Standard & Poor’s (S&P) raises rating on Eskom,

ESKOM’s (South African Power Utlility) hopes of raising part of the money needed for its R343bn capital expenditure programmes received a boost yesterday when international rating agency Standard & Poor’s (S&P) revised its local currency credit watch status from negative to developing.

Eskom’s ability to raise money in local and foreign markets in order to meet the huge capital needs of the build programme, partly hinges on the various agencies’ ratings.

S&P yesterday said it had revised its local currency credit watch status from negative to developing. It used Eskom’s recent application to the treasury for guarantees on all existing and future debt as the reason for the move. Eskom submitted the application on Tuesday this week.

“In our view, Eskom’s submission strongly suggests that credit-enhancing guarantees in some form are likely,” the agency said.

The treasury last month alluded to its preparedness to offer guarantees to Eskom in order to enhance the utility’s credit rating.

S&P said the resolution of the credit watch depended on the nature and scope of the guarantee package the treasury would approve.

“The local currency corporate credit rating and the issue ratings, as well as the long-term national scale rating, could be raised if the treasury were to approve a guarantee for all existing and future debt,” the agency said.

“They could also be lowered if only certain classes of debt were guaranteed — hence the revision of the credit watch to developing.”

The agency said the ratings on the utility showed its critical role in SA’s economic development through its electrification programme.

Konrad Reuss, S&P managing director for SA and subSaharan Africa, said that while the treasury had publicly committed to the guarantees, “it is critical to have clarity on the nature of the guarantees. We would like to look at the legal nature of the guarantees.

“Are they going to be conditional, or unconditional?”

Eskom CE Jacob Maroga said : “We welcome the approach adopted by S&P and are satisfied that S&P appreciates the critical role of Eskom to the South African economy and ongoing efforts between Eskom and government to design an appropriate capital structure for Eskom.”

Maroga said that in order to get the funds for its build pro-gramme, the utility was making progress “on critical fronts, including shareholder support and a tariff path placing Eskom on course to achieve long-term financial sustainability”.