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The Johannesburg Stock Exchange (JSE) has announced that Eskom’s bonds face suspension on the bourse as a result of the utility’s failure to publish its interim results. The JSE requires companies whose shares or bonds trade on its systems to produce financial results every six months, and Eskom’s interim results for the six months to end-September needed to be published by December 31 to meet the JSE’s rules. This deadline was missed.

Eskom bonds at risk of suspension“Accordingly, this announcement is issued to warn holders of debt securities [that] if the issuer fails to submit its interim report on or before January 31, the issuer’s debt securities and the issuer’s registration of the programme memorandum may be suspended in accordance with the provisions of the JSE’s debt listings requirements,” the JSE said in a statement.

The release of Eskom's interim results has been postponed repeatedly since November 2017. In a statement issued in December, the utility said that it was postponing its interim results announcement until “early next year (2018)” to review the impact of the 5.23% price increase granted by the National Energy Regulator of South Africa, and to allow its new board to review the financials.

Some media have since reported that Eskom is seriously considering challenging Nersa’s decision to grant it a 5.23% tariff increase for next year, as opposed to the 19.9% it applied for, in court. The increase will take effect on April 1 and July 1 2018 for Eskom’s direct customers for municipalities respectively, and is valid for a year.

Sources indicate that Eskom is expected to scrutinise Nersa’s decision and ask the High Court to determine whether Nersa has acted in accordance with legislation and whether this drastic departure from the thinking that underpinned previous decisions complies with the same prescribed methodology. If not, the High Court could set the determination of tariffs and suspend the decision while referring it back to Nersa to reassess the application.

In the meantime, trading can still take place pending the JSE’s final decision on whether it will suspend Eskom’s bonds or not, despite the fact that Moody’s cut the credit rating of Eskom’s bonds to its third rung of junk of Ba3 while S&P Global Ratings cut the power utility’s bonds to its sixth level of junk rating, B- in November last year.

Image credit: Copyright: fgnopporn / 123RF Stock Photo

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