Tuesday, 10 September 2019
Cape Town: Eskom chairperson Jabu Mabuza says Eskom has run out of its borrowing abilities and that it’s only short-term option is to turn to the shareholder for support.
Mabuza said this when Eskom, as well as the Department of Public Enterprises, appeared before the Joint Meeting: Standing Committee on Appropriations, Portfolio Committee on Public Enterprises and Select Committee on Appropriations to brief Members of Parliament on the Special Appropriation Bill.
“We are not generating the revenue. We are left with one other option which is shareholder support. We will not be able, with cost savings alone, to solve Eskom’s financial health.”
To ensure Eskom is able to meet its financial obligations, Finance Minister Tito Mboweni announced an Eskom support package of R23 billion for the next three years during his budget speech in February.
The Minister also tabled the Special Appropriation Bill to provide Eskom additional support of R59 billion in June.
The additional support (R23 billion over three years add to 2019/20: R26 billion and 2020/21: R33 billion) brings the total amount to R128 billion over a three year period.
Briefing MPs on Tuesday, Mabuza said Eskom’s finances were currently not in good health.
“On the cash flow side, cash as I have indicated is not sufficient. The cash we generate from our operations is a negative of R36 billion. We generate R33 billion and we need R69 billion to service our debt. That gives us a negative of R36 billion before we go borrowing. This R58 billion that we see is money we raised from borrowing in the past year.”
Mabuza said the current situation at Eskom was unsustainable and that the power utility was in a situation where it has to borrow money to service debt.
Finance costs for the utility was as a result of a few factors, including higher coal costs, increased IPP production and the wage settlement of bargaining employees, among others.
On top of this, there has been a decline in repayments from municipalities and revenue is declining at 1% per year.
Discussions are taking place at the Inter-Ministerial Committee to address municipal debt and they are engaging with communities in Soweto to address the non-payment culture, Mabuza said.
“We are having discussions with the Inter-Ministerial Team to address municipal debt.
“Ideally, revenue should be sufficient for Eskom to wash its face really – to at least cover the life of the asset and cover the interest cost. Our debt funding has exceeded R440 billion, we have reached the ceiling now,” he said.
He said Eskom’s strategy to renew itself would be done in three ways – stabilising the power utility, separating the business units and growing its revenue.
Mabuza said progress was being made in implementing its turnaround plan with an aim of bringing about debt relief, better revenue management, implementing cost initiatives, separating business units and achieving operational stability.
Eskom’s main focus at the moment is to ensure that there is no load shedding due to its impact on the economy and customers. The power utility has gone 157 days without load shedding.