DRAFT MEDIA STATEMENT
Eskom’s cash situation is stable
Friday, 25 April 2014: With reference to recent articles in the media regarding Eskom’s
cash flow challenges, Eskom would like to reassure the nation at large that its cash flow
situation is very stable. Eskom manages its cash flow in a responsible manner and will
always make sure that it has sufficient liquidity balances both in terms of actual liquid
assets as well as to easily issue financial instruments to manage any unexpected liquidity
needs.
Eskom has said for some time that the National Energy Regulator of South Africa ’s 2013
third multi-year price determination (MYPD3) decision to allow Eskom an 8% annual tariff
increase left the utility with a R225-billion revenue shortfall over the five-year period
between 2013 and 2018.
Being a financially responsible institution and cognisant of its obligations as set out in both
the Public Finance Management Act and the Companies Act, the Eskom Board and
Executive Committee had to move decisively to find a solution to the R225-billion revenue
shortfall from the reduced Nersa determination. The scope of this project was dealt with
through an internal efficiency exercise within Eskom which was established to determine
where this shortfall could be offset. The solution had to take into account all possible
elements, efficiencies, deferral, cessation of activities, additional debt finance, including
equity/equity-like instruments.
Although the R225-billion revenue shortfall from the Nersa’s MYPD3 determination has
been closed out (through Eskom’s internal efficiency processes), it has left Eskom’s credit
metrics showing negligible improvement over the MYPD3 period. This is seen as
inappropriate as Eskom seeks to be a fiscally responsible entity and where possible limit
undue dependence on the shareholder.
It is in this context that Eskom, through its shareholder ministry, the Department of Public
Enterprises, is in discussion with the National Treasury to find a long-term solution, which
may or may not include an equity injection. Despite the figures of a possible state
intervention being bandied about in the media, it is still too premature to mention the
mechanism or amount of balance sheet improvement which will be pursued as
discussions are currently underway.
In addition, Eskom has submitted a Regulatory Clearing Account (RCA) application to
Nersa for the MYPD2 period i.e. the application seeks to recover over/under expenditure
for that period based on the initial assumptions at MYPD2 award. Through this process,
the regulator is reviewing whether what it awarded Eskom previously, based on its forward
estimates of costs such as coal, stacks up against the costs that have actually been
incurred over the period. The regulator will make its own pronouncement on that. This is a
normal Nersa process and Eskom has not asked Nersa for a re-opening of the MYPD3
price increase decision as reported in the media.
Issued by: Eskom Media Desk
Tel:
+27 11 800 3304//3343/3378
Cell:
+27 82 805 7278
Fax:
086 664 7699
Email:
mediadesk@eskom.co.za
The 8% regulatory price determination in February last year has forced Eskom to continue
to prioritise productivity and sustainability. The utility is acutely aware of its obligations and
will continue to access financial markets efficiently and will prioritise this in its decisionmaking as it actively continues to manage its finances. In addition to cost cutting measures
mentioned above, Eskom is exploring all other avenues of potential funding, as any
business would.
“The renewed focus on the improvement of Eskom’s balance sheet is to ensure that
Eskom comfortably maintains an investment grade credit rating, thereby facilitating cost
effective access to the substantial domestic and international capital which Eskom
requires. It is important that Eskom remains financially sustainable to enable us to keep
the lights on and deliver on its build programme,” said Eskom’s Finance Director, Ms
Tsholofelo Molefe.
ENDS
Issued by: Eskom Media Desk
Tel:
+27 11 800 3304//3343/3378
Cell:
+27 82 805 7278
Fax:
086 664 7699
Email:
mediadesk@eskom.co.za