Eskom gets a breather

Eskom bought itself some financial breathing room after signing a R20 billion short-term credit facility with a group of banks.

The power utility needed the liquidity to see it through to the financial year that starts April 1, spokesperson Khulu Phasiwe said. It would allow the company to continue resolving governance issues and get back to its normal funding programme required for the 2018-19 year, acting CFO Calib Cassim said in a statement.

Eskom is facing a financial crisis exacerbated by weak demand for electricity and allegations of graft. It is building two large new coal-fired plants that are over budget and years behind schedule. President Cyril Ramaphosa announced changes to Eskom’s board as one of his first moves.

S&P Global Ratings cut the utility’s rating late on Tuesday to CCC+, saying Eskom was at risk of a distressed exchange situation or default in the next six months and noting “uncertainty regarding the extent and timeliness of government support for Eskom.”

The company has monthly debt-service costs of as much as R6 billion over the next six months, excluding refinancing of short-term bridge funding and recurring negative free cash flow.

The new board and leadership of Eskom has been working to revive relationships with lenders who stopped working with the company because of allegations of corruption and poor decision making, acting CEO Phakamani Hadebe said last month.

Eskom yesterday planned to pay back the R5 billion bridging loan from the Public Investment Corp. that it had arranged for the month of February, Phasiwe said. – Bloomberg