Siphamandla Goge
ESKOM embarked on power cuts again yesterday due to technical faults and vandalism, while at the same time the power utility’s fund-raising efforts were dealt a serious blow by Moody’s latest report.
Moody’s Investors Service’s latest Eskom research was likely to scare away investors that might have eyed buying Eskom bonds. “Moody’s does not anticipate a material improvement in Eskom’s financial profile before new generation capacity comes on stream,” said Paul Marty, a Moody’s vice-president and senior analyst.
Moody’s view suggests that in order to improve Eskom’s finances there need to be massive tariff hikes.
Mike Schussler, the chief economist at research group Economists.co.za, said that big increases in power prices would hurt the economy.
“It will help Eskom, but it will not help the country. It will increase our inflation and it will make it hard for us to compete with the rest of the world,” said Schussler.
He said increased tariff hikes would mean consumers paid more for unreliable electricity.
Moody’s found that weak operational performance combined with insufficient tariffs and a large capital expenditure programme continue to weigh on Eskom’s financial profile.
The agency said it expected Eskom’s credit metrics to remain very weak in the next 12 to 18 months. Moody’s released its report in the middle of a roadshow by Eskom to convince potential bond buyers to rescue the ailing power utility.
Eskom chief executive Tshediso Matona is on an international fund-raising roadshow in the US and the UK, trying to raise money to fund a cash-flow gap. The roadshow passed through New York, California, Washington and London.
He is expected back in South Africa this week.
The struggling power utility was tight-lipped yesterday about the progress so far regarding its international fundraising roadshow. It also did not say how much it was hoping to raise out of this trip.
Khulu Phasiwe, an Eskom spokesman, said it was too early to say anything on the fund-raising trip. “Nothing has been signed so far. Even if there is something, they need to report back to the board and government first before communicating further. It is a long process,” Phasiwe said.
He could not divulge potential investors, but denied the Eskom team was scheduled to meet with the World Bank.
The bank contributed about $3 billion (R34bn) towards a total cost of Medupi plant.
However, Phasiwe said the World Bank and African Development Bank representatives visited Medupi last week to monitor progress being made.
Bloomberg reported that Eskom had asked four financial institutions to assist with organising meetings with bond investors in the US and the UK.