Eskom needs R250 billion to avoid being junked
South African energy utility Eskom needs to find R250 billion of support or it could get cut to junk status and drag the country’s credit rating down, according to Bloomberg.
Citing Public Enterprises Minister Lynne Brown, the report said that this needs to happen in a matter of weeks, as ratings agency Standard & Poor’s could downgrade the company in mid-September.
Eskom is currently rated BBB-, the lowest investment grade at S&P.
“We are looking at how to get Eskom out of its trouble because it has a short time to prove it is on a good footing to credit agencies,” Bloomberg quoted the minister as saying.
“The main thing is to prevent a downgrade on Eskom from the credit agencies and the country as a whole from getting downgraded.”
S&P notes that Eskom’s total debt could exceed as much as R350 billion.
According to the report, prices may have to increase even further to plug the gap.
This is off the back of news that electricity prices could increase by as much as 14% in 2015, after Eskom was given approval to recoup R7.82 billion in lost revenue.
The power utility is also owed R3 billion from municipalities which have not paid their bills.
Dampening privatisation talk
On Tuesday, 5 August, Business Day cited a number of unnamed Cabinet Ministers and government officials, who reportedly advocated for the unbundling and partial privatisation of Eskom.
The DA welcomed the murmurings, saying that “it would be hugely beneficial to our economy”.
“It would take financial pressure off the state by getting private investors to help fund electricity supply generation,” the party said.
However, Brown dismissed the talk of privatisation, calling it misguided, and saying the debate should instead be about the long-term resolution to the country’s energy challenges.
“Eskom is critical for Government to implement its developmental agenda. It would be a grave mistake to privatise this critical player in the economy,” she said.
“To my knowledge, Cabinet has not discussed the matter of privatisation and there is no need to unnecessarily raise temperatures around this matter.”
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