Eskom wants government to take on its R100bn debt | Infrastructure news

In an effort to shore up its balance sheet, Eskom is looking to government to absorb R100 billion of its debt Chairman Jabu Mabuza told the Business Day newspaper.

The plan, which forms part of the utility’s turnaround strategy, would add 2% to debt-to-GDP ratio and according to the report is likely to be seen as negative by ratings agencies.

Mabuza made the comments to Business Day as Eskom was meeting investors on a roadshow to London and the United States this week.

Increasing debt

This comes after Finance Minister Tito Mboweni said Eskom should go to bond markets for funds rather than rely on state bailouts, which have been used in the past.

The utility’s debt has increased to R419 billion, and the company has resorted to load shedding as insufficient spending on maintenance has reduced its ability to generate electricity.

Mabuza further confirmed the utility’s dire financial situation at a news conference last week noting that asset sales could not solve Eskom’s problems and that a bailout or debt relief were preferable. The utility expects to make a loss before tax of more than 11.2 billion rand this financial year.

No proposal yet

Talking to Bloomberg News National Treasury spokesman Jabulani Sikhakhane  said that government has yet to receive a proposal from Eskom and any proposition for debt relief will have to be assessed in the context of the turnaround plan that Eskom is expected to present soon. He added that government’s policy stance is that funding for state companies must be “done in a deficit-neutral manner”.

Business Day, Bloomberg News, Reuters

Additional Reading?

Request Free Copy