Eskom Is Said to Be Pressured on Plan Before National Budget

(Bloomberg) -- South Africa’s government is pushing Eskom Holdings SOC Ltd., the power utility with 419 billion rand ($31 billion) in debt, to present a credible turnaround strategy before the Feb. 20 budget presentation, a person familiar with the situation said.

While the state-owned company has asked the national energy regulator for permission to raise power prices by 15 percent a year for three years, that request would still leave the utility needing 100 billion rand, the person said. The turnaround plan, initially scheduled for September, has been repeatedly delayed by management and President Cyril Ramaphosa has appointed an independent panel to come up with solutions for the company.

“That task team is working vigorously to ensure that they come up with proposals,” Ramaphosa told reporters in Johannesburg Wednesday. “Eskom has huge funding challenges.”

Eskom is seen as critical to South Africa’s creditworthiness with two major credit rating companies assessing the country’s debt as junk. A third, Moody’s Investors Service, still rates the country as investment grade.

Ramaphosa on Dec. 14 appointed a panel to advise the government on how to resolve the producer’s operational, structural and financial challenges. The president met with the Eskom task team and Public Enterprises Minister Pravin Gordhan on Tuesday.

“The strategy is currently being discussed at shareholder level,” Eskom spokeswoman, Dikatso Mothae, said in a reference to the government, which owns all of Eskom. “Once that process has been concluded it will be shared with the public.”

A comprehensive turnaround plan has not been presented to government, the person said.

©2019 Bloomberg L.P.