It is understood that the precise nature and detail of the payment schedule will depend heavily on the outcome of its tariff application to the National Energy Regulator of South Africa (Nersa) – all written public comments on the proposed hike were due on April 29, a public hearing is set for May 23, and Nersa is expected to make a final determination on June 6.

The shareholder injection is viewed as crucial in helping the State-owned utility to safeguard its much-coveted BBB+ credit rating with Standard & Poor’s (S&P), which placed the utility on a negative credit watch on January 11, just ahead of the rolling blackouts, and confirmed this status again on April 14.

The credit agency cited the material increase in the utility’s capital expenditure (capex) programme, as well as significant inflationary pressures, primarily related to fuel and capital-equipment prices, as the key reasons for the move – Eskom expects its capex over the five years to 2012 to rise from the initial projection of R150-billion to R343-billion.

An Eskom official, who cannot be identified, reveals that the term sheet from the National Treasury is likely to be significantly ‘front-end loaded’ should the utility fail to secure the increase it is seeking from Nersa.

In its application to Nersa, Eskom indicated that it expected the government loans to be phased in, with R6-billion to flow in 2008/9, R12-billion in 2009/10, R20-billion in 2010/11 and R22-billion in 2011/12.

However, this proposed schedule apparently depends materially on the nature and quantum of the Nersa-sanctioned increase, if any is deemed necessary. It is unlikely in the extreme that Eskom will receive the full 60%, but it is understood that the utility is still seeking to create some elbow room between S&P demands and the 14,2% increase already approved.

Eskom has, thus, secured scenario plans from S&P, outlining four funding models that will enable it to retain its current rating.

Although the four models differ in funding-composition detail – with sources ranging from local bonds, international issues, corporate paper bonds, export credit guarantees, development finance institutions to tariffs and the shareholder support – it is understood that the burden will, ultimately, have to be shared by either the taxpayer (its ultimate shareholder), or the consumer, for Eskom’s financial ratios to remain in sync with the demands of the rating agency.

The National Treasury is reportedly in possession of supporting documentation showing several funding scenarios, starting with the R60-billion injection announced, where the balance will be sourced from consumers, climbing all the way to a R120-billion shareholder injection, under a scenario where only modest price increases will be granted.

Eskom has also apparently made known its indicative five-year funding breakdown to both the National Treasury and S&P, which indicated that it could raise a maximum of R150-billion on the local and international debt markets, with more than 40% proposed for raising on the domestic markets.

In other words, with the R60-billion capital injection, Eskom believes it can secure R210-bil- lion of the R343-billion it needs for the capital programme from its shareholder and from the capital markets. The R133-billion balance, the utility proposes, should arise from its proposed tariff increases.

Should it fail to achieve these balances, the senior official warns, the group will be forced to halt the approval of new projects, until a viable funding strategy emerges.

This is likely to have a particular impact on the utility’s nuclear strategy, a decision on which is expected in June or July.

Rival nuclear vendors Areva, of France, and Toshiba’s Westinghouse, of the US, have submitted bids for the so-called ‘Nuclear-1’ programme, which could involve the construction of a two-unit nuclear power plant, with a capacity of between 3 000 MW and 3 500 MW.

The project’s capital cost was estimated at about R120-billion, but an Eskom source confirms that the figure had swelled significantly when the firm offers were received earlier in the year.

Eskom, which is considering the construction of 20 000 MW of nuclear capacity by 2025, is now reportedly mulling over other ‘nonemitting’ technologies, including high-potential imports, such as those that could arise from the proposed Inga 3 hydro system on the giant Congo river.