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Eskom wants government to take over majority of its debt

Eskom says it can only sustain R160bn of its R440bn debt.
Eskom which has already used R295bn of the guarantees offered by the government, is still struggling to service its debt. Picture: Moneyweb

Eskom wants the majority of its R440 billion ($29 billion) of debt transferred to the South African government.

The struggling state power utility said it can only sustain R160 billion of debt, company executives told investors on a no-deal road show in London on Wednesday, said Ksenia Mishankina, a senior credit analyst at Union Bancaire Privee Ubp SA in London.

Read: Eskom has 18 months to get its house in order

Eskom wants the government to transfer the debt it has guaranteed onto its own balance sheet. At the end of the fiscal year in March, Eskom had utilised R295 billion of the guarantees offered by the government, according to the National Treasury.

The utility is hoping for resolutions to some of its problems and progress on a plan to split into three units after the National Treasury’s mid-term budget in October, the executives said, according to Mishankina. They also want the government to provide a resolution to the issue of unpaid debt from some of its municipal customers.

The R160 billion figure is derived from an assessment that it can sustain debt of five times earnings before interest, tax, depreciation and amortisation.

© 2019 Bloomberg L.P.

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Here is a tried and tested solution for a drug addict.

– Give him 3 years of bottomless bailout drug supply
– Promise to keep support and employ all his cronies under him
– Let him know you got his back financially in tough times

He’ll quit his addiction in no time right Cyril? Oh wait, here he is begging again. I wonder why?

The only urgency shown by the “good” ANC in 18 months was to “fix” SARS.

The difference between the “good” and the “bad” ANC is transparency: the “bad” ANC steal openly, the “good ANC” steal by stealth.

Eskom is afraid to reduce the bloated workforce,so they would rather pass the buck.

Crazy fools indeed! The Eskom staff even have an audacity to demand bonuses and increases without any performance accountability.
Eskom people, the country does not have the money, Government does not have money, Government is SA people and the SA people taxes is what keeps the country running.
The three years increase guarantees of 7.2% , 10% on the third year should be cancelled and cancelled fast.

Eskom staff should be doing an honourable thing and offer to have their salaries and packs decreased by 10%. Your salaries are already way higher than most private companies salaries. I know this by engaging with my x tertiary mates with the same qualifications as I. The salaries are like 35-45% more. Why exactly !!!

Just work out the following based on a 27000 overstaffed eskom and all get a 13 cheque earning a minute salary of R8500 per month:(that is excluding any perks and other company cost:
27000 employees x 13months x R8 500 pm = R2 983 500 000 per year paid by eskom and receive nothing in return for it – how many more ghost /bee workers is probably floating around in eskom?
eskom is just 1 semi government organisation – accumulatively in all the other soe’s, government and semi government organisations how much is wasted the same anc way / style.
suppose the anc sees p.a.y.e. from these cadre employees as a type of income that must be hold onto, while messing up the economy of the rest of the country – the pure anc way to “create jobs for pals”

I recommend using the PIC money for NHI and Eskom.

The request comes from the same (think of some nice word) that has no clue how to run the thing. Now they know what to do to fix it or what is best for it.

Confirmation again that the 68 IQ estimate (mildly retarded) for SA might have to be checked again. Seems awfully high.

“They also want the government to provide a resolution to the issue of unpaid debt from some of its municipal customers.”

Easy. Cut off all power to Soweto until such time as the 90% defaulters start paying.

Same request by SABC! Crazy SOE people and people running the Government.
No body will die without the SABC so I do not see why bail them out.
The card about voice of the nation and the poor is a blatant lie.
The poor including me we will listen to other stations and watch other from other people or companies. This is already in place.
I have never seen so many DSTVs in informal settlements like ones, the guys have data also for TV and radio WhatsApp comments and some for just to call radio station, they do not mind airtime of being put on hold just to say HAPPY FRIDAY or WE ARE ALL TOGETHER, seriously now!!

@Incitatus. That is not so clear cut, I live in a municipality that is one of the big ones owing money to Eskom. The majority of people of the community living in the town (not including the adjacent townships forming part of the municipality) pay our electricity bills each month on time in full. The municipality eagerly take our money to pay salaries each month and then fail to pay Eskom (while also not trying to get the townships to pay rates as these people are their core voter base keeping them in power). It would be totally unfair for us as rate paying citizens to lose access to electricity because of the corruption and ineptness of the municipality.

Although I agree that the situation cannot continue, simply cutting all electricity supply is not so simple. I am personally in process of converting to solar power and geyser with gas stove to completely get off the municipal power supply. Though for most people in town it is not possible for financial reasons as things are not going so great for people in the “plattelandse dorpies”.

If they can’t sustain their debt then the Govt is surely responsible for reckless lending and should be prosecuted accordingly.
Unfortunately this is an endless circ with us taxpayers bearing the brunt in all scenarios. IMF loan fast approaching!!

Slight correction: Only the taxpayers that decide to stay and not emigrate will bear the brunt. Plenty are opting out.

Approaching IMF move will be the worst move for us proof on countries like Greece. Mandela also was against approaching IMF and losing control by the country. This is on most of his books. Are the comrades ignoring everything from their always so called best card that they always play, Mandela this, Mandela that!!

There is some sense to government taking over the debt:
1. It guarantees it anyway so let’s get real.
2. It is patently absurd for Eskom to incur say 12% coupon interest cost on what amounts to sovereign debt that costs say 8% as sovereign debt. One is simply transferring 4% to bankers.
3. Eskom is a mess and it’s debt muddies the mess. Partners, vendors and future financiers need a less murky picture.
4. A chunk of the hole in Eskom is due to non payment by councils and Soweto. If Eskom acted solely in its own interest and cut those delinquents, there would be civil war and economic chaos (more).

