Eskom needs cash injection to avoid debt crisis – CEO

Debt doesn’t just disappear – it creates a very significant risk to the sovereign: Andre de Ruyter.
Image: Moneyweb

Ailing power utility Eskom urgently needs more cash to stabilise its ballooning debt pile with the funds coming from a rise in tariffs or new equity, new chief executive Andre de Ruyter told lawmakers on Tuesday.

Eskom, which supplies 90% of South Africa’s power but has struggled to meet demand, had a bid for a big electricity tariff increase rejected by a court this month.

Eskom’s urgent application to the court for a tariff increase involved hiking rates by 16.6% from April 2020 and a further 16.7% from April 2021.

It said its proposed urgent rate hike followed an error by the regulator Nersa, which in 2019 set Eskom’s tariff rises at 9.4% for 2019/20, 8.1% for 2020/21 and 5.2% for 2021/22.

“The issue of Eskom debt has to be addressed to make Eskom sustainable,” De Ruyter told parliament’s Standing Committee on Public Accounts.

The utility has debt of about R450 billion, mostly backed by the government, and is struggling to service the interest on its borrowing due to falling revenues. Its access to capital markets has also been constrained by years of mismanagement.

Read: Eskom’s new CEO takes first step to trim outsized wage bill

“The money is going to have to come from somewhere. Either it comes from a tariff increase or it comes from an equity injection. It (the debt) doesn’t just disappear. In fact it creates a very significant risk to the sovereign,” said De Ruyter.

In July, the government allocated Eskom R59 billion over two years to service its debt, on top of the 10-year, R230 billion injection it provided months before that.

The utility has been forced to impose several rounds of severe power cuts in the past year that have dragged economic growth lower and increased the risk of credit downgrades, especially from Moody’s, the last agency that gives South Africa an investment grade rating.

Read: SA’s ‘Energy War Room’ to meet for first time

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COMMENTS   36

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Ja no well fine — That did not take too long to bring out the begging bowl !!!!

and he talks gibberish.What is …”…risk to the sovereign.”

Weasel-speak for what’s left of the economy.

“Risk to the sovereign” implies that the country is actually bankrupt, but nobody realises it yet. The risk is that people will begin to realize this if Eskom cannot repay its debt. The moment one of the SOEs default on a debt payment, it will trigger a cross-default of all government debt. If SAA or Eskom skips an interest payment or a repayment of principle, then lenders will call in the loans to all SOEs. This is imminent.

This is the scenario that afforded us a junk status credit rating. Our Sovereign is junk, but we knew that all along. What is going to happen next? They won’t be able to steal the pension fund money within the necessary timespan to avert a cross-default. So things are going to get really interesting and the rand can blow out.

Gibberish?…you obviously font understand what will happen when there is a default

Yip, like everything else the ANC touches, they have now broken the old proverb “beggars can’t be choosers” it seems!

Shed unnecessary costs like useless workers.

Just cut up their credit card.

Did someone tell de Ruyter to take a hike?

He is just like his bosses. Gime money.

PAY THE BLOATED WORKFORCE OFF!! Before you start begging on the bosses behalf.

He did not tell anyone that it is stupid to try and fix ESKOM and keep the 66% of the labourforce not required. What business sense has he got then??????? If he is trying to fix it on instruction from CR and Pravin rather just go boet. Take a hike.

He works for the shareholder. Actually in SA, I think they have that “world leading” King Commission where he actually works for all stakeholders, which includes employees. So according to the company governance, he isn’t allowed to advocate for improving the company’s structure. So no solution, just recurring cash bailoits (Sidebar: ever wonder why the King Commission is such a “world first” and why in countries where management reports to just old fashioned owners – corporates and GDP appear to do so much better? Hmm. It’s almost as though socialism doesn’t “pay”? No that can’t be it. Hmm.)

It seems the EFF is gearing up for demonstrations at Megawatt park. Let’s see how much lawlessness and anarchy they cause. ANC does not have the balls to protect law abiding citizens.

FW de Klerk apologized for Apartheid. Now can the ANS apologize for destroying Eskom.

Many of the criteria used to declare Apartheid a crime against humanity are being emulated by the ANC, just read the list used by the ICC.

The ANC should be declared a crime against all South Africans

Go and ask the Guptas. I am sure that are sitting on billions. But they will never be extradited because the moment they start testifying in court, they will spill the beans on everybody who had their hands in the till and that means 80%-90% of the ANC and the EFF. Even if someone kidnaps them and handcuffs them to the gate at the Joburg police station, the NPA will refuse to prosecute. Cyril’s biggest fear is that the ANC will tear in two and that must be avoided AT ALL costs.

And there have it – a VAT hike to 16%..

This heroin addict needs it’s next shot!

