Eskom tackles cash challenges
Treasury confirms loan guarantees will prop up power utility’s liquidity position
THE national Treasury yesterday said it had been working with the Department of Public Enterprises and Eskom to address the cash crisis at the utility, which poses a major threat to the economy.
The Treasury told The New Age that Eskom was covered by government guarantees that could be utilised in the event of a cash crunch. This after media reports claimed Eskom had only R1.2bn in reserves.
The power utility denied the claims but confirmed on Monday that its liquidity reserves were much lower than the required R20bn, but not as low as R1.2bn.
The Treasury, ahead of Finance Minister Malusi Gigaba’s mini budget last month, said the government recognised Eskom’s critical role in the economy and the need to maintain energy security.
It said for this reason it was imperative that Eskom completed its planned build programme, while sustaining a solid investment grade credit rating and that the government had approved the increase in Eskom guarantees to R350bn.
The R350bn includes the R175.97bn of guarantees announced in February 2009.
“The guarantees will deepen the financing options available to Eskom and reduce its cost of funding emanating from the lower than anticipated tariff increases,” the Treasury said.
Eskom said it was in a much better position than the R1.2bn stated in media reports.
“We are hard at work with Public Enterprises to address the issues that are impacting the entity’s liquidity position,” the Treasury said in response to The New Age questions.
“The teams are meeting weekly to continuously assess the financial position of the entity and will continue to monitor the situation until it normalises.”
In addition, the Treasury said a number of funding initiatives had been identified to improve its liquidity position.
It said the government was doing its best to assist Eskom to access these funding sources.
Further, the government is addressing the governance issues that Eskom had been experiencing in order to improve investor confidence in the entity.
“Furthermore, it must be noted that the National Energy Regulator of South Africa (Nersa) is in the process of adjudicating Eskom’s tariff application for 2018-19 and has indicated that it envisions making a decision early in December.
“Nersa is also expected to make a decision on when it will adjudicate the Regulatory Clearing Account applications that Eskom has submitted,” the Treasury said.
It said all these measures were expected to assist in improving the entity’s financial position and that at this stage Eskom has not requested any financial support from the government as there is still sufficient capacity that can be utilised in the government guarantees that were provided to Eskom.