South African president Cyril Ramaphosa said the government will soon give the embattled state power utility \u201ca significant portion\u201d of the R230 billion ($16 billion) it needs over the next decade to remain solvent.<\/p>\n
The announcement of the support for Eskom Holdings SOC Ltd comes just four months after the National Treasury gave it a three-year, R69 billion bailout and will place severe pressure on the government\u2019s already stretched finances.<\/p>\n
Letting Eskom go insolvent just wasn\u2019t an option – it supplies about 95% of the nation\u2019s electricity and would cripple the economy if it ceased operating.<\/p>\n
\u201cThe utility\u2019s financial position remains of grave concern,\u201d Ramaphosa said in his state-of-the-nation address to parliament in Cape Town on Thursday.<\/p>\n
\u201cWith the current committed funding from the government outlined in the 2019 budget, Eskom has sufficient cash to meet its obligations until October 2019.<\/p>\n
“For Eskom to default on its loans would cause a cross-default on its remaining debt and would have a huge impact on an already constrained fiscus.\u201d<\/p>\n
Eskom has been hamstrung by under-investment in new plants and years of management upheaval that left it with more than $30 billion in debt, insufficient income to cover its costs and a fleet of old and poorly maintained power stations that struggle to produce enough power to meet demand.<\/p>\n
The economy contracted an annualized 3.2% in the first quarter, largely due to Eskom instituting a series of rolling blackouts to prevent a collapse of the national grid.<\/p>\n
Finance minister Tito Mboweni will give details of the additional support, which will be allocated through a special appropriations bill, in due course, Ramaphosa said.<\/p>\n