Eskom Holdings SOC Ltd urgently needs a plan to turn profitable or South Africa\u2019s state-owned utility will collapse under mounting debt, according to credit agency Moody\u2019s Investors Service.<\/p>\n
The generator of more than 90% of the nation\u2019s electricity reported a record annual loss of R20.7 billion rand ($1.4 billion) last week and is regarded as the biggest threat to South Africa\u2019s economy. The government is giving Eskom a R128 billion bailout over the next three years to keep it afloat.<\/p>\n
\u201cThe company\u2019s operational and financial performance has deteriorated, indicating the extent of the challenges facing Eskom in meeting its debt obligations absent government support,\u201d Moody\u2019s said in an emailed report.<\/p>\n
The rand declined as much as 0.6% against the dollar after it was released.<\/p>\n
South Africa\u2019s cash injections through 2021 \u201ccannot do more than stabilize the company\u2019s debt burden, pending development of a longer-term solution for the company,\u201d Moody\u2019s said.<\/p>\n
The government has faced criticism from the country\u2019s biggest business lobby over its handling of the crisis at Eskom, which has some R440 billion of debt. Business Unity South Africa expressed frustration with delays in seeking a new chief executive officer and the appointment of Freeman Nomvalo as chief restructuring officer.<\/p>\n
The ratings agency also said the Department of Public Enterprises intends to publish an outline of the government\u2019s approach to unbundling the utility in mid-September, although it could be delayed.<\/p>\n
Moody\u2019s assesses South Africa\u2019s debt at Baa3, the lowest investment level, while Fitch Ratings and S&P Global Ratings have downgraded the country to junk.<\/p>\n
\u201cIn our assessment of Eskom, we continue to recognize the strategic importance of the company to the economy and factor in the ongoing strong commitment from the government of South Africa,\u201d Moody\u2019s said.<\/p>\n