Fin24

Eskom must be sustainable - CEO

2013-01-14 18:33

Johannesburg - Eskom said on Monday its downgrading by credit ratings agency Fitch highlights the need for the parastatal to be financially sustainable.

"We have taken note of the rating agency's analysis of the challenges facing Eskom," CEO Brian Dames said in a statement.

"Their comments highlight the electricity industry’s need for regulatory and policy certainty, as well as the need for Eskom to be financially sustainable."

On Friday, Fitch adjusted the ratings and outlooks of the country’s two most significant state-owned enterprises, Eskom and Transnet.

It downgraded Eskom and Transnet after also cutting the country's sovereign debt outlook.

Earlier, Fitch downgraded South Africa's sovereign debt by one notch to "BBB" and added that the outlook was stable.

Fitch said Eskom and Transnet's ratings remain linked to that of the country's sovereign debt.

Eskom's long-term local currency IDR (Issuer Default Rating) was lowered to "BBB+" from "A" with a stable outlook.

An IDR is an opinion on an entity's vulnerability to default on its financial obligations.

The agency said future developments which could lead to positive rating actions for Eskom included an upgrade of South Africa’s sovereign rating, provided the strength of Eskom’s links with the sovereign did not weaken.

Ratings by credit rating agencies influence Eskom's ability to raise funding, and the interest it pays on this debt.

Comments
  • wwrer.ww - 2013-01-14 19:05

    And you're not going get your funding from us tax payers. If you can't turn a profit when you own almost 100% of the electricity market in South Africa, then don't come running to us tax payers because you didn't plan ahead to increase capacity and was too busy paying yourselves the highest employee salaries in the country. No investment on capacity, 100% of the income was spent on salaries. Then the tax payer was asked to bail out Eskom for R350bn. Now you've lost your A+ rating and now you want the tax payers to help you out again with loans. If it's not price increases of 10%, it's loans - $50bn loans from the South African taxpayers. Why doesn't the government just privatize Eskom - there's $50bn. But you won't because then you would have to start acting responsibly - to shareholders, to customers, to the government, to the other businesses.

      stephen.redford.16 - 2013-01-14 20:49

      Government needs to cut its expenditure. The R250 billion we pay in income tax per annum could easily cover the full Eskom build cost at no additional cost to the taxpayer. We have too much government and are paying all our taxes just to keep government running. The biggest expense government has is government itself - it is employing too many people, and "taking" ownership of too many facets of life (renaming roads anybody?). We as taxpayers need to demand that government cuts its costs and utilised the capital of the nation (income tax) to build infrastructure rather than additional government. Instead government argues about the need for e-tolling to cover R20 billion in road upgrades, and keeps the money for itself.

      apgreeff - 2013-01-15 09:05

      And the rating has everything to do with how Escom is managed. If that is not a vote of no confidence, then the management will not recognise a vote of no confidence! Cut your parties and get the work done, fire the lazy and incompetent employees and manage the business like you should with accountability towards the citizens, business and the country.

  • mike.hahn.5661 - 2013-01-14 20:01

    Maybe they should stop giving bonuses to staff for no reason. Also, they always having functions for staff. Escom waste money no end. Even their staff are demoralized by the lack of planning and objectives. Money spending seems to be the norm! Cut their funding and make them realize they need to be more acountable.

  • Graham.Cooper2 - 2013-01-14 20:12

    It is clear that Eskom is run and managed by incompetant people, put a proper business man in the job for a 1/4 of the salary and you will have the place running much better and more efficient.

  • hennie.malan.16 - 2013-01-14 20:23

    If Escom does not make money, if seems logical that South Africans are not using enough electricity. Selling power is there only income so my statement is therefore 100% correct

      ebrahim.khan.5203 - 2013-01-14 22:37

      Hennie your statement is inaccurate. Eskom failed to invest in new generation capacity and had to scramble to build new infrastructure (failed to plan). Before embarking on this build Programme Eskom had to borrow because they had insufficient liquid assets to leverage off hence government had to come in to underwrite the loans. Not a electricity sales issue more like failure to realize that the economy needed more power to grow!

  • louwbester - 2013-01-14 21:51

    If Escom is not sustsainable how can that same CEO get a bonus over a million?

      apgreeff - 2013-01-15 09:00

      He has no performance appraisal program (or it is so skewed that he receives a bonus for just pitching at the office! He would probably not survive a week in the private sector.

  • buzz.bar.16 - 2013-01-14 21:53

    One word: deregulate. Once this is done, we can buy electricity on the free market without our tax money being used to prop up a monopoly with the government tenderpreneurs getting their snouts in the trough.

  • apgreeff - 2013-01-15 08:57

    Private enterprise will not get away with a 16% per annum increase for 6 years in a row without losing all its clients and going bankrupt. They also have infrastructure maintenance and development challenges and other typical needs of business. However, they manage costs down in order to generate the funds needed to maintain a competitive edge and develop infrastructure. This is done, amongst others, by efficiency management which includes recruitment, wage structures etc. These private business have to borrow and pay interest. They are also subject to wage demands, increases in the price of fuel and electricity and other daily chores as Escom is. Why is it then that Escom, like SAA, continously, need more and more and more to survive? The have almost the entire power provision of SA and a reasonable chunk of many of its neighbours. If I have any say, I would not pay a single cent more towards a provider that has an insatiable appetite for more and more from the consumers. I'd suggest you become mean and lean, price competitive and profitable by doing what private enterprise does..... Your wage bill is too high, you employ too many people and chances are a that a good few of your employees are not suitably qualified for the positions they hold or the renumeration they receive. Monopolisation does not give you carte blanche to not manage your business properly and effectively!

  • winifred.watson.9 - 2013-01-15 09:21

    Government needs to employ people at the top who know about working to a budget. In the new south africa there is no such thing as a buget that is why everything is run down or broke. Those at the top just see the income, dont worry about the expenditure and increase it. They have no idea how to cut down to curb spending, its just spend spend spend there is more where that came from. Its time now for them to learn to run off a buget, things get bad, cut down staff, cut out parties cut out this, but spending must come down, tenders need to be renegotiated, increases in salaries need to be looked at. This never happens in government, they have no idea to them buget is a bird in a cage. Life to them is just one party from one day to the next.

  • hugh.olphart - 2013-01-15 09:25

    What is the debt owed to Eskom? The non-recoverable's so to speak. You know? the no go areas where your meter readers don't go for safety reasons. How much low cost energy sold to neighbouring states is owed? Maybe, now just maybe if Eskom recovered its outstanding billing, sold less electricity to Zim and Moz, who dont pay anyway, charge international smelters operating in SA above cost prices, then maybe you would have enough energy for the country and actually be profitable.

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