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Government sells R23-b stake to fund Eskom

Government has sold its 13.91% stake in a well-known cellular service provider to the Public Investment Corporation (PIC), acting on behalf of the Government Employees Pension Fund (GEPF).

The proceeds from the sale will be used to finance the R23-billion allocation to Eskom.

The National Treasury and the Department of Telecommunications and Postal Services worked together in executing the transaction.

In arriving at a decision to dispose of its stake in the service provider to the PIC, government undertook an exercise where numerous organisations presented proposals for raising the funds to be allocated to Eskom.

Government considered a wide range of options including the sale of listed shareholdings it holds directly, the disposal of listed stakes held indirectly through Development Finance Institutions (DFIs), the sale of government’s unlisted shareholdings in state owned companies (SOCs) or their subsidiaries, the sale of assets held by SOCs and the sale of other assets, such as property owned by the state.

The sale of the service provider stake was the most viable option for ensuring government was able to swiftly realise the proceeds and inject equity into Eskom to bolster the utility while at the same time ensuring government was still able to deliver on its strategic objectives.

The PIC’s offer to government was in line with pricing quoted by other institutions when taking into account the large size of the stake and also provided the added benefit of keeping the shares within the broader family of public sector-related institutions.

In addition to the allocation of R23-b to Eskom, government committed to converting the R60-b subordinated loan previously provided to Eskom.

These measures will further strengthen the company’s balance sheet and will be complemented by cost reductions by Eskom and the utility applying for tariff adjustments through the normal regulatory processes.

The National Energy Regulator of South Africa (Nersa) declined Eskom’s most recent application and indicated the regulatory processes that should be followed by Eskom in applying for any future adjustments.

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