S&P puts Eskom on credit watch after government announced debt relief measures

Mpho Makwana has been apponted chairperson of the new board of Eskom.

Eskom board chair Mpho Makwana. Photographer: Armand Hough. African News Agency (ANA)

Published Mar 16, 2023

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Rustenburg - Rating agency S&P Global has placed Eskom on credit watch positive, following the announcement by the National Treasury of debt relief measures for Eskom in February.

Eskom said this was an indication to the market that the agency could improve Eskom’s CCC+ credit rating by one or more notches, based on its expectation that Eskom’s liquidity position would be strengthened by the debt relief.

“The announcement by S&P Global is extremely positive in that it endorses the positive impact of the debt relief on Eskom’s financial position and overall liquidity. It will also serve to allay fears lenders and creditors of Eskom might have with respect to Eskom’s financial stability,” acting CEO Calib Cassim said.

The potential rating upgrade was expected to take place once the Debt Relief Bill has been approved and signed by Parliament and also once the final terms and conditions of the debt relief have been provided by national treasury.

In the 2023 Budget review, national treasury announced debt relief of R254 billion for Eskom. This comprises advances to deal with Eskom’s debt service requirements over the next three financial years.

The national treasury also committed to taking over up to R70bn in Eskom debt in the 2026 financial year.

The debt relief will reduce Eskom’s debt by as much as R168bn, while at the same time alleviating pressure on Eskom’s operating cash flow, enabling expenditure on much-needed capital to restore the energy availability of Eskom’s fleet of power stations and to invest in strengthening and expansion of the networks, Eskom said.

Credit watch refers to a variety of special programmes offered by credit rating agencies and financial institutions to monitor an individual’s credit report for any credit-related changes.

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