The government may be unable to provide further loans to utility Eskom and will limit guarantees for debt as the firm faces a financial crunch, Business Report reported on Monday.
The paper said Eskom, which is struggling to raise R485-billion for new projects to ease a power deficit in Africa’s largest economy, would be granted loans and guarantees within previously agreed arrangements with the government.
However, additional funding and guarantees would be limited.
“[It is] clear that the government does not have money to provide further loans, and there is a limit on the total guarantees that the government can issue before the sovereign rating is affected,” the paper quoted Ayanda Shezi, a spokesperson for the Department of Public Enterprises, as saying.
She said providing more loans to Eskom would crowd out other infrastructure development projects.
Paper group Sappi, which will supply Eskom with 45MW of power from its plants, warned on Friday companies should prepare for another power crunch by cutting their reliance on Eskom and fossil fuels wherever possible.
Business Report said Eskom, which was granted an average of more than 25% in power tariff increases by the National Energy Regulator of South Africa for the next three years, would be loaned R60-billion by the government, while guarantees for debt contraction would be around R176-billion.
Eskom wanted to raise electricity prices by 35% a year for three years to help it raise cash to build more plants and avoid the blackouts that crippled mines in the world’s top platinum and major gold producer in early 2008.
Demand for power in South Africa is expected to rise over the coming years because of rising consumption in the mining industry and other sectors.
Shezi said other options to raise power supply would include accelerating investments by private power producers, energy efficiency and private participation in some of Eskom’s projects. — Reuters