Eskom’s credit rating cut deeper into junk

Eskom's stand-alone credit profile was downgraded one-notch at Fitch Ratings, signaling the power utility’s worsening ability to repay debt without additional government support.

Weakening revenue growth, profit-margin compression because of lower tariff increases, and higher primary energy costs were cited by Fitch as among the reasons for the reduction. Eskom’s poor liquidity and high debt levels are the worst among its peers, which includes Namibia Power, Fitch said in a statement on Monday.

Fitch assessed the government’s support for Eskom as inconsistent, and said this has led to an unsustainable financial profile over an extended period of time.

While the government plans to inject R230bn into the company over the next 10 years, this would only cover half of its debt-servicing costs, Fitch said. It does, however, give the company some flexibility over the next 12-18 months to execute its turn-around plan.

There are also risks to implementing reforms at the company, Fitch said, adding these are often difficult, and “generally associated with convoluted social and political pressures.”

Eskom, seen as the biggest threat to South Africa’s economy with at least R450bn in debt, is due to get a new chief executive officer by the end of October. The government is also set to release a plan to save the business.

The stand-alone rating was cut to ccc- from ccc, while Fitch affirmed Eskom’s long-term local-currency issuer default rating at BB-, with a negative outlook.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed. 
Subscribe to News24
Rand - Dollar
17.77
-0.8%
Rand - Pound
20.13
+0.5%
Rand - Euro
17.57
+0.2%
Rand - Aus dollar
11.55
-0.7%
Rand - Yen
0.12
-0.4%
Gold
1,715.78
-0.6%
Silver
20.66
-1.9%
Palladium
2,260.50
-2.7%
Platinum
921.00
-1.3%
Brent Crude
91.80
+3.2%
Top 40
59,202
-1.1%
All Share
65,613
-1.1%
Resource 10
63,687
-1.4%
Industrial 25
79,239
-1.1%
Financial 15
13,961
-0.7%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders