SA company bags E1.1m EEC contract
MBABANE - Mazars Corporate Finance, a South African consultancy, has been tipped for the Eswatini Electricity Company (EEC) optimum finance structure study.
According to the intention to award tender notice published in the Eswatini 3ublic 3rocurement Agency (ES33RA , the proposed contract price for this tender is E1 100 000.
The South African company was the only consultant that submitted a proposal.
The study that the SA consultant is set to undertake is aimed to inform the treatment of the weighted average cost of capital (:ACC for future tariff applications and determinations.
Equity
The optimum financing structure is the best mix of debt and eTuity financing that maximises the company’s value while minimising its cost of capital.
The optimum financing structure is the best mix of debt and eTuity financing that maximises the company’s value while minimising its cost of capital.
The focus of the study would therefore be to ascertain the appropriate gearing, cost of debt, as well as cost of eTuity that will maximise the company’s value, given local conditions.
,t is expected the study should consider local financial markets, economic indicators and local tariff objectives to determine an optimal debt and eTuity range suited to the EEC’s operation.
Since the optimal level of gearing is a moving target that changes over time, the study should present a gearing model whose inputs can be updated to inform the optimal gearing ratio at - a point in time, and - over a projected period (five years .
The initial primary outputs, therefore, will prioritise demonstration of
◗ A five-year projection of the
company’s optimal gearing.
◗ A methodology and tool that can be used to determine optimal gearing in response to real-time changes to input variables.
Consideration
The study should establish a methodology by which the EEC can calculate the appropriate cost of eTuity. This shall take into consideration the ownership structure of the utility. The study shall also consider the methodology reTuired by the Electricity Multiyear 3rice Determination Tariff Methodology for determining the cost of eTuity, currently the Capital Asset 3ricing Model (CA3M .
)urthermore, the study shall consider The most appropriate proxy for a risk-free rate, benchmarking with other capital-intensive regional parastatals to determine the appropriate range for a Beta, as suggested by the ESERA Tariff Methodology and benchmarking against other regional entities to determine an appropriate risk premium, as suggested by the ESERA Tariff Methodology.