Electricity: Banks, investors move to resolve $32bn Eskom debt crisis in South Africa

*Africa’s largest fund manager could take on some Eskom debt resulting from overspending on projects, which Goldman Sachs Group Incorporated has described as the biggest threat to the South African economy

Emmanuel Akosile | ConsumerConnect

Following the country’s recurrent power outages as a result of inadequate maintenance of its aging fleet of coal-fired power plants, Nedbank Group Limited is leading discussions to restructure South African power utility Eskom Holdings SOC Limited’s 464 billion ($32 billion) debt load.

The parties met in recent days, and one of the options is to transfer at least 100 billion Rand of debt to a special-purpose vehicle that would be overseen by the Public Investment Corporation, Africa’s biggest fund manager, reports Bloomberg.

In response to questions on the development, the company said: “Eskom intends to work constructively with all its creditors to develop a plan that will improve the company’s balance sheet while adequately catering for the requirements of its lenders and other stakeholders.

“The utility is in regular discussions with its stakeholders to agree on the best solution to shape the balance sheet as the company moves to the next phase of its strategy.”

Eskom, described by Goldman Sachs Group Incorporated as the biggest threat to the South African economy, has become mired in debt as a result of overspending on projects.

It was gathered that the utility cannot meet its costs, and is subjecting the country to intermittent power outages as a result of inadequate maintenance at its old fleet of coal-fired power plants.

The yield premium of Eskom’s 2028 Dollar bonds over comparable government debt narrowed Friday, February 19 to the least in 17 months, suggesting bondholders are gaining confidence in a rescue plan.

Nedbank in an e-mailed response to queries stated: “We continuously engage with strategically important state-owned companies, including Eskom.

“These constructive engagements are held with positive intent, together with other financial institutions and respective shareholders, and focus on creating solutions in respect of liquidity challenges faced by state-owned companies.”

Earlier, Eskom had said it could only service about 200 billion Rand of debt, and lenders might help it to meet some of its upcoming interest payments, according to report.

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