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Eskom, South Africa Treasury Seek Renewal of $1 Billion Loan Facility

Antony Sguazzin and Loni Prinsloo

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Eskom Holdings SOC Ltd. and South Africa’s National Treasury are in talks with banks to renew a 15 billion rand ($1.04 billion) government-guaranteed loan facility that the indebted state power utility announced in February last year.

While the lenders are reluctant to renew the facility given the parlous state of Eskom’s finances, the funding is needed to help keep the company afloat, two people familiar with the discussions said. It’s unclear if the whole facility has been used.

Eskom has more than 450 billion rand in debt, isn’t generating enough income to cover its operating costs and has instituted regular power outages as insufficient spending on maintenance leads to plant breakdowns. While the government has provided the utility with a series of bailouts, Finance Minister Tito Mboweni has said there is no scope to provide more aid.

The talks on the loan facility need to be finalized this month, said the people who spoke on condition of anonymity. Eskom didn’t disclose the identity of the banks when it announced that it had secured the initial financing.

“Eskom and government are in negotiations with the lenders and discussions remain confidential,” the Treasury said in response to emailed questions. Eskom declined to comment.

President Cyril Ramaphosa’s government has made rescuing Eskom its key focus as it tries to kick-start a stagnating economy that’s hamstrung by that lack of power, thats both depressing output and hindering new investment. Key to its success will be keeping the utility adequately financed.

“Standard Bank will engage with the process in a constructive and pragmatic manner whilst not compromising sound banking principles,” Standard Bank Group Ltd., South Africa’s biggest bank by assets, said. Absa Group Ltd., Nedbank Group Ltd. and Rand Merchant Bank declined to comment.

(Adds impact of power cuts in second last paragraph)

To contact the reporters on this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net;Loni Prinsloo in Johannesburg at lprinsloo3@bloomberg.net

To contact the editors responsible for this story: John McCorry at jmccorry@bloomberg.net, Mike Cohen, Hilton Shone

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