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CityPress - - Business - MOYAGABO MAAKE moyagabo.maake@city­press.co.za

he state’s sale of its stake in Vo­da­com to the Public In­vest­ment Cor­po­ra­tion (PIC) this week wrapped up slightly more than nine months of deal mak­ing for Trea­sury, which ini­ti­ated talks on the sale shortly be­fore the prepa­ra­tion of Fi­nance Min­is­ter Nh­lanhla Nene’s medium-term bud­get pol­icy state­ment.

Nene told City Press that Trea­sury’s as­set and li­a­bil­ity man­age­ment depart­ment sounded out about 20 fi­nan­cial ser­vices in­sti­tu­tions in the mar­ket – whose names he could not dis­close with­out first con­sult­ing with those in­sti­tu­tions – to iden­tify a num­ber of as­sets that could be sold to sup­port state power util­ity Eskom.

“Some of them were ac­tu­ally bid­ders [for the Vo­da­com stake],” he said. A few more in­sti­tu­tions tabled un­so­licited of­fers.

The state found a num­ber of as­pects of the PIC’s of­fer at­trac­tive, most sig­nif­i­cantly its pric­ing, which Nene said was “the best of­fer on the ta­ble” de­spite the 10% dis­count that the state of­fered be­cause of the large 13.91% stake be­ing sold.

The shares were sold at a 30-day vol­ume-weighted av­er­age price. If this was cal­cu­lated at the end of Oc­to­ber – the month Nene re­leased his bud­get pol­icy state­ment – the state would have pock­eted R23.8 bil­lion from the deal. If it was cal­cu­lated ahead of the con­clu­sion of the deal this week, the amount could be closer to R27 bil­lion.

Trea­sury is not re­veal­ing the deal value, but says the pro­ceeds are more than the R23 bil­lion set aside for Eskom’s eq­uity in­jec­tion.

How­ever, this – in ad­di­tion to the con­ver­sion of a R60 bil­lion loan into shares – will not solve the util­ity’s prob­lems.

“It’s al­ways been our view that Eskom should re­cover [its] costs,” said Nene. “It is for that rea­son that we will sup­port Eskom in get­ting cost-re­flec­tive tar­iffs.”

Nene’s view on what makes a cost-re­flec­tive tar­iff – es­pe­cially dur­ing a week in which Na­tional Energy Reg­u­la­tor of SA chair­per­son Ja­cob Modise slammed the util­ity for re­ceiv­ing “ex­ces­sive” in­creases since 2008 – is that these can­not be de­ter­mined overnight.

“It is my view that we need to move to a costre­flec­tive tar­iff; it must not put un­due pres­sure on poor house­holds, but Eskom must re­cover [its] costs.”

Given the util­ity’s poor credit rat­ings – Stan­dard & Poor’s and Moody’s re­cently slashed its debt to junk sta­tus – and high debt lev­els, it has be­come dif­fi­cult for Eskom to raise funds for its R280 bil­lion pro­gramme to build new power sta­tions.

Mak­gola Makololo, act­ing deputy di­rec­tor gen­eral of energy at the depart­ment of public en­ter­prises, said the eq­uity in­jec­tion and loan con­ver­sion would re­duce Eskom’s debt lev­els from “at least 75% to 67% to en­able it to bor­row”.

“From a credit rat­ing per­spec­tive, it will not im­me­di­ately im­prove the rat­ing, but there was pos­i­tive re­sponse to Eskom’s [re­cent] in­ter­na­tional road show,” said Makololo.

More than half of the state’s loan has al­ready been con­verted in Eskom’s books, and only about R26.6 bil­lion – the ex­pected value of the loan to be pub­lished in its 2015 an­nual re­port later this month – is still to be con­verted into shares.

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