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Monday, 24th February 2020
1:56:43am

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Eskom’s urgent bid for larger electricity tariff increases was rejected by the Pretoria High Court on Monday, in a fresh setback for the cash-strapped South African power utility.

Eskom lodged an urgent application with the court for a tariff increase of 16.6% from April and a rise of 16.7% from April 2021 to compensate for what it said was an error by energy regulator Nersa.

On Monday the court ruled that the utility had failed to prove that its dispute with Nersa was urgent, meaning that Eskom will now likely face months of court hearings as it argues its case with the regulator.

Eskom believes Nersa miscalculated its tariffs for the financial years beginning in 2019 to 2021 by treating 69 billion rand ($4.8 billion) of bailouts which the utility has been promised as revenue.  

Last year Nersa set Eskom’s tariff rises at 9.4% for 2019/20, 8.1% for 2020/21 and 5.2% for 2021/22.

Eskom supplies more than 90% of South Africa’s electricity but is struggling with high debts and power stations in need of refurbishment.

It has been forced to impose several rounds of severe power cuts in the past year that have dented the country’s economic growth.

Eskom said it would respect the court’s judgment but was encouraged that it indicated that there was merit to its case. 

“The judge indicated that ‘Nersa violated the basic principle of accounting by treating an equity injection as revenue’,” Eskom said in a statement regarding the ruling.

Nersa will comment after it has studied the judgment, a spokesman said.

-Reuters

The new chief executive of South Africa’s power utility Eskom said on Sunday that a plan to split the loss-making company should not be rushed, because risks associated with the process need to be assessed and managed properly.

President Cyril Ramaphosa announced last year that Eskom would be split into units for generation, transmission and distribution, as part of plans to overhaul of South Africa’s power sector and open the industry up to more competition.

A government paper showed in October that Pretoria plans to set up a transmission unit within Eskom by the end of March 2020 and complete the legal separation of all three units in 2022.

But in an interview with eNCA television on Sunday, Andre de Ruyter said while Eskom was committed to a restructuring of the power industry as set out in the government paper, the utility wanted to carefully manage risks associated with the process. 

“What we are careful of is with a precipitous unbundling to create risks that may end up causing us to have a less stable system,” said de Ruyter, who took charge of Eskom on Jan.6.

“For us to rush into full legal separation from day one creates a number of risks - transfer of assets, our lenders will be concerned about assets that they have loaned us money against, there could be capital gains tax events that could cost us a lot of money,” he added.

The government paper had set out a vision for a restructured electricity supply industry, where Eskom could relinquish its near-monopoly and compete with independent power producers (IPPs) to generate electricity at least cost.

One or more Eskom generation units will be created to compete with IPPs and the distribution model will be reformed so more power can be procured from small-scale producers. 

“There is a lot of planning that needs to go into the unbundling and restructuring of Eskom. We need to be quite careful on how we implement this not to precipitate all of these risks that we first need to understand, assess and manage them properly,” de Ruyter said.

Eskom supplies more than 90% of South Africa’s power, but its creaking fleet of coal-fired plants struggle to meet electricity demand.

The utility implemented severe nationwide power cuts in several bursts last year and sporadically earlier this month. The power cuts have pushed the economy to the brink of recession and piled pressure on Ramaphosa, who came to power with a pledge to revive investor confidence and lift economic growth.

-Reuters

Brazil’s state-controlled oil company Petroleo Brasileiro SA said on Tuesday it had ended its activities in Africa after closing the sale of a 50% stake in Petrobras Oil & Gas BV (PO&GBV), which holds some Nigerian oil assets.

Petrobras, as the company is known locally, said in a filing that it had sold the PO&GBV stake for just under $1.5 billion to Petrovida Holding, which is formed by Vitol Investment Partnership II, Africa Oil Corp and Delonex Energy.

It added that with the transaction, it had “completely closed its operational activities in Africa.”

-Reuters 

South African stocks rose to near seven-month highs on Friday, underpinned by gains in heavyweight Richemont and mining firms, while the rand fell against a broadly stronger dollar.

Richemont led the To-40 index higher, surging 5.82% after the world’s second-biggest luxury goods group, reported a 4% rise in third quarter sales, helped by double-digit growth in China and South Korea.

Resources continued to do some heavy lifting, with the mining index 2.66% firmer amid gains in gold, platinum and iron ore producers.

Gold edged higher on Friday but was on track to post its first weekly decline in six as solid Chinese data and a preliminary U.S.-China trade deal improved risk appetite.

Palladium jumped over 9% to register a record high as the market grapples with deep supply shortages, while platinum rose 1.01%.

This boosted Sibanye-Stillwater by 5.32%, African Rainbow Minerals by 4.54%, Impala Platinum by 3.11% and Glencore by 1.32%.

The bourse also got a lift from improved global risk appetite following Chinese growth figures that suggested the world’s second-biggest economy was stabilising.

The Johannesburg All-Share index rose 1.35% to 59,001 points, a level last seen on June 24, while the Top 40 index climbed 1.48% to 52,735 points.

In the currency market, the rand gave up morning gains as rate cut momentum gave way to the impact of a broadly stronger dollar. At 1603 GMT, the rand traded at 14.4650 per dollar, 0.4% weaker than its previous close.

Market participants were also cautious as the ruling African National Congress started a four-day National Executive meeting and the party’s Lekgotla gathering.

The ANC is expected to discuss options for struggling state-owned firms such as power utility Eskom and South African Airways, as well as trying to unify dividing voices on proposals to nationalise the central bank.

Finance Minister Tito Mboweni came out against that plan this week on Twitter.

“Policy uncertainty remains the name of the game,” Bianca Botes, Treasury Partner at Peregrine Treasury Solutions, said in a note.

In fixed income, the yield on the benchmark government bond was down 1 basis points at 8.18%.

-Reuters

Nigeria’s attorney general has withdrawn a $2 billion tax demand against South African telecoms giant MTN Group, a closely watched case that critics said damaged Nigeria’s appeal to foreign investors.

In a letter filed with the Nigerian stock exchange, MTN said the government had decided to drop its case and refer the issue to tax and customs authorities “with a view to resolving contentious issues.” 

“We are very pleased with the decision of the (attorney general) and we commend him for his wisdom,” MTN Nigeria’s Chief Executive Ferdi Moolman said in a statement.

Shares in MTN Group rose by more than 4% after the announcement. Nigeria is its biggest market, with roughly 60 million users. 

Attorney General Abubakar Malami had ruled that the firm owed taxes relating to the import of equipment and payments to foreign suppliers from 2007 to 2017. He did not immediately respond to a request for comment on Friday.

MTN, whose local unit listed on the Nigerian Stock Exchange last year, has said it would sell more shares to the public and increase local ownership once the tax row is resolved.

-Reuters

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