Eskom seeks balance-sheet aid
Eskom has approached the Treasury for a form of “soft support” to give it the balance sheet capacity to sign power purchase agreements with independent power producers (IPPs).
This is pending the outcome of its application to the National Energy Regulator of SA (Nersa) for a tariff adjustment under the revenue-clearing account that, if approved, will come through only next year.
The application to the Treasury is just one of many applications for support from stateowned entities at a time when the Treasury is forecasting lower growth, lower revenues and less money in the state coffers. South African Airways (SAA), SA Express and the SABC are among the entities needing an injection of state funds.
The Department of Energy’s deputy director-general for policy planning, Ompi Aphane, said in Parliament on Tuesday that the aim with support for Eskom under the government support framework agreement would be to bolster the utility’s balance sheet and allow it to proceed with signing the agreements ahead of a tariff adjustment. Eskom claims that the underrecovery relating to purchases from IPPs amounts to several billion rand and that this is having a negative effect on its balance sheet.
But the DA’s Gordon Mackay slammed the government’s “wholesale capitulation to Eskom” in supporting its application for assistance, saying that its weak balance sheet was the result of years and years of mismanagement and had nothing to do with the IPP programme.
The utility has applied to Nersa for a 19.9% tariff increase for the 2018-19 year and has also made two applications under the revenue-clearing account amounting to R44bn to R22bn each for the 2014-15 and 2015-16 years that, if accepted by Nersa, would feed into an adjusted tariff. The approved tariff increase for 2017-18 is 2.2%, of which 1% is consumed by Eskom’s obligations to purchase electricity from the IPPs.
The clearing account takes account of exceptional costs that have not been considered by Nersa when it approves a tariff. Aphane said that if and when Eskom were granted a tariff adjustment under the revenue-clearing account, it would be in a position to sign the IPP contracts. Until then, it was looking to receiving “soft support” from the Treasury.
The government support framework agreement guarantees support for Eskom to allow it to meet its obligation to buy electricity from renewableenergy IPPs. Signatories to the agreement, that have to be approached for support, are the ministers of finance, public enterprises and energy.
Aphane briefed the energy portfolio committee on the work of the task team, consisting of representatives of the departments of energy and public enterprises, Eskom and the IPP office, which was set up to resolve the impasse over Eskom’s refusal to sign power purchase agreements with about 39 IPPs in bid windows 4 and 4.5.
Acting director-general of the Department of Energy Tseliso Maqubela said the task team’s proposals would be submitted to the ministers by the end of the month, but input was required from the Treasury beforehand. The contractual obligations of the government towards the IPPs had to be balanced with the need to protect the sustainability of Eskom, that if threatened could affect the country’s sovereign debt as the utility has R350bn in state guarantees.
ITS BALANCE SHEET IS DUE TO YEARS OF MISMANAGEMENT AND HAS NOTHING TO DO WITH IPPs