The contract with independent power producers (IPPs) is binding for all parties involved.
This is word from National Treasury's director-general Lungisa Fuzile, speaking via video conference ahead of the Medium-Term Budget Policy Statement (MTBPS).
Finance minister Pravin Gordhan tabled the 20th MTBPS in Parliament in Cape Town this afternoon.
Government, Eskom and IPPs have been at odds over future of power purchase agreements.
Eskom is concerned that private producers, from which it is compelled by government to buy at prices it does not negotiate, will undermine the power utility's future revenue streams.
The power utility has previously said there is no need for new IPPs as the power grid is stable now.
Fuzile told media that private power producers will continue to generate energy for Eskom as envisaged in the 2010 Integrated Resource Plan (IRP) policy.
"All parties including Eskom are guided by the 2010 IRP policy. The current policy does not say no to IPPs," he stated.
"What happens outside the policy is neither here nor there, IPPs are still valid. The conditions of the policy will have to be met by Eskom.
"Policy is driven by government not public entities," he added.
According to the medium-term statement, government's major explicit contingent liabilities are its guarantees, which stood at R469.9 billion at the end of 2015/16.
Total guarantee exposure was R263 billion at the end of 2015/16, because several entities had not fully used their available guarantee facilities. The largest guarantee exposure - more than R170 billion - supports Eskom's capital investment programme, the document reveals.
The MTBPS reads: "An exposure of R200 billion relates to the IPPs. Eskom is obliged to purchase power from these independent producers over a 20-year period based on a power-purchase agreement approved by the National Energy Regulator of South Africa. 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 risk of default with the IPP guarantee is low as the regulator fully provides for IPP costs in the Eskom tariff determinations.
"These factors mitigate the risk arising from these guarantees. However, deterioration in Eskom's financial position would increase the risk of both exposures."
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