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Cape Town - S&P Global Ratings downgrade of Eskom’s long-term corporate credit rating is another vote of no-confidence in the power utility, according to the Organisation Undoing Tax Abuse (Outa).
"A forensic investigation into Eskom will provide clarity and insights to many questions which, if remain unanswered, will not do the nation or Eskom any favours as we grapple with its economic survival and ability to meet the nation’s future energy needs," it said in a statement on Monday.
READ: S&P downgrades Eskom over financial risks
Outa claimed that years of financial mismanagement have led to the need for unacceptably high and economy damaging electricity tariff hikes.
"Under any normal circumstances, the need for suretyships by lenders, would immediately signal that borrowings have exhausted their own balance sheet, and that extreme caution is required with forward financial lending.
"Yet in Eskom’s case the result was the extreme opposite as this state owned entity has gone on a spending spree that will require another R500bn over the next five years, and a further R1 trillion plus thereafter, if they are allowed to proceed with the nuclear power project," it charged.
Outa said that Eskom’s rising debt levels is likely to drive the electricity price beyond most consumers. "[T]his in turn is a serious risk which could lead to Eskom’s demise, as more people and businesses people switch to cheaper domestic energy alternatives and improved energy efficiency."
READ: Madonsela nails Eskom over Gupta coal tender
The damning findings of the previous Public Protector Thuli Madonsela in the State Capture report also points to serious concerns within Eskom, added Outa.
Eskom CEO Brian Molefe announced his resignation following the 355-page report, which implicated the power utility in allegations of impropriety.
S&P lowered Eskom’s long-term corporate credit rating by one notch to 'BB' from 'BB+', while the outlook remains negative.
"The negative outlook reflects that on the sovereign rating, as well as the potential uncertainty regarding the government's clear commitment, as well as its ability, to provide timely support to compensate for any shortfall in funding Eskom experiences during the fiscal year April 1, 2017-March 31, 2018."
The rating agency cited the increased financial pressure faced by Eskom due to the uncertain tariff path resulting from the ongoing court case against the National Energy Regulator (NERSA). The matter, which is still in arbitration, could lead to Eskom receiving considerably less tariff increases in fiscal year 2017.
"A negative outcome would increase pressure on Eskom's liquidity position, which we already view as less than adequate," it said.
S&P also expressed concern over uncertainty around the government’s decision to extend the current R350bn Government Framework Agreement (GFA) availability period extension. As it currently stands, the GFA will expire on 31 March 2017.
