Minister denies cabinet plans to privatise Eskom

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SOUTH Africa had ruled out privatising Eskom to solve the state-run electricity supplier’s R225 billion funding shortfall, Public Enterprises Minister Lynne Brown said yesterday. “It would be a grave mistake to privatise this critical player in the economy,” she said. “To my knowledge, cabinet has not discussed the matter of privatisation, and there is no need to unnecessarily raise temperatures around this matter.” Eskom bond yields jumped the most on record yesterday after the SACP, which has members in the cabinet, said there were moves afoot to privatise parts of the state-run utility. That would leave bondholders with fewer assets over which to make a claim in the event of a default, according to Elena Ilkova, a credit analyst at Rand Merchant Bank. The departments of Energy and Public Enterprises and the National Treasury are working on a way to close Eskom’s funding shortfall. The utility’s bonds had a 50 percent chance of being lowered to junk by the end of September, Standard & Poor’s said in June. That would significantly raise borrowing costs. – Bloomberg

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