Lower hikes to hit Eskom

Johannesburg - Power utility Eskom on Tuesday said its revised tariff application would result in a cash shortfall of R14bn in its 2012 financial year and R7.9bn in 2013.

Eskom has revised its tariff application downward by 10%, from 45% to 35%, in each of the next three years.

It said the new application would translate to a price increase of 70c per kilowatt-hour over the three-year period, or an increase of 37c per kWh over this period at an average of 10c per kWh per year, as opposed to 99c per kWh in the previous application.

But the revision would still mean that the utility would experience cash shortfalls.

Eskom said it would look into other funding methods to address the expected shortfalls.

The utility said it expected savings of R12.6bn rand from Eskom's operations and primary energy costs.

"In addition, increasing borrowings by R8.5bn over three years and bringing in R20bn new equity will also contribute to lessening the shortfall," Eskom said.

This significant shift in business strategy would mean the introduction of independent private producers (IPPs) in power generation, phasing of the supply side expansion programme, intensifying energy savings and greater cost efficiency.

On the supply side, the new Kusile Power Station (coal) and Sere Power Station (wind) would each be phased one year later. Eskom recommends that nuclear and the department of energy's IPP programme for peaking plant be delayed by two years.

The next coal plant (Coal 3) is recommended to be replaced by IPPs, with the assumption that a private equity partner for the Kusile project would be introduced within 24 months.

"Having done all of the above, a funding shortfall of R14bn remains," said Eskom. It added it was committed to addressing the shortfall by "intensifying its efforts and increasing the required borrowing, and by facilitating the introduction of private equity as soon as possible".

- I-Net Bridge