THE Sanral e-tolling saga had proved the consumer-pay principle needed to apply to safeguard the credit ratings of parastatals, Eskom said yesterday.
Finance director Paul O’Flaherty made the remark in a plea for electricity tariff increases to reach a level in the next five years where they would cover Eskom’s production costs.
"We are at 60 South African cents [per kilowatt hour] at the moment; in real terms we need to get that up to 90 cents.”
O’Flaherty was speaking after briefing parliament’s public enterprises portfolio committee on Eskom’s capital expansion programme.
He said erratic tariff determination over the five years leading up to 2010 had seen the Kusile power plant project put on hold because Eskom "would not have been a going concern”.
The problem had been resolved by the agreement, with the Treasury, of a funding plan in 2010. At that time, Eskom had a funding shortfall of R300-billion.
"More than 77% of our funding to finish off Kusile is completely secured and the rest has been identified,” O’Flaherty said.
"So we see no issues from a funding perspective to finish off until the end of Kusile.”
He said much of the money secured so far had been raised on foreign markets. The same probably applied for the remainder needed to finish the Kusile and Medupi power stations, set to be the world’s third- and fourth- largest coal-fired plants once completed.
"Unfortunately, quite a bit of that is foreign debt. That needs to be borne in mind. So you do have the fluctuating exchange rate going forward,” he said.
"Once you go to the international markets it is very, very important as you’ve seen with Sanral, that what you have is an investment grade rating. If you don’t have an investment grade rating it is very difficult to find money.
"So it is very important from an Eskom point of view that we continue on our path of solid ratings and that will come down to a tariff rate discussion.”
O’Flaherty said Eskom had managed to reduce the tariff increase for the current financial year from 25% to 16%, in part because the shareholder – the government – had sacrificed its return of R8-billion.
That saving to the consumer had now been exhausted.
He said when Eskom approached electricity regulator Nersa in July on the next set of tariff increases, it hoped to secure an agreement firstly to extend the multi-year price determination period to five years, and secondly to raise tariffs to levels where production would be covered.
"We need to constantly remind [the public] we need to move to cost-reflective tariffs.” – Sapa