Government to ponder Eskom cash crisis

Feebearing - Cape Town - 140305 - MEC Alan Winde gave the Western Cape Budget 2014 - 2017 this afternoon in the Provincial Legislature in Cape Town. Pictured: Lynne Brown leader of the opposition. REPORTER: WARDA MEYER. PICTURE: WILLEM LAW.

Feebearing - Cape Town - 140305 - MEC Alan Winde gave the Western Cape Budget 2014 - 2017 this afternoon in the Provincial Legislature in Cape Town. Pictured: Lynne Brown leader of the opposition. REPORTER: WARDA MEYER. PICTURE: WILLEM LAW.

Published Jul 29, 2014

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Parliament - Government will decide by September whether Eskom will receive a cash injection or further guarantees, Public Enterprises Minister Lynne Brown said on Tuesday.

An inter-governmental task team had come up with several options for Eskom's financial problems, she told Parliament's portfolio committees on energy and public enterprises.

“They have come up with 13 different scenarios. I'm saying bring us two scenarios... of what is more possible for Eskom,” Brown said on the sidelines of the meeting.

“Is it a public sector injection into Eskom or is it a relook at the funding model of Eskom. All of this must happen before September because September is when the credit ratings agencies will come along and they will be either downgrading Eskom and the country then, or they will be saying we're okay.”

Eskom has been asking for an equity injection of at least R50 billion to solve its cash flow problems.

The power utility on Tuesday painted a gloomy picture of its books, telling MPs it faced a R225bn revenue shortfall, partly as a result of being granted lower-than-expected tariff increases by the National Energy Regulator of SA (Nersa).

“During the MYPD3 (multi-year price determination) application we assumed certain sales growth, 2.9 percent, and the reality has been that we have seen quite a significant decline,” Eskom finance director Tsholofelo Molefe said.

“If you look at the 2013/14 financial results... we have actually lost over 9000 gigawatt hours which translates to R5.8bn rands of revenue.”

Eskom was still awaiting a decision on its application to Nersa to evaluate and approve the regulatory clearing account (RCA) balance for its previous multi-year price determination control period, between April 1, 2010 and March 31, 2013.

The RCA is a regulatory mechanism that allows Eskom to adjust for over-or under-recovery of revenue, as initial price determinations are based on projections and assumptions.

Consumers could see an increase or decrease in the price of electricity as a result of Eskom's submission.

A tariff adjustment alone would not solve Eskom's problems.

“We believe... the RCA adjustment will not be adequate to help us with our cash flows,” Molefe said.

“We do need to identify additional sources of liquidity for us to be able to continue with our operations.”

The state power giant would remain highly dependent on borrowing to continue its operations, and maintain the capital expansion programme.

“We do await the decision of the credit ratings agencies within the next three months, but from our perspective based on their ratings that were done just over a month ago, we do see the risk that we are highly exposed to refinancing of our current debt,” said Molefe.

Eskom would continue to introduce measures to cut costs, but it insisted only higher electricity tariffs would help solve its cash flow problems.

Sapa

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