BUT

With such a deal there has to be a rule that says NO MORE. Government will not guarantee future debt. More crucially, Eskom must be split such that:
1. T&D is housed in a NPO state owned monopoly that buys energy from Eskom Generation and IPP and supplies it to the distributors. Create an energy market that solar and wind and biomass and bagasse and anybody can compete.
2. Eskom Generation builds no new generation unless that new capacity was (a) won from T&D in open bidding (b) is backed by turnkey EPC vendor contracts. This nonsense where vendors mismanage Eskom build projects to the tune of 400% overrun as with that pumped hydro project must be stopped!!!

IMO we could probably get R100b back from the assorted vendors or their insurance companies if Eskom allowed a dozen experts in with half a dozen lawyers.

Great comment and spot on. It’s inevitable that the government will have to pick up this debt

Not sure about a few things Johan.

New sovereign debt to cover Eskom could be higher rate than current.

No monopolies; sell generation units freely (no self interest clauses) individually and devolve T&D to provinces and the big municipalities except maybe for national lines (like N road routes). No more centralised control. Lowest cost electricity generator wins up to their capacity to supply.

Get rid of AA and BEE, excess staff and employ on experience and qualification. Honest procurement.

We dream on.

By T&D monopoly I mean the national grid that collects from everywhere and delivers to cities, municipalities etc.

Eskom still directly services (supply and infrastructure) many customers – especially rural. But you are right that Eskom has no business distributing 400v or even 11kV customers in areas where most surrounding customers are within councils. Eg between Paarl and Franschhoek and Cape Town there are many pockets where Eskom is the retailer. My T&D would stop at those towns and they would take over the infrastructure as well as billing.

There are mega-consumers (sasol, some steel mills, etc) that are themselves orders larger buyers than some
cities. Even Eskom’s own generation plants are huge consumers. I think I saw Medupi is itself a 100MW+ user.

Government has cleverly decided that “Eskom is too big to fail”.

This is true of course, but it is an excuse, rather than call to arms.

The same as with blaming the state capture that went on under their very noses or even with their tacit consent.

Everything either logical or nonsensical, including nothing, done by the Minister, the president, the Eskom executive, down to the lowest remunerated employee or union representative can accordingly be justified or absolved on the basis that “Eskom is too big to fail”.

Gordhan himself called into a money radio show earlier this evening – he took offence at a guest who said, now after Zuma, we’re captured by Gordhan himself in the way that Eskom’s wage bill has grown since 2007 while it produces less power than in 2007.

AGAIN, Gordhan showed no sense of urgency, saying consultations were needed with business and unions regarding Eskom’s restructuring, the ANC was a “responsible” government that wouldn’t retrench workers (perhaps to please Cosatu who helps vote them into power every time) and that he was going to make “an announcement” later in August.
He said there had been no stage one load shedding since the start of the year, but said the radio host must “join” them in putting out a message of hope so that people stopped immigrating. Hopefully he didn’t mean the radio host must become a card-carrying member of his party and hopefully he accepts that the poor radio host / journalist cannot very well ignore – as the ANC does – the 3 recent Moody’s reports that warns government about the threat of Eskom to the country.
While one fully accepts that Gordhan is not part of the state-capture delinquents, he doesn’t seem to grasp the damage done to the economy by the repeated bail-outs. And why does government insist on running an airline when we can’t afford it!

I have no hope on that one name Pravin. He approved Eskom bonuses and increases after I think the previous CEO said no because Eskom is in a crises. Pravin was so afraid of Unions and sabotage by Eskom employees he approved all the demands . Really!!

No one is curbing the outflow of cash. They are not even trying.

It’s not the government who will take over this responsibility, it’s the good old taxpayer – already stripped to the bone. The majority of the population inthis country needs to be educated into understanding that freedom does not mean getting your basic services for free. They have to be paid for…..and politicians and municipalities are remiss in not ensuring they understand this.
Why should the minority be penalized for governments failure to deliver on their lying promises to the populace?
The ANC are heading towards a tax revolt if this continues.
In my opinion.

As mentioned in the past: even if useless eskom can start today with a 100% clean balance sheet owing nobody a cent, they will be in trouble again by the end of the year because eskom is not run as a business, can not distinguish between running expense and capital expense. by over capitalizing their useless work on new power stations (which are after 10 years still not 100% completed and not running at full capacity)they have increased the bookvalue of “assets”, but seams to forget that the loans funding it has to be paid back +interest charged on the loan. if the only product that I make is sold left right and centre but i don’t receive payment from my debtors,is over staffed,bee mess ups etc etc – my business is for sure doomed = eskom’s useless staff is to be trimmed down by a minimum of at least 27000 people, a self created problem by the anc for bee / cadre friends.

Even Vladimir Lenin was forced to adopt a New Economic Policy [“NEP”]. Maybe Eskom should try a NEP “Plan B” before dragging the Treasury → Fiscus → Taxpayers → Economy deeper into the abyss.

‣ Link salaries to production
‣ Sell off assets, from Megawatt Park to power stations
‣ Introduce competition (allow IPPs) and introduce subsidiarity (managing at the lowest competent level instead of centralising)
‣ End Corruptheid (ethnic cleansing, over-priced tenders, cadre deployment, AA, BEE)

That way, CR2017 could reassure his base that the NEP is only temporary and, once the economy is fixed, we can go back to NDR/New Dawn/Corruptheid.

At the end of the day it is the taxpayer that is footing the bill. A double wammy. The first is the last 12 years of tariff increases (550%) and now requesting the government to take over R280 billion rand. Privatize the bloody Eskom.

End of comments.

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