PIC willing to convert R90 billion of Eskom debt into equity

Africa’s biggest fund manager, the Public Investment Corp., is willing to convert more than R90 billion ($5.2 billion) of Eskom Holdings SOC Ltd. debt into equity.

The proposal has been submitted to South Africa’s National Treasury by the PIC and its main client, the Government Employees Pension Fund, Chairman Reuel Khoza said in an interview.

The PIC, which manages R2 trillion, worked on a similar proposal in 2018 and 2019, people familiar with the situation told Bloomberg in July last year. The GEPF has invested some extra cash into Eskom directly, Khoza said.

Eskom has about R450 billion in debt and its revenue doesn’t match service costs. It supplies almost all of South Africa’s power.

“Making Eskom work is a challenge for the nation, both public and private sector, and it should be all hands on deck,” Khoza said. “We’re working hand-in-hand with the GEPF, because we didn’t want to make offers we couldn’t back up. We’ve given a perspective of what can be done to resolve this conundrum.”

The PIC’s initial plan for Eskom was delayed because of a commission of inquiry into the Pretoria-based fund manager, which in March found senior management flouted internal procedures and recommended sweeping changes to laws that govern the company.

The country’s focus on measures to contain the Covid-19 pandemic also contributed to the slow progress, Khoza said.

The PIC previously wanted a say over how to fix Eskom’s messy finances, including board representation, people with direct knowledge of those talks said last year. The company on Wednesday named Abel Sithole as its chief executive officer, filling a post vacated 18 months ago by Daniel Matjila.

ENCA, a broadcaster based in Johannesburg, reported the proposal earlier. Eskom and the Treasury declined to comment.