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Eskom gets R21.9 billion bailout to help keep the power on, and lights burning

Finance Minister Enoch Godongwana injected another bailout of R21.9 billion into Eskom as it struggles to meet its financial obligations, but flagged it would need to sell some of its assets to reduce debt. Photographer: Nadine Hutton/Bloomberg

Finance Minister Enoch Godongwana injected another bailout of R21.9 billion into Eskom as it struggles to meet its financial obligations, but flagged it would need to sell some of its assets to reduce debt. Photographer: Nadine Hutton/Bloomberg

Published Feb 24, 2022

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FINANCE Minister Enoch Godongwana injected another bailout of R21.9 billion into Eskom as it struggles to meet its financial obligations, but flagged it would need to sell some of its assets to reduce debt.

The Eskom debt is R392bn and it’s also owed R40.9bn by municipalities. However, Godongwana would not say which assets Eskom would need to sell.

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“We expect Eskom to take further steps towards cost containment, conclude the sale of assets and implement operational improvements to enhance the reliability of electricity supply,” said Godongwana.

He said National Treasury was also working with the power utility to reduce its debt.

“Government continues to support Eskom to remain financially sustainable during its transition. To date, Eskom has been provided with R136bn to pay off its debt with a further R88bn until 2025/26. We acknowledge, however, that Eskom is faced with a large amount of debt that remains a challenge to service without assistance.”

Eskom has been facing financial pressure and the Estimates of National Expenditure said its debt remained high. “Its financial position remains weak, and the entity is not able to generate enough cash from operations to cover debt obligations when they become due. As at 30 September 2021, Eskom’s debt amounted to R392bn while municipal arrears amounted to R40.9bn. Given this weak financial position government has committed to providing financial support to assist with the company’s debt service obligations with an additional R21.9bn allocated for this in 2022/23,” stated the document.

After a bout of load shedding early this year, the government said Eskom continued to improve its generation capacity and reduce load shedding.

Businesses have complained about the impact load shedding has on their operations as billions are lost.

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In the Budget Review it has been revealed that the separation of Eskom into three entities for generation, distribution and transmission is still in the process. They have not finalised these issues because of legal requirements.

But the power utility has over the last year relied on government guarantees to stay afloat.

By the end of the 2021 financial year Eskom had used R281.6bn of its R350bn government guarantee. There was another R7bn that was committed.

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But load shedding has had an impact on the economy with the electricity availability factor dropping from 66.7 percent to 64.2 percent. This was due to incidents of unplanned breakdowns.

The budget review said the Minister of Finance had allowed Eskom to get more guarantees.

“Taking into account redemptions over the period, the minister approved a special dispensation to allow the utility to access additional guaranteed debt of R42bn in 2021/22 and R25bn in 2022/23, which is still within these limits. Meanwhile government has provided Eskom with equity support of R31.7bn in 2021/22,” said the review.

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“Although Eskom has registered its transmission unit as a subsidiary with the Companies and Intellectual Property Commission, it missed its deadline of 31 December 2021 to complete the legal separation of this unit, in part because lenders have not yet approved the proposed restructuring.

“The generation and distribution entities are expected to complete legal separation by 31 December 2022. Eskom has prepared financial statements for the three entities and applied to the regulator for a transmission licence,” stated the budget review.

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