Eskom needs 32% hike to solve debt problem
Raise tariffs
Eskom has R400 billion of debt that it cannot service and relies on annual bailouts from the National Treasury.
Eskom chief financial officer Calib Cassim says that even if Eskom is relieved of R200 billion in debt, the company will soon be back in the same position if it doesn't significantly raise tariffs, cut costs, and get people and municipalities to pay their bills.
Cassim was speaking at the first day of hearings on Eskom's tariff application to the National Energy Regulator of SA (Nersa) on Monday, where Eskom is asking for a 32% increase for 2023/24.
Eskom has R400 billion of debt that it cannot service and relies on annual bailouts from the National Treasury. It also costs Eskom more to produce electricity than it can bill consumers, making it impossible to escape the debt trap permanently. Treasury is considering relieving Eskom of a large portion of debt – perhaps as much as R200 billion – to enable Eskom to borrow again.
The 32% increase is due to large escalations in Eskom's cost assumptions, says Cassim. For instance, while Eskom previously expected to spend R5 billion on diesel next year, it has revised that to a more realistic projection of R16 billion, as it plants slide into a greater state of disrepair. Also, part of the 32% increase are amounts that Eskom has been allowed by Nersa to recover retrospectively (R1.7 billion) from previous years for costs it incurred. It is also planning to recover from consumers R15 billion, paid to it by Treasury to assist its sustainability but which Nersa incorrectly deducted from its allowable revenue.
Cassim has asked Nersa that these amounts be allocated directly to the revenue of Eskom's new transmission and distribution companies, which have been created in readiness for the unbundling and splitting of Eskom. The thinking is, said Cassim, that if this was done, then these two parts of the business would come close to achieving cost-reflectiveness.
This in turn, will send a positive message to holders of Eskom's debt from which Eskom needs to secure consent for the unbundling.
"Let's try to make the transmission and distribution parts of the business no longer a burden on the fiscus. They should be able to stand on their own feet and meet their capital and operating requirements. We think there is an opportunity to fix two-thirds of the business now," he said.
The hearings are continuing this week. -Fin24
Cassim was speaking at the first day of hearings on Eskom's tariff application to the National Energy Regulator of SA (Nersa) on Monday, where Eskom is asking for a 32% increase for 2023/24.
Eskom has R400 billion of debt that it cannot service and relies on annual bailouts from the National Treasury. It also costs Eskom more to produce electricity than it can bill consumers, making it impossible to escape the debt trap permanently. Treasury is considering relieving Eskom of a large portion of debt – perhaps as much as R200 billion – to enable Eskom to borrow again.
The 32% increase is due to large escalations in Eskom's cost assumptions, says Cassim. For instance, while Eskom previously expected to spend R5 billion on diesel next year, it has revised that to a more realistic projection of R16 billion, as it plants slide into a greater state of disrepair. Also, part of the 32% increase are amounts that Eskom has been allowed by Nersa to recover retrospectively (R1.7 billion) from previous years for costs it incurred. It is also planning to recover from consumers R15 billion, paid to it by Treasury to assist its sustainability but which Nersa incorrectly deducted from its allowable revenue.
Cassim has asked Nersa that these amounts be allocated directly to the revenue of Eskom's new transmission and distribution companies, which have been created in readiness for the unbundling and splitting of Eskom. The thinking is, said Cassim, that if this was done, then these two parts of the business would come close to achieving cost-reflectiveness.
This in turn, will send a positive message to holders of Eskom's debt from which Eskom needs to secure consent for the unbundling.
"Let's try to make the transmission and distribution parts of the business no longer a burden on the fiscus. They should be able to stand on their own feet and meet their capital and operating requirements. We think there is an opportunity to fix two-thirds of the business now," he said.
The hearings are continuing this week. -Fin24
Kommentar
Allgemeine Zeitung
Zu diesem Artikel wurden keine Kommentare hinterlassen