Eskom not allowed to borrow during debt relief period

During the debt relief period, Eskom will not be allowed to borrow in the capital markets, Public Enterprises Minister Pravin Gordhan said on Wednesday.

“It is therefore critical that they continue with the saving programme, and they drive efficiencies internally in order to reduce their cost base,” Gordhan said.

He was reacting to Finance Minister Enoch Godongwana’s budget speech, in which he announced government would take over Eskom’s debt of R254 billion to restore the power utility’s financial viability.

“This consists of two components. One is R184 billion. This represents Eskom’s full debt settlement requirement in three tranches over the medium term,” said Godongwana.

“Second is a direct take-over of up to R70 billion of Eskom’s loan portfolio in 2025/26.

“Government will finance the arrangement through the R66 billion baseline provision announced in the 2019 Budget, and R118 billion in additional borrowings over the next three years.”

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As at December 2022, Eskom’s debt stood at R422 billion from R396 billion recorded at the end of March 2022.

Maintenance budget

Eskom’s R254 billion debt relief means government will service Eskom debt obligations for the next three financial years (both debt capital and interest).

“The debt relief will provide Eskom with a space to utilise cash from operations to among others increase the maintenance budget, which is critical for the improvement of plant performance and eventually to increase the Energy Availability Factor (AVF),” said Gordhan in a statement.

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Improving plant performance is one of the key interventions of President Cyril Ramaphisa’s Energy Crisis Action Plan unveiled in July last year, to ensure that Eskom prioritises maintenance of six top power stations in their fleet to minimise load shedding.

“The neglect of maintenance has created a vicious cycle of deteriorating performance,” said the president at the time.

According to Gordhan, the debt relief is government’s commitment to turn around the power utility and a clear indication that “we will do everything in our might to reform Eskom and ensure its operational and financial sustainability”.

In a short statement, Eskom spokesperson Sikonathi Mantshantsha said the power utility was “grateful” for the financial relief.

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“Eskom will study the details of the plan before it can make any comment,” he said.