Eskom has redeemed its ES26 bond, a long-term debt instrument, to shore up investor confidence as the power producer eyes a return to capital markets and wrestles to regain its investment-grade status.
The power utility is also aiming to get out of the shadow of the government, whose generous guarantees have kept it afloat for more than a decade.
The state-owned entity, indispensable to South Africa’s economy, on Monday said it has now redeemed the R38bn ES26 bond, which was first issued in March 2007.
“This redemption represents a structural win for the South African economy. By honouring this large-scale commitment, Eskom is actively reducing its risk premium, which lowers the interest rates the utility pays on future borrowing,” the group said in a statement.
“While celebrating this achievement, Eskom remains focused on navigating the headwinds arising from ongoing energy sector reforms.
“The utility continues to prioritise revenue collection and operational efficiency to ensure that today’s financial milestone translates into a stable and affordable energy future for all South Africans.”
The entity last year outlined its plans to tap the capital markets again for funding in the next three years, looking to invest billions of rand a year over the next five years in maintaining and expanding its infrastructure.
This comes as the group’s top brass believe the company, which dominates South Africa’s energy sector, is on a path to regaining investment-grade status, contingent on continued financial discipline and building on the success of its turnaround strategy.
The company’s creditworthiness is set to continue benefiting from the government’s support over the remainder of the debt-relief period provided by the government.
Moody’s, Fitch and S&P all have Eskom credit ratings below investment grade, in tandem with that of the sovereign.
Group CEO Dan Marokane said the redemption marks a decisive milestone in the utility’s journey toward financial independence.
“The redemption of the ES26 bond is a testament to the utility’s turnaround trajectory and our commitment to rigorous financial governance. This achievement is a result of the structured support provided under the Debt Relief Act, integrated with our significantly improved year-on-year financial performance,” Marokane said.
“By adhering to these debt relief conditions, we are fostering a more predictable and stable investment environment. This fiscal discipline is a critical lever for sustainability, and it ensures that Eskom can continue to honour its obligations without placing an unsustainable burden on the government.”
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