#Eskom says can find cash for power stations<- yup! more power outages, strikes and another $117 billion loan

Credit & Thanks: Eskom says can find cash for power stations.

South Africa’s power utility Eskom, which is battling a power shortage, said there was strong appetite from international bond markets and investors to help it raise the funds needed to pay for new plants.

Finance Director Paul O’Flaherty, who took the position at the troubled utility this year, said on Friday he expects to secure the initial 90 billion rand within the next 18 months, with various sources being considered.

“These options need to be finalised in the next 18 months and the money needs to be in the bank,” he told Reuters.

The lion’s share of the money will pay for the 4,800 megawatt Kusile power station which the utility is relying on to plug a dire power supply shortfall.

South Africa’s national grid nearly collapsed in early 2008, forcing mines and smelters to shut, costing Africa’s biggest economy billions of dollars.

Eskom is looking at the option of having private players help foot the bill for Kusile, and while a minority equity stake is being debated, Eskom may sell more than 49 percent of the plant if it gets government approval to do so.

O’Flaherty said the company was looking at both financial institutions and industrial users who may be interested in buying into the plant in return for security of supply.

Eskom will need an additional 100 billion rand if new projects beyond 2017 are taken into account

“Beyond Kusile, there is still significant power that is required in the grid. We are estimating (annual) electricity growth rates of 2.5-3 percent between now and 2025, so that’s very critical,” he said.

NEW CHIEF EXECUTIVE

O’Flaherty said the utility does not plan to approach the Treasury for more guarantees, but plans to tap domestic and international bond markets. Inquiries had shown a “very positive” appetite from the market, he said.

The utility has been granted hikes in electricity tariffs of 25 percent per year for three years, and O’Flaherty said Eskom was working under the assumption that tariffs would rise by a further 25 percent in the fourth and fifth year as well.

Eskom is also looking at reducing costs, with a target of at least 10 billion rand over three years.

O’Flaherty said Eskom would soon conclude negotiations with BHP Billiton on the price it pays for power.

“By the end of this month we would hope that these negotiations are in effect immediately,” he said.

Similar talks with Anglo American will be finalised before the end of this year.

He said a new chief executive would be appointed soon at the utility, which has been without a CEO since the previous one left after a leadership battle last year.

“It’s fairly imminent and within the next 6-8 weeks an announcement will be made,” he said, without giving details.

O’Flaherty said there was no intention to privatise Eskom, but there may be discussions in the future to sell Eskom’s distribution business to EDI Holdings, and to pair its transmission unit with an independent power purchasing authority that is due to be created by government soon.

Until now, Eskom has had a monopoly in the power sector, supplying more than 90 percent of the country’s power and controlling its generation, distribution and transmission.

Edited by: Reuters

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