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Policies threaten viability of Eskom and Transnet - Brown

Mar 08 2017 20:20
Matthew le Cordeur

Cape Town – Public Enterprises Minister Lynne Brown said government policies and regulations threaten Eskom and Transnet’s future sustainability and should be addressed urgently.

Brown was in Parliament on Wednesday to present the challenges and performance of state-owned companies (SOCs) under her portfolio.

“Eskom operates in a complex and highly regulated environment and the policy decisions determine whether the SOC will be operationally or financially sustainable or not,” she said.

“The challenges facing Eskom are the uncertainty regarding the role of the company in the future build programme, the adverse impact of (the) IPP (independent power producer) programme on the potential impact on its balance sheet, and high environmental compliance costs.”

Brown said the regulatory uncertainty regarding energy regulator Nersa’s Multi-year Price Determination decisions poses a significant challenge to Eskom’s revenues and the SOC’s ability to meet its debt payment obligations.

“Nersa only approved a 2.2% price increase in its latest determination, and the court case regarding the legal challenge on RCA (regulatory clearing account) determination still remains unresolved.

“Despite the above, Eskom has continued to maintain a positive financial performance with the company posting a net profit of R4.6bn in the 2015/16 financial year. Furthermore the company is projected to post a profit for the financial year ending in March 2017.”

Regarding Transnet, Brown said it is “faced with the major policy challenge as the National Ports Act requires corporatisation of the Transnet National Ports Authority”.

Said Brown: “This poses a serious risk to the strength of Transnet group’s balance sheet and if implemented, it could jeopardise the implementation the SOC’s investment programme as outlined in the market demand strategy.

“Despite these challenges, Transnet has continued to expand its networks. The company is committed to spend over R200bn in infrastructure over the next 10 years.”

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