• BEE winners and losers

    Creating real change and real jobs requires a new ideology, says Gerhard Papenfus.

  • Governance matters

    Addressing risk well and timeously can be a source of growth, says Ian Mann.

  • Road to riches

    Taxpayers keep funding structures with big plans but who knows what efficacy, says Mandi Smallhorne.

See More

Moody's warns of significant Eskom hikes

Nov 11 2011 11:51 I-Net Bridge

Related Articles

Treasury disagrees with Moody's appraisal

Treasury downplays Moody's downgrade

Moody’s puts SA rating on negative watch

Moody's changes SA outlook to negative

Rand, bonds fall on Moody's downgrade

Moody’s reviews SA banks for downgrade

Johannesburg - Moody's Investor Service said on Friday it believes that significant above-inflation tariff increases are likely to be necessary for a couple of years for power utility Eskom to make the transition to full cost recovery.

In the note accompanying its change in outlook on Eskom's rating from stable to negative, Moody's said the annual tariff increases of about 25% over the second multi-year price determination period (MYPD 2) from April 2010 to March 2013 should allow Eskom's financial profile to improve over time - although this will depend on the timing of the build-out and the control of costs.

It said Eskom's financial credit metrics showed an improvement at the end of its financial year in March 2011 as it benefited from the implementation of higher tariffs.

However, it cautioned that the company's metrics could weaken again in 2012 as capital expenditure ramps up in line with the company's medium-term investment plan of about R453bn over the 2012 to 2017 period.

Moody's noted that the evolution of Eskom's financial profile over the medium to longer term will be influenced by additional factors.

"The first is the increase in tariffs for the third multi-year price determination period (MYPD 3, post-2013), which has yet to be decided," it said.

It added that an additional factor is the pace, scale and funding strategy for any further, as yet uncommitted, capital expenditure in the context of the country's long-term strategic plan, which calls for significant further investment.

Eskom dismisses outlook

Eskom said on Friday that while Moody's had changed the outlook on its rating to negative from stable, it believes its fundamentals continue to improve.

The change in outlook was anticipated following an announcement by Moody's earlier in the week that it had changed its outlook on SA's A3 local and foreign currency government debt ratings to negative from stable.

"Eskom's fundamentals continue to improve and we continue to progress with our committed capital expenditure programme, which will provide much-needed electricity capacity and drive growth in the economy," Eskom said.

moody's  |  eskom  |  sa economy  |  electricity tariffs


Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Add your comment
Comment 0 characters remaining

Company Snapshot

We're talking about:


Johannesburg has been selected to host the Global Entrepreneurship Congress in 2017. "[The congress] will ensure that small business development remains firmly on the national agenda and the radar screen of all stakeholders, the Small Business Development minister said.

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

How will you manage Vodacom’s price hike for contracts?

Previous results · Suggest a vote