Agency welcomes govt guarantees to Eskom

Thursday, November 4, 2010

Pretoria - Government's plan to increase its state guarantees to Eskom has been described as a reflection of support for the parastatal.

The rating agency Moody has said it views positively the government's plan to increase guarantees for Eskom debt to a total of R350 billion from R176 billion.

Last week, Finance Minister Pravin Gordhan announced a further guarantee of R174 billion to allow Eskom to complete the construction of the Medupi Power Station in Limpopo and the Kusile plant in Mpumalanga.

Moody said the increase in the guarantee limit, in addition to the R60 billion subordinated loan approved in 2008, demonstrates the government's recognition of Eskom's strategic importance to the country and its ability and willingness to support the company and its large-scale investment programme.

Commenting on Moody's statement, the utility's Finance Director Paul O' Flaherty said shareholder support and cost reflective tariffs are the building blocks that will put Eskom in a better position to improve its credit rating so that it can raise critical funding in order to build capacity to meet South Africa's growing electricity needs.

Eskom's current ratings remain unaffected with Eskom's foreign currency rating.