Eskom Holdings told bondholders at a road show in London on Wednesday that it wants the majority of its R441bn debt transferred to the South African government.

The struggling state power utility can only sustain R150bn of debt, company executives told investors, said Ksenia Mishankina, a senior credit analyst at Union Bancaire Privee, who attended the meeting. The discussions follow the announcement last week of Eskom’s record R20.7bn annual loss.

Eskom wants the government to transfer the debt it has guaranteed onto the state’s balance sheet.

At the end of the fiscal year in March, the company had utilised R295bn of the guarantees offered by the government, according to the National Treasury.

Finance minister Tito Mboweni announced a R59bn bailout of Eskom over two years,  in addition to the R69bn over three years he committed in February,  to keep the state-owned company afloat, as it implements a plan to make the business profitable.

“We are having business update discussions with investors,” Dikatso Mothae, a spokeswoman for Eskom, said in a reply to questions about the meeting. The yield on the utility’s 2025 dollar bonds declined 10 basis points during the day.

The state-owned company is hoping for resolutions to some of its problems and progress on a plan to split into three units after the National Treasury’s mid-term budget in October, the executives said, according to Mishankina. They also want the government to resolve the problem of unpaid debt from some of Eskom’s municipal customers.

Moody’s Investors Service on Tuesday warned that Eskom’s operational and financial performance has deteriorated to the point that it urgently needs to take steps toward turning the business around.

The R150bn figure is derived from an assessment that it can sustain debt of five times earnings before interest, taxes, depreciation and amortisation. A number of other people who attended the meeting declined to comment.

With assistance from Oliver Telling and Paul Burkhardt


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