Troubled Eskom might escape future credit downgrades

JANUARY 28, 2015

Troubled power utility, Eskom, could again escape a ratings downgrade in the immediate future owing to a promised R20 billion government bailout. Last year, ratings agencies set Eskom's credit rating on a negative outlook - refraining from downgrading the utility to sub-investment or junk status.

A sub-investment or junk status credit downgrade would mean that Eskom's debt will be below the level at which large international funds are permitted to buy it, even with government guarantees.

Still, the ratings agencies are keeping a close eye on the parastatal as well as what Finance Minister Nhanhla Nene's budget speech will reveal about government’s response to Eskom’s woes.

Eskom late last year re-introduced rolling blackouts last seen in 2008 as it battles to supply enough to the economy – the result of neglected maintenance and upgrading of power generation systems.

The blackouts have attracted outcries from business and consumers alike. If not crippling production, the loadshedding has meant constant downtime for companies without back-up generators.

Now the power utility says it will hike its prices on days when the system is expected to be under severe strain in an effort to reduce demand.

In a statement on its website, it says that customers will be given 24 hours notice and that this will be implemented on no more than 17 days in the year.

Photo: Eskom's Koeberg nuclear. power station.