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Government confident Eskom's China funds will come through by month-end

Apr 19 2019 18:02
Khulekani Magubane, Fin24

The Department of Public Enterprises says it is confident that Eskom will receive the necessary funds from the China Development Bank (CDB) by month's end.

This after the CDB loan failed to materialise in March, nearly plunging the cash-strapped power utility further into a liquidity crisis.

The CDB was meant to release some R7bn from a $2.5bn facility, which was concluded in July 2018. However, the CDB funds did not materialise due to "its central bank exchange control requirements", a Treasury report signed by Finance Minister Tito Mboweni to Parliament said.

The CDB indicated that the planned drawdown would instead only be executed in April. This meant that without the funds, Eskom would have been unable to meet its obligations due at the end of March. The incident has highlighted just how dire Eskom's financial situation is, prompting National Treasury to scramble for funds at the 11th hour.

Mboweni was forced to write to Parliament earlier this month that he would invoke Section 16 of the Public Finance Management Act in order to secure funds for the ailing utility.

This would authorise R17.6bn from the National Revenue Fund to be transferred to Eskom before the end of April.

Mboweni said as a contingency measure, Eskom requested Absa Capital to provide a R3bn bridging facility, which was supported by a government guarantee. Currently government’s exposure to Eskom in terms of guarantees is R281bn. 

Asked whether Eskom had since received the CDB funds, the Department of Public Enterprises told Fin24 that Eskom was still waiting on the money.

They were however confident that the funds would arrive by the end of April.

"The Ministry of Public Enterprises is confident that the CDB will execute its commitments to help capitalise Eskom," the department said to Fin24 via text correspondence.

Eskom is saddled with R419bn of debt and isn’t selling enough power to cover its interest payments and operating costs, a legacy of years of mismanagement and cost overruns on new plants, among other things.

eskom  |  china development bank  |  china
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