Eskom Says No Decision Made Over $21 Billion Funding Shortfall

Eskom Holdings SOC Ltd., South Africa’s state-backed electricity supplier, said it’s too early to determine how much financial assistance it will get from the government to fill a long-term funding shortfall.

Limits on tariff increases left Eskom with a cash-flow deficit of 225 billion rand ($21 billion) from 2013 to 2018 and it is in talks with the government over how to raise the money, it said today in a statement. Business Day, a Johannesburg-based newspaper, reported April 24 the company had asked the state for an equity injection of at least 50 billion rand, citing Eskom Finance Director Tsholofelo Molefe as saying.

“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 under way,” Eskom said in the statement.

The utility’s funding gap emerged after South Africa’s energy regulator rejected the company’s plans to raise electricity prices 16 percent each year in the five years to 2018, instead allowing only an 8 percent increase. The company, which supplies 95 percent of South Africa’s power, reduced the shortfall to 191 billion rand from 225 billion rand through cost-cutting measures.

The long-term solution “may or may not include an equity injection,” Eskom said in the statement.

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