Part 1 Revenue Application: Multi-Year Price Determination ... - Eskom

Overview of Multi-Year Price Determination
2013/14–2017/18 (MYPD 3)
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During MYPD 4 a price increase of 9% per year would be required for five years to ensure
that the IRP 2010 capacity expansion is fundable. Thereafter, it is expected that prices will
normalise around 5% annual price increase between 2023/24 and 2030/31.
Further findings are as follows:
Capital expenditure: Eskom‟s total capital expenditure would be more than R3 trillion
between 2013/14 and 2030/31. About half of this would be for new build beyond Kusile
power station, of which about R180 billion would be spent during MYPD 3. The
remaining period from 2018/19 to 2030/31 will add a further R1.6 trillion resulting in a
cumulative R1.8 trillion cost for new build capital expenditure beyond Kusile
IPPs: Purchasing electricity from lPPs could cost close to R750 billion between 2013/14
and 2030/31, of which about R150 billion could be spent during MYPD 3.
Debt: Eskom would need to raise approximately R1.1 trillion in debt from 2013/14 to
2030, with a ceiling of about R60 billion per year in 12/13 real terms (based on an
independent study).
Equity: It has been assumed that no further equity injections would be made into
Eskom.
Scenario 2: Eskom builds 100% of capacity post MYPD3
To achieve the 100% target, Eskom would need price increases of 20% a year for the five
years of MYPD 3, as shown in Figure 2. The price path for the 65% and 100% scenarios up
to 2017/18 is similar, as the substantial impact of the changes occurs post the MYPD3
window. The projected price path for electricity reaches 102c/kWh in real terms in 2030/31.
To achieve the 100% target, Eskom would need price increases of 20% a year for the five
years of MYPD 3, as shown in Figure 3. The price path for the 65% and 100% scenarios up
to 2017/18 is similar, as the substantial impact of the changes occurs beyond the MYPD3
window. The projected price path for electricity would be lower than the IRP 2010 price path,
with the price reaching 102c/kWh in real terms in 2030/31 compared to the 110c/kWh in the
IRP 2010.