Moody's downgrades Eskom’s unguaranteed credit ratings

Wednesday, November 6, 2019

Eskom has noted rating agency Moody’s downgrade of its unguaranteed credit ratings.

Moody’s downgraded to ‘B3’ from ‘B2’ the long-term corporate family rating (CFR) of Eskom. The zero coupon Eurobonds rating has similarly been revised to ‘B3’ from ‘B2’, in line with the CFR and the global medium term note (GMTN) programme. The senior unsecured GMTNs of Eskom were downgraded to ‘(P) Caa1/Caa1 from (P) B3/B3 with the outlook remaining negative.

Moody’s has simultaneously affirmed the Baa3 rating on Eskom’s government guaranteed notes.

“Eskom notes with disappointment the ratings decisions implemented by Moody’s. The current board and management have worked painstakingly hard to try and resolve corporate governance issues of the past regime,” said the power utility on Tuesday.

The power utility said it continues to implement the generation recovery nine-point plan to stabilise plants and the security of supply.

While the system has been constrained, Eskom has endeavoured to provide a secure and stable electricity supply.

Eskom’s Acting Group Chief Executive and Interim Executive Chairman, Jabu Mabuza, said the utility acknowledges the concerns raised by Moody’s.

“We acknowledge the concerns expressed by Moody’s and continue to work closely with shareholder ministries to resolve the current challenges.

“Whichever option gets implemented through the unbundling processes, we will ensure that our creditors will not be compromised and that the execution of these options gets done under acceptable legal frameworks. Our electricity supply system remains fairly constrained but we are doing everything we can to make sure that the supply is not compromised,” said Mabuza.

Eskom’s downgrade follows the rating agency’s decision last week to affirm South Africa’s long term foreign and local currency debt ratings at ‘Baa3’ and also revise the outlook to negative from stable.

At the time, government noted the decision, saying that South Africa’s credit ratings by Moody’s remain investment grade (one notch above non-investment grade).

The agency further acknowledged the South African Reserve Bank’s demonstration of a good track record in implementing credible and effective monetary policy and preserving financial stability.

“The rating affirmation affords South Africa a narrow window to demonstrate faster and concrete implementation of reforms that are already underway, aimed at lifting growth and returning public finances to a more sustainable path. Economic reforms have to be implemented without delay,” said National Treasury at the time. –