Eskom to get an extra R59bn over two years

By Paul Burkhardt and Mike Cohen

(Bloomberg) – South Africa will ramp up support for its ailing state-owned power utility Eskom Holdings SOC Ltd. with an additional R59bn ($4.2bn) spread over two years.

The electricity company, which is seen as the biggest threat to the nation’s economy, will get R26bn of the money this financial year and R33bn in 2020-21, according to a copy of a special appropriations bill seen by Bloomberg. That’s only five months after Finance Minister Tito Mboweni announced a three-year R69bn cash injection for the utility.

Eskom is struggling under more than R440bn of debt and expects to report another annual loss this month because of lagging demand and unreliable generation from ageing coal plants that resulted in power outages in the first quarter. The government has vowed to help the company that provides about 95% of the nation’s power as the dire state of its finances have became clearer.

South African President Cyril Ramaphosa said last month the government would soon give the company a “significant portion” of the R230bn it needs over the next decade to remain solvent. Mboweni was due to announce the additional allocations for Eskom on Tuesday.

The funds will come from the Revenue Fund and the finance minister may impose conditions to be met by Eskom before any part of the amount is transferred, according to the document. The National Treasury declined to comment when Bloomberg called for confirmation. Reuters reported the funding earlier.

Yields on Eskom dollar securities due 2021 climbed eight basis points on Monday to 5.12%, the highest since June 28. The yield has risen five out of the past six sessions.

“There is a disappointing lack of further detail on what the money will be used for or how it will be funded,” said Peter Attard Montalto, head of capital markets research at Intellidex. The bill does impose conditionality, but fails to indicate on what grounds, he said.