Eskom and Transnet lead the pack
Government extends power utility’s R350bn guarantee by six years — but it will not be used to cover nuclear build. Meanwhile, the state transport company gets R273bn to spend over the next five years
Government entities will spend about R433bn on capital goods over the next three years, most of which will be spent on fixed infrastructure by the state’s six largest companies.
This will take total expenditure on infrastructure to over R1 trillion since 2012, as these entities have already spent R514.4bn, finance minister Pravin Gordhan said in parliament this week.
Eskom and Transnet are at the forefront of the capital expenditure drive, having taken up 74% of the total.
This was spent by Eskom bringing online 1,900 MW of electricity-generating capacity and transmission infrastructure, while Transnet’s acquisition of locomotives and investment in rail infrastructure added 26.4Mt of capacity for its general freight business.
Another 9Mt was added to the export coal line to the Richards Bay Coal Terminal and the capacity of the iron ore line was boosted by 7.2Mt.
Transnet’s capital expenditure amounts to over R122bn over the past five years, including buying 1,064 rail locomotives, laying a fuel pipeline and rolling stock.
The utility will spend the money expanding and upgrading its rail infrastructure and rolling stock.
Over the next five years, Transnet will spend another R273bn on capital infrastructure.
In addition to handing Eskom a cash bailout of R23bn and converting a R60bn loan into equity, government has extended the utility’s R350bn guarantee facility by six years.
The guarantee, which Eskom needs to complete the building of the two power stations currently under way, has been extended from next month.
This guarantee is specific to raising money for the current build of coal-fired power stations.
It will not be extended to fund Eskom’s ambitious nuclear electricity investment drive.
Late last year, Eskom requested proposals from interested parties to provide information on what it would cost to build the infrastructure. When the process closed last month, Eskom said it had had overwhelming interest from major international nuclear vendors, and would analyse the information to determine the way forward.
Eskom wants to build a fleet of power stations eventually amounting to 9,600 MW by the year 2037.
At current estimates it is expected to cost R440bn at the low end and R1.2 trillion at the top end.
Equally, Eskom has stated that its balance sheet cannot fund any expenditure of this nature without government support.
This is a significant amount, as current government expenditure totals R1.56 trillion over the medium term. Asked if the budget makes allowance for nuclear build, Gordhan said no.
“That process (at Eskom) is still in the early stages, and treasury is not yet required to make any provision for it,” he said.
A major surprise in the budget was an allocation of R200bn for the construction of the Mthombo oil refinery that PetroSA wanted to build at Coega in the Eastern Cape.
The fuel supplier quietly abandoned the project two years ago, in the face of depressed oil prices that would have made the 300 000 barrels per day uneconomical. It was at the feasibility stage then. Treasury says in the budget review that should this project go ahead, it would require further investment of R100bn in supporting infrastructure to make it work in an area bereft of fuel transportation capacity.
Majuba power station: Eskom and Transnet are at the forefront of the capital expenditure drive