Finweek English Edition - - INVESTMENT -

In essence, Eskom will strug­gle to pay the in­ter­est on a R252bn debt pile partly re­lat­ing to Medupi and Kusile whilst its fall­ing credit sta­tus will make rais­ing fur­ther funds in­creas­ingly ex­pen­sive. On the ba­sis of one fi­nan­cial ra­tio – re­turn on as­sets – the com­pany is woe­fully un­der­per­form­ing.

Re­turn on as­sets is sup­posed to be on par­ity with the cost of money to Eskom. How­ever, the util­ity’s CFO Tsholofelo Molefe said at Eskom’s year- end re­sults that re­turns on as­sets was only 0.53% while the cost of rais­ing cap­i­tal was 7.65%, an out­come that was “in­ad­e­quate” and would “re­sult in a fur­ther ero­sion of Eskom’s fi­nan­cial po­si­tion”.

“It is there­fore im­per­a­tive that the price of elec­tric­ity mi­grates to cost- re­flec­tiv­ity,” said Molefe. “Eskom re­quires a rate of re­turn on as­sets that will en­able it to main­tain and re­place the cur­rent as­set base,” she said.

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