Eskom finance head Calib Cassim says that Eskom requires government to take over R200 billion in debt or else it will be unable to accept R130 billion in funding offered by other countries, reports City Press.
The state-owned power utility currently has around R400 billion in outstanding debt. It is therefore asking the South African taxpayer to take over half of its debt burden.
Cassim said that Eskom has been in discussions with the department of public enterprises and the National Treasury about this issue for two years without progress.
He explained that Eskom could not use the R130 billion in funding offered by the US, UK, and EU countries to repay its debt.
As part of the terms of this funding, Eskom must use it for new projects such as converting old power stations from coal to renewables and strengthening its network.
Cassim also emphasised that the funding is not a donation but rather a collection of low-interest-rate loans — something that Eskom cannot justify adding onto its balance sheet while still owing R400 billion.
“It’s just like in one’s personal finances, where one has to make substantial progress with the payment of one mortgage bond before taking out another one; otherwise, you are at risk of defaulting,” said Cassim.
Cassim stressed that the funding would provide massive value to Eskom.
“It’s wonderful to have funding available, especially for strengthening the transmission and distribution networks,” he explained.
“It’s one headache less and, because it’s offered over a longer term and there are therefore no large repayments every second year, it will help with Eskom’s liquidity. There’s also an element of a payment holiday.”
Cassim speculated that Treasury was afraid to take over half of Eskom’s outstanding debt because other state-owned enterprises and even municipalities would start asking for the same thing.
However, he argued that the state is effectively already repaying a large part of Eskom’s loans thanks to a generous aid package providing Eskom with a substantial annual bail-out.
Government could save money if Treasury takes over the debt, as it would pay far lower interest rates, Cassim said.
He explained that Eskom’s weak balance sheet means the interest on its debt is exceptionally high.
Cassim’s statements come on the back of Finance Minister Enoch Godongwana not providing any additional support to South Africa’s state-owned companies—including Eskom—during his medium-term budget policy statement (MTBPS) last week.
However, Godongwana has noted that the power utility presents a significant risk to public finances because it already relies on government guarantees to fund its operations.
Finance minister Godongwana has told Bloomberg that he and his colleagues in Cabinet believe Eskom should sell some of its coal-fired power stations to pay off the debt.
He has also criticised the performance of Eskom CEO André de Ruyter, arguing that the power utility’s leadership were given leeway to perform planned maintenance, but have not delivered the appropriate results.
“We don’t see the results of that planned maintenance; he’s cut us out of electricity doing planned maintenance,” said Godongwana.
“The indication is that there’s more blackouts under him than ever, in the midst of a lockdown.”
Godongwana has also argued that the focus on fixing Eskom, rather than improving the power grid, has been a 13-year mistake.
He has commended the recent bid window for the Renewable Energy Independent Power Producer Procurement Programme, as these projects promise to generate over 2,500MW of electricity at cheap rates.
“Over the long term, creating a competitive energy market will help contain costs of generating electricity and support GDP growth.”