Eskom asks government to take stake in company to ease debt payments

Eskom, South Africa’s indebted state power utility, told investors it has asked the National Treasury to convert R16 billion ($840 million) of bailout funds into equity.

Eskom officials said on an investor call Wednesday that an application has been made to convert the subordinated loan into equity and a decision is expected soon, according to a person on the call who asked not to be identified because the conversation was private.

Eskom and the Treasury didn’t respond to requests for comment.

The credit, which can be converted into equity if certain conditions are met, is part of a bigger R254 billion government bailout being extended to arrest the decline in Eskom’s performance, which has caused near-daily power cuts. Having the government take a stake in the company would lessen a debt-service burden that’s prevented Eskom from carrying out adequate maintenance.

In its first-half results presentation, in which the company disclosed that it’s heading for a seventh consecutive annual loss, Eskom said it was working on converting the loan, without giving the amount or stating whether an application had been made. Eskom said on Wednesday its on course to lose R23.2 billion this year.