Business Insider Edition

Eskom just got R20 billion worth of breathing room from banks – only hours after it was downgraded as a credit risk

Phillip de Wet , Business Insider SA
 Feb 28, 2018, 03:39 PM
  • Eskom and seven banks signed a R20 billion loan agreement.
  • The loan comes with a government guarantee.
  • Just hours earlier S&P Global Ratings had downgraded Eskom.
  • Eskom believes the loan bodes well for renewed confidence in its governance after a string of scandals.

Seven banks had agreed to loan it R20 billion, Eskom said on Wednesday afternoon – at a reasonable price.

The new credit facility is on terms "comparable to Eskom’s existing facility agreements and pricing is aligned to market benchmarks of similar structures" the utility said in a statement.

Earlier on Wednesday S&P Global Ratings had downgraded Eskom to CCC+ from B-, saying it could default on its loans because of insufficient government support.

The new loan will come from a consortium of local and international banks, and is to be used for the capital programme under which Eskom is building some of the biggest coal-fired power stations in the world.

"We view the successful execution of this facility as a demonstration of the financial markets’ confidence in Eskom’s turn-around strategy," acting group chief executive Phakamani Hadebe said in the statement.

 “The funding provides Eskom with sufficient liquidity to allow the company time to continue resolving its governance related issues," said acting chief financial officer Calib Cassim.

Both Hadebe and Cassim are acting in their positions after their predecessors were pushed out amid accusations that they were active participants in state capture.

Lynne Brown, the cabinet minister who had been responsible for Eskom during the period it worked closely with the Gupta family and associated companies, was also replaced in a cabinet reshuffle this week.

At the end of January Hadebe said he was comfortable Eskom would be able to raise R20 billion before March on the basis of its cashflow forecasts. However, the deal was signed on the very last day of February – shortly after that cabinet reshuffle.

Eskom came perilously close to having its bonds suspended by the JSE earlier this year because it had failed to publish financial results.

It had held back its results because it struggled to secure the money necessary to guarantee it could remain a going concern.

The Public Investment Corporation (PIC) ended up lending Eskom R5 billion – for which it was fiercely criticised – on the basis that if the electricity company ran out of money it could have "collapsed the domestic economy"

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