Moody’s has warned that the planned Eskom grid split – the carving out of transmission assets into a new state‑owned operator – could dent the utility’s credit profile, even as the agency affirmed Eskom’s long‑term rating after a year free of load shedding and a healthier balance sheet.
The ratings firm kept Eskom’s B2 corporate family rating steady on 29 May, but used the affirmation to flag the structural risks tied to the government’s flagship energy reform. The first phase of the split saw the creation of the National Transmission Company South Africa (NTCSA), while a task team under the National Energy Crisis Committee (Necom) is busy drafting a roadmap for an independent transmission system operator (TSO).
Moody’s cautions that further detaching NTCSA from Eskom will be a complex exercise. Transferring grid infrastructure and the cash flows they generate could weaken Eskom’s risk profile, and without mitigating measures the utility’s credit quality could be significantly impaired. The agency stresses that creditor consent is essential to avoid breaching existing debt covenants, meaning bondholders’ exposure will hinge on the final structure of the reorganisation.
Operationally, Eskom looks stronger than it has in years. The energy availability factor (EAF) – a key metric of how much of the fleet can generate – rose to 65 % in FY 2026 from a low of 55 % in FY 2024. South Africa has now endured more than twelve consecutive months without national load shedding, a milestone that has reduced reliance on costly diesel‑fuelled open‑cycle gas turbines, bolstered profitability and improved liquidity.
Eskom grid split and municipal debt pressures
Moody’s report makes clear that the threat to Eskom’s finances has moved rather than vanished. Municipal debt arrears kept climbing, topping R114 billion at the end of December 2025, despite interventions such as distribution‑agency agreements and prepaid supply models. Falling electricity sales – especially to industrial customers – and tariffs that still lag behind costs add to the strain, raising concerns about the utility’s long‑term financial sustainability.
| Metric | Amount (R billion) | Trend / Note |
|---|---|---|
| Municipal debt arrears (Dec 2025) | 114 | Continuing rise |
| Debt relief received | 220* | 140 converted to equity |
| Cash & investments (Mar 2026) | 143 | Covers FY 2027 obligations |
| Capital expenditure plan (5‑yr) | 343 | Requires new borrowing |
*Debt relief includes equity conversion and earmarked funds.
The table shows that while Eskom has R143 billion in cash and investments, enough to meet its 2027 commitments, the R343 billion capital spend over the next five years will force the utility to tap new financing, especially as municipal arrears weigh on cash flow.
Government backing remains a crucial safety net. Moody’s upgraded South Africa’s sovereign outlook to positive on 22 May, keeping the Ba2 rating intact. Since Eskom is wholly state‑owned, its credit rating remains closely linked to the state’s willingness and ability to intervene.
Under the debt‑relief programme, R220 billion has been injected into the utility, with R140 billion converted to equity and R10 billion earmarked for FY 2029. Moody’s estimates that Eskom’s cash position should comfortably cover obligations through FY 2027, but warns that without fresh borrowings the utility could struggle to meet its ambitious capital programme and upcoming debt maturities.
Eskom’s Group CEO Dan Marokane welcomed the affirmation, stressing that the utility “remains focused on delivering the turnaround plan” and that a year without load shedding marks a turning point for grid stability and energy security. He linked the progress to broader market liberalisation and the integration of renewable energy sources, underscoring that the Eskom grid split is part of a larger transformation agenda aimed at a more resilient, competitive power sector.
The balancing act is clear: while a cleaner, more reliable grid bolsters operational performance, the financial engineering required to separate transmission assets must be handled with care to protect creditors and sustain the utility’s long‑term solvency. The next few months will reveal whether South Africa can untangle its power system without compromising the very credit foundations that underpin the nation’s energy future.