This used to be a solvent functioning entity. Due to AA(cadre employment of unskilled and incapable crooks), BEE(buying everything at a colossal premium to market prices enriching a few tenderpreneurs) and wholesale theft as well as buying votes through “job creation” this entity is very broken.

And now the SA taxpayer will have to pay for this-thank you ANC for your wisdom, leadership and insight.

Get your money out of this place…

You cannot “defect” form eskom by way of cost component of goods/services purchased …but you cvan defect by way of not using them in your personal capacity …

Abscond form the grid, or use as little possible …do it at speed..
The economic incinerator ( thank you Sensei) do not appreciate the the honest paying public if they continue to condone soweta and every non paying municipality ..

You cannot “defect” form eskom by way of cost component of goods/services purchased …but you can defect by way of not using them in your personal capacity …

Abscond form the grid, or use as little possible …do it at speed..
The economic incinerator ( thank you Sensei) do not appreciate the the honest paying public if they continue to condone soweto and every non paying municipality ..

Bonus time around the corner, methinks!

State captors stole 5 trillion. Ask them for it.

Look after your supply chain contracts first.
Get rid of middle-man BEE companies with zero employees that supply your diesel, transport your diesel and transport your coal.

Then, get rid of all the deadwood middle managers. There is about 2000 too many. each earning R1000 000 pa.

Then, collect outstanding debt from every single municipality, including Soweto.

THEN you can come ask for more money.

Arrow: spot on!

I will donate a month of my time as I am sure will 100 gatvol engineers, CA, lawyers. Give us full access to interrogate and query anything. We will within a month come up with tens of billions of savings in corrupt contracts that the counter-party would NEVER have the guts to try and enforce.

Nee man, my little firm has a tiny mad contract with Eskom. It is worded so crudely and there are so many obstacles to performance that it is bound to end in tears. I just do not want them to be mine.

Yes fine, we accept the messed up reality and the sacrifices it is going to take to prevent the meltdown of the country….but what is being done about the evils within that will just misappropriate the next tranche of bailout money?
We haven’t heard anything about improving financial controls or flushing out those that have been helping themselves to the bank account.
Sure, retire or retrench whoever you can but the locust swarm is never going to go voluntarily, because they have it too good feeding off the bank account.
Eskom, prove to us what you are doing about that, otherwise you will see how quickly money can move away from funds, banks, deposits, portfolios and retirement products that are quietly buying bonds to bail SA & Eskom out, thinking investors aren’t noticing their increased exposure.
People don’t mind being part of a true (honest, successful) solution, but when it comes to their money vs. someone else’s being lost, human nature will see most people save themselves first.

Because of ESKOMS incompetence my business needs a cash injection!

Dear Mr de Ruyter. Please, before you knock on my door for some ZAR, get into your ESKOM bakkie and drive around to aaaaalll the defaulting municipalities and collect your outstanding debts. I suggest that whilst you are on your jolly road trip, please disconnect all illegal electricity connections (ie theft). After that, us law-abiding, tax-paying citizens MAY have time for you

Aye, then drive around in your bakkie and if you see anyone loafing either fire them or freeze their salary. Problem solved in a week.

Why must some customers pay for electricity and others not?

If everyone paid for electricity then we could all save on additional Tax.

Prediction Engine spat this out : in the coming budget speech, a one-off Eskom Levy. The best way (collection wise and getting everybody to pay) would be by way of a VAT surcharge like in the US where a county can add say 2% to their local sales tax to raise funds for a bridge or stadium or whatever. The announcement will be preambled by a long story from the finance minister about how the culture of non payment is to blame, so now everybody has to pay. But it is one-off special levy and will be removed (promise, really)

We’re screwed people!

How to stabilise a ballooning debt pile? Add more debt of course.

in the residential complex where I am living we have eskom employees living there too. guess what? who’s levies and council rates & taxes are most behind? eskom employee @ number 32.

Yes Eskom needs more cash. Cut operational costs. We ( Eskom, South Africa) cant borrow money to pay debt.

You need someone like Margaret Thatcher to tell the unions to F#@K off and then fire two thirds of the parasitic workers at Eskom that are sucking the money supply dry. I am pretty sure that Eskom would be very cash positive if it were not for the policies of this socialist / Marxist ANC government that believe in loading up every State Owned Entity with friends, family and cadres to “create more jobs”. Literally no jobs are actually created by added people to the Public servants wage bill. Just asking the tax payer to pay more. A political slight of hand like a magician with a cheap trick.

How about cutting the electric supply to all the freeloaders? Electricity is definitely not a basic human right.

And yet Eskom has closed down functional coal fired stations in Mpumalanga, that could have assisted in providing the space for maintenance and increased its revenues eroded by loadshedding. Eskom is in fact, planning on shutting down MORE units over the next year or two. This is absurd in a country experiencing rolling black-outs on a regular basis.

End of comments.

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