The Public Investment Corporation (PIC) has agreed to loan Eskom R5 billion that will be used for operations at the utility for the month of February.
“The Public Investment Corporation (PIC) on behalf of the Government Employees Pension Fund (GEPF), has agreed to advance a R5 billion bridging facility to electricity utility company, Eskom, for one month. The loan will fund the company’s operations during the month of February 2018,” said the PIC and the GEPF in a joint statement on Monday.
The PIC was approached by Eskom, which indicated that it was experiencing enormous liquidity constraints, which were threatening the company’s growth status.
“Following the request, the PIC conducted its own due diligence and obtained approval in line with its mandate and corporate governance requirements. The GEPF and PIC Board take comfort from the fact that the bridging facility is fully backed by a government guarantee and that the pricing for this transaction is favourable to GEPF,” said the PIC.
The PIC and the GEPF said they are encouraged by the recent changes in the governance of Eskom. In January, government announced the appointment of a new board so as to bring stability to the utility.
“The GEPF and the PIC are encouraged that the new Eskom Board and the new management team have moved with the necessary speed to restore good corporate governance at Eskom. The utility announced their interim financial statements last week, which had previously been delayed, in a frank and transparent manner,” said Chief Executive Officer at the PIC, Dr Daniel Matjila.
In addition to the bridging facility, Eskom has approached other lenders as the utility needs a total funding of R20 billion.
Meanwhile, three commercial banks have indicated that they are willing to further extend credit facilities to Eskom subject to the outcome of their respective due diligence processes, which are currently underway.
“To date, Eskom has demonstrated that it has secured financial commitments to meet its borrowing requirements over the short term. The GEPF and the PIC will continue to closely monitor developments,” said Matjila.
At a media briefing at its premises in Johannesburg, Eskom interim Group Chief Executive Phakamani Hadebe announced that the utility’s net profit after tax dropped from R10 billion to R6 billion.
The utility reported earnings before interest, tax, depreciation and amortization (EBITDA) of R30 billion (Sept 2016: R32 billion), due to the 2.2% tariff. Eskom’s net profit after tax came to R6 billion (Sept 2016: R10 billion), with higher depreciation and net finance cost due to new build units coming online.
The PIC – which is wholly owned by government – is the only investment management company in South Africa that focuses exclusively on the public sector.