The energy community is likely to pay even more attention than usual to Finance Minister Nhlanhla Nene’s Medium-Term Budget Policy Statement, which is due for release on October 22. On that date, he is planning to release details relating to the size of an approved equity injection for Eskom, as well as how the injection will be funded.

The bail-out, which is part of a broader support package, is additional to a R60-billion subordinated loan already advanced and government guarantees of R350-billion, and Nene has indicated it will be funded by “leveraging nonstrategic government assets”. These so-called nonstrategic assets have already been identified within “various government departments”, but Nene has refused to disclose what they are.

No mention is made of any intention to dispose of Eskom power stations, as was speculated at one point. In fact, Nene says he is “not too sure that we can regard a power station as a nonstrategic asset”. Instead the focus is on assets “located within various departments in government” around which there is “an ongoing engagement”.

Nene is also quick to stress that the equity injection is but one element of the package, with government indicating that it will also support Eskom’s application to the National Energy Regulator of South Africa (Nersa) for “tariff adjustments in line with the regulatory process”.

The utility has already applied for, and partially received, claw-back relief from Nersa under the Regulatory Clearing Account (RCA) mechanism for the second multiyear price determination period (MYPD2), which covered the three-year time horizon from April 1, 2010, to March 31, 2013. While the distribution mechanism has not yet been finalised, the decision is expected to begin impacting on tariffs from April 1, 2015, over and above the 8% already sanctioned. Eskom is expected to begin making MYPD3 RCA applications in due course.

But the support package may also clear the way for a tariff ‘reopener’, whereby Eskom could again seek the 16% a year increases it had requested for the five-year period from April 1, 2013, to March 31, 2018.

Besides its support for tariff adjustments and the equity injection, Cabinet has also approved six other components that are designed to help close what Eskom has calculated to be a R225-billion revenue shortfall.

Eskom, for instance, will raise additional debt of about of R50-billion, over and above its original plan of R200-billion during the MYPD3 period.

There will also be an acceleration of demand management measures and a refinement of energy policy and regulatory governance mechanisms to “help keep the lights on and give certainty regarding the energy industry going forward”.

Poor households will be protected from the possible tariff implications through the free basic electricity allocations, including support for municipalities struggling to deliver on these allocations.

The plan also reaffirms support for the expansion of the independent power producer procurement programme to complement Eskom’s build programme and insists on savings and efficiencies at Eskom.

But, without question, most of the focus will be on the equity injection and the possible implications for future electricity prices.