S&P revises outlook for Eskom from negative to stable

State-owned enterprises are pivotal to economic growth, but what will their role in SA be in 2019?
State-owned enterprises are pivotal to economic growth, but what will their role in SA be in 2019?

Ratings agency Standard & Poor's has kept Eskom at junk status, but has revised outlook from negative to stable, the power utility said in a statement issued on Friday afternoon.

S&P has Eskom's foreign and local currency long-term ratings at CCC+, with a stable outlook.

A CCC rating means that the power utility is vulnerable and dependent on favourable business, financial and economic conditions to meet its financial commitments, according to a S&P's ratings definition.

Last week Finance Minister Tito Mboweni announced that government has set aside R69bn over the next three years for the power utility to service its debt costs and institute a turnaround.

The power utility will be split into three entities – generation, transmission and distribution, which will still remain state-owned, President Cyril Ramaphosa assured.

The transmission entity will be established first, with its board to be appointed by mid-2019.

Treasury told Parliament's standing committee on finance at a briefing on Friday that there is uncertainty about the full figure required by the power utility.

Last year, Eskom had approached Treasury for a debt takeover of R100bn. The power utility has a debt burden of R419bn.

According to Treasury Eskom requires balance sheet support of R150bn, amortised over 10 years. This is why R23bn has been allocated per year. Treasury's acting deputy director general for the budget office Ian Stuart said different options are being considered.

Eskom has R419bn in debt it has to settle, and the financial support from government will go towards helping Eskom service its debt, Stuart said.

So far Eskom has secured 95% of its R72bn funding requirement for FY18/19 and 35% of the indicative R48bn funding requirement for FY19/20, the power utility said in its statement.

Eskom Chief Financial officer Calib Cassim said that S&P's decision is a "positive reinforcement" of the strides taken to improve the power utility's liquidity position.

"The moderately improved liquidity will allow us to focus on continuing to secure funding required for the FY19/20 and stabilise Eskom's security of supply."

*CORRECTION: A previous version of the article stated that S&P's local and foreign currency credit rating for SA is CCC+. The article was updated on March 4 at 09:50 to reflect that it is in fact power utility Eskom's local and foreign currency credit rating which is CCC+. Fin24 apologises for the error. 

ZAR/USD
17.39
(+0.58)
ZAR/GBP
22.68
(+0.69)
ZAR/EUR
20.50
(+0.17)
ZAR/AUD
12.45
(+0.44)
ZAR/JPY
0.16
(+0.85)
Gold
1932.28
(+1.38)
Silver
25.63
(+3.24)
Platinum
937.00
(+1.84)
Brent Crude
44.46
(-1.09)
Palladium
2164.99
(+3.74)
All Share
57432.72
(+0.46)
Top 40
53109.56
(+0.53)
Financial 15
10210.66
(-0.05)
Industrial 25
76273.68
(+0.99)
Resource 10
58709.05
(+0.05)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 969 votes
It depends on how the funds are used.
74% - 6448 votes
No. We should have gotten the loan elsewhere.
15% - 1334 votes
Vote