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Eskom sees no need for more state funding

Estimated revenue loss of R4bn is anticipated for lockdown.
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Eskom, South Africa’s debt-stricken power company, told investors it currently doesn’t need to approach the government for more support, even as a Covid-19-related national shutdown slashes revenue.

The company needs to raise R89 billion this year and R56 billion of that will come from an existing state bailout, chief executive officer Andre de Ruyter and chief financial officer Calib Cassim said on the call, according to investors who listened to it. Eskom spokesman Sikonathi Mantshantsha declined to comment.

“After accounting for the R56 billion of bailout funds committed this year, Eskom management estimates that it has R31 billion of funding needs for this year,” said Ali Dhaloomal, a London-based credit research analyst at Bank of America. “Eskom doesn’t see the need to ask for additional state support at this point of time.”

About 40% of the remaining funding required has been committed by development finance institutions; the balance will come in the form of structured products from banks, export-credit agencies and the sale of domestic bonds, the people said. They asked not to be identified as the call wasn’t open to the media.

In a discussion dominated by investor concerns about cash flow, the executives said the company could withstand a few more weeks of a lockdown if it was extended. An estimated revenue loss of R4 billion is anticipated for the three-week lockdown that began March 26, they said.

The plunge in electricity demand due to the mandatory closure of mines and factories has allowed Eskom to boost maintenance to 9 500 megawatts of capacity from 4 000 megawatts. However, longer-term closures of plants for deeper maintenance will have to wait until the lockdown is lifted because the work would violate social distancing guidelines.

Yields on Eskom’s dollar bonds stayed lower after dropping earlier for the first time in eight trading days amid a resurgence of global risk appetite. The company’s $1.25 billion of 2025 securities gained 1.8% to 70.3 cents on the dollar, driving the yield down 48 basis points to 16.22%.

© 2020 Bloomberg

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When I read the headline “Eskom has NO NEED for state funding”…I checked today’s date (which is 7 April) and thought “isn’t this 6 days late?” 😉

Well, it helps if Eskom is still piggybacking on existing funds to be committed.

Things could be slightly improving, but it won’t be the last.

But Eskom is about 500 billion in the red? Did this debt evaporate?
It seems as if ‘at this point in time’ Eskom don’t need a bailout. Next week is another point in time, how stupid of me.

WHAT THE COVID-19 PANDEMIC TEACHES US; IF ANYTHING AT ALL…

At the centre of it all we really have been exposed as to how fragile we are as a species and as humanity. As African, South Africans in particular we are given a small window of opportunity to seriously consider and to embrace the concept of UBUNTU… Communism has failed, socialism is too complex for us to understand yet capitalism is too open to corruption and inequality. For 12 days to date the country has been locked-down, we are all grounded like kids who misbehaved when the parents were busy with their own business. Both the poor and the rich, the homeless and the those in safe family networks, the old and the young,the sick and the not sick, the educated and those who are not… we all have been reduced to one label and one title…”Locked-down”South Africans.

IF I WERE PRESIDENT…

I would make electricity, water, and other municipality services free of charge for primary residency. Holiday homes and businesses will be billed as normal.

How will I fund all those service:… I would increase VAT to 18% and levy 150 cents off a litre of petrol(reducing RAF Portion from the fuel levy) 50 cents off packet of cigarettes 50 cents from every 330 ml of bear and ciders 50 cents from liquor and spirits 10 cents from every box of matches and 50 cents any technological fire lighting device.

All will pay more for goods and won’t be able default on services and treasury will get this money and handover to municipalities when payments are to be made. No South African should be basically deprived of the dignity of not having a fundamental means to life due to the lack of employment or income. UBUNTU tells us that “i am because you are”… COVID-19 Reminds us that UBUNTU as a Southern African concept can be used as a basis of any of the three “…isms”.

Eskom should not have a financial problem, it should worry about how it will expand its reach to the furthest corner of the country.

End of comments.

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