While Eskom expressed regret at rating agency Standard and Poor’s decision to downgrade the power utility’s long-term corporate credit rating, the Organisation Undoing Tax Abuse (Outa) called for a full forensic audit.
“Eskom Holdings SOC Ltd notes with regret the rating action announced by Standard and Poor’s to lower the company’s long-term corporate credit rating to ‘BB’ from ‘BB+’, outlook remains negative,” said the power utility, according to SAnews.gov.za
The rating agency cited the increased financial pressure faced by Eskom due to the uncertain tariff path resulting from the ongoing court case against the National Energy Regulator of South Africa (Nersa).
The agency also expressed concern over uncertainty around the government’s decision to extend the current R350-billion government framework agreement (GFA) availability period extension.
“We are confident that the current process to extend the GFA availability period will be achieved to address the rating agency’s concern,” said Eskom’s chief financial officer, Anoj Singh.
“It is clear from this ratings announcement that regulatory and tariff certainty is critical for Eskom’s financial sustainability; therefore the conclusion of the ongoing court case against Nersa is imperative for the determination of an appropriate tariff regime.”
But Outa’s Wayne Duvenage said a forensic investigation into Eskom would provide clarity and insights to many questions which, if remain unanswered, “will not do the nation or Eskom any favours as we grapple with its economic survival and ability to meet the nation’s future energy needs.
“Under any normal circumstances, the need for suretyships by lenders would immediately signal that borrowings have exhausted their own balance sheet, and that extreme caution is required with forward financial lending.
Yet, in Eskom’s case, the result was the extreme opposite as this state-owned entity has gone on a spending spree that will require another R500bn over the next five years, and a further R1 trillion plus thereafter, if they are allowed to proceed with the nuclear power project.
“Eskom’s rising debt levels is likely to drive the electricity price beyond most consumers and this is a serious risk which could lead to Eskom’s demise.”