S&P upgrades Eskom’s credit rating on back of treasury R254 billion bailout

  • On 24 November 2023, S&P Global Ratings (“S&P Global”) announced their decision to upgrade Eskom’s long-term issuer credit rating to ‘B’ from ‘CCC+’ with a stable outlook on the Group’s senior secured and senior unsecured debt.
  • In addition, S&P Global also upgraded Eskom’s South Africa national scale rating to ‘zaBBB/zaA-2’ from ‘zaB/zaB’.
  • Eskom recently reported poor performance across the board and a record net loss of R23.9 billion for financial year ending 31st March 2023. Read more

In their rationale, the credit rating agency stated that the upgrade is due to their expectation that the South African government’s R254 billion financial support package, as part of the Eskom Debt Relief Act signed into law on 7 July 2023, 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.

Related news: ‘No limit to the greed that permeates the whole Eskom ecosystem’ – Pravin Gordhan

The stable outlook reflects S&P Global’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.

Related news: Municipalities apply for debt relief from Eskom totalling R56.8 billion

“Eskom welcomes the decision to upgrade the company’s credit rating by S&P Global. 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,” said Eskom’s Acting Group Chief Executive, Calib Cassim.

Eskom’s 14 coal-fired power plants, with an average age of 41 years, provide 38.7 GW of the country’s 52.5 GW installed capacity. The coal power stations continue to fail to deliver enough power to meet demand with 2023 being the worst year ever when it comes to daily blackouts – so far over 272 days. Image credit: EskomSePush (ESP)-loadshedding app provides a summary of loadshedding (blackouts) number of days and levels for the last six years. 

The debt-relief package extended to Eskom by 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 Minister of Finance.

Author: Bryan Groenendaal

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