Finance Minister Enoch Godongwana has maintained his position that Eskom will not be investing any capital expenditure in new generation capacity for the next three years as part of the government’s R254 billion debt-relief programme.
Briefing the Parliament’s Standing Committee on Finance yesterday, Godongwana reiterated that Eskom’s capital expenditure was restricted to transmission and distribution.
According to the debt-relief programme, the first condition for Eskom is that only capital expenditure that may be undertaken for generation relates to minimum emissions standards, flue-gas desulfurisation and required maintenance.
No other greenfield generation projects will be allowed during the debt-relief period.
EFF MP Floyd Shivambu asked Godongwana to justify the logic of not investing in generation capacity on the back of Eskom’s failure to meet electricity demand and implementing Stage 6 load shedding.
“Eskom debt-relief gives a conditionality that Eskom’s capital expenditure is only restricted to transmission and distribution of electricity. But we all know that the biggest problem of Eskom is on generation of electricity,” Shivambu said.
“So what kind of intervention is that? What is Eskom going to transmit and distribute if the conditionality which the National Treasury has put is senseless? It’s actually the most ridiculous thing that can be done by any responsible government.”
However, Godongwana said the government’s decision was aimed at getting more renewable energy into the grid while shoring up Eskom’s balance sheet.
Godongwana said Eskom was restricted into infrastructure maintenance and actually upgrading its own infrastructure that exists.
“It is our considered opinion that little effort has been done to date to invest largely on improving the performance of these plants and some of the information being gathered now is proving that point effectively,” Godongwana said.
“Eskom is at liberty to do three things at the same time. The first one is ramping up investment in its power plants.
“Secondly is transmission. I am told there are certain areas where we can’t get this capacity which has been developed in terms of renewables, but we can’t put that stuff on the grid because of the transmission lines.
“And therefore it is quite important that we prioritise transmission. Distribution is (also) a major challenge.
“Now, because of its financial position, these restrictions are intended to ensure that over time Eskom does not rely on the fiscus and can build up its balance sheet.
“If Eskom by any reason decides there is a good opportunity which is a greenfield and wants to invest and there is a case for that, there is a window of opportunity in a sense that Eskom can with the approval of the Minister of Finance entertain that investment.
“So it’s not closed completely, but we are trying to safeguard the balance sheet.”
The government has been considering various measures to address Eskom’s unsustainable R423bn debt burden.
The goal is to strengthen the utility’s balance sheet, enabling it to restructure and undertake the investment and maintenance needed to support the security of electricity supply.
In the Budget Review 2023, the Godongwana announced a debt relief arrangement of R254 billion (about R168bn in capital and R86bn in interest) over the next three years.
Treasury has proposed advances to Eskom of R78bn in 2023/24, R66bn in 2024/25 and R40bn in 2025/26 to cover capital and interest payments as they fall due and may only be used for that purpose.