Eskom wants state to take on al­most quar­ter of its debts

Gulf Times - - AFRICA -

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.

Mabuza ... in the red

Newspapers in English

Newspapers from Qatar

© PressReader. All rights reserved.