Moody’s says Eskom split will do little to solve financial problems – report

A freight train leaves the Eskom power plant in Hendrina on February 22, 2018, after having discharged its load of coal. Picture: MARCO LONGARI / AFP

A freight train leaves the Eskom power plant in Hendrina on February 22, 2018, after having discharged its load of coal. Picture: MARCO LONGARI / AFP

This comes after the announcement that the utility would be divided into three separate entities.

The intended split of South Africa’s cash-strapped power utility Eskom into three separate entities will allow for more transparency in its running, but will not do much to solve its financial problems, ratings agency Moody’s was reported as saying on Monday.

“The move paves the way for a more transparent group with more clearly allocated revenue and cost between business segments,” news agency Reuters quoted Moody’s in a research report.

“However, in and of itself, it does little to address Eskom’s financial challenges.”

A copy of the report was not available to African News Agency.

In his state of the nation address to parliament last Thursday, President Cyril Ramaphosa said Eskom would be divided into “generation”, “transmission” and “distribution” entities as part of a new business model to help turn it around.

He acknowledged the electricity company was in crisis and posed a significant risk to the South African economy, requiring bold decisions that would not affect the country’s sovereign credit rating. Ramaphosa also said Eskom would need more revenue through an affordable tariff increase.

Eskom, which has asked energy regulator Nersa to approve annual traffic increases of around three times the inflation rate over the next three years, on Monday implemented rolling power cuts for the second day in a row, the first time since December 9 as its generating capacity reportedly comes under renewed pressure.

– African News Agency

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