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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Eskom engaged Ernst & Young to independently determine the depreciated replacement
value of its regulated assets. This was done at the end of 2009/10, and updated in 2010/11.
The valuation was conducted on the basis of modern equivalent assets, taking into account
service capacity, age, usage and the remaining useful life of assets. The revaluation is
reflected in the regulatory asset base and corresponding depreciation. The useful life of the
revaluation reserve – the positive difference between the value of assets and the
replacement value of assets – is similar to the remaining useful life of the assets. Only
regulated assets have been included in the valuation. The values are subject to Nersa‟s
review.
Table 30: Replacement value asset base and depreciation (R million)
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Average regulatory asset base (Rm) 709 145 779 203 852 266 919 665 981 854 1 043 100
Replacement depreciation (excl corporate) (Rm) 25 884 28 438 32 028 35 419 38 357 41 706
3.4.6 Return on assets
The return on assets portion of the revenue requirement is made up of two components – a
return to lenders and a return to the shareholder:
The return to lenders represents the cost of debt interest, based on contractual
obligations. With the acceleration of the build programme, the interest on borrowings
has become a significant cost and will increase for the duration of the programme.
The return to the shareholder (or equity portion) remunerates the equity provider for
the capital invested into Eskom.
Table 31 shows the returns attributable to lenders and shareholders. The shareholder
continues to forfeit returns until the end of 2015/16.
Table 31: Summary of return on assets (R million)
2013/14 2014/15 2015/16 2016/17 2017/18 MYPD 3
Returns (Rm) 7 271 14 643 31 187 51 878 81 885 186 864
Interest costs (Rm) 21 198 26 503 30 223 31 824 30 619 140 366
Equity returns (Rm) - 13 927 - 11 860 964 20 054 51 265 46 497