Johannesburg - Eskom acting chief executive Brian Molefe said the power utility had raised nearly R100 billion in the bond market and was confident of raising even more.
Molefe told an Eskom War Room feedback briefing in Cape Town on Friday that the power utility had secured R72bn in loans for the 2015/16 financial year to improve its financial position. “Our borrowing requirement for this year is R55bn and as of yesterday we have signed commitments for R72.4bn,” Molefe said.
Eskom must raise a total of R110bn to ensure the maintenance of its power stations and other operational requirements continues and is seeking some of this money through price increases. The power utility won approval last October to increase tariffs by an average 13 percent starting in April.
The regulator in June denied it permission to raise fees by as much as 25 percent.
“We will find the money to continue with our programmes, even without tariff increases,” Molefe said.
Moody’s Investor Service downgraded Eskom debt to Ba1 in November, a day after cutting its rating on South Africa’s sovereign debt.
The rating cut, to one level below investment grade, potentially increased the cost of borrowing funds for the utility.
“The downgrade has not added too much to our cost of borrowing at about 60 basis points above sovereign,” Molefe said.
Borrow again
Molefe said even if the utility was not able to get tariff increases from the National Energy Regulator of South Africa (Nersa), it should be able to find money to fund its maintenance and operation programmes.
“We have to borrow again if we don’t get tariff increases to fund activities,” Molefe said. “Instead of getting big tariff increases now – we should ask for certainty.”
Molefe said that within the utility’s funding cycle, there would be greater opportunities to manage Eskom’s liability profile in order to optimise the debt portfolio. He said Eskom would continue to do so in the ordinary course of business.
“Eskom remains cognisant and committed to its existing loan covenants and does not intend entering into any debt restructuring as suggested by the recent media comments.”
Molefe’s buoyant tone comes in the wake of his claim that Eskom was planning to add closer to 20 000 megawatts into the grid next year in order to ease the country’s power crisis. Eskom planned to synchronise one unit in Kusile and four others in Ingula power station by August next year.
Molefe said Eskom had been able to raise R12.5bn from foreign development finance institutions and R3bn from local institutions. He said the utility had negotiated and concluded Export Credit Agency financing arrangements for R11.9bn with R20bn raised from the local bond market.
“Our main focus is to get the borrowing in,” he said. “We will issue bonds in a more structured way. We will swop debt into a yield choice that works for us.”
Economist Azar Jammine said the fact that Eskom was able to raise money without having to rely on government bailouts could be a sign that the utility was taking a new funding direction.
Jammine said the money would help Eskom stabilise its finances and to focus on bringing more electricity to the grid.
“It is a step in the right direction for Eskom,” Jammine said. “But we just have to wait a bit to see if it is not just talk before we can confidently say that it (Eskom) has turned things around.”
Molefe said Eskom was focused on raising finances and its reorganisation would happen in the near future. More than 95 percent of the funding raised had been signed and committed by both local and foreign financial institutions.
He said Eskom planned to meet all its debt obligations and was not looking for write-downs.
In June, Molefe told Nersa that Eskom would embark on an aggressive drive in order to fund some of its programmes.
He said at the time that the reason for Eskom’s downgrade by rating agencies was not because of the financial performance on its balance sheet, but was a result of a combination of corporate governance and maintenance backlogs that the utility was attending to.
Molefe said: “Are we able to raise additional borrowing in the market? Yes we are, we continue to participate in the domestic capital market. We issued a bond for $125bn (R1.7 trillion) in January of this year in the US and we intend to go back to the international capital markets during this year.”
* Additional reporting by Bloomberg
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