Eskom will continue to focus on revenue collection and operational efficiency as it navigates ongoing energy sector reforms.
Image: SA Government News Agency
Eskom has paid off a massive R38 billion bond, closing the chapter on one of its longest-running debt instruments and marking a “decisive milestone in the utility’s journey toward financial independence”.
The ES26 bond, first issued in March 2007 as a R500 million tranche, grew to an outstanding amount of about R38 billion over its 19-year tenure, which Eskom said reflected “strong and sustained investor support”.
Group chief executive Dan Marokane said the redemption reflects the utility’s improving financial discipline.
“The redemption of the ES26 bond is a testament to the utility’s turnaround trajectory and our commitment to rigorous financial governance. This achievement is a result of the structured support provided under the Debt Relief Act, integrated with our significantly improved year-on-year financial performance.
The Eskom Debt Relief Act of 2023, authorised a R254 billion government bailout to Eskom between 2023 and 2026 to manage its debt crisis and interest payments.
This act enabled National Treasury to convert loans into equity, strictly conditional on Eskom’s compliance with financial reforms.
The utility has returned to profitability, reporting a R16 billion profit for the year to March and anticipates also being profitable this year.
Its interim results to end-September showed that profit after tax increased by 37% to R24.3 billion.
However, significant risks remain. Municipal debt remains a major issue, with more than R100 billion owed to Eskom. This figure is set to balloon to more than R300 billion within the next five years.
Eskom itself has previously warned that this trajectory could cripple its turnaround plans.
The number of municipalities with an arrear debt balance of more than R100 million has increased to 75 as of the end of March, when compared to the 69 seen a year earlier. The bulk of the arrears comes from municipalities in the Free State (27%), Mpumalanga (27%) and Gauteng at 22%.
Municipalities account for 42% of its sales.
Marokane said that, by adhering to debt relief conditions, Eskom is “fostering a more predictable and stable investment environment”.
The repayment comes as Eskom shows signs of recovery after years of losses and operational instability. Operational reliability has also strengthened, reaching about 98%.
Eskom has also added fresh expertise to its board changes as it seeks to sustain financial gains, improve operational stability, steer unbundling reforms and advance energy transition goals.
Eskom said the redemption represents a structural win for the economy. By settling one of its largest obligations, Eskom is reducing its risk premium, which lowers the interest rates it pays on future borrowing.
The utility said it will continue to focus on revenue collection and operational efficiency as it navigates ongoing energy sector reforms.
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