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Banks, PIC push to solve R464bn Eskom debt crisis

No final decisions have been made and proposals will be presented to Treasury in coming weeks.
Image: Bloomberg

Nedbank is leading discussions to restructure South African power utility Eskom’s R464 billion debt load, according to people familiar with the talks.

The parties met in recent days, and one of the options is to transfer at least R100 billion of debt to a special-purpose vehicle that would be overseen by the Public Investment Corp., Africa’s biggest fund manager, the people said.

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“Eskom intends to work constructively with all its creditors to develop a plan that will improve the company’s balance sheet while adequately catering for the requirements of its lenders and other stakeholders,” the utility said in response to questions. “The utility is in regular discussions with its stakeholders to agree on the best solution to shape the balance sheet as the company moves to the next phase of its strategy.”

Eskom, described by Goldman Sachs Group Inc. as the biggest threat to the South African economy, has become mired in debt as a result of overspending on projects. The utility can’t meet its costs and is subjecting the country to intermittent power outages as a result of inadequate maintenance at its aging fleet of coal-fired power plants.

‘Constructive engagements’

“We continuously engage with strategically important state-owned companies including Eskom,” Nedbank said in an emailed response to queries. “These constructive engagements are held with positive intent, together with other financial institutions and respective shareholders, and focus on creating solutions in respect of liquidity challenges faced by state-owned companies.”

Eskom has previously said it can only service about R200 billion of debt, and lenders may help it meet some of its upcoming interest payments, said the people.

The PIC, which oversees the pensions of South African government workers, manages R1.91 trillion of assets, including about R90 billion  of Eskom’s bonds. The company has previously supported a failing retailer – Edcon – and has invested heavily in the debt of other struggling state-owned entities.

It has previously proposed converting the Eskom debt it holds into equity.

“The PIC considers a wide range of possible options in this regard, in light of the impact of energy security on all investments,” a spokesman said by email. “Whatever solution the PIC eventually supports, if any, will be informed by clients’ investment mandates and their risk-and-return expectations.”

The Congress of South African Trade Unions, a key supporter of President Cyril Ramaphosa, has repeatedly urged the use of PIC funds to rescue Eskom.

After transferring the debt to a special-purpose vehicle, the remaining liabilities could be divided between three proposed Eskom units — transmission, generation and distribution — when a planned split comes into effect, the people said.

No final decisions have been made and proposals will be presented to the National Treasury in the coming weeks, said the people.

The Treasury didn’t immediately respond to emailed queries. Neither did the Ministry of Public Enterprises, which oversees Eskom. The presidency declined to comment.

© 2021 Bloomberg

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Smoke and mirrors. Shuffle the deck as much as you like the debt will not go away.
Try reducing expenditure, read salaries. Reduce the no of employees.
Recover the money stolen by former CEO’S.

Everything but recovering the stolen money.

No one goes to jail, the money never gets found – amazing

The scope of CEO delinquency and ineptitude, that still remains unprosecuted, that resulted in this astronomical debt is beyond comprehension. If we ignore it, it will go away – Another. New. Crisis.

Its simple. Take R464 bn from the pension funds-interest free for the first 5 years thereafter revert to market rates . Save about R35bn a year in interest and the pensioners can be lightly boiled by the frogboiler in chief and his accomplices.

NO.
PIC is defined benefit and backed by taxpayers for any shortfalls.

Pensioners are already struggling.

Just raise the price if electricity to be cost reflective.

R5/kWh is fine by me (On Solar)

No-this isn’t Denmark or Canada. This is the continent of solely short term thinking and stealing!

Shifting musical chairs while the Titanic is sinking, that’s the best analogy for this disastrous attempt at financial engineering. One has to wonder what’s the size of the advisory fee Nedbank CIB will be getting for all of this.Moving R100 billion of Eskom’s debt to the PIC which is just the asset management arm of the GEPF(Goverment Employees Pension Fund) may sound like a good idea except for a “small” fact that the GEPF is a defined-benefit pension fund (meaning payouts are guaranteed irrespective of the fund’s performance) thereby also meaning the taxpayer will on the hook if that R100 billion cannot be repaid not including interest. To add salt to the wound,this does not solve Eskom’s inability to generate power to meet the needs of the economy.

I dont quite understand. what happened to the US$12 billion secured from Saudi Arabia by Ramaphosa and the US$2.5 billion loan from china investment bank specifically for Eskom.

Hmm, I rather suspect it was Ramaphosa speak where “secured” means dreamed up while I was lolling in the sun om my game farm. The Chinese in particular are not stupid people and the Saudis will want their pound of flesh.

The losses and the debt loads of Eskom and the rest of the SOEs are easily determined. They account for it in the financial statements. Nobody else but citizens will bear these losses and service the debt. This is only a small fraction of the actual price we pay for ANC policies though.

The real cost of ANC policies can be measured by the negative effect it has on the economy. The Debt/GDP ratio, the budget deficit, the unemployment statistics, the rising amount of malnourished children, social unrest, the implosion of service delivery and the loss of precious skills, account for a much larger cost. This is not the price of state capture. This is the cost of socialism, the ANC itself in other words.

We can calculate the cost of state capture, but under the ANC socialist dogma there exist a much higher level of plunder. The real costs are the economic growth we do not experience, the jobs that are not created, the social security that evaporated and the bright future that was stolen from us.

Solution: Privatise Eskom. Maybe, just maybe! If we repeat it often enough, they will start taking notice – of coarse, if fits into Moneyweb’s Politically correctness…

All that while Eskom is still bleeding bucks every minute !

Eskom should put their money where their mouth is and use their own pension fund to bail out Eskom. Or would they?

This ‘special purpose vehicle’? Sounds like something that fits in a condom?

Give debt holders a haircut. But give them a choice:

1. Interest rate halved.
2. Capital halved.

They are all big boys & girls that assuredly researched Eskom and they invested knowing that they were funding a sick puppy.

You pays your money you takes your chances. Not all chances work out well.

End of comments.

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