S&P revises Eskom outlook upward but says government support is insufficient
The outlook was revised to stable from negative, affirming its speculative CCC+ rating
S&P Global Ratings said it had upgraded its outlook on Eskom's debt, judging that the government's plan to provide it with liquidity support had reduced the risk of it facing a liquidity crisis in the short term.
The outlook was revised to stable from negative, affirming its speculative CCC+ rating, even though S&P maintained that the support would not be sufficient to cover the power utility's funding requirement for the financial year ending March 2020, the ratings company said in a statement on Friday.
However, the support announced during finance minister Tito Mboweni's budget statement in February, together “with improved access to external financing, cash-flow supportive tariffs, and favourable cost trends, could help Eskom's sources of liquidity exceed projected uses for more than six months”.
The government announced that it would support Eskom with R23bn a year for three years, rising to R150bn over a decade to shore up its balance sheet. The utility currently has about R419bn in debt that it cannot service through its revenue. The government support will be subject to the implementation of a tough restructuring plan, including splitting the company into three parts, Mboweni said.