Tariff hike will prop up Eskom – Moody's VP

By Banele.ginindza Time of article published Nov 21, 2018

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JOHANNESBURG – Eskom's tariff increase application before the National Energy Regulator of South Africa (Nersa), if approved, will free the power utility from the financial quicksand it is in and allow it to complete stalled projects, a research paper by Moody's vice-president, senior credit officer Helen Francis, pointed out yesterday. 

Francis said a 15 percent rise in each of the three years would allow Eskom to address rising operating costs and its still sizeable capital expenditure programme, which included the completion of coal-fired generation projects as well as new investment projects. 

“If approved, the tariff increases would be credit-positive for Eskom,” she said. 

The report highlighted another benefit as additional cash flow that would allow Eskom to meet its debt-servicing costs more easily though it warned that recent regulatory decisions suggested Eskom may struggle to achieve tariff increases of this size. 

“Lower tariffs would maintain pressure on Eskom's financial profile and be likely to prompt further action to cut costs.” 

Nersa last month said that it had approved Eskom's liquidation of the third multi-year price determination (MYPD3) regulatory clearing account (RCA) balances for the 2014/15, 2015/16 and 2017/18 financial years over a four-year period. 

The regulator granted Eskom a 4.1 percent increase effective in April. 


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