Eskom bonds record gains

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Dollar-denominated bonds issued by South Africa’s Eskom gained on Thursday after a senior treasury official said the government was weighing extra options to support the struggling state power firm.

The 2023 issue added 0.7 cents in the dollar, while the 2028 issue gained 0.5 cents in the dollar, according to Tradeweb data.

Ian Stuart, Acting Deputy Director General for the National Treasury’s Budget Office, had told Reuters that the support included swapping Eskom’s debt for government bonds or ring-fencing it in a special account.

Stuart said that various scenarios were being considered for resolving the “large and complex” issue, with implications for South Africa’s credit rating, a key criterion.

“We are looking at which option is best both in terms of fiscal costs and support for the reform process,” he said.

“Support could take the form of ongoing subsidies, or the firm’s debt could be moved off its balance sheet to the government or into a special purpose vehicle.

“A switch to South African government bonds will be looked at, but we have to confirm the legalities of each option and implications for ratings agencies,” he said.

He said that  discussions were at an early stage, adding that it had yet to be clear which option would be chosen.

Eskom, which supplies more than 90 per cent of the country’s electricity, has this year been forced into rolling nationwide power cuts that have eroded growth in an already fragile economy.