Wed, 23 Sep 2020

Eskom, South Africa's debt-stricken power company, told investors it currently doesn't need to approach the government for more support, even as a Covid-19-related national shutdown slashes revenue.

The company needs to raise R89 billion this year and R56 billion of that will come from an existing state bailout, Chief Executive Officer Andre de Ruyter and Chief Financial Officer Calib Cassim said on the call, according to investors who listened to it. Eskom spokesman Sikonathi Mantshantsha declined to comment.

"After accounting for the R56 billion of bailout funds committed this year, Eskom management estimates that it has R31 billion of funding needs for this year," said Ali Dhaloomal, a London-based credit research analyst at Bank of America. "Eskom doesn't see the need to ask for additional state support at this point of time."

More lockdown?

About 40% of the remaining funding required has been committed by development finance institutions; the balance will come in the form of structured products from banks, export-credit agencies and the sale of domestic bonds, the people said. They asked not to be identified as the call wasn't open to the media.

In a discussion dominated by investor concerns about cash flow, the executives said the company could withstand a few more weeks of a lockdown if it was extended. An estimated revenue loss of R4 billion is anticipated for the three-week lockdown that began 26 March.

The plunge in electricity demand due to the mandatory closure of mines and factories has allowed Eskom to boost maintenance to 9 500 megawatts of capacity from 4 000 megawatts. However, longer-term closures of plants for deeper maintenance will have to wait until the lockdown is lifted.

Yields on Eskom's dollar bonds stayed lower after dropping earlier for the first time in eight trading days amid a resurgence of global risk appetite. The company's $1.25 billion of 2025 securities gained 1.8% to 70.3 cents on the dollar, driving the yield down 48 basis points to 16.22%.

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