13 August 2008
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Johannesburg — THE credit rating downgrade by Moody's is by far not the only serious challenge facing beleaguered electricity utility Eskom.
Moody's downgraded Eskom's foreign and local credit rating to Baa2 on Monday, which is going to make raising capital for its R343bn capital expenditure programme more difficult.
The downgrade is just one in a growing list of factors that will make life for the utility even more challenging in future. If management was found lacking recently, they certainly will have their work cut out for them in future.
For instance, Eskom will have to stand in a long queue of countries wanting new and critical coal and nuclear power station technology and equipment, because of global underinvestment in the sector.
Delays may well be inevitable. This, coupled with rapidly rising costs globally for the energy generation sector , means capital expenditure programme cost estimates may increase more than anticipated.
Then there are existing problems with power supply - although Eskom seems to have rectified these for now.
The engineering and construction sectors are beset by skills shortages. Eskom may find it difficult to attract suitable local contractors to undertake the large capital expansion projects - more so given the competition with other infrastructure projects in SA.
There is also the added problem of divesting management time and interest into developing alternative energy programmes .
Then there are Eskom's own day-to-day staff requirements and projects to consider.
In the past Eskom has been given a fairly free rein by the government to conduct its own affairs. It has become clear that the utility needs much closer support and oversight by national government.
The Bottom Line is edited by Edward West
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