Oct 28, 2010
R350bn in guarantees opens way for big Eskom bond assault, bankers appointedBack
© 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)
Updated 21 minutes ago Vertically integrated steel and vanadium slag producer Evraz Highveld Steel and Vanadium’s business rescue practitioners (BRPs) have appointed nonexecutive director Andrew Phillip Maralack acting CFO of the company, with immediate effect. Maralack was a qualified...
Updated 34 minutes ago Airliner manufacturer Airbus continues to seek to improve its production efficiency. This was highlighted to aviation journalists from around the world on Thursday at Airbus' Innovation Day 2015 by company COO Tom Williams. "The main issue for us is commitments," he...
Updated 48 minutes ago The level of intermediate inputs imported by South Africa’s metals and engineering sector has risen strongly from around 22% 20 years ago to over 35% currently, Steel and Engineering Industries Federation of Southern Africa (Seifsa) research shows. Speaking at the...
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
This Week's Magazine
While economic forecasts for the African continent are most favourable, African airlines may not be able to benefit from the expected growth in the region’s gross domestic product (GDP), International Air Transport Association VP: Africa Raphael Kuuchi has warned....
The Automotive Production and Development Programme (APDP) will need to change substantially post 2020, says Metair Investments South African operations COO Ken Lello. “We must not make tweaks. We have to change. What we are doing is not sustainable.”
Banking group Absa’s forecast is for the rand to end the year at around R13 against the dollar, weakening further to R13.50 by 2016, says Absa sectoral analyst Jacques du Toit. He warns that possible interest rate hikes in the US may see capital being pulled from...
The Dispute Resolution Centre at the Bargaining Council for the Civil Engineering Industry (BCCEI) is now open to handle party-to-party disputes. The BCCEI represents the interests of all level four to nine Construction Industry Development Board companies.
Communications technology firm Ericsson sub-Saharan Africa head Fredrik Jejdling says the company’s commitment to sustainability and corporate responsibility has been integrated into all facets of its operations, which has provided it with sustainable revenue...