Eskom CEO Dan Marokane has welcomed the latest ratings report by Fitch Ratings that has affirmed and positively revised Eskom’s credit ratings.
The state-owned utility is in the last year of a three-year debt relief programme in which the government has assisted it with a R254bn debt relief package.
New borrowings were prohibited during this period that comes to an end at the end of this financial year on March 31 2026.
Eskom has indicated that it will resume borrowing but vowed to keep its borrowings below the limit of R300bn, a level it hopes to reach in the financial year ending on 31 March 2030, down from R411 billion at the end of the current financial year.
An improvement in its credit rating will lessen the interest burden on Eskom.
Fitch announced its decision to affirm Eskom Holdings long-term local-currency issuer default rating (IDR) at “B”, with a stable outlook.
In addition, Fitch Ratings revised Eskom’s stand-alone credit profile (SCP) to “ccc+” from “ccc-”. The ratings agency stated that the revision of Eskom’s SCP was a reflection of the improvement in the operational performance of the group and the material increase in earnings before interest, taxes, depreciation, and amortisation (ebitda) that the ratings agency has evaluated as likely in Eskom’s financial years 2025-2029.
“The affirmation and positive revision on our credit rating profile by Fitch reinforces our determination to continue our efforts to turn around Eskom’s financial and operational performance. Our aim remains to ultimately reduce Eskom’s reliance on government support by driving the company towards financial sustainability,” said Dan Marokane, Eskom’s group CEO.
Fitch Ratings has also affirmed Eskom's senior unsecured debt at “B” with a recovery rating of “RR4” and its senior unsecured guaranteed debt at “BB-”.
This Fitch attributed the affirmation of Eskom’s IDR to strong links between Eskom and SA (BB-/Stable) under the ratings agency’s latest Government-Related Entities (GRE) rating criteria.
Eskom is nevertheless under great pressure to resolve the problem of outstanding debt by municipalities, which has grown at a rate of 33% over the previous financial year and amounted to R100bn at the end of March.
Electricity and energy minister Kgosientsho Ramokgopa has called it an “existential threat” to Eskom and Marokane has cautioned that it may undo the positive effects of the government’s debt relief programme.
A programme instituted by the Treasury whereby participating municipalities could see their arrear debt to Eskom being written off over three years, provided they pay their current Eskom bills on time and in full, among other conditions, has had very limited success.
Eskom head of distribution Monde Bala said most participating municipalities acted as if the programme gave them a payment holiday. Metros had begun to default. As their consumption was high, any metro default had a big effect on total arrears.
Marokane recently asked that National Treasury makes it compulsory for municipalities that don’t comply with such conditions to appoint Eskom as distribution agent. Eskom would then take over the distribution function, including metering, billing and revenue collection.
According to Ramokgopa, mayors in three provinces have already agreed to that. Outsourcing a municipal function is, however, strictly regulated and such municipalities will have to comply with legislative requirements.
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