Siseko Njobeni
21 July 2008
Johannesburg — POWER utility Eskom is expecting its credit ratings to come under pressure "in the near term" but to recover later as a result of the recently approved higher electricity tariffs and government financial support.
Spokesman Fani Zulu said yesterday Eskom expected rating agencies to conclude their review of the utility soon .
"As a result of Eskom's capital expansion programme, the organisation's credit metrics are likely to weaken in the near term, but will recover as higher tariffs and government equity contributions feed through."
Uncertainty about the extent of government financial assistance in support of Eskom's R343bn capital expansion programme has stopped international rating agencies from reviewing the utility's ratings.
Eskom CEO Jacob Maroga is currently leading an Eskom team, including financial director Bongani Nqwababa, on an overseas annual results road show. Zulu said yesterday the road show would include London, Paris and Frankfurt.
"We will be talking to bankers, rating agencies and equity and fixed-income investors," he said.
The trip comes shortly after the government unveiled plans to disburse a R60bn loan to Eskom. Nqwababa said yesterday the loan was a step towards ensuring Eskom's long-term financial sustainability and will enhance the utility's ability to deliver the multi billion rand capital expansion programme.
The treasury's announcement last week also puts to rest anxiety about the disbursement of the loan and is likely to see major international agencies reconsider Eskom's ratings.
Top agencies have Eskom on credit watch.
The announcement last week amounted to a change of heart by the treasury.
When Finance Minister Trevor Manuel announced the loan earlier this year it was for over five years, with R6bn likely to be paid out in this financial year. But the department last week said that the loan would now be disbursed over three years in much bigger amounts. The utility would get R10bn in the current financial year, R30bn next year and R20bn in the third year.
National Energy Regulator of SA (Nersa), which supported the "front-loading" of the loan, has welcomed the government's move. The regulator's Thembani Bukula last week said the announcement was aligned to Nersa's proposal that the government pay out most of the money in the first two years "because that is when Eskom needs the money most".
Nersa had suggested that R12bn be paid in the current financial year, with the amount decreasing over time.
"It means Eskom gets to pick up earlier," the regulator said.
The treasury said that " in addition to the deeply subordinated loan, government will consider providing guarantees to enable Eskom to access funding otherwise not available".
Read comments. Write your own.
Copyright © 2008 Business Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
I give up,put it up for sale to private bidders they have no choice but to do a better job,and Im sure they can.