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About a month ago, the following questions relating to Eskom debt were put to Eskom and its financial director, Anoj Singh, in writing by EE Publishers, through the official channels of communication, namely Eskom Mediadesk and the Eskom spokesman.

Despite numerous re-sends and reminders, and even escalation of the questions to the spokesman of the Eskom board, no response (or even acknowledgement of receipt) was ever received.

It seemed that in the current public relations crisis, Eskom officials had abandoned any pretence of professionalism in handling media queries.

Then on Thursday, after reading an excellent analysis of Eskom’s debt by Moneyweb’s Warren Thompson entitled “Government employees are propping up Eskom”, in exasperation I forwarded the questions to an overseas private sector financial analyst, who came back in an hour with the answers to the questions below:

What is the level (ZAR-billion) of Eskom’s current debt finance, and its projected debt finance requirements over say the next 5 to 10 years?

Most of this is not totally transparent, so here is my rough understanding of where things are at. Currently Eskom has around R350 billion of debt financing. Net debt is around R320 billion. Eskom is expected to borrow around R50 billion gross per year going forward.

Can you give a broad breakdown of the sources of Eskom’s current debt finance e.g. listed foreign capital market debt, listed local capital market debt, local commercial paper, foreign commercial paper, etc.

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At end of the 2015/16 fiscal year, of Eskom’s R322.7 billion of debt, R126.5 billion was ZAR market bonds, R83 billion was DFI (development finance institution) funding, R59 billion was foreign exchange market debt, R38 billion was export credit and R4.8 billion was commercial paper, with the balance being “other”.  However, the share of DFI funding and export credit is expected to increase.

Can you give the amount or percentage of Eskom’s current debt finance held by the PIC (Public Investment Corporation)?

We can’t really tell on unlisted stuff and bilateral lending, but out of listed instruments, 43.98 percent is PIC and other government pension funds, including the Eskom pension fund. I would guess that it is a similar percentage for unlisted direct lending, especially as the private sector pulls back. I think people focused too much on Futuregrowth’s position last year. There has been a larger, quieter shift going on elsewhere too. Hence the recent failed auctions of Transnet debt.

Can you advise the amount of debt maturities coming up in the next say 3 to 5 years, and whether this presents any challenges to Eskom’s liquidity, especially in light of the SA and Eskom credit downgrades and the delays by NERSA in processing Eskom’s RCA applications?

A total of R298 billion of Eskom debt is listed on Bloomberg. Of this, some R21.5 billion matures by end 2020, and R61.9 billion by end 2022. Eskom will have to roll this over at much higher coupon and yield rates, given both its stand-alone and headline ratings. Despite all the scandals, I don’t think that Eskom will be blocked from the market, but it will have to pay up significantly if negative perceptions around its management can’t be changed. As such it may turn elsewhere. The current strategy of shifting to IFI funding (international financial institutions such as World Bank and IMF), DFI and BRICS funding, etc., may well have to continue as a result.

Fitch says the following for total debt maturities by year, as at end 2015/16 fiscal year:

 

Debt Maturities                (ZAR-billion)

 

2017                                       16,354

2018                                       19,217

2019                                       38,227

2020                                       40,683

After 2020                           212,105

Total debt                           326,586

 

Editor’s note:

The above responses were duly forwarded to Eskom to provide comment on the circumstances of Eskom’s failure to respond to the questions, and/or to comment on, add to or correct any of the above information on Eskom debt, including the information given in the Moneyweb article. Again, no response or acknowledgement of receipt was received.

EE PUBLISHERS