Eskom seeks internal solutions in order to raise funds, funds needed to ensure that the supply of electricity is met

In South Africa, state-owned power utility Eskom is considering ring-fencing and selling off some of its assets in order to raise funds for which it desperately needs to keep the country’s lights on.

This statement was made by the Treasury on Wednesday as it struggles to find alternative solutions to securing finances, according to Reuters.

Seeking financial support

This strategy may be the only solution for the power utility to acquire funds as apart from Eskom’s low in 2008, it has been battling to keep up with demand since June last year and people are fearing that a national black-out may not be too far from reality.

“Given Eskom’s constrained balance sheet and government’s constrained fiscal position, there is a need to explore all options,” the Treasury said in a statement.

It added: “Consideration is being given to ring-fencing and selling stakes in Eskom’s non-core businesses or power stations as well as into Eskom’s business as a whole.”

According to the statement, government would still hold majority ownership of the company, and authorities would also consider amending regulations to allow private firms to generate electricity for their own use and sell any surplus to the national grid, Reuters reported.

The private sector

The Business Day daily reported on Wednesday that Treasury Director General Lungisa Fuzile had said government had revived a discarded policy that stipulates the private sector could take a stake of up to 30% in Eskom’s power-generating assets.

Reuters reported that Eskom’s funding gap to 2018 is estimated at ZAR200 billion and the utility expects to receive a ZAR23 billion cash injection from the government this year.

Tariff increase

In March, the power utility confirmed an electricity tariff increase of 12.69% for direct consumers with effect from 1 April 2015 and 14.25% for municipalities from 1 July 2015, which NERSA had approved in November 2014.

In addition to the 12.69%, the state-owned power utility has submitted a selective reopener application for consideration by the energy regulator, which is demanding an additional tariff increase of a staggering 25.3%.