Assets to be sold to fund Eskom

2010-11-11 10:52

State holdings are to be liquidated to fund a R20-billion equity injection for Eskom’s build programme, government spokesperson Themba Maseko said today.

Briefing the media following Cabinet’s regular Wednesday meeting, he said Cabinet had noted and supported a hybrid funding solution to enable Eskom to continue its programme to ensure the security of energy supply.

The government hoped strengthening Eskom’s balance sheet by R20 billion would help keep electricity prices under control, he added.

The hybrid funding solution would also see the state nearly doubling its guarantee framework from R176 billion to R350 billion to enable Eskom to continue with its committed build programme for the Kusile Power Station, and an equity injection of R20 billion over three years, starting in the 2011/12 financial year.

“The equity injection will be funded from liquidating state holdings in non-strategic and non-core assets.”

National Treasury would identify such assets in due course and in consultation with the public enterprises department and other relevant departments, Maseko said.

He said the latest lifeline to Eskom could be seen as a government attempt to shield consumers from further large electricity price increases, and the economy from the inflationary effect of these.

“Government is also trying to fight the inflationary effect of the huge tariff increases that Eskom has been imposing.

“They still have a responsibility of submitting tariff increase proposals that they think will strengthen the balance sheet... but we are not likely to see tariff increases in the region of 30, 40%. That is what we are trying to do with this initiative.”

Maseko would not comment on whether Eskom was given the cash injection on condition that it would temper its demands for tariff increases. It began implementing average annual increases of 25% this year for a three-year period.

“We want to strengthen their balance sheet,” he said, adding that Cabinet did not “want to raise expectations” with the public on prices.

He said Cabinet saw selling off non-core holdings as a smarter move than simply increasing the national budget.

Eskom hopes to spending more than R385?billion over the next five years to build the infrastructure it needs to meet the country’s electricity demand, and prevent a repeat of the power crisis a few years ago.

“The issue of security of supply is a major challenge for the nation... load-shedding is to be avoided at all cost.”?

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