As Eskom buckles, guess who will pay up? You
Eskom is no closer to resolving its cash crunch, and its revenue shortfall “requires significant shifts in the business”, it indicated in a statement on Friday.
The power utility said it had secured 90.5% of R300 billion in funding for its capital expansion programme, but it was hobbled by the National Energy Regulator’s (Nersa’s) decision to allow it only to recover costs for the three years to 2013, ignoring the additional three years Eskom asked for.
“The revenue shortfall ... requires significant shifts in the business,” said finance director Tsholofelo Molefe, adding that Eskom was pursuing a number of options with government to plug the gap.
In June, credit ratings agency Standard & Poor’s (S&P) downgraded the utility’s credit rating, placing it a rung above junk status, and putting it on credit watch, which means it had a 50% chance of being downgraded within 90 days.
Eskom said all of its ratings remained “at the lowest end of investment grade”.
“Eskom’s financial sustainability is under pressure, but we have investigated alternative funding, including possible equity and quasi-equity in response,” said Molefe. “We have applied to Nersa for the [regulatory clearing account] adjustment, and we have launched a business productivity programme to reduce costs, increase productivity and enhance efficiencies.”
Eskom’s revenue and expenditure is largely based on forecasts, so the regulatory clearing account is used to recover differences in forecast and actual revenue/expenditure.
But there appears to be some confusion about the extent of Eskom’s shortfall. Eskom believes it has a R28.5 billion shortfall. S&P, when placing Eskom on credit watch in June, put the shortfall at R50 billion. On Wednesday, at a press briefing announcing the appointment of Tshediso Matona as Eskom’s new CEO, Public Enterprises Minister Lynne Brown said Eskom needed R219 billion.