PIC: Eskom debt to equity swap is just one option

A possible
conversion of the Public Investment Corporation’s bond investment in Eskom into equity is just one of a “range” of options on the table, the state-owned asset manager has said.

Earlier in
the week, Bloomberg
reported that a proposal to convert more than R90 billion of the ailing state-owned power utility’s debt into
equity had been submitted to Treasury by the PIC and its largest client,
the Government Employees Pension Fund (GEPF).

The PIC,
which manages over R2 trillion in assets, said misinterpretation of its
intentions would be “regrettable”.

“The
Public Investment Corporation wishes to clarify and place in context reports
that it is intending to convert its bond investment in the power utility, Eskom,
into equity,” it said on Saturday morning.

“The
reports are based on an interview that PIC Chairman, Dr Reuel Khoza, had with
television news channel, eNCA, in which Dr Khoza stated that the PIC has
developed a discussion document on its investment in Eskom.

“In
that regard, the PIC confirms that it has developed a discussion document which
sets out a wide range of possible options. Whatever solution the PIC eventually
supports, if any, will meet the risk and return expectations of our clients and
be fully consistent with our fiduciary responsibilities.”

Eskom has a
debt burden of around R450 billion. It is hoping to reduce this to R200 billion
through a range of measures including cost cutting, raising tariffs and
stabilising its balance sheet.

However, it
is still
expecting to record a loss of around R16 billion for the 2020 financial year.