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Eskom widens its funding search to Sukuk market

The utility has about R450 billion in debt and no current plans to ask the government for additional cash injections.
Image: Bloomberg

Eskom Holdings SOC Ltd. plans to issue a R1 billion ($58 million) sukuk bond as it tries to diversify funding sources to reduce borrowing costs.

Eskom has appointed a lead arranger “to work towards establishing time lines for the issue,” spokesman Sikonathi Mantshantsha said in an emailed response to questions on Monday. The utility has about R450 billion in debt and no current plans to ask the government for additional cash injections.

The company’s funding plan “requires sizable funding that can provide diversification and longer tenors at reduced finance costs,” Eskom said in a request for proposals posted on the National Treasury website. “Eskom has assessed the viability of an innovative local-currency South African-based Sukuk funding solution that would enable Eskom to further develop its borrowing plan.”

The latest proposal for a rand-denominated sukuk was first reported by Business Insider.

No Benchmark

Shariah-compliant bonds have been considered as a funding source by Eskom since at least 2012. It said two years later that it would watch the South African government’s debut sukuk issuance as a barometer for future funding plans. While the government has sold one dollar-denominated sukuk, it hasn’t issued one in the rand market.

South Africa sold $500 million of Shariah-compliant bonds in 2014 at a 3.9% profit rate, at the time its lowest-cost dollar bond yet, according to data compiled by Bloomberg. Investors bid for $2.2 billion of the debt, which matured this month.

Eskom’s proposal, issued on June 24, invites legal institutions and companies to work with the company on the bond, which will include a government guarantee and have a listing on the Johannesburg Stock Exchange.

© 2020 Bloomberg

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The “utility” has had R450 billion in debt for the past few of years now with no change if not longer.

The exchange rate has been all over the place yet the debt stays the same.

A real enigma this ESKOM I tell you what. Some say they are not in control of their debt? Or they are in a debt spiral?

Cant be.

“Shariah-compliant bonds have been considered as a funding source by Eskom since at least 2012”

So now the govt is after the followers of various faiths’ money – in this instance the Islamic community – in order to pay off its debt. Somehow I don’t see this working.

End of comments.

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