The power utility is also considering approaching the electricity regulator to review the tariffs it is allowed to charge consumers as it struggles with spiralling operating and funding costs.
"We have approached the government, through the Public Enterprises Department, to see if there’s a possibility of getting an equity injection," Eskom finance director Tsholofelo Molefe said in an interview this week. "As a minimum we may require R50bn, but that must come in addition to a tariff review."
Eskom’s needing at least this much money bodes ill for South Africa, with institutions including the International Monetary Fund expecting the economy to slow and high energy costs already weighing on consumers and business alike.
Further, the government has little room for manoeuvre after Finance Minister Pravin Gordhan called for restraint in spending in the budget speech in February.
The likely consequences of Eskom’s dire financial position are higher electricity prices and the further stretching of government’s balance sheet to extend more guarantees to cover the power utility’s issued debt.
An equity injection is necessary for Eskom to stop the deterioration of its standalone credit rating, said Elena Ilkova, a credit analyst at Rand Merchant Bank. "It would be an excellent development — the reality is that Eskom is undercapitalised ."
Without the government’s guarantee of its debt, Eskom’s standalone rating was "pretty low", Ms Ilkova said. "If there is an equity injection, bond investors would be really happy with that."
Ms Molefe said the R50bn figure could change in either direction, depending on a number of variables. These included a possible decision by the National Electricity Regulator of South Africa (Nersa) to review its decision to grant Eskom half the tariff increase it applied for.
"We are in dialogue with the regulator to solve the funding programme," Ms Molefe said.
Public Enterprises Department spokesman Mayihlome Tshwete said the government was considering ways to help Eskom with its problems. "No figures are being discussed yet ; neither is any financial assistance."
Mr Tshwete said the plan was being worked on together with the Department of Energy and the Treasury. He would not give a deadline on when the government expected to make a decision on Eskom’s request.
Government was working to find a solution as soon as possible. "More importantly, we’re looking at options to ensure Eskom’s capital expenditure programme is not compromised," Mr Tshwete said.
The power utility is in the middle of a troubled R350bn capital investment programme that has been hit by massive delays. It had to raise debt for most of the projects, and received government guarantees to support its debt programme.
"We’re now very close to reaching our borrowing capacity," Ms Molefe said.
Eskom is considering asking the regulator to review its decision to raise electricity prices 8% over the current five-year period, instead of the 16% it asked for. The new tariff implemented last year has left Eskom with a revenue shortfall of R225bn over the five years to 2018.
"Operationally there have been changes," Ms Molefe said.
What Nersa awarded Eskom in its third multi-year price determination was lower than what Eskom required. Nersa’s rules allowed it to review its decision annually based on what had happened in the period, Ms Molefe said.
Nersa spokesman Charles Hlebela said the regulator was busy with its annual review of the tariff increase and its effect on Eskom’s financial position.
Ms Molefe said any decision by Nersa to allow Eskom to charge more for power would be based on the regulator’s assessment on how "prudent" the utility management’s had been and external factors including coal prices.
Eskom’s coal supply problems have led to massive diesel bills. It has spent R10bn on the fuel to run gas turbines for long periods to avoid blackouts. It had budgeted just R3bn for this.
Further, the utility had started servicing the debt it raised for the new Medupi and Kusile power stations, which will cost R105bn and R120bn respectively. "We need about R20bn a year to service debt on the whole build programme," Ms Molefe said.
The plants are not producing power yet and so are not generating any revenue. "The revenue shortfall (from tariff increase) does affect our debt-servicing ability," Ms Molefe said.
But she was "comfortable" that Eskom’s cash flow was stable. Former CE Brian Dames had said in March that the financial situation at Eskom was "acute".
No comments:
Post a Comment