S&P Global Ratings has upgraded Eskom’s credit ratings, moving the state-owned utility’s long-term global scale foreign and local currency ratings from stable to positive. Eskom’s national scale issuer credit rating also improved from ‘zaBBB’ to ‘zaBBB+’, while its short-term national scale rating of ‘zaA-2’ was reaffirmed.
In a statement on Wednesday, Eskom welcomed the news, attributing the upgrade to progress in financial stability bolstered by the R254 billion Eskom Debt Relief Act signed into law in July 2023. This support package ensures that Eskom can meet its debt servicing and repayment obligations through 2026, significantly reducing liquidity risks.
S&P said, “The stable outlook reflects our view that the group's creditworthiness will continue to benefit from explicit and timely support from the South African government, facilitating a strengthening of Eskom's liquidity position and less risk of default as the debt relief agreement is implemented as stipulated.”
However, the ratings agency warned, “Eskom's operating performance and cash flow will remain under pressure, even though the expected injections will reduce Eskom's liquidity risk. We, therefore, revised our assessment of Eskom's stand-alone credit profile to 'ccc' from 'ccc-', capturing our view of a lower risk of a short-term liquidity crisis and that a default-like scenario is less likely to occur over the next six months.”
S&P raised its long-term issuer credit rating on Eskom and its issue ratings on the group's senior secured and senior unsecured debt from 'CCC+' to 'B'. The issue ratings on government-guaranteed debt remain unchanged.
Progress in stabilising operations
Eskom Group CEO Dan Marokane hailed the upgrade as a milestone in restoring the utility’s financial and operational health.
He said, “This upgrade is a clear indicator of the progress we are making in strengthening Eskom’s financial and operational foundation. It sends a positive message to investors and stakeholders, reinforcing trust in our ability to deliver energy security while driving long-term sustainability.”
A credit rating upgrade reflects improved financial stability and reduced risk, making an entity more attractive to investors. For Eskom, this could lead to lower borrowing costs and better access to capital markets, which are critical for infrastructure development and operational improvements.
Marokane also noted the utility’s operational achievements, including improved generation performance and R16 billion in diesel savings.
“Sustaining this momentum will support Eskom’s path to profitability and reduce our reliance on fiscal support in the future,” he said.
Outlook and Scenarios
S&P maintained a stable outlook for Eskom’s ratings, reflecting confidence in the government’s continued support and the expected strengthening of Eskom’s liquidity position under the debt relief plan.
However, the agency warned of potential downside risks if Eskom fails to meet the conditions of the debt relief package or if its operating performance deteriorates sharply. Conversely, an upside scenario could emerge if Eskom’s free operating cash flow improves significantly and leverage metrics approach favourable levels.
Eskom reiterated its commitment to implementing generation recovery plans, strengthening governance, combating corruption and future-proofing its operations to secure long-term sustainability for South Africa and the broader region.
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