Bloated by debt, bled by corruption and battered by structurally declining sales, South African power utility Eskom Holdings SOC Ltd. is facing what’s known in the industry as a “death spiral.”
And the Johannesburg-based company poses the biggest credit risk to Africa’s most industrialized nation, according to S&P Global Ratings.
More than a decade of unreliable supply and surging prices are driving consumers and businesses off the grid as the price of renewable energy drops, leaving Eskom with lower sales and high fixed costs due to the expense of building new power plants.
The company that supplies 95 percent of South Africa’s electricity is losing middle-class clients, while arrears from near-bankrupt municipalities climb as many customers in impoverished townships don’t pay their bills or steal power through illegal connections. Rampant corruption and a bloated workforce have pushed total debt to 419 billion rand ($30.8 billion), and sales volumes — already at a decade-low — are falling, according to interim results reported last week.
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