Power utilities warned of vicious cycle of borrowing

Eskom

Eskom

By GIFT NDOLWANE in Cape Town, South Africa
CAPE TOWN, (CAJ News) – AFRICAN power utilities have been warned of the danger of increasing their borrowings to cover costs.
The warning at the Africa Utility Week Conference in Cape Town follows the problems reported at South Africa’s Eskom, whose recent financial statements have showed increased costs and declining profits.
This was followed by a credit downgrading by ratings agency Standard & Poor with significant implications for Eskom’s borrowing ability.
Local media further reported Eskom’s debt obligations then already stood at R317 billion (US$24,26 billion).
Senior energy specialist at the World Bank, Chris Trimble, reacted to the state of affairs at the South African utility.
He argued it was always better for power utilities to be self-sufficient and not depend on government subsidies to avoid becoming trapped in a vicious spiral when debt gets out of control.
Earlier, Eskom chairman, Dr Ben Ngubane, during a media briefing, meanwhile said Brian Molefe’s reinstatement as chief executive would make electricity more affordable.
“Our objective is to lower the cost of electricity in the country by paying back the government guarantees, generating enough revenue, creating savings through efficiencies like the design to cost programme,” he said.
Meanwhile, Trimble in his presentation shared the findings and recommendations of the World Bank report indicating many African countries were unable to cover their operating expenditure leading to deficits.
These findings highlight a significant revenue gap in most African countries with only two exceptions – Uganda and the Seychelles who recover all their costs.
“It’s quite a bleak picture,” Trimble said.
He warned with many countries not recovering operating costs sufficiently, it might hamper maintenance of infrastructure which can ultimately also affect the reliability of power provision.
Over 7000 decision makers from over 80 countries are attending the three day conference where the latest developments, challenges and opportunities in the power and water sectors will be under the spotlight.
Some 300 experts will over three days discuss innovative solutions to the continent’s energy and water challenges and the exciting opportunities for utilities and industry players.
CAJ News

Short URL: http://cajnewsafrica.com/?p=19900

Posted by on May 17 2017. Filed under Africa & World, Electricity, Energy, Featured, Finance, National, Regional. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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