Eskom wants government to take on R100bn debt, also plans job cuts
Eskom wants the government to take on R100bn of its debts, its chair said, suggesting the struggling power utility wants relief on almost a quarter of its borrowings.
Eskom, which has been implementing power cuts 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 chair Jabu Mabuza told Business Day.
The state-run company wanted the government to take on R100bn of its debt.
Mabuza did not give Eskom’s total debt or indicate the profile of the borrowings the firm wanted to offload.
Its balance sheet showed total debts were R419bn at the end of September.
Eskom spokesperson Khulu Phasiwe declined to elaborate on the utility’s debt-relief plans.
Eskom executives met investors in London and the US this week after posting an 89% slump in first-half profit.
They told investors 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, said.
“Without some form of debt-management operation it does question how sustainable this company is in the long run,” the investor said, 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.
Ministry spokesperson Jabulani Sikhakhane said: “The government’s policy stance on the funding of state-owned companies remains that such funding must be done in a deficit-neutral manner.”
Moving Eskom’s debt to the government’s balance sheet could also endanger SA’s sovereign credit ratings.
Moody’s is the last of the “big three” ratings agencies to have SA’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.
Mabuza said last week asset sales could not solve the firm’s problems and it favoured government support.
Eskom had discussed turnaround plans with the public enterprises ministry and President Cyril Ramaphosa, he said.
Ramaphosa has made reforming Eskom a priority, but the scale of its financial difficulties has made progress slow.
Eskom expects to make a pre-tax loss of more than R11.2bn this financial year. – Reuters