By Alexander Winning
JOHANNESBURG (Reuters) – South African state-run power firm Eskom said on Wednesday that asset sales could not solve its problems and that a bailout or debt relief were preferable, as it flagged a loss before tax of more than 11.2 billion rand ($800 million) this financial year.
Eskom, Africa’s largest public utility, is working on a turnaround plan to reverse a decade of steep decline, in which electricity sales fell while debt ballooned and the company became embroiled in corruption scandals.
It supplies more than 90 percent of South Africa’s power, making it critical to the health of the $340 billion economy.
“Eskom is in a state of severe financial difficulty, … we are locked into a loss-making position,” Eskom Chairman Jabu Mabuza told a news conference.
“All the assets which we could sell are the ones that no one could buy,” Mabuza said. “There are other ways, call them what you want. A bailout, an equity injection by the shareholder … or some debt relief.”
President Cyril Ramaphosa appointed a new board at Eskom early this year, in one of his first moves since replacing Jacob Zuma as leader of the ruling African National Congress.
But efforts to turn the company around have been hampered by severe fiscal constraints, labour unrest and fuel shortages affecting as much as two-thirds of its coal-fired power stations.
On Wednesday, Eskom reported a 671 million rand profit in the six months to the end of September but said its performance in the next six months would be hurt by a wage deal with trade unions and greater maintenance costs.
That compares with a 6.3 billion rand profit in the six months to the end of September 2017 and a full-year loss of 2.3 billion rand loss for the 2017/18 financial year.
Eskom’s total debt rose to 419 billion rand at the end of September, from 367 billion a year earlier. Its cash levels rose from 8.5 billion rand to 17.3 billion rand over the same period but are expected to come under pressure in the second half of the 2018/19 financial year.
Eskom’s Mabuza ruled out debt-to-equity swaps as a way to reduce indebtedness, saying converting debt held by state pension fund the Public Investment Corporation was a “dangerous route”.
CEO Phakamani Hadebe said options for government support could be a cash injection or moving some of its debt to the government’s balance sheet. “Our debt levels have reached certain levels which are no longer sustainable,” he said.
($1 = 13.9692 rand)
(Reporting by Alexander Winning; Editing by Alexandra Hudson and Edmund Blair)