The loan provides much-needed funding to the beleaguered Eskom, which is battling deteriorating liquidity. The power utility urgently needs R20bn by the end of its financial year on March 31. The PIC, a state-owned financier, said the loan would fund Eskom’s operations during this month.
It said Eskom approached it for a loan, citing enormous liquidity constraints, which were threatening its going concern status.
In the six months ended September 30 last year, Eskom’s liquid assets decreased from R30bn at the end of September 2016 to R9bn.
The precarious position has forced the utility to seek further funding, despite its current debt of R360bn and gearing ratio (debt to equity ratio) of more than 70percent. The utility is also battling dwindling sales volumes and a growing municipal arrear debt.
For its urgent cash requirements, Eskom seems to be winning over lenders. PIC chief executive Daniel Matjila said there were other institutions who were on the verge of extending loans to the power utility. “Three commercial banks have indicated that they are willing to further extend credit facilities to Eskom, subject to the outcome of their respective due diligence processes, which are currently under way,” Matjila said.
“To date, Eskom has demonstrated that it has secured financial commitments to meet its borrowing requirements over the short term.”
Eskom spokesperson Khulu Phasiwe yesterday said that the PIC was among the organisations that Eskom had spoken to in its bid to raise the R20bn.
“During the results presentation last week, interim chief executive Phakamani Hadebe said that we have in principle agreement from some of the funders.”
Phasiwe said the utility was expecting a positive response from other funders.
The PIC said it conducted its own due diligence and obtained approval in line with its mandate and corporate governance requirements following the request from Eskom.
The Government Employees’ Pension Fund (GEPF) and PIC board were comfortable that the bridging facility was fully backed by a government guarantee and that the pricing for this transaction is favourable to the GEPF.
The PIC is the asset management company for GEPF, which is the largest pension fund in Africa.
PIC spokesperson Deon Botha yesterday declined to reveal the interest Eskom would pay on the loan. “Unfortunately, I cannot tell you that,” he said.
Ratings agencies Moody’s Investors’ Service and Fitch Ratings recently downgraded Eskom’s rating, making the utility’s prospects of accessing affordable funding slim.
The PIC and the GEPF said they were encouraged by the recent changes in the governance of Eskom. The new leadership has taken steps to turn the company around.
“The GEPF and the PIC are encouraged that the new Eskom board and the new management team have moved with the necessary speed to restore good corporate governance at Eskom,” said Matjila.
- BUSINESS REPORT