JOHANNESBURG (Reuters) - South Africa’s cash-strapped power utility Eskom is evaluating bids for its mortgage lending business, a spokesman said on Friday, as the company works to shore up its balance sheet against a backdrop of operational woes.
State-run Eskom is struggling to keep the lights on in Africa’s most advanced economy, and has been implementing frequent controlled power cuts to prevent the grid from collapsing under the weight of electricity demand.
“Eskom is currently evaluating bids for the sale of its non-core subsidiary Eskom Finance Company (EFC),” the utility’s spokesman Khulu Phasiwe said on Twitter, adding the firm could not give further details until the process was completed.
“The proposed sale of EFC has been on the cards for years,” Phasiwe said.
The sale of Eskom’s mortgage business, which specializes in lending to employees, would be the first major privatization deal under President Cyril Ramaphosa, who has made revamping state-owned firms like Eskom a top priority.
The government said as far back as 2015 that it was considering divesting some Eskom assets, but the proposal was vehemently opposed by trade unions.
Eskom, which supplies more than 90 percent of South Africa’s power, faces a funding crunch as it races to bring new power plants online to stave off an electricity crisis.
The company is also battling with coal shortages and poor plant performance.
Ramaphosa appointed a task team on Friday to advise the government on how to resolve Eskom’s operational and financial problems, including cutting its debt burden.
The task team includes former Eskom chief executive officer Brian Dames.
Its work will address “the government’s concern that the lack of adequate electricity has a negative impact on economic recovery and that there is a need for intervention in the short and medium term to restore the supply-demand balance”, the presidency in a statement.
“Appreciating the urgency of the matter, the President has requested the task team to submit initial recommendations by the end of January 2019,” it added.
Last week, the power firm said it wanted the government to take on 100 billion rand ($6.95 billion) of its total borrowings of 420 billion rand, a move Ramaphosa said on Thursday was not an option as it would cause the country’s debt to balloon.
Reporting by Olivia Kumwenda-Mtambo; Editing by Mark Potter and Jan Harvey