S&P Approves South Africa's Divestment of Eskom

South Africa has gotten a thumbs up. This is because of the timeline for  the execution of her plan to overhaul its power sector by breaking up state utility Eskom. This will happen over the next three years and has been rated “somewhat optimistic,” by Standard & Poor's Global Ratings.

 

Eskom SA
Source: The South African

President Cyril Ramaphosa promised in February that he would split Eskimo into units for generation, transmission and distribution, to make the utility more efficient.

A government paper released in October set out a vision for a restructured electricity supply industry, where Eskom could relinquish its near-monopoly and compete with independent power producers to generate electricity at least cost.

The government plans to set up a transmission unit within Eskom by the end of March 2020 and complete the legal separation of all three units in 2022.

S&P said it saw “the reform timeline as somewhat optimistic”, although the firm said it noted that “improved financial flexibility introduced by the support package reduces the risk of unintentionally triggering a default at Eskom, or of its debt guaranteed by the sovereign”.

The rating agency said Eskom’s business separation process would require sweeping changes to systems and processes, ownership of assets and contracts, as well as laws and regulations.