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Govt gives Eskom extra firepower

Cape Town - The government has extended guarantees to Eskom to help finance its electricity generation programme, Finance Minister Pravin Gordhan said on Thursday.

Eskom is on a massive capacity building programme to bulk up its power grid and prevent future blackouts, after the power crisis in 2008 shut down mines and other industries and cost the country billions.

"We have extended guarantees to Eskom by R174bn. Eskom will now have R350bn from government to enable it to continue with its build programme through 2017," Gordhan said in a presentation to a parliamentary committee.

Eskom has been struggling to find all the money it needs to pay for two new 4800 MW coal-fired power plants.

The power utility has said it will tap the US bond market in early 2011 for cash to pay for new power stations and other infrastructure desperately needed to avoid a power crunch.

Officials have warned of rolling blackouts from 2011 to 2016 unless extraordinary measures are taken to generate more power.

Lungisa Fuzile, Treasury's head of asset and liability management, told the same committee that Eskom is financially sound and will be able to service its debt.

"Backed by these guarantees... when they complete (new power stations) Medupi and Kusile, the energy that is going to be generated by these power stations should actually enable Eskom to service its debt," he said.

Treasury director general Lesetja Kganyago told MPs it was necessary to allow foreign exchange to go out of South Africa to mitigate the recent appreciation in the rand.

The government has no target for foreign exchange reserves and will accumulate any as and when it is possible, Gordhan said on Thursday.

"There is no target as far as reserves are concerned. As and when we can afford to fund the Reserve Bank's purchase of dollars and accumulation of reserves, we will certainly do that," Gordhan told parliament.
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