South Africa’s Public Investment Corporation (PIC) said on Monday it has agreed to give cash-strapped Eskom a R5-billion bridging facility.
“The PIC was approached by Eskom, which indicated that it was experiencing enormous liquidity constraints, which were threatening the company’s going concern status. Following the request, the PIC conducted its own due diligence and obtained approval in line with its mandate and corporate governance requirements,”the PIC said in a joint statement with Eskom.
“The Government Employees Pension Fund (GEPF) and PIC board take comfort from the fact that the bridging facility is fully backed by a government guarantee and that the pricing for this transaction is favourable to GEPF.”
PIC administers the GEPF, the country’s largest pension fund. Eskom has been marred by allegations of corruption and state capture, leading to Parliament’s public enterprises committee establishing an inquiry into the affairs of the state-owned enterprise. The power utility has also been dogged by scandals of dodgy contracts which have defrauded the power utility of millions of rand, including a R1.6 billion payment unlawfully made to Trillian Capital and global consultancy McKinsey.
Last month, Eskom reported that its revenue for six months ending 30 September 2017 fell by two percent to R96 billion and cash from operating activities dropped 30 percent to R22 billion, with level of debt over R300 billion.
Eskom’s liquid assets had declined to R9 billion from R30 billion a year previously due to tariff increases of only 2.2 percent and a 1.9 percent decrease in electricity sales volumes, offset by cost containment measures.
PIC CEO Dan Matjila said he was encouraged by the recent board and management overhaul at Eskom. “The GEPF and the PIC are encouraged that the new Eskom Board and the new management team have moved with the necessary speed to restore good corporate governance at Eskom. The utility announced their interim financial statements last week, which had previously been delayed, in a frank and transparent manner,” he said.
Eskom said that in addition to PIC funding, it has approached other lenders such as commercial banks seeking financing. It said three commercial banks have indicated that they were willing to further extend credit facilities to Eskom. Eskom needs at least R20 billion in funding.
– African News Agency (ANA)