Durban -Energy experts said the National Treasury’s message to Eskom that it would not be providing it with additional funding and that it had to use the revenue derived from tariffs it charged consumers to fix and maintain power stations would compel the power utility to become more self-sufficient.
This week, the Treasury briefed MPs in Parliament's Standing Committee on Appropriations on the Eskom Debt Relief Bill, reiterating that Eskom may not borrow for the next three years and that the company would not receive any other financial bailouts from the government to fix its ailing power stations.
Briefing Parliament’s Standing Committee on Finance, Finance Minister Enoch Godongwana reiterated that Eskom’s capital expenditure was restricted to transmission and distribution.
According to the debt-relief programme, the first condition for Eskom is that the only capital expenditure that may be undertaken for generation relates to minimum emissions standards, flue-gas desulfurisation and required maintenance.
Treasury has proposed advances to Eskom of R78 billion in 2023/24, R66bn in 2024/25 and R40bn in 2025/26 to cover capital and interest payments; these funds may only be used for that purpose. Eskom has over R420bn of debt.
The power utility has struggled to recoup debt, especially from municipalities, with Deputy President Paul Mashatile last month revealing that at the end of December 2022, municipalities owed Eskom more than R56.3bn.
Energy expert Professor Wikus van Niekerk said the Treasury was correct in its conclusion, as the money that has been made available is specifically to reduce the power utility’s debt.
“This will force Eskom to take a harder line on defaulting customers and municipalities. We have already seen Eskom attaching the assets or cutting power to defaulting municipalities,” Van Niekerk said.
He said one had to have some sympathy with Eskom when it came to the exorbitant debt owed by municipalities.
“That is unfortunately a political decision and the governing party should lean on councils to do the proper thing and pay their debt to Eskom,” he said.
Another expert, David Lipschitz, said Eskom’s financial statements would be in order were it not for the financial drain of Medupi and Kusile.
“Medupi and Kusile are weighing Eskom down.
“They should not be on the utility’s financial statement but should be on long term finance. Although Eskom looks insolvent, that is because of those two power stations,” Lipschitz said.
Eskom acting chief financial officer Martin Buys yesterday said they were grateful that the National Treasury was taking over the debt servicing cost and Eskom was expected to fund the capital programme from the cash generated within the power utility.
“This will come from the revenue and we are comfortable with the decision. It will allow us to do more long term planning,” Buys said.
The Treasury’s deputy director-general Duncan Pieterse told MPs that because of Eskom’s debt, it had not been able
to spend the funds required on maintenance, capital expenditure and investment in transmission and distribution.
“They have constrained those budgets because of their debt challenges. So, the major intention is to free Eskom from the debt burden so that they can prioritise that critical CapEx and resolve load shedding,” he said.
Meanwhile, the Treasury has invited public comment for the controversial proposed exemption for Eskom from including particulars of irregular expenditure and fruitless and wasteful expenditure in its financial statements for a period of three financial years.
The exemption had been gazetted, but after public outrage, Godongwana told a joint meeting of five parliamentary committees that the Treasury had decided to withdraw the Government Gazette pending public input.
The decision to review the exemption was taken after a meeting with Auditor-General Tsakani Maluleke.
Treasury in a statement said comments can be emailed to [email protected] by no later than tomorrow, April 21.