There would be some very ”tough negotiations” with Eskom over the repayment of its R60-billion loan, Finance Minister Trevor Manuel said in Cape Town on Thursday.
”The terms will have to be worked out, it’s not in our interests to try to squeeze a short-term return,” he told a breakfast meeting.
The R60-billion is earmarked to help fund the utility’s massive short-term expansion plans, which will see the return to service of three mothballed power stations and the construction of two new ones.
”Since its establishment in 1923, the principle on which Eskom has been funded is that the users pay for Eskom in all its glory,” Manuel told the meeting.
He noted that the last significant loan was probably in 1931.
”We’re dealing with a special circumstance. The glory days of a surfeit of power generation is over,” he said.
Added to this were changes in coal supply and a very real decline in the real price per kilowatt hour of what South Africans pay.
”I think there needs to be a set of disincentives to be built in as well to get people more conscious of their electricity usage,” he said.
”In the short term we won’t change the resource based nature of the economy.”
”These infrastructure investments are long term and we need to assist in the restructuring of their [Eskom’s] balance sheet.”
Won’t throw Eskom to the wolves
He said that the extent of the expansion programme meant that Eskom would require some support.
”We are not going to throw them to the wolves,” Manuel emphasised.
He noted that over the next ten years there will be a series of other areas to explore ”as we can’t allow an environment where the key determinant of the price is that at which Eskom has to borrow”.
”The credit rating is very important and the guarantee will be evaluated in that context,” concluded Manuel.
Eskom currently operates 26 power stations, with a total generating capacity of 37 761 megawatts, but ageing infrastructure and the government’s failure to anticipate the growing demand for electricity means it is not producing enough power.
In his budget speech, Manuel said that over the next five years, Eskom’s capital expansion plans will amount to R343-billion, of which almost three-quarters will be for power-generation projects.
”The return to service of previously mothballed power stations, [at] Camden, Grootvlei and Komati, will add a combined 3 677 megawatts of generating capacity by 2011,” he told MPs in the National Assembly.
Other smaller projects will produce about 2 000 megawatts.
”Two major new coal-fired plants, Medupi in Lephalale and Bravo near Witbank, will each cost in excess of R80-billion and produce about 4 500 megawatts each,” he said.
According to the National Treasury’s Budget Review, the price of electricity in South Africa — just more than 22 cents a kilowatt hour — is ”well below comparable prices internationally”. This, it said, is contributing to the ”mismatch” between supply and demand.
Asked if he would stay on as Finance Minister under South Africa’s next president, he said to applause : ”It’s an enormous privilege to serve the country and it’s something we would have to evaluate. I can’t just walk away when the country needs me and that is the approach I will take.” – I-Net Bridge