Carol Paton Editor at Large
Picture: REUTERS
Picture: REUTERS

The Central Energy Fund (CEF), the government’s holding company in the energy sector, presented its strategic plan to parliament on Tuesday, unveiling a wish list for more capital and a share of government tax revenues.

The CEF group includes PetroSA, the Strategic Fuel Fund, the African Exploration and Mining Finance Corporation, iGas and the Petroleum Agency of SA (PetroSA).

CEF chair Monde Mnyande said the CEF is not looking for a bailout but is in the process of restructuring the group. In particular, PetroSA — which in recent years has made heavy losses — needs capital to restructure.

The CEF proposal comes while the fiscus is under enormous pressure with a likely budget deficit for the fiscal year of more than 10%. Ratings agencies and investors as well as finance minister Tito Mboweni have repeatedly emphasised that bailouts for state-owned companies are a drag on public finances.

Acting group CEO Lufuno Makhuba said that the CEF faces three choices on PetroSA: do nothing, which would lead to the collapse of the group; close down the company at an associated cost of R13bn and an impact on the Eastern Cape economy; or restructure the entity, for which R15bn is required.

The CEF also wants the government to take over PetroSA’s rehabilitation liability of R8bn, which it has been unable to fully fund.

Restructuring would involve inviting strategic partners to assist with refinery operations, divesting from upstream blocks and investing in downstream activities. PetroSA has a gas-to-liquids refinery in Mossel Bay and is involved in oil and gas exploration, which is largely responsible for the heavy losses it has incurred.

Makhuba said that to support the turnaround of the group the CEF wants 25% of the fuel levy to be directed from the National Treasury to fund its infrastructure and growth projects as well a share of carbon tax raised to fund new energy initiatives such as biofuels.

The Transnet pipeline should be transferred to the CEF, the strategic plan reads, and the group should be designated to execute liquefied natural gas projects.

The CEF would also like to bring in strategic equity partners.

patonc@businesslive.co.za