S&P says state support for Eskom falls short for next 12-18 months

LONDON, Oct 31 (Reuters) - Government financial support for South Africa’s state-owned utility Eskom is insufficient to cover its funding requirements for the next 12-18 months, S&P Global Ratings said on Thursday.

“However, it is possible that the support, combined with improved access to external financing, cash-flow supportive tariffs, and favorable cost trends, could help Eskom’s sources of liquidity exceed projected uses for more than six months,” the ratings agency said.

Finance Minister Tito Mboweni on Wednesday said new cash flow support for state power utility Eskom would no longer be in the form of equity but loans.

The government has pledged to give Eskom, which is mired in debt, more than 100 billion rand over the next two fiscal years, with additional aid spread over the next decade.

S&P has a ‘CCC+’ issuer credit rating with a stable outlook for Eskom, which S&P said were not immediately affected by the government’s plan.

The stable outlook reflected S&P’s view that the government’s support package had cut both the risk of funding shortfalls over the coming six months and uncertainty about the state’s commitment to provide timely support to the utility, it added. (Reporting by Tom Arnold, editing by Karin Strohecker)