South Africa Eskom relief could see interest charged

South Africa is still assessing the effect of adding interest to a 254 billion rand ($13.8 billion) debt relief package for state-owned Eskom Holdings SOC Ltd. as the company prepares to split into three, according to a National Treasury official. 

Treasury announced in last week’s budget that it would convert the loans in the deal announced in February from interest free to interest bearing - at a rate yet to be determined - to better reflect the cost of the arrangement. 

The bailout was provided to the heavily indebted power utility to strengthen its balance sheet and enable it to undertake plant maintenance and investment, as the country battles almost daily electricity rationing. Eskom is also preparing to separate into units for generation, transmission and distribution.

"We have not done much modeling yet - we are still finalizing how Eskom’s governance will now work with the new structure and the fact that the electricity tariff still has everything bundled in: transmission, generation and distribution,” Jeffrey Quvane, director for energy and telecommunications in the Treasury’s asset and liability management unit, told lawmakers in Cape Town on Wednesday. 

Government has so far disbursed 16 billion rand of the 78 billion rand earmarked for the utility this fiscal year.