South Africa's dominant electric utility. Vertical integration across the entire electricity value chain. Recent negative regulatory intervention in tariff setting. Heightened operational risks due to tight electricity margins in South Africa. Execution risks on a very large capital expenditure (capex) program. High leverage due to the largely debt-funded capex program. Weak credit metrics in the near term as tariff increases are insufficient to cover costs. Recently announced government support package, which includes a cash injection and additional tariff increases, will alleviate pressure on liquidity in the near term. Potential for additional funding requirements in the medium term if tariff increases are not approved annually as expected. The negative outlook reflects our opinion that there is material execution risk associated with
