Treasury’s largest guarantees are billions for Eskom

According to the medium-term budget policy statement, of this amount, R200 billion went towards Eskom’s purchase power from independent power producers (IPPs).

So far two IPPs have been given licences, which Eskom is obliged to honour over a 20-year period based on a power-purchase agreement approved by the National Energy Regulator of SA (Nersa).

“Should Eskom be unable to do this, government must purchase the power on Eskom’s behalf. The most recent recapitalisation – combined with governance reforms and operational recovery – has improved Eskom’s liquidity and profitability,” the statement reads.

Treasury was optimistic that the risk of Eskom defaulting with the IPP guarantee was low, as Nersa fully provided for IPP costs in its tariff determinations.

“However, a deterioration in Eskom’s financial position would increase the risk of both exposures.”