Talks about reducing the South African state power utility’s R402-billion debt to a manageable level are taking too long, its CEO Andre de Ruyter said.
Eskom Holdings, which produces most of South Africa’s power, can’t meet its running and debt service costs and is dependent on government handouts to keep operating. It also needs to borrow more money to help it transition away from the polluting coal-fired plants used to produce the bulk of its electricity.
“The last element of our balance sheet restructuring involves a one-off injection of between R150-billion and R200-billion in order to enable us to have a reasonable net debt-service cost,” De Ruyter said, according to the transcript of an interview published by The Conversation, a website that posts articles by academics and researchers. “Discussions in this regard are ongoing, albeit more slowly than we would have liked.”
Eskom, which has subjected South Africa to intermittent power cuts since 2005, is seen as a brake on economic growth as the outages limit output and damage investor confidence.
Options to cut Eskom’s debt that have, or are being considered by government include moving a portion of the borrowings onto the state balance sheet or persuading a fund manager that oversees state workers’ pensions to convert its bond holdings into equity.
David Masondo, South Africa’s deputy finance minister, has suggested that some sovereign debt could be forgiven by creditors in exchange for the government recapitalizing the utility and closing down its coal-fired plants.
“Eskom cannot rely on the government bailout forever,” De Ruyter said. “We are well aware that we are not entitled to a cent of taxpayers’ money.”
The CEO urged the National Energy Regulator of South Africa to “come to the party with electricity tariffs that reflect the cost of producing the power.” The nation’s power costs would be cheap by international standards even if the utility were granted a 20% increase, he said.
South Africa’s inflation rate is currently 4.6%.