South African electricity utility Eskom will present a “comprehensive sustainability strategy” to the economic cluster of Ministers by the end of June, outlining proposed solutions to its current financial, operational and asset-creation problems.

The utility will face a R225-billion revenue shortfall between 2013 and 2018 as a result of having been granted yearly tariff increases of 8% for the five-year period, instead of the 16% it had requested from the National Energy Regulator of South Africa (Nersa).

It has been working with the Department of Public Enterprises, the National Treasury and the Department of Energy to find ways to deal with the shortfall and has also reportedly canvassed the possibility of a further equity, or quasi-equity, injection of R50-billion.

In addition, it has made a regulatory clearing account submission to Nersa arising from the second multiyear price determination period, which was in operation between 2010 and 2013. Should it receive a favourable determination, it could receive an upward tariff adjustment on the 8% already sanctioned for introduction on April 1, 2015.

Interim CEO Collin Matjila reports that an ‘emergency task team’, comprising board members and executives, has been assembled to work on the strategy, which would have to be refined by the economic cluster ahead of implementation. The intention is to gain Cabinet approval for the strategy ahead of Eskom’s July annual general meeting (AGM).

Newly appointed Public Enterprises Minister Lynne Brown says she needs time to familiarise herself with work already done on the issue by senior officials from the three departments. But she has also promised to move with some speed in tabling the matter before Cabinet once she has had consultations with her cluster counterparts, Finance Minister Nhlanhla Nene and Energy Minister Tina Joemat-Pettersson.

“I’m quite committed to ensuring that all of this happens in an adequate time.”

She has promised similarly swift action on the appointment of a permanent CEO at the utility, whose chairperson, Zola Tsotsi, has handed her a board recommendation. “The [recommendation] will go through a process that eventually lands with Cabinet; and Cabinet will make the final decision,” Brown reports.

Matjila, who has made it clear that Eskom will not be able to emerge from its financial predicament through “belt tightening alone”, stresses that Eskom is not waiting for the AGM to implement aspects of the sustainability plan, with a business productivity programme already well under way.

He adds that the objective of the task team is to oversee the crafting of a long-term financial and operational sustainability plan, which identifies levers and solutions to ensure that Eskom is able to deliver on its security-of-supply mandate.

The financial sustainability component will home in on business productivity targets, but will also including new funding options.

The operational component is focused primarily on ensuring improved generation plant performance, while the asset creation element focuses on delivering on the current build programme.

Beyond the current build programme, Eskom is hoping to gain direction from the updated Integrated Resources Plan, which is likely to raise the profile of gas in the domestic electricity mix. For this reason, the utility is also working on a new gas strategy.

“Throughout the 2013/14 financial year, Eskom has been working together with the National Treasury to find sustainable ways to close its funding gap. This is a long and elaborate process, which requires a careful balancing of priorities,” Brown says.

But she also stresses that government “remains committed to supporting Eskom”.