(Ecofin Agency) - The South African government could help its loss-making power utility Eskom out of the indebtedness that has been drowning the company for years. According to Colin Coleman (pictured), a former MD of U.S. Goldman Sachs Group Inc. in sub-Saharan Africa, the government should shift Eskom’s guaranteed debt to the state balance sheet.
Under a bailout plan, Eskom received about $8 billion in 2008 and expects another $6.7 billion in the coming months. The challenge would be to settle this debt issue in compliance with creditors’ requirement, and without increasing the country’s increasingly unbearable debt.
The possibility of converting debts into equity was also mentioned but the idea was not supported unanimously. In the meantime, Eskom must continue to service the debt, which costs $209.3 million in debt repayments each year.
According to Colin Coleman, if the South African government takes over the guaranteed debt, the company will have a better debt ratio and will be able to focus on boosting energy production and distribution at lower costs.