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Nene tables bills to help Eskom

Cape Town – Finance Minster Nhlanhla Nene on Wednesday tabled a bill which is set to approve a R23bn bailout to Eskom and an amendment bill which will convert a R60bn loan to equity, meaning the supplier will not have to pay it back.

Nene told MPs that the Special Appropriation Bill intends to provide Eskom with funds in three tranches “R10bn in June 2015, a second R10bn in December 2015, and the remaining R3bn in 2016/17”.

The government is trying to fill Eskom’s R225bn cashflow shortfall as it works to build power plants to end blackouts.

“In order to ensure that the funding allocation would not have an impact on the budget deficit - it is to be funded through the sale of non-strategic government assets. The appropriations are to be made as the funds are received from the national revenue fund.

“Significant progress has been made in the process of raising the funds, anticipating the receipt of proceeds and to ensure that the first R10bn allocation can be transferred in June as has been announced,” Nene said.

According to the National Treasury the financing of the R23bn will be deficit neutral, suggesting that the bill will pay for itself over a given budget period.

Potential asset sales

On May 17 Bloomberg reported that Goldman Sachs was informally advising National Treasury on the sale of state assets to raise the money.

According to the report Treasury is likely to sell its 13.9% stake in Vodacom [JSE:VOD] as a first move. The sale would be valued at approximately R30bn at the mobile phone operator’s current share price.

The government also holds stakes in Sasol [JSE:SOL] and Kumba Iron Ore [JSE:KIO], among others, through the state-owned Industrial Development Corporation.

Eskom 'not paying interest'

According to Nene the conversion of the R60bn Eskom loan to equity will strengthen Eskom’s balance sheet. "Due to its structure a portion of the subordinated loan is already recognised as equity on Eskom’s balance sheet, whilst the remainder is reflected as debt.

“This loan’s conversion to equity would result in the full R60bn being reflected as equity. This would reduce Eskom’s debt by R24.4bn, whilst simultaneously increasing the equity by the same amount. The funds were already appropriated and paid to Eskom between 2008-2011,” Nene said.

An amount of R10bn was appropriated to Eskom in 2008/9 followed by an amount of R30bn in 2009/10 and a further R20bn in 2010/11.

“Eskom is currently not paying interest or guarantee fees on the loan, nor was it anticipated to do so over the 3-year period of the medium term expenditure framework,” Nene said.

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