S&P puts Eskom on watch

Standard & Poor's Ratings Services said it placed Eskom Holdings Ltd.'s A- local-currency and BBB+ foreign-currency ratings on CreditWatch with negative implications in light of Eskom's plans to increase its capital expenditure program, the tightening capacity margin in South Africa and significant inflationary pressures, primarily on fuel prices and capital equipment.

The current ratings on Eskom assume a capital expenditure program of ZAR 150 billion in the five years to 2012, with ZAR 100 billion funded by debt. However, S&P now expects that actual capital expenditures will be materially above this figure.

A financing plan for the increased capital expenditure program is yet to be defined. If funded entirely with debt, the investments will result in a material weakening of Eskom's credit metrics, and S&P expects Eskom to require additional funding support from its owners to mitigate the impact on the ratings. The agency said it views implicit support for Eskom as strong, reflecting its developmental role and strategic importance to the South African economy, but potential capital support from the government is yet to be defined and approved.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.