/ 2 April 2009

Eskom may need more state aid

Eskom may need to approach the government for yet more support to help fund its R384-billion investment programme, its head was quoted as saying.

The Treasury said in February it would provide the utility with loan guarantees of R175,97-billion over the next five years, in addition to a R60-billion, three-year direct loan to the company announced last year.

But Eskom’s chief executive Jacob Maroga said the utility might need more.

”Government has given us a guarantee … but we may require more,” Engineering News quoted him as saying.

The utility is expected to seek a significant increase from the country’s power regulator when it soon applies for a tariff increase that should help it fund the power expansion programme.

Maroga declined to elaborate on the figure the utility would apply for, but said that the application would not only include a price adjustment to current electricity tariffs, but would also involve an intergrated funding model for its operations and the investments.

Eskom, which provides 95% of South Africa’s power, has been rationing electricity since early last year, when a near collapse of the grid forced mines and smelters to shut for five days, costing Africa’s biggest economy billions of dollars.

The government has owned up to years of underinvestment in power generation, which led to the chronic power shortages after the economy expanded and demand for electricity grew. – Reuters