Eskom mulling 15 000 layoffs as it seeks way out of crisis - TechCentral

Eskom mulling 15 000 layoffs as it seeks way out of crisis

Eskom utility is considering asking for extensions on some debt and staff layoffs as it grapples with its finances after years of burning through funds, according to people familiar with the matter.

The company, which depends on government support to service its R368-billion of debt, is evaluating a so-called liability management exercise as it seeks to implement a turnaround plan, said the people, who asked not to be identified because the matter is private. Management have discussed seeking to recover unpaid bills and increase tariffs to boost revenues by about 50% in four years and lay off about 15 000 workers, the people said.

Representatives for the company declined to comment on the debt extension proposal and said any headcount reductions would need support from stakeholders. Eskom is in the process of appointing financial advisers to “assist the company with possible balance sheet optimisation solutions,” they said in an e-mailed response to questions.

Eskom has been at the centre of scandals involving the financing of transactions and awarding of contracts to firms linked to the Gupta family, who are alleged to have used their connections with former President Jacob Zuma to secure business and influence government appointments. Zuma and the Guptas deny any wrongdoing.

The utility, which faces more than R62-billion due in principal debt payments in the next five years, has burnt through about R40-billion a year since 2013. The new management, brought in as President Cyril Ramaphosa took over leadership of the nation earlier this year, is struggling to pass measures aimed at improving its financial position.

Energy regulator Nersa gave Eskom permission to raise prices by 5.2% from 1 April, far short of the almost 20% Eskom had applied for. The power utility implemented rolling blackouts last month for the first time since 2015 after protesters blockaded roads and attacked staff when wage negotiations broke down.

Workers have demanded a 9% annual salary increase annually for three years, while the utility had previously offered 5%. Eskom has since raised its offer.

Biggest risk to economy

Eskom, which Goldman Sachs Group said in September is the biggest single risk to South Africa’s economy, needs R72-billion of funding until the end of 2019, including the refinancing of a R20-billion loan obtained with a government guarantee, according to a March report published by Moody’s Investor Services.

The power company has been meeting investors since December to drum up demand for a new dollar bond but has so far failed to get enough support for the transaction, the people said.

“Eskom regularly engages with various stakeholders including financial markets stakeholders as a matter of course,” Eskom officials said in the response to questions regarding the bond sale. “Various funding sources are accessed as and when market conditions are conducive to do so.”  — Reported by Luca Casiraghi, Antonio Vanuzzo and Paul Burkhardt, with assistance from Sam Mkokeli, Katie Linsell and Chris Vellacott, (c) 2018 Bloomberg LP

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