Eskom to be boosted with R20bn cash injection
By Wendell Roelf
"Government will closely monitor Eskom's financial position and, if necessary, could consider providing additional support to the utility by converting its existing subordinated loan to equity," Treasury said.
The 20 billion rand injection will be raised through the sale of non-strategic state assets, such as property, direct and indirect shareholding in listed firms and surplus cash balances in public entities, the Treasury said.
"Over the next two years capital injections for Eskom and funding for other state-owned companies will be raised in a way that has no effect on the budget deficit," the Treasury said.
Last month Treasury approved a financial package to the utility which includes the company raising 50 billion rand in additional debt, over and above its original plan of 200 billion rand, as it struggles to finance an ambitious new generation program designed to overcome power shortages that have crimped economic growth.
Because of the impact on growth and on key sectors such as mining, the government is keen that Eskom bridge its funding gap, estimated at around 225 billion rand over the next four to five years, without raising its rates too high.
The energy regulator recently approved a tariff hike which will help fund the building of new and expensive coal-fired power plants.
In March, the utility was forced to impose rolling blackouts for the first time in six years to prevent the national grid from collapsing, a situation that underscored just how precarious the balance is between power supply and demand.
(1 US dollar = 11.0105 South African rand)