S&P holds Eskom rating steady

Johannesburg – Rating agency Standard & Poor’s (S&P) has affirmed its BB- credit rating for Eskom, and the outlook for the power utility remains negative.

S&P said the R350bn government support provided to Eskom through the Guarantee Framework Agreement from March 2017 to March 2023 contributed to the affirmation of the rating.

The rating agency previously expressed concerns about the Guarantee Framework Agreement , which was to expire on March 31.

S&P still lists Eskom’s “challenging regulatory environment” and the company’s potential risk of liquidity and ability to service debt as concerns.

“We are pleased by S&P’s decision to affirm our credit ratings. This action demonstrates the positive results that the company has realised from the implemented turnaround strategy,” chief financial officer Anoj Singh said in a statement.

“We are acutely aware of the regulatory challenges highlighted in the rating agency’s report and are engaging Nersa [the National Energy regulator of South Africa] on this matter,” he added.

“We also strongly believe that with the company’s improving operations and financial profile, and ensuring sufficient liquidity, we will address the concerns cited by the rating agency.”

READ: S&P downgrades Eskom over financial risks

Last year S&P downgraded Eskom from BB+ to BB. At the time the rating agency expressed concern over the financial pressure the power utility was facing over uncertain tariffs. Since then, Nersa has confirmed Eskom could hike tariffs by 2.2%.

City Press recently reported that Eskom spent R311m on the Back to Basics Programme, even though former public enterprise minister Malusi Gigaba did not approve it.

The programme aimed to improve Eskom’s business processes involving engineering reliability and maintenance of its assets, information technology, quality assurance, and promoting the safe and healthy lifestyle of employees, City Press reported.