{"id":260839,"date":"2018-07-25T09:48:02","date_gmt":"2018-07-25T07:48:02","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=260839"},"modified":"2018-07-25T09:48:02","modified_gmt":"2018-07-25T07:48:02","slug":"eskom-takes-steps-to-plug-r399-billion-debt-hole","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/energy\/260839\/eskom-takes-steps-to-plug-r399-billion-debt-hole\/","title":{"rendered":"Eskom takes steps to plug R399 billion debt hole"},"content":{"rendered":"
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South Africa is getting down to the business of fixing its debt-ridden state power utility.<\/p>\n

Eskom Holdings SOC Ltd had R399 billion ($30 billion) of debt at the end of March, according to data compiled by Bloomberg, and has been flagged by ratings companies as a key risk to South Africa\u2019s economy. The utility has been mired in a series of scandals, struggled to raise funds and was forced to implement rolling blackouts last month after wage talks with unions broke down.<\/p>\n

Eskom announced Tuesday it\u2019s secured a $2.5 billion long-term loan facility from China Development Bank, giving a big boost to its fundraising efforts this year. About an hour later, a top official in the ruling African National Congress told reporters the Public Investment Corp is in talks about converting part of the debt it is owed by the state power utility into equity.<\/p>\n

\u201cWe\u2019re seeing sufficient signs that management at Eskom cares about dealing with the problem and we\u2019re seeing progress,\u201d said Darias Jonker, an Africa analyst at risk-advisory firm Eurasia Group. The moves are \u201ca sufficient encouragement that Eskom is too big to fail and that a default is unlikely,\u201d he said.<\/p>\n

The CDB loan was announced as part of a series of investments by China in South Africa after a meeting between President Cyril Ramaphosa and his Chinese counterpart, Xi Jinping, in Pretoria. The facility takes Eskom\u2019s secured funding to more than 60 percent of requirements for this year, Chief Executive Officer Phakamani Hadebe said.<\/p>\n

Yields on Eskom dollar bonds due 2021 dropped 18 basis points to 6.83%.<\/p>\n

Also on Tuesday, Paul Mashatile, the ANC treasurer-general, said that the party favors splitting Eskom into three parts – electricity production, transmission and distribution.<\/p>\n

“The company would become more manageable\u201d if it were broken up, he told the Cape Town Press Club. \u201cNow it is an elephant that is too big to walk.\u201d<\/p>\n

Mashatile also revealed that the PIC, which oversees South African government workers\u2019 pensions, is in talks with the government and Eskom about converting part of the about R100 billion of the company\u2019s debt it owns into equity. The move would support Eskom\u2019s balance sheet and allow it to raise more money, he said.<\/p>\n

Proper Consultation<\/strong><\/p>\n

\u201cThe process of developing a new business model is work in progress,\u201d Public Enterprises Minister Pravin Gordhan said.<\/p>\n

\u201cThere is no doubt that both financial and structural measures will be required to make Eskom sustainable. There will be proper consultation with all stakeholders.\u201d<\/p>\n

Eskom\u2019s debt is projected to increase to R600 billion within four years, the company said on Monday. It reported a loss of R2.3 billion for the year through March and said it discovered 19.6 billion rand in irregular costs, a liability largely inherited from previous leadership.<\/p>\n

The utility is also still in wage negotiations with unions, after backing down on a refusal to offer pay increases following last month\u2019s protests.<\/p>\n

Eskom may consider a liability management exercise for its dollar bonds due 2021, people familiar with the matter said on Monday, asking not to named because the talks were private. Liability management involves debt investors agreeing to changes such as maturity extensions or discounted buybacks.<\/p>\n

While the latest announcements show a determination to tackle Eskom\u2019s problems, there\u2019s still a long way to go, said Eurasia\u2019s Jonker.<\/p>\n

\u201cStabilizing Eskom is still very far from being realized,\u201d he said.<\/p>\n

\n

Read: Eskom counts R2.3 billion in losses as irregular spending blows up to R19.6 billion<\/a><\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

South Africa is getting down to the business of fixing its debt-ridden state power utility.<\/p>\n","protected":false},"author":59,"featured_media":258151,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9874],"tags":[1164,26],"class_list":["post-260839","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-energy","tag-eskom","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/260839","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=260839"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/260839\/revisions"}],"predecessor-version":[{"id":260843,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/260839\/revisions\/260843"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/258151"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=260839"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=260839"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=260839"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}