundling would be beneficial.

Yelland spoke to Daily Investor about Eskom’s future and how to address the problems at the power utility.

He said listing Eskom’s generation unit on the JSE would subject it to more oversight and transparency due to introducing new shareholders.

“When you have one shareholder – the state – nobody cares about the investment,” Yelland said.

“However, when you many shareholders, including public institutions like pension funds, they watch their investment very carefully.”

The government could retain a significant shareholding in Eskom while allowing other institutions to hold a share of the company.

Yelland explained that getting in new shareholders through a JSE listing is different from privatisation, as Eskom would be publicly listed.

“The move would be a way to increase public participation in the business of Eskom,” he said. “This would be a very positive move.”

Yelland’s suggestion is similar to the situation with Telkom, where the government retained a large shareholding after it was listed on the JSE in 2003.

Telkom is a standout performer compared to other state-owned enterprises like Eskom, SAA, SABC, and SA Post Office, which need regular bailouts to survive.

Telkom is the mobile and broadband provider of choice to millions of South Africa, and it contributes significantly to the state through tax.

If the Telkom model can be replicated with Eskom’s generation division, it can go a long way to make it a productive and profitable entity.

Eskom JSE listing not far fetched

Yelland’s proposal to list Eskom’s generation division on the JSE is in line with recent developments regarding the company’s debt.

Finance minister Enoch Godongwana outlined conditions for Eskom to receive debt relief, which includes private participation in the transmission network.

“Eskom, National Treasury, and the Department of Public Enterprises have agreed to design a mechanism for building new transmission infrastructure,” Godongwana said.

“It will allow for extensive private sector participation in the development of the transmission network.”

It indicates that Eskom’s transmission network will, effectively, be privatised if it wants to receive Treasury’s debt relief.

An international commission will also assess Eskom’s operations and “review all plants in Eskom’s coal fleet and advise on operational improvements”.

Eskom will be “required to implement the operational recommendations” of this assessment as a condition of receiving debt relief.

Efficient Group chief economist Dawie Roodt said these measures “are effectively busy privatising Eskom”.

While the minister cannot say this explicitly with an election looming, private sector participation is officially a prerequisite for Eskom to receive its debt bailout.