Research Update: South African Electricity Utility ESKOM Holdings 'CCC+' And 'zaB' Ratings Affirmed; Outlook Stable

In our view the South African rand (ZAR)138 billion government support package for ESKOM Holdings SOC Ltd. is insufficient to cover its remaining funding requirements for fiscal years (FY; ending March 31) 2020 and 2021, and the utility continues to struggle with below cost-inflation tariff increases and constrained cost containment. However, a combination of solid access to external financing, cash-flow supportive tariffs, and favorable cost trends could help Eskom's sources of liquidity exceed projected uses for more than six months. We believe that, in addition to full utilization of the government's support package, Eskom needs to raise around ZAR50 billion in each of the next two fiscal years to refinance high upcoming debt maturities. We are affirming our 'CCC+' global

...- In our view the South African rand (ZAR)138 billion government support package for ESKOM Holdings SOC Ltd. is insufficient to cover its remaining funding requirements for fiscal years (FY; ending March 31) 2020 and 2021, and the utility continues to struggle with below cost-inflation tariff increases and constrained cost containment. - However, a combination of solid access to external financing, cash-flow supportive tariffs, and favorable cost trends could help Eskom's sources of liquidity exceed projected uses for more than six months. - We believe that, in addition to full utilization of the government's support package, Eskom needs to raise around ZAR50 billion in each of the next two fiscal years to refinance high upcoming debt maturities. - We are affirming our '###+' global scale ratings and maintaining our stable outlook, and affirming our 'zaB' national scale ratings and all our ratings on ESKOM's debt - The stable outlook reflects our view that the government's commitment to...

Research Update