Eskom: Ratings agency gives power utility an UPGRADE
South Africa’s state-owned power utility Eskom was upgraded two notches by Standard and Poor’s Global Ratings on Friday.
The ratings agency cited the SA government’s substantial financial support plans. Eskom’s credit rating was lifted to B, five levels into junk, from CCC+ by S&P on Friday, according to a statement.
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ESKOM’S BLACK FRIDAY
Ironically, on the same day, Eskom implemented Stage 6 power cuts for the first time since September, as the power utility confronts generation capacity constraints and diesel shortages.
Eskom needs to take 6,000 megawatts off line to prevent a total collapse of the grid.
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“It is with great regret that due to the shortage of generating capacity and emergency reserves, Stage 6 load shedding will be implemented from 12:00 today (Friday) until 05:00 on Monday,” the power utility said.
The return of this level of electricity rationing is a step backward for SA government, which has prioritised stabilising the system.
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Nonetheless, credit assessor S&P changed Eskom’s outlook to stable, saying the government’s R254 billion financial support package will help cover Eskom’s debt obligations for the current and the following two fiscal years.
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POINTS FOR DEBT RELIEF ACT
“The extraordinary support from the South African government should reduce Eskom’s refinancing and liquidity risk, subject to the group’s compliance to the conditions set forth by the Eskom Debt Relief Act,” S&P analysts wrote.
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Analysts do however expect Eskom’s operating performance to remain under pressure due to weak operating efficiency.
The long-term corporate family rating of Eskom was upgraded by Moody’s Investors Service to B2 in September, five levels below investment grade. Fitch Ratings assigns the equivalent score.