May 20, 2024
News

Eskom faces a growing financial tension, S&P Global says

Eskom has been working very hard to avoid load shedding on Election DayAfter enduring 32 days of load shedding since 1 April as a country

According to rating agency S&P Global, Eskom is under increasing financial pressure from the impact of lower-than-expected tariffs, rising diesel costs and business disruptions , and all this may force it to raise more capital

The Intermittent power outages are blamed for hampering the growth of Africa’s most advanced economy.

The state-owned company began to ease the effects of a long-term blackout in late June after a strike by  workers on current wage contracts. Due to so-called “stage 6” power outages, and due to this most of South Africans had no power for at least six hours a day.

S&P Global has reported that for the financial year to March 2023. Eskom’s demand for funds could be up to  R45 billion ($2.64 billion) from the previously estimated R3 billion  due to reduced revenue and higher costs.

“Not only did South African energy regulator (Nersa) award a lower-than-anticipated tariff, the company also suffered strike action…that disrupted its power generation, and (faces) higher-than-forecast diesel costs,” said S&P Global in a July 19 bulletin.

S&P Global has assigned Eskom a CCC+ rating as a negative outlook.

Eskom received a rate increase of 9.6%, lower than the 20.5% requested for the current fiscal year. Due to frequent breakdowns of aging coal-fired power plants, the cost of diesel fuel, which Eskom is increasingly reliant on to generate electricity, has also risen significantly this year, driven by international oil prices.

According to Eskom, between April and July of this year, the utility generated 20% more power from diesel turbines  compared to the same period last year.

According to S&P Global, Eskom will need to raise more capital to pay off debt, interest payments and other cash shortfalls.