S&P upgrades Eskom’s outlook

S&P Global Ratings put Eskom’s debt assessment on positive watch, meaning it may upgrade South Africa’s state-owned power utility.

The move follows the announcement last month that Eskom will receive R254-billion in debt relief from the government, the ratings company said in a statement on Tuesday. S&P expects the move “will address Eskom’s near-term debt obligations once implemented and give Eskom room to focus on operational improvements and electricity-sector reform targets,” it said.

S&P could raise Eskom’s CCC+ rating by one or more notches based on the expectation that the utility’s liquidity position will strengthen and that the risks of a near-term default event will reduce once the debt relief agreement is implemented.

Moody’s Investors Service raised its outlook on Eskom ratings to positive for the first time in 15 years after finance minister Enoch Godongwana said in October that the government would take over some of the company’s debt.

Meanwhile, Eskom will implement stage-3 load shedding — in which 3GW is removed from the national grid — from 5am until 4pm starting Wednesday, according to a statement on Twitter. The utility will still cut 4GW in the afternoons and at night this week.

Eskom will maintain a reserve margin of only 2.2GW, which is equal to a buffer of 7% on average during evening peak demand, Netwerk24 reported, citing the utility.

The reserve margin is the difference between net system capability and peak demand and provides for unforeseen faults, which could lead to a mismatch between demand and supply of power, and a collapse of the grid.

Contingency plans

The government has contingency plans in place to safeguard key food production facilities against an escalation in power cuts, the agriculture minister said.

Measures have been taken to ensure abattoirs can continue operating and animal vaccines are protected, agriculture, land reform & rural development minister Thoko Didiza said in an interview.

In another development, independent power producer Red Rocket placed an order with Denmark-based Vestas Wind Systems for the supply and installation of wind turbines to produce 373MW of electricity.

Read: Mpho Makwana: Eskom is determined to nail the corrupt

The order is for Red Rocket’s Brandvalley, Rietkloof and Wolf wind parks in the Western Cape and Eastern Cape provinces, Vestas said in a statement on Tuesday.

The projects are part of the so-called bid window 5 of South Africa’s Renewable Independent Power Producer Programme that’s aimed at supplementing electricity supply because Eskom can’t meet demand with its aging coal-fired plants.  — (c) 2023 Bloomberg LP

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