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S&P downgrade pushes Eskom deeper into junk

Risk of default in next six months.

Power utility Eskom was dealt another blow on Wednesday when ratings agency S&P Global announced a further downgrade of Eskom’s credit rating with a negative outlook.

S&P announced that it “lowered its long-term foreign and local currency issuer credit ratings on South Africa-owned utility ESKOM Holdings SOC Ltd. to ‘CCC+’ from ‘B-‘. 

“At the same time, we lowered our long-term South Africa national scale rating on Eskom to ‘zaB’ from ‘zaBB-‘, and affirmed our ‘zaB’ short-term national scale rating.”

In its statement, S&P says Eskom remains at risk of facing a distressed exchange situation or default in the next six months despite securing R30 billion in short-term funding from local and international funders so far this year.

“We now believe there is a lower likelihood that Eskom would receive extraordinary support from the government, reflecting our view that government support for the utility over the past few months has been insufficient given that the utility’s liquidity concerns persist.

“We are therefore downgrading Eskom to ‘CCC+’ and ‘zaB’ from ‘B-‘ and ‘zaBB-‘.

The agency said the negative outlook points to uncertainty regarding the extent and timelines of government support for Eskom over the coming six months, considering the magnitude of the utility’s funding deficit and refinancing risks.

Listen: S&P’s Eskom downgrade ‘not surprising’

Moneyweb earlier reported that Eskom has run out of cash and had to make two payments totalling R20 billion during February.

This came after funders closed their wallets out of concern for apparent corruption and governance failures at Eskom.

Government appointed a new board and some senior executives associated with corruption have left the utility. Applications for a new CEO and CFO have closed.

Eskom obtained bridging finance from the Public Investment Corporation (PIC), but no solution has yet been communicated beyond the PIC loan.

Read: GEPF to provide R5 billion loan to Eskom

The utility’s position will be even worse from April 1, when the 5.23% tariff increase granted by energy regulator Nersa kicks in. The increase amounts to a decrease in real terms as 4 percentage points of the increase is a pass through for Eskom’s obligations to pay for renewable power from independent power producers.

Former finance minister Malusi Gigaba has described Eskom as the biggest risk to the south African economy. Government has provided R350 billion of guarantees to Eskom which could be called upon if Eskom defaults.

The downgrade by S&P would make it even more difficult for Eskom to find funding and if it does, it would increase the cost.

Read: Eskom’s dollar bonds fall after S&P downgrade

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Cut staff, Eskom is over staffed and over paid.
Improve on Staff efficiencies.
Source coal from cheaper suppliers.
Terminate suspect contracts from the Zuma era.
Renegotiate contracts for better rates.

and get rid of the R8.9 billion housing loans to employees. What an obscenely corrupt gravy train.

ANC take note. This is what happens when you replace experience and qualifications with cadre deployment.
Now the whole economy is under threat.

Give it some time, Mr. Zuma left a mere two weeks ago,
President Ramaphosa is the right resource to sort it out.

Feathers will fly at Eskom, watch this space.

Has McKinsey paid there R1 Billion?
Has Molefe paid his R30 Million?
Has Koko been fired?
Have the contracts that were rewarded to the company that Koko’s daughter works for been investigated?

Speculator: the number s you quote are miniscule if land theft becomes constitutional.

We will long back to the good ole days of Ajay and family

Ditto with land reform especially the free type.

How can it be that an educated man such as Cyril can be so dumb?

Is it because he is …………………..?

Don’t worry hear comes Cyril with all the bucks he has saved from expropriation without compensation.

Privatise Eskom and get rid of the incompetent staff and managers.

Pacaratac is correct. It would be racist.

Best practical way to solve staff costs, is to improve the payroll system: employees with surnames A-N gets remunerated in Jan, March, May, etc…while employees with surnames M-Z will get paid in months of Feb, April, June, etc.

It solves the problem of not retrenching anyone. And NO ONE will need to take a pay cut. (They just need to make their normal salary for 2 months at a time… 🙂

Nope, the economy is not under threat. Instead MEGA business opportunities for everyone to go into solar & wind on a commercial to micro scale.

Then SA kiss Eskom goodbye (…all their skilled employees can then work for, or start their own solar businesses instead)

The townships that on average pay 9-11% of their rates bills, can revert to candles, and use fridges as storage shelves).

Now is the time to get of the grid and go solar. Really don’t feel like paying for corruption over the next ten years and to sit and wait for the next “Gupta” stooges to arrive at eskom.

On 2nd to 44th thoughts. Somewhat counter intuitive but……….

Maybe a national downgrade to full junk status should come asap. Followed by an IMF bailout.

There is just a sliver of hope that this may shock the 45 000 000 clinically insane into a severe wake up to scrap ALL race based laws.

Are the 45 000 000 still so cowardly and utterly useless that they need a plethora of racist laws to protect them. FFS they are the majority not a tiny minority.

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