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Parliament critical of ISMO due diligence report delays

The parliamentary portfolio committee on energy under chairperson Sisi Njikelana when debating the ISMO Bill has expressed extreme dissatisfaction with the delay in the production by Eskom of a due diligence report on the implications of and the financial risks involved in Eskom transferring its assets and the financial and operational  implications in future of not running portions, or the whole of, the national electricity grid.

Eskom is part of a task team which includes national treasury and department of public enterprises, led by department of energy, but the key to the report is the participation of Eskom.  ParlyReport clients will get details of the report immediately is is presented in Parliament.

The need for a due diligence report on the possibilities of breaking up the national electricity supply chain and transferring the national grid network out of Eskom arose during joint portfolio discussions under the Independent Supply Market Operators (ISMO) Bill recently tabled in Parliament.

Present for the portfolio committee meeting, but not included in the discussion for reasons of maintaining impartiality, was the director general of the department of energy, Ms Nelisiwe Magubane.

Eskom had been requested in meetings to produce such a report to the committee but outraged MPs said that they were there to listen to the report – only to be told by Eskom when they arrived that there would be no such document. It was then indicated by Eskom that by mid February a further meeting indicating how the task team would work was  given.

Njikelana was told by a spokesperson for Eskom that the agreed due diligence exercise had not yet even been started at that stage, due to a whole change in the manner of preparing the report. She said that another four months was required by both Eskom and its partners to the exercise, National Treasury, plus the department of public enterprises.

The committee was told that it had been decided by all the parties compiling the report that in order to retain impartiality insofar as Eskom was concerned it had been agreed, as emphasised by National Treasury and the department of public enterprises, that outside consultants must be appointed.

Such required authority in writing from the minister of energy, who, having only just been asked to give such authority, had not yet acceded.

Such a due diligence exercise, said Eskom managing director of transmission, Mongezi Ntsokolo, was not only essential to the process of Eskom retaining its rating for international funding purposes in the light of breaking up its balance sheet as proposed in the exercise, but also in the light of the revenues that might be taken away from Eskom for sales against what it might receive for its assets.

He said the implications of the ISMO Bill were extremely serious for Eskom, the Eskom balance sheet as it stood now having been the basis of past funding arrangements. This could now to be changed. How the new ISMO portion and Eskom portions would be rated after the application of the new proposals was an important exercise for Eskom and the idea of having this done by independent consultants had been agreed to in order to maintain financial integrity.

Opposition MPs, particularly ID MP Lance Greyling, diminished this excuse saying that the time delay was entirely unacceptable, it now being August and more than halfway through the parliamentary year. The delay, he said, “was ignoring a request from Parliament to have this report ready on time.

Greyling said the opportunity given by Parliament to Eskom “had been taken advantage of”.  Parliament had not been informed of the necessity of appointing outside consultants, he said, or the fact that there was to be such a long delay affecting the passage of the ISMO Bill and affecting also the entire industry.

Chair Sisi Njikelana echoed the sentiment saying that such delays could not be countenanced.  He reminded both Eskom and National Treasury in terms of the promise made to the country in the state of the national address that the ISMO Bill would be processed by Parliament and be ready for enactment by the end of the year.  He said that the ISMO exercise with Eskom and all parties was a supposed to be a “team” exercise but Parliament had been let down.

It was put to Eskom by Njikelana that the reasons for the delay, however serious to Eskom, had more serious implications in the terms of both the national integrated energy resource energy plan (IRP) and the development and economic planning behind other sustainable sources of energy. The incorporation and registration of new independent power producers required urgently the fruition of the ISMO Bill in terms of bringing the necessary security to their own funding proposals.

Both National Treasury and the department of enterprises were informed by the chair that no more than two months further could be given under any circumstances if the ISMO Bill was to be processed in the current parliamentary year.

The director general of energy, stood to confirm her acknowledgement of this request in front of the other representatives of the various state departments.

Eskom acquiesced to the request although Eskom’s Ntsokolo had said earlier that he did not see how consultants could carry out the exercise in such a short time.

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