Registered users can save articles to their personal articles list. Login here or sign up here

Transfer of Eskom’s debt to government credit neutral – Moody’s

Eskom’s request for government to take up R100bn of its debt could cause the country’s overall debt ratio to jump two percentage points says ratings agency.

Power utility Eskom’s request for government to take up R100 billion of its debt could cause the country’s overall debt ratio to jump two percentage points from the current 55.8%, ratings agency Moody’s said on Friday.

Moody’s, the last of the top three ratings firms to still rate Pretoria’s debt at investment grade, said in a research note dated December 12 that granting Eskom’s request would have a neutral credit impact and was unlikely to accelerate the firm’s long-promised turn-around strategy.

Last week, the cash-strapped power firm said it wanted the government to take on R100 billion of its total borrowings of R420 billion, a move President Cyril Ramaphosa on Thursday said was not an option as it would cause the country’s debt to spiral.

“The transfer will increase South Africa’s debt/GDP ratio by around two percentage points from the 55.8% envisioned for fiscal year 2019,” Moody’s said, noting that it does not currently include the firm’s government guaranteed debt in the overall measure of debt.

“If the debt transfer grants further measures like efficiency savings and/or tariff increases requested by the company in October that reduce this contingent liability risk, the overall credit impact of the debt transfer could be neutral,” Moody’s said.

The agency however said this was unlikely as Eskom had already delayed its turnaround plan on numerous occasions, and that the utility was unlikely to implement it before general elections due mid-2019. 

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.


To comment, you must be registered and logged in.


Don't have an account?
Sign up for FREE


Insider GOLD
ONLY R63pm

Moneyweb's premium subscription is a membership service which will give you access to a number of tools to take charge of your investments.
Or choose a yearly subscription at R630pa - SAVE R126

Get instant access to all our tools and content. Monthly subscription can be suspended at any time.



Follow us:

Search Articles:Advanced Search
Click a Company: