Debt woes to increase for Eskom with additional R50bn loan

By Kabelo Khumalo Time of article published May 20, 2019

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JOHANNESBURG - The debt trap facing embattled power producer Eskom mounted on Friday, with the utility saying it will have to borrow nearly R50billion in the current financial year to stay afloat with its debt fast approaching the unprecedented R500bn mark.

Eskom, which said its liquidity position stood at just R7.7bn as of the end of last month, said that it had already secured 52percent of its borrowing plan.

“Eskom has been able to raise R5.2bn through drawdowns against a portion of committed loans, of which R4bn was received from the China Development Bank and the issuance of domestic bonds,” Eskom said.

"The government also announced R17.6bn support for Eskom in April 2019. As at April 30, 2019, Eskom’s total carrying value of the unaudited debt of the company at the end of March 2019 was R440bn, of which R273bn nominal value is government guaranteed.” Eskom said its funding plans aimed at borrowing R46bn during the 2019/20 financial year from “various sources.”

Adding to the company’s financial woes were reports that contractors at Kusile Power Station have submitted claims amounting to R36bn.

The parastatal’s debt gobbles up more than 8percent of GDP.

Its liquidity and funding update came days after rating agency Moody’s warned it expected the government debt burden to rise to 65percent of GDP by 2023 and more than 70percent if including guarantees to Eskom.

Economist Fanie Brink said: “The latest indication this past week in a new research report by the credit rating agency Moody’s confirms that the state’s guarantees to Eskom will now be included in its prospects for the country’s credit rating. This change will be one of the last nails in the coffin of the economy and the country.”

The government allocated Eskom a R69bn cash injection over the next three years in the February budget.

However, the power producer’s management has since said that it had received R250bn less than it had initially asked for in tariff increases and government support, and was in discussions with the government to provide more support.

Intellidex head of capital markets research Peter Attard Montalto said he expected the Eskom results including the bailout would lead to going-concern status at the end of June.

“Then we expect enabling regulations or legislation for bailout 2.0 (as well as the appropriation of bailout 1.0) to occur in the third quarter in Parliament - with execution of the bailout and any debt swop, restructuring or credit risk transfer in the middle of the second half,” Montalto said.

Finance Minister Tito Mboweni confirmed last weekend that former Absa and Transnet chief executive Maria Ramos was in the running for the new position of Eskom chief reorganisation officer.

The government was in the process of breaking up the utility into three separate entities.


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