- People familiar with the matter say banks and investors recently met to discuss a rescue plan for Eskom.
- Nedbank which is said to be leading the talks says it continuously engages with Eskom.
- Eskom has previously said it can only service about R200 billion of debt, and lenders may help it meet some of its upcoming interest payments.
Nedbank is leading discussions to restructure Eskom’s R464 billion debt load, according to people familiar with the talks.
The parties met in recent days, and one of the options is to transfer at least R100 billion of debt to a special-purpose vehicle that would be overseen by the state-owned asset manager, the Public Investment Corporation (PIC), the people said.
"Eskom intends to work constructively with all its creditors to develop a plan that will improve the company’s balance sheet while adequately catering for the requirements of its lenders and other stakeholders," the utility said in response to questions.
"The utility is in regular discussions with its stakeholders to agree on the best solution to shape the balance sheet as the company moves to the next phase of its strategy," it added.
Eskom, described by Goldman Sachs Group as the biggest threat to the South African economy, has become mired in debt as a result of overspending on projects.
The power utility can’t meet its costs and is subjecting the country to intermittent power outages as a result of inadequate maintenance at its aging fleet of coal-fired power plants.
The yield premium of Eskom’s 2028 dollar bonds over comparable government debt narrowed on Friday to the least in 17 months, suggesting bondholders are gaining confidence in a rescue plan.
"We continuously engage with strategically important state-owned companies including Eskom," Nedbank said in an emailed response to queries.
"These constructive engagements are held with positive intent, together with other financial institutions and respective shareholders, and focus on creating solutions in respect of liquidity challenges faced by state-owned companies," said the banking group.
Interest Payments
Eskom has previously said it can only service about R200 billion of debt, and lenders may help it meet some of its upcoming interest payments, said the people.
The PIC, which oversees the pensions of South African government workers, manages R1.9 trillion of assets, including about R90 billion of Eskom’s bonds. The company has previously supported a failing retailer – Edcon and has invested heavily in the debt of other struggling state-owned entities.
It has previously proposed converting the Eskom debt it holds into equity.
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"The PIC considers a wide range of possible options in this regard, in light of the impact of energy security on all investments," a spokesperson said by email. "Whatever solution the PIC eventually supports, if any, will be informed by clients’ investment mandates and their risk-and-return expectations."
The Congress of South African Trade Unions (COSATU), a key supporter of President Cyril Ramaphosa, has repeatedly urged the use of PIC funds to rescue Eskom.
After transferring the debt to a special-purpose vehicle, the remaining liabilities could be divided between three proposed Eskom units -- transmission, generation, and distribution – when a planned split comes into effect, the people said.
No final decisions have been made and proposals will be presented to the National Treasury in the coming weeks, said the people.
The National Treasury didn’t immediately respond to emailed queries. Neither did the Ministry of Public Enterprises, which oversees Eskom. The presidency declined to comment.
– With assistance from Robert Brand.
