Eskom’s plan to raise R200 billion through new finance model

Eskom is working on a unique financing vehicle which it hopes will raise up to R200 billion and save the power utility from increasing debt.

The City Press reports that the financing vehicle is being developed by Eskom’s sustainability task team and Meridian Economics, and aims to raise funds by reducing carbon emissions.

Speaking to the paper, task-team member Grové Steyn said that the power utility aims to raise between R150 billion and R200 billion from climate change mitigation funding, at discounted interest rates, in return for Eskom accelerating its shift away from coal-based power generation.

As part of the offering, Eskom would also unbundle into three separate business units focusing on generation, transmission and distribution.

He said that the model is being developed alongside discussions with potential international and local investors, with interest already shown by major development finance institutions in Europe and the UK.

Growing debt

The embattled power utility’s debt burden – described as the biggest threat to the nation’s economy – has continued to grow, compounding the difficulty the government faces in formulating a turnaround plan.

Eskom’s debt is now approaching R500 billion ($35 billion), according to data compiled by Bloomberg from public records, including bonds and issued loans, up from about R370 billion a year ago.

While the utility declined to comment on the current number, its CEO Phakamani Hadebe last month put total debt at about R450 billion.

President Cyril Ramaphosa announced plans earlier this year to split the company into three units to make it easier to manage, and the National Treasury allocated a R69 billion cash injection over the next three years in the February budget – a bailout that’s already been partly offset by the rising debt.

Read: South Africa’s Debt-to-GDP could top 70% if Eskom isn’t reined in: Moody’s

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Eskom’s plan to raise R200 billion through new finance model