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Cape Town – Moody’s downgrading of its South Africa’s
sovereign debt outlook has caused a chain reaction rippling through to Eskom
and Transnet.
On Thursday the ratings of five municipalities and the South
African National Roads Agency were reduced from stable to negative.
AS to Eskom, the credit rating agency warns that electricity
tariff increases considerably higher than the inflation rate will probably be
required for a “number of years” yet to reflect the full cost of power
generation.
Moody’s reduced the outlook for Eskom's debenture credit
rating from stable to negative because the utility, if necessary, could depend
heavily on government finance in light of its strategic role as the dominant
electricity provider.
According to Moody’s the South African government has almost
doubled the maximum loan amount that it will guarantee for Eskom from R176bn to
R350bn. Moody’s acknowledges that the series of 25% increases in electricity
prices between 2010 and 2013 have improved Eskom's financial position, but this
could again weaken by next year as capital expenditure rises. The parastatal is
planning, among other things, to spend R453bn on the construction of new power
stations from next year to 2017.
Eskom's only response has been to confirm the downgrade and
to say that the positive aspect is that its finances continued to improve and
that it was proceeding with its capital expenditure programme.
According to Moody’s, Eskom’s finances could be affected by
the coming series of tariff increases for the years after 2013, and then by the
extent and tempo of any further capital expenditure in the long run.
Moody’s lowered the outlook for Transnet’s A3/Prime 2 senior
unsecured long and short-term debentures from stable to negative – also as a
consequence of its downgrading of the government debt prospects, and also
because of the risks of Transnet’s huge capital programme over the next five
years and possible pressure to accelerate capital expenditure.
Moody’s has left the rating of Transnet’s A3/Aa3.za/Prime 2
debentures unchanged.
- Sake24
For more business news in Afrikaans, go to Sake24.com.