Eskom needs R250bn to prevent downgrade

2014-08-07 11:01

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Eskom needs R250 billion to stop a downgrade, with a capital injection or loans being options for the utility, Public Enterprises Minister Lynne Brown has said.

“We are looking at how to get Eskom out of its trouble because it has a short time to prove it is on a good footing to credit agencies,” Brown said at a briefing in Johannesburg today.

“By September, we have to tell public what we have done to help save Eskom. The main thing is to prevent a downgrade.

“It will have to be a capital injection or a loan conversion; in a few weeks we will be able to tell the public.”

The utility has a funding deficit of R225 billion for the five years to 2018.

The deficit came about after South Africa’s energy regulator last year granted it half the tariff increases sought.

Eskom’s bonds have a 50% chance of being lowered to junk by the end of September, Standard & Poor’s said on June 20.

That would significantly raise borrowing costs for Eskom, which had R254.8 billion in debt securities and borrowing outstanding at March 31.

The state-run electricity provider was forced to schedule managed blackouts in March and June as it struggled to keep the lights on after a decade of underinvestment in power stations.

The government departments of energy and public enterprises and the national treasury are working on a way to close Eskom’s funding shortfall.

South Africa has ruled out privatising the utility to solve its cash needs, Brown said.

“Having private interests in state-owned companies erodes credibility,” she said.

“The government would not want to privatise Eskom because the government must have access to the economy; how it directs the economy to fulfil developmental goals.

It’s not government policy to privatise at this stage.”

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