Photo by: Bloomberg
State-owned power utility Eskom’s long-term issuer credit rating has been upgraded to ‘B’ from ‘CCC+’ with a stable outlook on the group’s senior secured and senior unsecured debt.
Ratings agency S&P’s Global Ratings has also upgraded Eskom’s national scale rating to ‘zaBBB/zaA-2’ from ‘zaB/zaB’, which is considered an upgrade.
S&P attributes the ratings upgrade to its expectation that the South African government’s R254-billion financial support package, as part of the Eskom Debt Relief Act signed into law on July 7, will cover Eskom’s debt servicing and repayment obligations over the current and coming two financial years resulting in an improvement of the company’s credit quality.
Moreover, the stable outlook reflects S&P’s view that Eskom’s creditworthiness will continue to benefit from explicit and timely support from the South African government, facilitating a strengthening of Eskom’s liquidity position and less risk of default as the debt relief agreement is implemented as stipulated.
“Eskom welcomes the decision to upgrade the company’s credit rating by S&P’s. We continue to work with key stakeholders, particularly shareholder ministries as we implement our turnaround plan with a focus on key strategic objectives which include operations and financial recovery; people, culture and ethics, and legal separation of the business,” says Eskom acting CEO Calib Cassim.
The debt-relief package extended to Eskom by the National Treasury is being used to cover debt service requirements and was enacted on condition that Eskom does not
incur any further indebtedness over the next three years without explicit approval of the Finance Minister.