NEWS
29/03/2018 08:00 SAST | Updated 29/03/2018 08:00 SAST

Eskom's Financial Woes Continue As Moody's Downgrades It

Moody's says there is no clear plan at Eskom to get it out of its financial mess.

Siphiwe Sibeko / Reuters

Ratings agency Moody's has downgraded Eskom's credit rating, citing a lack of clarity about its plans to stabilise its finances, Bloomberg reported.

"Despite a number of improvements at the company in relation to its corporate governance and liquidity, there is limited visibility at this juncture as to Eskom's plans for placing its longer-term business and financial position on a sustainable footing," Moody's reportedly said.

Moody's also said there was a lack of "any tangible financial support for the company in the February state budget, and the liquidity and funding challenges Eskom may continue to face".

Eskom's earnings for the 2017/2018 year reflect a downturn in net profit of R4-billion, while its liquid assets fell from R30-billion to R9-billion, according to The Citizen. It needs R72-billion to meet its financial obligations for the year, and it has to repay a R20-billion loan by the end of August.

Meanwhile, Eskom is reportedly furious that its request to hike electricity tariffs was turned down, saying this will leave it worse off financially. Fin24 reported that Eskom officials appeared before Parliament's portfolio committee on energy on Wednesday, bemoaning the fact that energy regulator Nersa had turned down its request for a 20 percent electricity tariff hike.

Instead, Nersa approved a tariff increase of 5.23 percent for the 2018/2019 financial year. Eskom had plans to ask for a 30 percent tariff hike next year.

Nersa reportedly criticised Eskom for its inability to collect revenue properly, driving tariff increases that have led to power interruptions at municipalities that owe Eskom money.

But acting Eskom CEO Calib Cassim reportedly said Nersa needed to take into account current coal costs.

"Nersa assumes that Eskom should have free cash flow of more than R32-billion at the end of the 2018-19 financial year. It is based on untenable cutting in costs and repayments. This is in contrast to evaluation by investors, credit rating agencies and Eskom's own projections," Cassim reportedly said.