Eskom notes rating decision

Pretoria - Eskom has expressed regret at rating agency Standard and Poor’s decision to downgrade the power utility’s long-term corporate credit rating.

“Eskom Holdings SOC Ltd. notes with regret the rating action announced by Standard and Poor’s to lower the company’s long-term corporate credit rating to 'BB' from 'BB+', outlook remains negative,” said the power utility on Friday.

The rating agency cites the increased financial pressure faced by Eskom due to the uncertain tariff path resulting from the ongoing court case against the National Energy Regulator of South Africa (Nersa).

The agency also expressed concern over uncertainty around government’s decision to extend the current R350 billion Government Framework Agreement (GFA) availability period extension. As it currently stands, the GFA will expire on 31 March 2017.

“We are confident that the current process to extend the GFA availability period will be achieved to address the rating agency’s concern. It is clear from this ratings announcement that regulatory and tariff certainty is critical for Eskom’s financial sustainability; therefore the conclusion of the ongoing court case against NERSA is imperative for the determination of an appropriate tariff regime,” said Eskom’s Chief Financial Officer Anoj Singh.

“Importantly, this 1- notch ratings downgrade will not have a material impact on Eskom’s funding plans for the financial year ending 31 March 2017. Eskom has secured funding of 86% for this period and this we believe will mitigate possible liquidity risks,” he said. –