Oct 28, 2010
R350bn in guarantees opens way for big Eskom bond assault, bankers appointedBack
Engineering|Eskom|Projects|Transnet|United States|R142-billion Kusile Power Station|Gross Domestic Product|Product|Brian Dames|Hilary Joffe|Power|Pravin Gordhan
© Reuse this
Gordhan, who was expected to make the announcement in his Medium Term Budget Policy Statement (MTBS), instead disclosed the increase in presentation to a parliamentary committee on Thursday.
The R174-billion is in addition to the government guarantees of R176-billion announced in 2009, as well as a R60-billion subordinated loan injection, which had flown from the National Treasury to the utility over the past few years.
Gordhan said that the R350-billion in guarantees would enable the utility to continue with its build programme through to 2017.
Eskom CFO Paul O'Flaherty welcomed the announcement and told Engineering News Online that it could be viewed as the "first part" of a larger funding package, which has been under discussion for a number of months.
The next stage would involve a "recapitalisation" of Eskom through a further equity injection, which should be announced soon.
But the guarantees in themselves would be sufficient to allow Eskom to approach the domestic and international bond markets to raise the borrowings necessary to close a significant funding shortfall, which peaks in the first three years at over R100-billion.
It was particularly supportive of Eskom's stated intention to approach the international capital markets for funding in early 2011.
THREE BANKS SELECTED
O'Flaherty confirmed that the utility had selected three banking partners, Bank of America Merrill Lynch, Absa-Barclays and JP Morgan to help it with the design and implementation of what will be a multibillion-rand international bond programme, which could kick off in the US early next year.
He refused to be drawn on the size of the first tranche, save to say that it would be "sizeable".
He also confirmed that Eskom was considering an option to accelerate its bond-raising efforts, owing to the strength of the rand and the favourable interest-rate environment. "There could definitely be merit in raising more earlier," O'Flaherty told Engineering News Online.
Eskom has indicated previously that it could borrow R90-billion a year over a three-year period to help fund the programme and that up to R50-billion of that will be sourced from the international markets.
The balance of the funding would arise from shareholder equity, loans and guarantees, as well as from consumers, who are facing strongly rising tariffs of around 25% a year between 2010 and 2013.
The utility was also targeting cost savings of R20-billion over the next three years, with most of these likely to arise from efficiencies surrounding its yearly procurement budget of R90-billion.
In the MTBPS, Gordhan cautioned that the total public sector borrowing requirement would be higher over the medium term to March 31, 2014, owing primarily to the borrowings that will be needed to part-fund the capital expenditure programmes of State-owned enterprises (SoEs), such as Eskom and Transnet.
The public-sector borrowing requirement is expected to be 10,1% of gross domestic product in 2010/11 and the SoEs are expected to add over R320-billion to public sector debt between 2010/11 and 2013/14.
Gordhan's announcement dovetailed with an earlier assertion by Eskom CEO Brian Dames, who announced that its current projects were now "fully funded".
Dames added that it was, thus, moving ahead with the outstanding orders for the R142-billion Kusile power station, the first unit of which was now scheduled to come on line in 2015, instead of 2014.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Other Electricity News
Updated 1 hour 8 minutes ago The Eastern Cape’s Nelson Mandela Bay is well on its way to becoming South Africa and Africa’s hub for green energy components manufacturing and technologies, said Coega Development Corporation (CDC) energy division investment manager Sandisiwe Ncemane on...
Updated 2 hours 26 minutes ago Public Enterprises Minister Lynne Brown announced on Wednesday that Cabinet had approved the appointment of Department of Public Enterprises (DPE) director-general Tshediso Matona as the new CEO of State-owned electricity producer Eskom. Brown made the announcement...
Updated 5 minutes ago Electrical and lighting product distributor ARB Holdings on Wednesday reported increases of 27% in its operating profit and headline earnings a share for the year ended June 30, to R203-million and 50.28c respectively. The increase in operating profit resulted in an...
Updated 11 minutes ago With the preparations for ten new Special Economic Zones (SEZs) to be completed within the next six months, the Portfolio Committee on Trade and Industry said on Wednesday it was pleased with the progress made by the Department of Trade and Industry (DTI) in this...
Updated 22 minutes ago South Africa had to embark on an aggressive export drive, particularly into the rest of Africa, to adequately grow its manufacturing sector, Department of Trade and Industry (DTI) industrial development policy and strategy adviser Nimrod Zalk said on Wednesday,...
Recent Research Reports
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
This Week's Magazine
The Built Environment unit at the Council for Scientific and Industrial Research (CSIR) has developed a cost-competitive ultrathin concrete pavement surface that, for the upgrading of unpaved roads to paved roads, is more durable than many other pavement alternatives...
The Southern African Large Telescope (SALT), based at Sutherland in the Karoo region in the Northern Cape province, is promising to become an important instrument for research into dark matter. "SALT is shaping up to be very important for answering questions about...
The South African tool, die and mouldmaking (TDM) industry is being revitalised to locally produce the tools, dies, moulds and fixtures required by the manufacturing sector. Local TDM capability is key to enable the manufacturing industry to remain competitive, says...
Misfortune often finds its roots in the smallest of things. Such as a centimetre or two. Or is that in inch? Perhaps a foot? Swedish or Dutch? The French had reason to blush in May as it became apparent that national rail operator SNCF had ordered 2 000 trains that...
The repositioning of the Fibre Processing & Manufacturing Sector Education and Training Authority (FP&M Seta) and its business processes will ensure improved performance in reaching strategic targets and in providing customer service.