Ramaphosa to announce Eskom special team

As President Cyril Ramaphosa prepares to announce a special team to come up with solutions to Eskom‘s problems, CEO Phakamani Hadebe, had detailed steps which he believes can make the power utility viable again.

He says chances of selling the Medupi power station to save Eskom are slim.

However, there are reports that businessman Patrice Motsepe’s African Rainbow Capital Investments is standing in line to buy Eskom’s home loan business or take over some of its operations.

Eskom has been struggling to keep the lights on due to serious financial problems and corruption.

Eskom CEO Phakamani Hadebe says:”We still have to reduce more costs. While I understand some of the issues that NERSA has raised, I fail to understand how it could give us a 5.2% tariff increase.”

“Which means in the past two years we had a tariff increase of 3.5%,  against the inflation of about 6%. We have a huge debt eating in our balance sheet. We need to optimise our balance sheet.”

Meanwhile, Eskom’s request for government to take up 100 billion rand ($7 billion) of its debt could cause the country’s overall debt ratio to jump two percentage points from the current 55.8 percent, ratings agency Moody’s said on Friday.

Moody’s, the last of the top three ratings firms to still rate Pretoria’s debt at investment grade, said in a research note dated Dec. 12 that granting Eskom’s request would have a neutral credit impact and was unlikely to accelerate the firm’s long-promised turn-around strategy.

Last week, the cash-strapped power firm said it wanted the government to take on 100 billion rand of its total borrowings of 420 billion rand, a move President Cyril Ramaphosa on Thursday said was not an option as it would cause the country’s debt to spiral.

“The transfer will increase South Africa’s debt/GDP ratio by around two percentage points from the 55.8 percent envisioned for fiscal year 2019,” Moody’s said, noting that it does not currently include the firm’s government guaranteed debt in the overall measure of debt.

“If the debt transfer grants further measures like efficiency savings and/or tariff increases requested by the company in October that reduce this contingent liability risk, the overall credit impact of the debt transfer could be neutral,” Moody’s said.

The agency however said this was unlikely as Eskom had already delayed its turnaround plan on numerous occasions, and that the utility was unlikely to implement it before general elections due mid-2019. – Additional reporting by Reuters

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