Eskom notes rating agency downgrade

Wednesday, June 14, 2017

Pretoria - Power utility Eskom has noted Moody’s decision to downgrade it to Ba2 from Ba1.

In a statement on Wednesday, the power utility said it had been downgraded following the rating agency’s decision to downgrade South Africa’s credit rating by one notch (to Baa3 with a negative outlook) on Friday.

“Therefore, Moody’s has downgraded the corporate family rating (CFR) of Eskom Holdings SOC Limited (Eskom) to Ba2 from Ba1. The rating agency also revised the senior zero coupon Eurobonds rating to Ba2 from Ba1 in line with the CFR,” said Eskom of Tuesday’s downgrade.

Simultaneously, Moody’s has downgraded to Ba3/ (P) Ba3 respectively the unsecured global medium term notes (GMTN) and GMTN programme of Eskom.

The outlook on all ratings is negative.

“We note the Moody’s rating action as primarily driven by the downgrade of the Sovereign credit rating. Eskom has secured 53% of this fiscal year’s funding requirement and we remain resolute that we will fully execute the required funding for the year, albeit under challenging market conditions,” said Eskom’s Chief Financial Officer, Anoj Singh.

Singh said the power utility’s liquidity levels remain healthy and that Eskom’s financial profile continues to improve and stabilise.

“Backed by the availability of the government guarantees and the stable financial profile; we do not foresee significant impediments in the execution of the remainder of the FY17/18 funding requirement,” said Singh.

Eskom is among a total 11 companies that were downgraded by the rating agency on Tuesday.

In announcing its decision to downgrade South Africa on Friday, Moody’s said the downgrade was driven by the weakening of the country’s institutional strength, reduced growth prospects reflecting policy uncertainty and slower progress with structural reforms.

The rating agency also cited the continued erosion of fiscal strength due to rising public debt and contingent liabilities.

The decision still puts the country at investment grade. –

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