
Government's intentions of bolstering Eskom's drive to create new generating capacity with a R60bn financial package and financial support for developing alternative, renewable energy sources has been welcomed by Eskom.
The announcement of the shareholder loan, on terms yet to be determined in the "Adjustments Appropriation" budget, and a R2bn contribution towards encouraging more efficient use of electricity and renewable energy sources were signs that Treasury and government were reaffirming their commitment to partnering with Eskom in their drive to increase capacity in the medium to long-term, Jacob Maroga, Eskom CEO said today.
Announcing the Eskom loan, Minister Manuel said: "The return on an investment in power generation is very long term, and the repayment of debt must be similarly deferred. But we would not be supporting these investments if we were not confident that they are economically and financially viable." "The statement by the Minister of Finance echoes that of the President's State of the Nation address and reaffirms the confidence that they have in Eskom's ability to rise above the present situation and, given time and investment, return to a stable generating environment. We are encouraged by the government support and believe that this support, translated into action through the National Response Plan, will provide us a solid platform for future positive development," Maroga said.
We agree with Minister Manuel's statement that: "Eskom's tariffs were steadily reduced in real terms during the 1980s and 1990s, so that electricity prices in South Africa are now far lower than in any other comparable country, and well below full economic cost. The tariff structure is now too low to support the required borrowing." "It was a fact of life that we could not sustain development on tariffs that were steadily declining. The constantly rising demand for power, pressure on our facilities and rising costs of coal - our primary fuel-made it impossible for Eskom to meet the needs of South Africa on a long-term basis.
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