Eskom mulls ways to close R80bn funding shortfall
Africa|CoAL|Eskom|PROJECT|Projects|Renewable Energy|Renewable-Energy|Sustainable|Africa|South Africa|Acceptable Electricity Tariff|Electricity Tariffs|Energy|Integrated Funding Solution|Sustainable Funding Solution|Bobby Godsell|Jacob Maroga|Power|Koss R-80 Consumer Headphones
© Reuse this
Eskom has said that it is determined to achieve ‘break-even’ at an operating level in the 2009/10 financial year, and CEO Jacob Maroga emphasised that ensuring a “sustainable funding solution” for the future was imperative.
Eskom, which posted a R9,7-billion loss for the year ended March 2009, expects an R80-billion funding shortfall for its expansion plans.
Maroga added that the utility would have a funding model finalised by the end of September.
“I am confident that the country will find an integrated funding solution,” he stressed.
Eskom chairperson Bobby Godsell said that the most important issue was to get clarity from South Africa on what an acceptable electricity tariff would be - one that would allow Eskom, co-generating industries, and independent power producers to get a fair return on power produced.
Once this issue was settled, the issue of equity and debt required to assist capital expenditure programmes could be clarified.
Looking toward the new build programme, which Eskom was undertaking to ensure it would have enough power to supply the anticipated future demand, Maroga said that the utility’s five-year capital expansion programme stood at R385-billion, primarily on already committed projects.
In the 2008/9 financial year, Eskom spent R47,09-billion on capital expenditure, and the largest projects being funded were the Medupi coal-fired power station, the Kusile coal-fired power station, and the Ingula pumped-storage project.
“Funding this programme at a time of global crisis is a challenge,” said Godsell.
He explained that if Eskom assumed that electricity tariffs increased at the same rate as the 31,3% recently granted for the next two years, then the utility would experience a shortfall of R80-billion for the build programme.
Godsell further said that Eskom was working “urgently” with both government and the National Energy Regulator of South Africa to close this funding gap, and “is confident that this can be done”.
However, if this gap could not be closed, the utility would have to introduce delays in some parts of the build programme.
Eskom also outlined targeted reductions for the 2009/10 year, and hoped to save R6,2-billion on primary energy costs; cut R7,1-billion in operating expenditure; as well as save R8,7-billion by deferring capital expenditure.
In the year under review, Eskom spent R25,3-billion on primary energy costs – a 38% increase from R18,3-billion in the prior year. Eskom also increased operating expenses by 32% in the 2008/9 financial year, to R29,3-billion. That said, revenues also increased by 21%, reflecting the increases in electricity tariffs, and the company’s turnover was R53,8-billion, compared with R44,4-billion in the previous year.
Eskom has already previously announced five projects that would be delayed, most being renewable energy projects.
With regard to projects that have been delayed, Maroga stated once again that “everything relies on finding a sustainable funding model, and next month we will have more clarity on that”.
Maroga said that Eskom made a conscious decision to “keep the lights on” and prioritised this, knowing that it would mean the utility incurring a loss at the bottom line.
He explained that if moneymaking were the priority “we could simply shut down those who are most expensive”.
Edited by: Mariaan Webb
© Reuse this
Comment Guidelines (150 word limit)
Other Electricity News
Fourth renewables bid announcement postponed amid third-round closure delay
Article contains comments
Steel among the five resource value-chains being prioritised
The Mineral Beneficiation Action Plan (MBAP), which is currently in draft form, should be finalised by the end of March 2015, the Department of Trade and Industry (DTI) has confirmed. The department is leading the drafting process, which also involves the National...
Article contains comments
Eskom started with scheduled blackouts on Friday afternoon, the power utility said. "Load shedding will continue until 8pm tonight," it said in a short power update.
Article contains comments
Increased maintenance costs, poor rolling mill yields and strike action have widened Evraz Highveld Steel’s operating loss, from R149-million in the nine months ended September 30, 2013, to R483-million for the comparative 2014 period. The company added on Monday...
Energy Minister Tina Joemat-Pettersson has misled Parliament and should be suspended pending an investigation, the DA said on Monday. "Reports indicate that the minister was involved in recommending and appointing Mr Tshepo Kgadima as chairman of the board of...
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
JSE-listed real estate investment trust (REIT) Rebosis Property Fund achieved a distribution growth of 8.1% to 99.45c per linked unit in the financial year ended August 31, despite volatile market conditions.
The MOM incubator was designed to help babies in developing nations who were dying in conflict-struck nations or who do not receive hospital care
A low-cost, inflatable incubator won this year’s international James Dyson design award, which aims to encourage and inspire the next generation of design engineers.
The World Bank released its ‘Doing Business 2015: Going Beyond Efficiency’ report last month and ranked South Africa 43 out of 189 global economies for its ease of doing business, with Singapore topping the rankings.
Air Products South Africa officially launched its R300-million Eastern Cape air- separation unit (ASU), at its new manufacturing facility in the Coega Industrial Development Zone (IDZ), earlier this month. It is the second facility that Air Products launched in South...
BMW South Africa (SA) has signed a power purchasing agreement with energy company Bio2Watt. The offtake partnership will bring renewable energy to the carmaker’s Rosslyn plant, north of Pretoria.