Eskom still waiting for govt to relieve its balance sheet of R200bn debt, Parly hears

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Eskom's CFO Calib Cassim.
Eskom's CFO Calib Cassim.
Picture: Luvuyo Mehlwana
  • Eskom has proposed to government that it provide support of R150 billion to R200 billion to halve its debt, but no agreement has been reached to date.
  • Until Eskom can resolve matters such as outstanding municipal debt and secure cost-reflective tariffs, it may have to remain reliant on government support.
  • Other proposals include a debt-for-equity swap.

Eskom wants government to relieve its balance sheet of as much as R200 billion in debt, and while discussions are ongoing, there is no agreement on the matter yet, according to its CFO, Calib Cassim.

Eskom officials on Tuesday briefed the Standing Committee on Public Accounts on the consequence management and other measures taken to clamp down on irregular expenditure.

Cassim was probed on the utility's liquidity position which remains a risk, to which he responded efforts were being made to introduce cost efficiencies and savings. In the last financial year, Eskom saved R14 billion and the current year's target is for savings of R20 billion. The latest year-end forecast indicates that R17 billion of the R20 billion target will be achieved. Eskom is also working on a solution to resolve outstanding municipal debt - which is around R40 billion.

Another sticking point is for Eskom to be able to secure cost-reflective tariffs.

Notably, Eskom has a debt burden of near R400 billion, which cannot be serviced with its current cashflows and operations, Cassim said. "We are unable to meet both the interest and the capital repayments," he said. This has led to the need for government equity support over the last few years, in the current financial year Eskom received R31.7 billion.

The utility is expected to receive tranches of R20 billion over the next few years to deal with debt-servicing commitments. National Treasury's deputy director-general of asset and liability management, Duncan Pieterse has previously told Parliament that Eskom has already been allocated equity support of R230 billion, to be disbursed over 10 years. So far R136 billion has been disbursed. There has also been a special dispensation for Eskom to access additional guarantees of R42 billion in the current fiscal year and R25 billion in the next year.

Cassim said that Eskom would still need government support - until it can resolve the other issues linked to cost efficiencies, municipal debt and achieving cost reflective tariffs. For Eskom not to remain reliant on government, then there needs to be a solution from government to help the utility deleverage its balance sheet. That way Eskom on its own could be capable of covering the debt service costs.

Bheki Hadebe, ANC MP and member of the committee, further probed Cassim on the specifics of the debt solution. Cassim said that Eskom had submitted to government that it provide support in the region of R150 billion to R200 billion. "That is our submission to government. They have not agreed to it. We are in discussions with them, we do understand that some other items have been mentioned recently."

He added that Eskom would have to work with government on the plausibility of some of the options, but for now there is no solution.

Last week Public Enterprises Minister Pravin Gordan told the National Assembly that Eskom, National Treasury and other stakeholders including the Public Investment Corporation are consulting on a solution for Eskom's debt burden. The restructuring of the utility into three entities- generation, distribution and transmission would also impact how debt is managed on balance sheets, but this is subject to approval by lenders, Gordhan said.

Gordhan also emphasised that a R131 billion offer from rich nations to support the country's move away from coal would not be used as a debt solution for Eskom.

Labour unions have previously proposed a debt-for-equity swap, particularly linked to the bonds held by Government Employees' Pension Fund (GEPF) - this is about R82 billion or a fifth of Eskom's debt, Bloomberg reported. While the PIC which manages the GEPF's investments had been considering the proposal, the GEPF itself had not been approached on the matter, Bloomberg reported.

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