Eskom and City Power have signed a memorandum of understanding regarding the possible transfer of Johannesburg electricity distribution to City Power.
South African electric utility, Eskom and the electricity company owned by the City of Johannesburg, City Power, have signed a memorandum of understanding (MOU) with a view to concluding a transaction in which Eskom would eventually sell or transfer the distribution of electricity in the parts of Johannesburg currently supplied by Eskom to City Power.
This comes a week after the City of Johannesburg signed a power purchase agreement with private electricity supplier Kelvin Power Station to add 100MW of electricity supply sent to the city.
City Power currently holds the Distribution licence to the rest of the City of Johannesburg. No transaction has been concluded yet, and in terms of the regulations, all affected stakeholders will be part of the decision-making process.
In terms of the MoU, City Power will conduct its own due diligence study on Eskom’s infrastructure and assets in the areas. Among others, the affected areas include parts of Soweto, Sandton, Orange Farm, Ivory Park, Diepsloot and surrounding areas, in which Eskom currently holds the distribution licence.
The due diligence study will consider, among others, the state and value of the infrastructure that would eventually be sold to City Power, the outstanding debt owed by customers to Eskom, and other corporate information that will be material to an eventual agreement.
Should an agreement be reached on the discussions, the parties will seek the requisite regulatory approvals and give the affected customers an opportunity to contribute to a settlement in a public participation process. Among the regulators from whom approvals are required are the National Energy Regulator of South Africa (NERSA), the National Treasury, and the Department of Mineral Resources and Energy.
The parties are committed to keeping the public and affected stakeholders informed of the progress of the talks.