The easiest way to rescue ailing state power utility Eskom Holdings SOC Ltd would be for South Africa\u2019s government to assume part of its R419 billion ($30.7 billion) debt, chief executive officer Phakamani Hadebe said.<\/p>\n
\u201cThe debt swap is easy for the government,\u201d Hadebe said in an interview in Cape Town on Thursday, shortly after president Cyril Ramaphosa announced plans to split the Eskom into three units and provide it with financial assistance.<\/p>\n
\u201cIf the government has to first go borrow money and give it to us, that takes time.\u201d<\/p>\n
Eskom\u2019s debt mounted as its ailing and poorly maintained plants battled to produce enough power to meet demand and an increasing number of customers elected to go off-grid as electricity prices rose.<\/p>\n
The utility has previously told bond investors it wanted the government to assume about R100 billion ($7 billion) of its debt, an option Ramaphosa and finance minister Tito Mboweni have said they don\u2019t favor.<\/p>\n
In December, Mboweni tweeted a picture of a sieve just days after saying that the government couldn\u2019t continue pouring money into state companies that weren\u2019t productive.<\/p>\n
Rating companies have identified the parlous state of Eskom\u2019s finances as a key risk for Africa\u2019s most-industrialized economy.<\/p>\n
If the government were to take over R100 billion of Eskom\u2019s debt, it would be \u201cclose to credit neutral,\u201d because it would only raise country\u2019s debt-to-gross domestic product ratio by one or two percentage points, according to Hadebe. The government could alternately give Eskom cash to settle some of its debts, he said.<\/p>\n
Ramaphosa announced in his annual state-of-the-nation address that Eskom will be split into generation, distribution and transmission businesses under a state holding company, enabling each unit to manage its costs more effectively and making it easier for them to raise funding.<\/p>\n
He didn\u2019t specify how much financial assistance the government will give the utility or what form it would take, saying details will be provided in the budget later this month.<\/p>\n