4 May 2017

South Africa: Astral Reprieve Doesn't Absolve Municipality From Debt - Eskom

Power utility Eskom pointed out on Thursday that its court settlement with poultry producer Astral Foods doesn't usurp its constitutional right to recover debt from owing municipalities.

Astral on Wednesday reached an agreement with the power utility in the North Gauteng High Court which ended the threat of disruptions in electricity supply to its operations in Standerton (the Lekwa municipal region).

According to the agreement, Eskom will now not disrupt electricity supply to Standerton as previously threatened, which Astral said would have had "devastating consequences" for its operations.

Astral warned in January that millions of chickens would starve if Eskom's planned power cuts to its largest facility went ahead.

"Should permanent power cuts be implemented as outlined by Eskom in their correspondence, Astral will be left with 11.5 million chickens that they will not be able to feed on a daily basis," the company said at the time.

"The animal welfare impact will be catastrophic, leading to unprecedented large-scale euthanasia of the birds."

Astral CEO Chris Schutte hailed the agreement as a "victory, which resulted in the settlement agreement being made an order of court thereby protecting Astral's operational interests in the region permanently".

Astral based its original complaint on Eskom's plan to cut electricity supply to Standerton, because of the municipality's incompetence and failure to pay over monies collected from consumers in the region and service its mounting debt.

In a previous judgment in February 2017 in the North Gauteng High Court, Astral was granted temporary relief from electricity interruptions pending further argument in the high court, which has now taken place.

Astral will now receive uninterrupted power supply to its operations in Standerton, on the basis of making direct payments to Eskom for its electricity consumption. The court order also ruled that Eskom will bear Astral's legal costs for all applications in the matter, including the earlier interim relief application.

Eskom acting head of legal and compliance Suzanne Daniels explained: "Astral and another industrial customer will be paying their contribution of municipal consumption directly to Eskom, which was estimated at about 60% of the monthly municipal consumption."

However, the Lekwa municipality remains fully liable to servicing the balance of its debt to Eskom. "The municipality will transfer 15% of its equitable share to Eskom, as and when this is allocated to Eskom to absorb the costs of the suit."

The municipality has signed a legally-compliant payment agreement, the terms of which still need to be honoured.

Daniels emphasised that the present agreement between Eskom and Astral is merely an extension of the arrangement which had been in place since January.

"We have consistently said that the implementation of scheduled interruptions, as a debt recovery mechanism, was an option of last resort, a necessary lever exercised responsibly within the strict application of the required law," she said, adding that Eskom never had any "malicious intent" in implementing power cuts.

"Eskom is always open to creative alternatives to addressing these challenges without totally crippling the functions of a service delivery. It is in this spirit that the settlement has been reached," said Daniels.

Municipal debt cannot be addressed by using a "one-size-fits-all" approach, as each municipality has unique dynamics and challenges which need to be considered on a case by case basis, said Daniels.

Source: Fin24

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