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South African Finance Minister Enoch Godongwana said plans for the government to take over part of the troubled state power utility’s debt remain on track and the pending departure of its chief executive officer hasn’t affected negotiations with bondholders.
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Eskom Holdings SOC Ltd., which supplies more than 90% of the country’s power, owes about 400 billion rand ($22.6 billion) but isn’t generating enough income to cover its operating costs and interest payments. The utility has subjected the country to rolling blackouts since 2008, because its old and poorly maintained plants can’t generate enough electricity to meet demand. The company announced this week that CEO Andre de Ruyter will leave his post at the end of March.
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The bulk of Eskom debt “is guaranteed by the sovereign,” Godongwana said in a speech to business executives on the sidelines of a governing-party conference in Johannesburg on Saturday. “So if I don’t do anything about it, Eskom will drag me down with them. I am between a rock and a hard place. We have got to take that debt.”
The government first announced in October that it will take on between one third and two thirds of the debt, with details to be announced in the February budget.
“I am told the budget is on Feb. 22,” Godongwana said. “Market expectation in October was that I was going to be explicit. So I can’t continue to dilly dally, I must be explicit on that day.”
The quantum of relief will in part depend on the tariff increases Eskom secures from the nation’s energy regulator. Price rises will need to be both palatable to consumers and ensure the utility becomes sustainable, according to the finance chief.
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“I don’t want an Eskom that will come back to me in the future, after settling that debt,” he said.
Other highlights:
- “Without fear of contradiction, I want to say we dropped the ball, because we focused on fixing Eskom rather than on fixing power to the grid. There is a difference between these two. What is required is a focus on both.”
- “Between 2019 and to date, we have put 230 billion rand in Eskom. I don’t know what people mean when they say it needs money. They charge people, they generate revenue. So what is needed?”
- “I am not sure if Eskom is the right vehicle for this, but we need new capacity. I don’t care who delivers that new capacity, whether it is someone from Mars, it is immaterial. What I want is electricity in the grid.”
- Eskom is in discussions with the Treasury’s asset and liability team about securing additional funds to buy more diesel to run its generators, but a number hasn’t been discussed so far.