Despite rumours that Eskom is facing cash flow challenges, the utility has stated that it “would like to reassure the nation at large that its cash flow situation is very stable.” This comes after Eskom reportedly asked the government for an “equity injection of at least R50 billion” to alleviate its “acute” cash-flow situation.
“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,” the company said in a statement.
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.
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,” the company said.
“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.