SA mulls Eskom privatisation

Published Aug 5, 2014

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Johannesburg - The government is considering inviting private-sector capital to help bridge state-run electricity supplier Eskom’s R225 billion  funding gap.

Private investment is one of a number of solutions being considered by the government, Public Enterprises Minister Lynne Brown said on July 29, her spokesman, Colin Cruywagen, said in an e-mailed statement today.

“There has been serious public speculation about public-sector equity injection, assets being sold, private-sector equity and tariff hikes,” Brown said.

“These are levers which must be considered in any serious discussion.”

The departments of energy, public enterprises and the National Treasury are working on fixing Eskom’s funding shortfall that would minimise the chance of the company’s credit rating being downgraded to junk, Cruywagen said July 31.

The utility’s bonds were placed on negative CreditWatch by Standard & Poor’s on June 20, meaning they have a 50 percent chance of been lowered to junk, which would significantly raise borrowing costs, by the end of September.

Eskom’s funding shortfall for the five years to 2018 arose last year after South Africa’s energy regulator granted the utility only half the tariff increases it requested.

The state-run electricity provider was forced to schedule managed blackouts in March and June as it struggled to keep the lights on after a decade of underinvestment in power stations.

 

Privatisation Opposed

 

The South African Communist Party, which is in government with the ruling African National Congress party, said it was aware of moves to privatise parts of Eskom.

“There are individuals within the broader liberation movement who would gladly support privatisation,” spokesman Alex Mashilo said in an interview, declining to identify anyone.

The SACP is opposed to Privatisation because it would lead to increased electricity prices for the poor, he said.

Zizi Kodwa, the ANC’s national spokesman, said he wasn’t aware of any discussions regarding privatising Eskom.

Yields on Eskom’s $1 billion (R10.7 billion) of bonds due in August 2023 increased the most since they were issued in August last year, rising 17 basis points, or 0.17 percentage point, to 6.01 percent by 11:23 a.m. in Johannesburg. - Bloomberg News

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