South Africa’s cash-strapped power utility Eskom has reportedly secured a loan of worth R15 billion from a consortium of local and international banks.
Eskom, which supplies more than 90 percent of its power, is currently in a bad financial position with negative cash flow and a debt burden of R419bn, which it is unable to pay off from its own revenue.
The R15bn loan guaranteed by the state will partly fund Eskom’s current capital expenditure programme.
“The conclusion of the facility will ensure that Eskom’s liquidity requirements for the financial year 2018-2019 are timeously fulfilled, which is critical for business operations,” the power utility company said in an official statement announcing the loan, reported Fin24.com.
The struggling state power firm has already secured about 95 percent of the R72bn funding requirement for the financial year. It is aiming to raise the remaining 5 percent through domestic debt capital markets and other sources.
“The stable liquidity position places the company in a position to focus on securing funding for the next financial year, of which 30% has already been secured,” the statement read.
The government-guaranteed loan comes at a time when President Cyril Ramaphosa is considering plans to turn around Eskom’s finances. Last week, Ramaphosa ensured that the government will not allow the power utility to fail and that the plans to resolve the challenges facing Eskom would be announced soon.
The state power utility has already applied for 15 percent per annum tariff increase over three years.
While addressing the Business Economic Indaba in Johannesburg earlier this week, Public Enterprises Minister Pravin Gordhan said that the power utility will undergo a major restructuring exercise soon.
He explained that there was no room in the fiscus for “endless bailouts”.
Rumors are that Ramaphosa will likely announce his plans for Eskom at a state of the nation address next week on Thursday, Feb. 7.