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Government's equity injection not enough for Eskom

Government's equity injection not enough for Eskom [Image: www.moneyweb.co.za]

Eskom is planning to raise R66bn in debt funding during 2015/16 to cover operational and capital expenditure (capex) shortfalls that will arise even after a government equity injection of R23bn.

Engineering News added that the figure does not take into account any possible further increase in Eskom’s 2015/16 tariff, beyond the 12.7% already sanctioned by the National Energy Regulator of South Africa (Nersa.) It also does not factor in any proceeds from the sale of core or noncore assets, or from the listing of shares in business, as flagged recently by African National Congress and government leaders as a possibility.

Eskom has made an application to Nersa for a selective reopener in an effort to secure additional resources to pay for the diesel it is burning at the open-cycle gas turbines in the Western Cape, as well as to pay for short-term power purchase programme (STPPP) contracts with private generators.

For 2015/16, it is requesting an additional R10.9bn for diesel, which is currently capped at R1.5bn for the year, as well as R5.3bn to pay for the STPPP contracts. These costs, together with a proposed 2.5% increase in the environmental levy, would raise the tariff increase for the year to 25.3%, inclusive of the 12.7% already sanctioned. But it is far from clear whether Nersa, which will hold public hearings into the merits of Eskom’s application on June 23 and 24 and will publish a determination by June 29, will concur.

Eskom’s current budget forecasts revenue for the year of R171bn and for primary-energy costs and operating costs to come in at R98bn and R46.5bn respectively. Cash from operations is forecast at R27bn, before interest (R24bn) and loan repayments (R23bn.) But Eskom is planning to roll over a high proportion of the bonds that are due to mature in September in an effort to reduce immediate cash flow pressures.

Long, dark road ahead

On Tuesday, Ted Blom – Blom Consulting and Training mining and energy advisory partner – claimed on South Africa’s rotational load-shedding would likely extend until 2023 as the strained State-owned battled several challenges that could potentially sink the power utility in five years if left unchecked.


 

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