Eskom wants state to take on almost quarter of its debts
South Africa’s Eskom wants the government to take on 100bn rand ($7.2bn) of its debts, its chairman told a newspaper, suggesting the struggling staterun power firm wanted relief on almost a quarter of its borrowings.
Eskom, which has implemented power cuts in recent months due to coal shortages and poor plant performance, is fighting for survival after a decade of financial decline.
Investors said they were told it wanted to cut 16,000 of its 48,000 employees.
“Cost compression, revenue enhancement and debt relief are the core of the turnaround strategy,” Eskom chairman Jabu Mabuza told the Business Day newspaper, adding that his firm wanted the state to take on 100bn rand of its debt.
He did not give Eskom’s total debt or indicate the profile of the borrowings the firm wanted to offload.
Eskom’s balance sheet showed total debts were 419bn rand at the end of September.
Eskom spokesman Khulu Phasiwe declined to elaborate on the utility’s debt relief plans.
The company is critical to Africa’s most industrialised economy because it supplies more than 90% of its power.
Eskom executives met investors in London and the United States this week after posting an 89% slump in first-half profit.
They told investors that shifting debt to the government and cutting up to 16,000 staff were key parts of a new corporate strategy, one investor who met Eskom in London told Reuters.
“Without some form of debt management operation it does question how sustainable this company is in the long run,” said the investor, asking not to be named as the meeting was private.
Eskom’s debt plan has not been approved by the finance ministry, which has said it cannot keep pouring money into state firms as it tries to cut the budget deficit.
“The government’s policy stance on the funding of stateowned companies remains that such funding must be done in a deficit neutral manner,” ministry spokesman Jabulani Sikhakhane said.
Moving Eskom’s debt to the government’s balance sheet could also endanger South Africa’s sovereign credit ratings.
Moody’s is the last of the “big three” ratings agencies to have South Africa’s debt in investment grade.
Eskom’s bonds have been on the slide for months, though some of its most recently issued ones have seen a bounce over the last week.
Eskom’s Mabuza said last week that asset sales could not solve the firm’s problems and it favoured government support.
He said Eskom had discussed turnaround plans with the public enterprises ministry and President Cyril Ramaphosa.
Ramaphosa has made reforming Eskom a priority since taking office in February, but the scale of its financial difficulties has made progress slow.
Eskom expects to make a pretax loss of more than 11.2bn rand this financial year.