Eskom to raise more debt, get state equity injection

JOHANNESBURG: South Africa's government has approved a support package for state-run power utility Eskom, which will include the company raising additional debt and receiving an equity injection from the state.

Eskom has huge financial problems because its costs are running ahead of its revenues.

"Eskom is facing significant challenges that threaten its sustainability," the Treasury said in a statement on Sunday.

"Eskom will be raising additional debt in the region of 50 billion rand ($4.5 billion), over and above its original plan of 200 billion rand," the statement added.

The Treasury was referring to an application from Eskom two years ago, when it laid out expenditure forecasts and proposals for the tariffs it said it needed to charge consumers.

Eskom, which supplies virtually all the power for Africa's most advanced economy, is scrambling to keep the lights on and maintain its own liquidity by building new stations, while trying to maintain older ones.

"While higher debt levels do have a negative impact on Eskom's balance sheet, it is necessary to reduce the immediate impact on electricity consumers," the Treasury said. To shore up the utility's balance sheet, it said: "An allocation of funding will be given to Eskom.

"This will be funded from leveraging non-strategic government assets. Details in this regard will be provided by the Minister of Finance as part of budget announcements."

It did not say what state assets would be leveraged or if that would involve possible sales to the private sector.

The Treasury also said the government would support Eskom's application to the energy regulator for tariff adjustments, though it was not clear if this meant it could charge higher prices than those already granted.

Eskom in July was given permission to increase prices next year above the 8 percent previously granted so it could raise 7.8 billion rand in additional revenue from consumers, though the precise percentage has not yet been worked out.

In 2013, Eskom was granted hikes of up to 8 percent over a five-year period, half the 16 percent it had been seeking.