Electricity and Energy Minister Kgosientsho Ramakgopa is confident that regulations permitting private-sector players to participate in the electricity transmission space will be finalised by the first quarter of next year.

Speaking at the Matla-Urja Energy Conference, in Johannesburg, on November 28, he said these electricity reforms were important to redefine the future energy landscape in the country.

“We need about R390-billion of investment to support the expansion and modernisation of the transmission [network]. So, it's important that the regulations . . . define what the goals are in the most granular fashion, and to introduce some degree of certainty for those who have an interest in participating. The regulations [will provide] some degree of certainty,” he said.

He reiterated the need to expand and modernise the transmission grid by about 14 000 km over the next seven to ten years.

“Just to put that into context, in the [last] ten years, we only did 1 400 km. Therefore, it's important that we are able to tap into the liquidity of the private sector, and to raise the industry to participate in this build programme,” Ramakgopa said.

He said this investment requirement presented “a major challenge for the sovereign balance sheet”.

“So, we've been working with some of the most reputable financial institutions across the globe designing credit-enhancing instruments that are acceptable to the market. It was important [that] as we designed those instruments, we didn't just sit with National Treasury on our own. We're engaging private-sector financing houses to say, ‘Is this acceptable to you?’ We're designing that and we know that the market will accept those as credit-enhancing instruments,” Ramakgopa explained.

He said he was confident that these credit-enhancing instruments would be finalised by the first quarter of next year as well.

Ramakgopa noted that government had been considering novel transmission solutions seen in countries such as Chile and Brazil, which incorporated an independent transmission project office, which is essentially a concession made in particular corridors for private-sector participation, but which still allows the system operator to remain in charge.

“The sovereign balance sheet is compromised, and the Eskom balance sheet is very weak, so we really need innovative financing and bespoke solutions to finance this expansion,” he said.

However, Ramakgopa said it remained important to continue working in parallel to ensure that there was continued private-sector participation in the development of new generation capacity.

He further confirmed that work was being done on legislation that would determine the framework for wheeling and feed-in tariffs.

“[This is needed] so that we're able to accelerate private-sector investment, so that we don't necessarily have to rely on public procurement. What the wheeling and feed-in tariff does is it creates an additional dispensation for private-sector participation, so that they can enter into a power purchase agreement without having to wait for government. And the wheeling framework is going to give significant meaning to that,” Ramakgopa said.

He added that it was becoming increasingly apparent that significant reform was also needed in the distribution space.

“You have seen now in the public domain the amount of leakage that is there when at the municipal level. We know that the municipal debts to Eskom announced are R90-billion. Consumers’ debt to all the municipalities is R347-billion. It's a sector in crisis and it requires intervention that has a technical nature [and] a regulatory nature. That's an area that is receiving attention,” Ramakgopa said.