Eskom narrows funding gap with $1.1bn loan

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The logo of state power utility Eskom is seen outside Cape Town's Koeberg nuclear power plant in this picture taken March 20, 2016. REUTERS/Mike Hutchings

South Africa’s struggling state power firm Eskom has moved a step closer to narrowing a funding gap for the financial year which ends in March by agreeing a 15 billion rand ($1.1 billion) loan with a local and international banks.

The logo of state power utility Eskom is seen outside Cape Town’s Koeberg nuclear power plant in this picture taken March 20, 2016. REUTERS/Mike Hutchings

Eskom is vital to the health of Africa’s most industrialised economy as it supplies more than 90 percent of its power, but it is drowning in around 420 billion rand of debt.

The government-guaranteed loan comes at a time when President Cyril Ramaphosa is trying to turn around Eskom’s finances.

Eskom now only needs to secure around 5 billion rand of funds by the end of March.

“The conclusion of the facility will ensure that Eskom’s liquidity requirements for FY18/19 are timeously fulfilled, which is critical for business operations,” Eskom said in a statement.

Experts hired by Ramaphosa to help revive Eskom have proposed splitting it up to make it more efficient, sources have told Reuters. Analysts expect Ramaphosa to announce his plans for Eskom at a state of the nation address on Feb. 7.

Eskom said on Friday it had already secured 30 percent of its funding needs for the 2019/20 financial year.