Eskom requests government to take $7.2b of its debt

Eskom's chairman Jabu Mabuza gestures during the 2018/19 interim results at the Eskom's head office at Megawatt Park, in Sunninghill, South Africa. [Photo: Reuters]

JOHANNESBURG - South Africa’s struggling state-run power firm Eskom wants the government to take on 100 billion rand ($7.2 billion) of its debt to shore up its balance sheet, Eskom Chairman Jabu Mabuza told the Business Day newspaper.

Cash-strapped Eskom, which supplies more than 90 percent of South Africa’s electricity, is struggling to emerge from a financial crisis and has implemented power cuts over the past week because of coal shortages and poor plant performance.

“Cost compression, revenue enhancement and debt relief are the core of the turnaround strategy,” Mabuza told Business Day.

Eskom executives are meeting investors on a roadshow to London and the United States this week. A financial market source in London told Reuters that Mabuza had spoken to investors on the roadshow about the idea of shifting 100 billion rand of Eskom’s debt onto the government’s balance sheet.

However, South Africa’s finance ministry, which is at pains to trim the country’s large budget deficit, said on Wednesday that it had not yet received the debt proposal.

“The government’s policy stance on the funding of state-owned companies remains that such funding must be done in a deficit neutral manner,” Treasury spokesman Jabulani Sikhakhane said.

Eskom spokesman Khulu Phasiwe declined to elaborate on Mabuza’s comments, saying the company’s turnaround plan was still the subject of discussions with stakeholders in government.

Mabuza told a news conference last week that asset sales could not solve Eskom’s problems and that a bailout or debt relief were preferable. At the time, he said Eskom had discussed its turnaround strategy with the public enterprises ministry and South African President Cyril Ramaphosa.

Ramaphosa has made reforming Eskom a priority since taking over from scandal-plagued Jacob Zuma in February, but the scale of the financial difficulties at the utility has meant that progress has been slow.

Eskom expects to make a pretax loss of more than 11.2 billion rand this financial year.