Johannesburg, South Africa — ESI-AFRICA.COM — 02 December 2010 – Eskom Holdings Limited “’ South Africa’s state-owned power utility “’ says the timing of a decision by Moody’s Investors Service Incorporated to raise the outlook on its bonds was “fitting” in light of the government’s decision to double loan guarantees.
Moody’s said in an e-mailed statement that it was changing the outlook on Eskom’s Baa2-rated senior unsecured bonds to “stable” from “negative” to reflect a number of measures taken over the past few months to strengthen the company.
“Eskom views this rating amendment favourably and views it as a further enabler to its commitment to delivering much-needed capacity while maintaining the financial sustainability of the company,” the Johannesburg-based utility said in an e- mailed statement.
The yield on Eskom’s benchmark 7.5% bond due September 2033 fell almost 3 basis points, or 0.03 percentage point, to 9% today, according to data compiled by Bloomberg.
Eskom, which supplies about 95% of South Africa’s electricity, is spending about R485 billion to prevent a repeat of five days of blackouts that brought some of the country’s biggest gold and platinum mines to a standstill in January 2008.
Last month, the government said it would almost double loan guarantees for Eskom to R350 billion to fund expansion, and early this month the cabinet said it might inject a further R20 billion into the company over the three fiscal years through to April 2014.
“We have had strong support from the government,” CEO Brian Dames said earlier this week in an interview in Cape Town. “We have had great clarity. There is nothing that impacts on the certainty of our expansion programme.”
Eskom’s financial prospects also improved after regulators allowed it to raise tariffs 25% this year and 26% in each of the following two years. The utility said last month that net income had jumped to R9.5 billion in the six months through to September, from R1.1 billion a year earlier, as sales grew 33%.