Connect with us

Hot News in World

Eskom assistance welcomed, but risks remain, Moody’s warns

Public Protector: We're not fighting with Gordhan, we want to help him clear his name


Eskom assistance welcomed, but risks remain, Moody’s warns

Moody’s has expressed optimism regarding government’s efforts to stabilise Eskom’s debt, but raised the alarm about a host of financial and operational challenges affecting the beleaguered entity.

Moody’s last week published a research report on Eskom, which it released to media on Monday, within days of another sovereign credit ratings agency, Fitch, revising the South African economy’s outlook from stable to negative, reaffirming the rating at BB+.

Moody’s applauded the financial support government has committed to extend to Eskom, through the special appropriation bill proposed by Minister of Finance Tito Mboweni. However, it also said the utility’s operating costs and debt owed to it could not be ignored.

“We currently expect Eskom’s debt to broadly stabilise as a result of the government capital transfers in the financial years 2020-21.

“However, the company’s future debt trajectory will depend on its ability to contain operating costs, which are likely to remain under upwards pressure, and capital spending. Any further municipal debt arrears will also continue to weigh on Eskom’s debt and financial metrics,” the report said.

The Moody’s report said government’s finance injections for Eskom were also evidence of the government’s ongoing strong commitment to Eskom.

“If passed, the increase in the government capital transfers to R105bn will be credit positive for Eskom as they will help the company meet its interest and principal debt repayments, as well as support the proposed separation of the company’s business into three entities,” the report said.

The report said it remained to be seen whether Eskom’s strained financial profile would benefit from government’s reorganisation efforts in the long term.

“The longer term evolution and sustainability of Eskom’s capital structure will depend on a still to be devised strategic turnaround plan. The government has yet to appoint a Chief Restructuring Officer, whose task will be to put the company on a more sustainable footing,” it said.

Moody’s said it would pay particular attention to Eskom’s challenges, including poor operational performance, a decrease in energy availability to 67%, higher costs and an increase in outstanding payments from indebted municipalities to R20bn.

Source link

Continue Reading
You may also like...
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


To Top
error: Content is protected !!