Downgrade won’t pull plug on Eskom
Power utility remains confident despite challenging market conditions
MOODY’S Investors Service has downgraded Eskom’s credit ratings – a day after announcing a downgrade of South Africa’s five major banks.
In a statement yesterday, Eskom announced Moody’s had downgraded the corporate family rating (CFR) of Eskom to Ba2 from Ba1.
The downgrade followed the agency’s decision to downgrade South Africa’s sovereign credit rating by a notch to Baa3 with a negative outlook on June 9.
“We note Moody’s rating action as primarily driven by the downgrade of the sovereign credit rating,” Eskom chief financial officer Anoj Singh said.
“Eskom secured 53% of this fiscal year’s funding requirement and we remain resolute of fully executing the required funding for the year, albeit under challenging market conditions.
“Our liquidity levels remain healthy, and 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 2017/18 funding requirement.”
On Tuesday, Moody’s pointed to a weakening government credit profile leading to its reduced capacity to provide support to banks in case of need when it downgraded the five largest South African banks with a negative outlook.
Moody’s downgraded the long-term local and foreign-currency deposit ratings of the banks one notch above investment grade to Baa3 with a negative outlook from Baa2. The downgraded banks were Standard Bank, FirstRand Bank, Absa, Nedbank and Investec.
Moody’s said the primary driver for downgrades was the challenging operating environment in South Africa, characterised