New Eskom downgrade raises grave concerns

2015-03-22 15:00

The Eskom crisis deepened this week with the utility earning its second “junk” credit rating downgrade after the suspension of four senior members of its executive team last week.

Ratings agency Standard and Poor’s decision to slash Eskom’s rating to BB+ from BBB- is expected to make the power utility’s debt more expensive – but not in local markets.

Those asset managers polled by City Press who are investing on behalf of pension funds said they would hang on to their holdings in Eskom.

Eskom bonds made up 7.15% of Stanlib’s bond fund, which had R3?billion in assets by the end of last month, while they account for a 10.6% share of Allan Gray’s R700?million bond fund.

But the share of Eskom’s debt sourced from international bond markets appears to be growing. It embarked on an international fundraising drive early last month in the US and UK, resulting in a bond sale of $1.25?billion (R15?billion).

Standard Bank, which was the joint arranger of the bond sale, said this came from investors in the US, UK and Europe, and was above the $1?billion initially hoped for.

The new 10- year bond has raised the carrying value of Eskom’s foreign bond stock to about R44.2?billion, just R6?billion short of bringing it to the halfway mark of the size of its total domestic debt.

The SA Chamber of Commerce and Industry said the downgrade of Eskom was a “grave concern”.

“The potential for the enterprise to raise the additional R50?billion that it requires, in addition to the original plan to raise R200?billion at a reasonable interest rate, is significantly reduced by this downgrade,” said acting CEO of the organisation Peggy Drodskie.

Business Leadership SA (BLSA) met Deputy President Cyril Ramaphosa on Friday and said it was willing to work with government to restore public and business confidence in Eskom.

BLSA requested a meeting with him and his Eskom energy advisory panel.

The energy advisory panel is made up of Professor Anton Eberhard, Dolly Mokgatle, Sy Gourah, Smunda Mokoena, Derick Elbrecht and former Eskom chairperson Bobby Godsell.

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