CHAMWE KAIRA
S&P Global Ratings has revised Eskom Holdings SOC Ltd.’s outlook from ‘B’ foreign and local currency long-term ratings to positive from stable.
The company affirmed its ‘B’ issue ratings on the group’s senior secured and senior unsecured debt and its ‘BB-‘ foreign currency issue ratings on the government-guaranteed debt.
S&P Global Ratings has raised its long-term South Africa national scale credit rating to ‘zaBBB+’ from ‘zaBBB’ and affirmed its short-term national scale rating of ‘zaA-2’.
Currently, Namibia imports most of its electricity from South Africa and other countries in the region. A special arrangement between NamPower and Eskom, the South African power utility, enables Namibia to buy and use surplus energy from South Africa at affordable rates.
The South African government owns Eskom, a vertically integrated power utility.
S&P Global said it revisee its outlook on the ‘B’ long-term global scale foreign and local currency ratings onEskom to positive from stablem, mirroring the outlook revision on the sovereign.
According to S&P Global Ratings, Eskom has a high likelihood of receiving support from the government if necessary.
“Therefore, we do not see Eskom’s creditworthiness as insulated from that of South Africa and our ratings on Eskom are influenced by those on the sovereign.
If we were to upgrade South Africa, we would most likely also upgrade Eskom, all else being equal,” the company said.
The government signed the Eskom Debt Relief Act into law on July 7, 2023. The Act includes a 254-billion-rand financial support package that benefits Eskom’s creditworthiness and covers its debt servicing and repayment obligations for the current fiscal year (to March 31, 2025) and the next two fiscal years. The utility has received additional support through other debt guarantees.
S&P Global Ratings said it based its positive outlook on the ongoing support the group is receiving from the South African government.
“We expect Eskom’s liquidity position to strengthen and the risk of default to reduce as the ongoing debt relief package is implemented.”
S&P Global Ratings said it could lower the ratings if the conversion of Eskom’s subordinated loans to equity does not materialise and said this could also take a negative rating action if Eskom’s operating performance deteriorates or if it took a negative rating action on South Africa, all else being equal.
“We could take positive action on the utility if we took a similar action on South Africa and Telkom continues to pass our sovereign stress case, allowing it to be rated one notch above the foreign currency rating on South Africa.”
