JOHANNESBURG, February 28 – S&P Global said it was cutting its rating on Eskom further into junk, with a negative outlook on Wednesday, saying the power utility remained at risk of a distressed exchange situation or default in the next six months.
The ratings agency said there was now a lower likelihood that Eskom would receive extraordinary support from the government, reflecting its view that state support for the utility over the past few months had been insufficient given that its liquidity concerns persisted.
“We therefore anticipate pronounced pressure on Eskom’s fiscal 2019 financing plans, which include capital expenditures of around R55 billion and negative free cash flow, as well as refinancing R20 billion in bridge financing due August 31, 2018, and about R20 billion in scheduled debt maturities,” S&P said.
“We are therefore downgrading Eskom to ‘CCC+’ and ‘zaB’ from ‘B-‘ and ‘zaBB-‘.”
Several Eskom executives have been implicated in allegations of corruption and mismanagement of the cash strapped utility, and the National Treasury said in its 2018 budget review last week the company’s financial position was now a major risk to the economy and public finances.
The Treasury however said decisive action by government to strengthen governance at Eskom had staved off the likelihood of a near-term default.