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Eskom, Treasury seek renewal of R15bn loan facility

Funding needed to keep the company afloat.

Eskom Holdings and National Treasury are in talks with banks to renew a R15 billion government-guaranteed loan facility that the indebted state power utility announced in February last year.

While the lenders are reluctant to renew the facility given the parlous state of Eskom’s finances, the funding is needed to help keep the company afloat, two people familiar with the discussions said. It’s unclear if the whole facility has been used.

Eskom has more than R450 billion in debt, isn’t generating enough income to cover its operating costs and has instituted regular power outages as insufficient spending on maintenance leads to plant breakdowns. While the government has provided the utility with a series of bailouts, Finance Minister Tito Mboweni has said there is no scope to provide more aid.

The talks on the loan facility need to be finalised this month, said the people who spoke on condition of anonymity. Eskom didn’t disclose the identity of the banks when it announced that it had secured the initial financing.

“Eskom and government are in negotiations with the lenders and discussions remain confidential,” the Treasury said in response to emailed questions. Eskom declined to comment.

President Cyril Ramaphosa’s government has made rescuing Eskom its key focus as it tries to kick-start a stagnating economy that’s hamstrung by that lack of power, thats both depressing output and hindering new investment. Key to its success will be keeping the utility adequately financed.

“Standard Bank will engage with the process in a constructive and pragmatic manner whilst not compromising sound banking principles,” Standard Bank Group, South Africa’s biggest bank by assets, said. Absa Group, Nedbank Group and Rand Merchant Bank declined to comment.

© 2020 Bloomberg L.P.

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Tito is a light weight within the ruling party, no one listens to him…

Rather concentrate on reducing costs.

Start by reversing VAT to 14%.

The banks are starting to act recklessly by continuing to roll over such vast amounts. They’ll have to answer to tax payers!
Guarantee or not, the R15bn must start to be repaid gradually over time – perhaps R400 000 a month!

rather make it R40 000 000 per month – R15bn (R15 000 000 000) interest free would still take 31+ years to pay off.

What a schitt show

Don’t see it being interest free.
But the banks are enabling the SOE – runaway debt fiasco which ultimately is harming the entire country!
Regarding SAA, Gordhan:s latest ploy is to ask the banks for billions for this loss-making gravy-train but WITHOUT issuing any government guarantee! Gordhan is dragging our banks into the ANC’s mess – what do the banks’ shareholders have to say about this type of risk exposure???

Govt and unions still fail to grasp the fact that our SOE’s are leaking buckets and that no matter how full you fill them, they will need to be repeatedly refilled over and over again until their holes have been plugged.
After more than a decade the dam to fill the bucket has now run dry and yet despite this, this stupid lot of numb-nuts still can’t address the problem. It’s no wonder most of Africa has forever been small fry from a global perspective, even though it’s always been the most resources rich continent in the world.

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