Eskom scores R254bn bailout, with conditions

Eskom will receive R254bn bailout from National Treasury as part of relief measures to help the embattled state owned entity with debt.

This was announced by finance minister Enoch Godongwana, who tabled the 51st budget speech in Parliament on Wednesday.

However, some of the conditions placed by Godongwana require Eskom to prioritise capital expenditure in transmission and distribution during the debt-relief period; focus on maintenance of the existing generation fleet to improve availability of electricity. and that the debt relief be used to settle debt and interest payments only.

Eskom has a total debt of R423bn.

Speaking in Parliament, Godongwana said the country had experienced record level blackouts in 2022. South Africans experience 207 days of blackouts compared to the 75 days in 2021.

“In response, we are acting decisively to bring additional capacity onto the grid. We are also working to transform the electricity sector to achieve energy security in the long-term. 

“We announced that the government will take over a portion of Eskom’s debt. We are doing this for two reasons: firstly, doing so will ease pressure on the company’s balance sheet, enabling it to invest in transmission and distribution infrastructure. It will also allow Eskom to conduct the maintenance required to improve the availability of electricity.

“Secondly, R337bn of Eskom’s debt is already government guaranteed. Explicitly taking on this debt will reduce fiscal risk and enhance long-term fiscal sustainability,” he said.

Godongwana continued that the total debt-relief arrangement for Eskom of R254bn consisted of R184bn which represented a full debt settlement requirement which would be paid over in three tranches over the medium term. The second, was a direct takeover of up to R70bn of Eskom’s loan portfolio in 2025/2026 financial year.

He said because of the structure of the debt relief, Eskom would not need to borrow any funds during the relief period.

As part of easing pressure on the grid, Godongwana also announced a tax incentive for households who install rooftop solar panels from March 1.

Godogwana said homes would be able to claim a rebate of 25% of the cost of the panels up to a maximum of R15000 per household. Government has set aside R4bn for this project.