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Brown: Eskom finances clear in Sept

Cape Town - Public Enterprises Minister Lynne Brown says Eskom will know by September how government plans to help it remain financially sustainable.

Addressing Parliament's portfolio committees on energy and public enterprises, Brown said an inter-governmental task team had come up with several options for Eskom's financial problems.

Tariff increases

"A draft report with options has been shared with us and we're going to be receiving the final proposal soon, after which we will take this to... Cabinet, ideally before the end of September," Brown said.

The power utility painted a gloomy picture of its books, telling MPs it faced a R225bn revenue shortfall, partly as a result of being granted lower-than-expected tariff increases by the National Energy Regulator of SA (Nersa).

"During the MYPD3 [multi-year price determination] application we assumed certain sales growth - 2.9% - and the reality has been that we have seen quite a significant decline..." Eskom finance director Tsholofelo Molefe said.

"If you look at the 2013/14 financial results... we have actually lost over 9 000 gigawatt hours which translates to R5.8bn of revenue."

Solve problems

Eskom was still awaiting a decision on its application to Nersa to evaluate and approve the regulatory clearing account (RCA) balance for its previous multi-year price determination control period between April 1 2010 and March 31 2013.

The RCA is a regulatory mechanism that allows Eskom to adjust for over-or under-recovery of revenue, as initial price determinations are based on projections and assumptions.

Consumers could see an increase or decrease in the price of electricity as a result of Eskom's submission.

A tariff adjustment alone would not solve Eskom's problems.

"We believe... the RCA adjustment will not be adequate to help us with our cash flow going forward," Molefe said.

"We need to identify additional sources of liquidity to be able to continue with our operations."

Highly exposed

The state power giant would remain highly dependent on borrowing to continue its operations and maintain the capital expansion programme.

Molefe: "We await the decision of the credit ratings agencies within the next three months, but from our perspective based on their ratings that were done just over a month ago we do see the risk that we are highly exposed to refinancing of our current debt," said Molefe.

Eskom would continue to introduce measures to cut costs, but it insisted only higher electricity tariffs would help with its cash flow problems.

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