Eskom seeking Competition Commission nod to sell R9-billion ball and chain

Eskom has found a buyer for the R9-billion Eskom Finance Company, and it must now secure approval from the Competition Commission for the sale to proceed.

The state-owned power utility has been trying to offload the company for nearly 20 years. Eskom board chair Mteto Nyati told Business Times that, after screening four bidders, it ultimately chose a deal with an unnamed listed company.

He added that he couldn’t disclose the deal’s value. However, he noted that the company was able to get a value that was in line with, or slightly better, than its expectations.

“The board, about a month ago, approved that deal, but it has to go through the Competition Commission to make sure the company gets the necessary approval,” added Nyati.

The finance company primarily provides home and other loans to Eskom employees and those who work for its pension and provident fund.

Its sale is a key condition of the R254-billion debt-relief package Eskom received from the National Treasury.

In February 2023, Finance Minister Enoch Godongwana proposed the R254-billion debt-relief arrangement while presenting the year’s Budget Speech.

He said the funding would go a long way to managing Eskom’s debt and ending load-shedding. However, it was accompanied by strict conditions to protect the public funds.

“We are proposing a total debt-relief arrangement for Eskom of R254 billion,” Godongwana said.

“This consists of two components. One is R184 billion. This represents Eskom’s full debt settlement requirement in three tranches over the medium term.”

“Second is a direct takeover of up to R70 billion of Eskom’s loan portfolio in 2025/26,” he added.

The minister said the package meant Eskom wouldn’t need further loans during the relief period.

“Government will finance the arrangement through the R66 billion baseline provision announced in the 2019 Budget and R118 billion in additional borrowings over the next three years,” said Godongwana.

He outlined several conditions that Eskom must meet to retain the debt-relief deal. These are as follows:

• The power utility must prioritise capital expenditure in transmission and distribution
• It must focus on the maintenance of its existing fleet to improve energy availability
• Eskom cannot borrow funds from 1 April 2023 until the end of the debt-relief period, unless otherwise approved by National Treasury
• Eskom may not adjust remunerations that negatively impact its financial position and sustainability
• The package can only be used to settle debt and interest payments
• Eskom must implement recommendations outlined in an independent survey of its operations, commissioned by the National Treasury

The package will make a big dent in Eskom’s debt obligations, which, at the time of Godongwana’s speech, amounted to R423 billion.

“The goal is to strengthen the utility’s balance sheet, enabling it to restructure and undertake the investment and maintenance needed to support the security of electricity supply,” the National Treasury wrote in a document about the package.

It also provided a breakdown of how the funds will be allocated.

Eskom will receive advances of R78 billion during the 2023/24 financial year, R66 billion in 2024/25, and R40 billion in 2025/26.

“These amounts represent Eskom’s full debt settlement requirement over the next three years,” the National Treasury added.

While the debt-relief package was originally meant to be interest-free, Godongwana announced in November 2023 that this was no longer the case.