South Africa\u2019s beleaguered power utility may need to raise R45 billion of debt this year to refinance upcoming obligations, purchase diesel and pay inflation-beating salaries to workers, according to S&P Global Ratings.<\/p>\n
That\u2019s an increase from S&P\u2019s borrowing forecast of R30 billion for Eskom Holdings SOC Ltd. in November, according to Omega Collocott, director of corporate ratings for South Africa at the company. The utility had a funding plan of R24.4 billion for the year to March, according to a company presentation in November.<\/p>\n
Africa\u2019s most-industrialized nation had to endure hours of outages in the past few weeks as labour strife and breakdowns at coal-fired plants forced Eskom to resort to rolling blackouts. The elevated use of diesel-fed turbines, the wage deal and a tariff increase that didn\u2019t meet the company\u2019s requirement left the utility with a bigger hole in its finances.<\/p>\n
\u201cAll in, net cash flows\u201d at the lower end are R15 billion below S&P\u2019s forecasts, Collocott said in an emailed response to questions. \u201cThis obviously assumes no change to the planned quantum of government transfers to Eskom,\u201d she said, referring to the R22 billion the government pledged for the company in the current fiscal year.<\/p>\n
The funding concerns have pushed the spread between Eskom\u2019s guaranteed and unguaranteed tranche of 2028 dollar securities to near pandemic-level highs. The utility has about R396 billion of debt.<\/p>\n
The tariff increase of 9.6% was lower than what Eskom required. That means S&P\u2019s revenue assumptions for the year ending March 31 could be lower by about R10 billion compared with the rating company\u2019s November forecast.<\/p>\n
S&P rates Eskom\u2019s debt at CCC+, seven levels below investment grade, with a negative outlook.<\/p>\n
Fitch Ratings last week said the poor finances of many public enterprises meant they posed considerable risks to public finances.<\/p>\n
The rating company said it expects Eskom to require additional financial support of around R150 billion, \u201cwhich is not factored into our debt forecast due to the uncertain timing and form of support,\u201d Fitch said, without giving a time frame.<\/p>\n