Africa’s biggest fund manager must ensure that state-owned power utility Eskom Holdings SOC Ltd. will operate profitably before its 92 billion rand ($5.48 billion) debt pile is converted to equity, said David Masondo, deputy finance minister.
The plan proposed by workers’ unions that the Public Investment Corp. convert its debt into equity to help ease the power utility’s debt burden “has the potential to work,” Masondo said. While Eskom has been able to pay interest on the debt, the power utility would need to generate sufficient revenue and profits to pay dividends, Masondo said.
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“The PIC must ensure that the expected dividend earnings will be reasonably higher than the current interest earned on their loans,” Masondo told the City Press newspaper. “Eskom must meet certain conditions if converting PIC debt to equity is to be successful and sustainable.”
Eskom, which supplies almost all of South Africa’s power, has about 450 billion rand in debt and its revenue doesn’t match service costs. A proposal that the fund manager, which manages over 2 trillion rand, take a stake in the utility, was submitted to treasury this year, the PIC chairman Reuel Khoza said in June.