Global energy restructuring veteran KW Miller has seen many messes, but says nothing comes even close to the Eskom disaster

Now that the ANC government has finally admitted defeat on Eskom by ending its monopoly and last week promising to assume up to ⅔ of its massive debt burden, the facade is being stripped from SA’s teetering electricity provider. Global energy turnaround specialist KW Miller, who calls Eskom an “operationally dysfunctional, financially insolvent, unreliable and corrupt entity” says the path forward will be determined by the actions of creditors which own a large chunk of mostly SA government-guaranteed Eskom debt that he says is far higher than the official number of R400bn. Eskom has tapped global bond markets for decades – and according to Miller those who own the debt are now insisting the disaster be urgently addressed. In this powerful interview with Alec Hogg of, media-shy Miller says the only route now open for SA’s State-owned electricity provider is for the private sector to take over the productive assets to cut off third-party leeches and criminal syndicates that continue to bleed the utility. Abu Dhabi-based Miller, who rarely grants interviews, says he “made an exception given the importance of the Eskom restructuring to SA citizens.”

Excerpts from the interview with KW Miller

KW Miller on the South African government’s recent admission of defeat relating to Eskom’s debt burden

Eskom’s real debt, and we’ll talk about that in a minute, is over 75% of South Africa’s total debt. Eskom is South Africa, for lack of better terms. So when you look at South Africa from a credit point of view or from a country risk point of view, Eskom and South Africa are one. That’s a fact. Now, number two: putting some portion of Eskom’s debt on South Africa’s Treasury balance sheet is nothing more than a shell game. It’s irrelevant to the problems on the ground and the problems financially in the global capital markets because at the end of the day, we already look at South Africa and Eskom as one debt bubble. And so whether you move the debt to Eskom, to South Africa’s Treasury or to some other government guaranteed entity, it’s all one piece of debt. And the reality of that, Alec, is that South Africa on paper is technically insolvent when you do the math and we can talk about that. 

On the disaster at Eskom being the worst he’s ever seen

The reality of the world is [that] we deal in facts and figures and in the energy and infrastructure business, while politics play a little role at the top in theory, at the end of the day, when you run your assets into the ground… And I will tell you this for your viewers; I’ve been doing this for over 30 years. I’ve seen as ugly of an energy complex problem as you can see. I’ve seen bad power plants, I’ve seen bad companies. I’ve seen overleveraged companies. I’ve seen everything you can imagine from debt problems to operational problems and everything in between. South Africa’s Eskom is as bad as I’ve seen in my entire career, because it has every single problem you could imagine in a restructuring – financially and operationally. And these are the facts that the South African taxpayers have started to understand. 

So, in 2019, when we put out the first definitive CRO report on Eskom, then we followed up with the definitive debt restructuring and subsequent analysis, we, as you know, got a lot of pushback from, we’ll call it, “The Cabal”. “The Cabal” is the current government and the criminal syndicates who are milking the system. Now, we sat back and we said to the creditors, “Your investments are worth zero. There’s nothing you can do right now. Sit back, because there’s nowhere to go. You’re stuck.” And then three years later, give or take, the wheels have started to really come off. Right? I think you’re starting to see that on the ground. And what you’re seeing is the South African people who actually are involved in the process have come to us over the last three years systematically. And it’s growing. 

And it’s now reached what we’ll call a crest, meaning the operators, the engineers, the financiers, the average educated South African who got a college degree who’s now middle class. Even the poorer South Africans who are just watching the news, they’re emailing and texting. They want to know why this is happening. And so you add that with the fact that the operations have collapsed, and we can talk more about that, and then the fact that the ANC, the government in power today – and by the way, I’m not a politician – is broke. 

You put all those together and then you look at the massive debt bubble and you say, “Okay, you know, the wheels have pretty much come off of South Africa, because when you take out the power generation out of the industry, you can’t run your plants, you can’t run your smelters, you can’t run your mines, you can’t run your light industrial manufacturing. And so your economy starts to collapse. So, when Eskom goes down, for all practical purposes, the economy goes down in South Africa. And I want people to understand this is not something that’s going to be solved by renewable energy. 

On the solution for the big, deep pit that South Africa is in 

I’m not a politician. Let me say this: the political regime in South Africa is going to have to sort itself out on its own. Right? One way or the other. So, what I do is I focus on the issues: the money, the operations, the operators, the details of how to fix the problem. We’ve got to pull, and we’re planning to pull, the coal plants out of Eskom’s operational control and put it into a special purpose vehicle. That special purpose vehicle will be funded by outside money – maybe creditors, maybe others. We’ll figure that out. We’re working through the numbers now. 

The operations team has to come under the control of, what we’ll call, a special purpose vehicle. All of the fuel contracts have to come over. So, we need to isolate the coal plants and the peakers and put them into a special purpose entity that will still provide power to Eskom under some contractual structure so that we can nurse that along to keep South Africa alive. But it has to be two conditions, minimal. One, the government has no involvement, no control. They cannot get involved and linger in the process. 

Number two, we control all of the fuel contracts, because we have to cut the fraud. [It’s] the only way we can clean this up, because the coal contracts are wrought with fraud, they’ve destroyed the boilers by poor quality coal bidding and switching, they’re skimming all the diesel. I mean, they’re burning 10 billion litres of diesel a day. They’re going to spend 20 billion rand in 2023 on diesel alone. 20 billion rand just on diesel. The numbers are ungodly, Alec. So that has to happen. We’ve already started the process of basically pulling the operators into the mix. 

I can’t say much about it, but let’s just say that we already have what we need operationally to run this portfolio. We’re heavily involved in what’s going on operationally every day, but we don’t talk to Eskom management and we don’t talk to the government about those matters because they’re really not in control. The control lies elsewhere and that’s what I think is important from 2019 to today; that control has shifted. And everybody has realised that they really don’t have a choice. One way or the other, they don’t have a choice.

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