Eskom power grid/Bloomberg

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South Africa forced into emergency bailout to troubled Eskom

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The government announced a record ZAR 69 billion bailout for Eskom in February to be paid over three years and of that, ZAR 23 billion is pledged for the current financial year.

Sunday 21, April 2019

Bloomberg) --Less than a week after the boss of South Africa’s Eskom Holdings declared the days of surprises are over, documents show the government was forced to pay ZAR 5 billion ($355.2 million) in emergency funds so the state-utility could meet obligations.

The payment on 2 April was intended to let Eskom to pay bills due at the end of March, and avoid a call on its existing guarantees after a loan expected from the China Development Bank failed to come through in time.

Finance Minister Tito Mboweni, said that the amount repaid a ZAR 3 billion bridge loan from Absa Group.

The remaining balance will have to be subjected to the normal appropriation process when parliament is constituted after the 8 May election.

The ZAR 23 billion required a special bill that did not come up before parliament completed it business before the election. The National Treasury had targeted disbursement between August and October 2019.

President Cyril Ramaphosa is under pressure to chart a new strategy for the money-losing utility while retaining the support of trade unions ahead of the vote. He also needs to preserve South Africa’s sole investment-grade credit rating with Moody’s Investors Service. Rating companies have cited Eskom as one of the biggest risks to the sovereign.

Mboweni warned that Eskom doesn’t expect to be able to generate enough internal cash to meet its obligations over the next five years. The government and Eskom are in talks on how to secure the company’s long-term financial sustainability.

“Even after accounting for funds raised, cash flow is not adequate to fund its capital expenditure programme,” added Mboweni.

Adrian Lackay, Spokesman for Public Enterprises Minister Pravin Gordhan, said that the ministry was confident that the China Development Bank would carry out its commitment to help capitalise Eskom.

 

TAGS : Eskom, Absa Group, China Development Bank, President Cyril Ramaphosa, Finance Minister Tito Mboweni

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