Eskom wants massive price increase

Eskom wants to raise electricity tariffs by 25% from April in order to make up its R225 billion cash-flow shortfall, according to Bloomberg.

On Thursday, Standard & Poor’s (S&P) downgraded Eskom’s long-term credit rating to BB+ following the suspension of four of its senior officials.

This had led the ratings agency to have less confidence in the company’s corporate governance arrangements and its stand-alone credit profile, primary credit analyst Karim Nassif said.

“The negative outlook reflects our opinion that material execution risk remains associated with the government’s support plan, and that Eskom’s operating performance has not yet stabilised due to rising costs and the very tight generation capacity margin in South Africa.”

Last week, Eskom chief executive Tshediso Matona, finance director Tsholofelo Molefe, group capital executive Dan Morokane, and commercial and technology executive Matshela Koko were asked to step aside as the power utility embarked on a fact-finding inquiry.

“The country has descended into protracted periods of confidence-sapping rotational power cuts, which are designed to prevent the electricity network from experiencing a total blackout,” Eskom said in the application dated March 16.

Efforts to improve supply “will come at a cost which would need to be funded”, it said.

Consumers will be hit with a 12.69% electricity tariff hike in April this year, the National Energy Regulator of SA (Nersa) announced in October 2014.

That increase is 4.7% above the 8% tariff increase originally agreed to for the year to March 2016.

In 2013, Nersa said that Eskom could only raise tariffs 8% a year for the five years to 2018, instead of 16% requested by the power utility.

However, the regulator noted that Eskom’s costs exceeded projections for the three years to 2013, enabling the company impose higher tariffs.

This article was republished with permission from BusinessTech.

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