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Eskom a step closer to cash lifeline

| Economic factors

Eskom is one step closer to receiving R23bn and converting its R60bn subordinated loan into equity, after the National Council of Provinces passed the two bills tabled by Finance Minister Nhlanhla Nene.

This comes after the House of Representatives passed the bill on Wednesday.

“Both Houses of Parliament have passed the two bills … to enable a R23bn allocation to Eskom and conversion of a R60bn subordinated loan to the company into equity,” Treasury said in a statement on Friday.

The Eskom Special Appropriation Bill and the Eskom Subordinated Loan Special Appropriation Amendment Bill will now go to President Jacob Zuma to be signed into law.

To ensure there is no impact on the budget deficit, the appropriation to Eskom would be funded through the sale of non-strategic assets and that the funds would be transferred once the proceeds have been realised into the National Revenue Fund, Treasury explained.

“The process for the disposal of assets to fund the allocation to Eskom is well-advanced and government will make further announcements in this regard in due course,” it said.

The R23bn injection and the conversion of the R60bn loan into equity will be complemented by the other measures approved by Cabinet in 2014.

Tariff 'adjustment' needed to achieve cost-reflective levels - Treasury

This includes the Cabinet package required that Eskom save R60bn in costs up to March 2018.

“Government recognises that electricity tariffs need to be adjusted to achieve cost-reflective levels,” it said. “Eskom has therefore, applied for tariff adjustments in line with the regulatory processes.

“Together, these measures will over time enhance the financial sustainability of Eskom.”

Eskom was hammered by politicians, analysts, unions and business leaders this week during the public hearings into its tariff hike application. Many say there are many options that Eskom and government are avoiding, such as unbundling the monopoly.

Treasury said the interventions would be complemented and strengthened by the five point plan and the Energy War Room.

“The key interventions under the five point plan have involved immediate measures being taken to improve Eskom’s operational performance, additional power being secured from independent power producers and demand side management initiatives,” Treasury said

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