Pretoria - Eskom has acknowledged Moody’s affirmation of the company’s long-term foreign currency rating with a negative outlook and the downgrading of the company’s standalone credit quality.
On Friday, the credit ratings agency simultaneously affirmed Eskom’s long-term foreign currency rating with a negative outlook and downgraded the company’s standalone credit quality by one notch.
Moody’s stated that the affirmation of Eskom’s Baa3 rating with a negative outlook reflected that the state-owned utility continued to be of critical strategic and economic importance to South Africa.
Moody’s attributes the downgrade of Eskom’s standalone credit quality to uncertainty over the evolution of Eskom’s investment programme and financial profile over the medium term; limited potential for improvement in the company’s weak financial metrics based on the National Energy Regulator of South Africa’s multi-year price determination (MYPD3) decision, and the significant challenges facing Eskom in relation to the management of operating costs in the context of a stretched electricity system until new generation comes on stream.
In 2010, government announced that it had approved the increase in Eskom guarantees to R350 billion. The R350 billion included the R175.97 billion worth of guarantees announced in February 2009. The guarantees are also in addition to the R60 billion subordinated loan from government, which was approved in July 2008.
“We acknowledge Moody’s affirmation and action and we are comfortable with the measures we are taking, with the continued support of our shareholder, to move towards a more sustainable financial profile over the long-term,” said Eskom chief executive officer Brian Dames on Sunday.
Acting Chief Financial Officer Caroline Henry said although the downgrade of Eskom’s standalone credit quality was a “challenge”, the company remained focused on developing a satisfactory response to Nersa’s MYPD3 decision.
In February, Nersa granted the power parastatal an 8% tariff increase over the course of the next five years of MYPD3.
In its application to Nersa in October 2012 for a tariff hike, Eskom asked the regulator to grant it a total 16% hike over the course of a five-year period. The total 16% would be split, with 13% going to the parastatal’s own needs and 3% to support the introduction of Independent Power Producers. - SAnews.gov.za
