Oct 28, 2010
R350bn in guarantees opens way for big Eskom bond assault, bankers appointedBack
Engineering|Design|Environment|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
Electricity utility Eskom says it and Anglo American have concluded a Memorandum of Understanding (MoU) that maps out the process to be followed to enable the parties to conclude a final coal-supply contract for the Kusile power station, which is currently being...
Article contains comments
Electricity utility Eskom has confirmed a likely further, albeit modest, slippage in the schedule for first synchronisation of Medupi Unit 6, which was scheduled for December 24, 2014. The delay is the latest in several to afflict the project, which has faced...
State-owned electricity utility Eskom is forecasting a dramatic slump in profitability for the full-year to March 31, 2015, with CEO Tshediso Matona indicating that its profit is likely to fall to R500-million in 2014/15 from nearly R7.1-billion in 2013/14. Releasing...
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
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 road...
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.
This Week's Magazine
JSE-listed real estate investment trust (REIT) Rebosis Property Fund achieved a distribution growth of 8.1% to 99.45c per linked unit in the financial year ended August 31, despite volatile market conditions.
A low-cost, inflatable incubator won this year’s international James Dyson design award, which aims to encourage and inspire the next generation of design engineers.
The World Bank released its ‘Doing Business 2015: Going Beyond Efficiency’ report last month and ranked South Africa 43 out of 189 global economies for its ease of doing business, with Singapore topping the rankings.
Air Products South Africa officially launched its R300-million Eastern Cape air- separation unit (ASU), at its new manufacturing facility in the Coega Industrial Development Zone (IDZ), earlier this month. It is the second facility that Air Products launched in South...
BMW South Africa (SA) has signed a power purchasing agreement with energy company Bio2Watt. The offtake partnership will bring renewable energy to the carmaker’s Rosslyn plant, north of Pretoria.