Moody’s down­grades Eskom and gives it a neg­a­tive out­look

The Star Early Edition - - NEWS - Sizwe Dlamini

ESKOM felt the brunt of the low­er­ing of the coun­try’s credit rat­ing by Moody’s In­vestors Ser­vice when the rat­ing agency down­graded the state-owned util­ity and gave it a neg­a­tive out­look.

Moody’s down­graded the power util­ity’s long-term cor­po­rate fam­ily rat­ing (CFR) to Ba2 from Ba1 and the zero coupon eu­robonds to Ba2 from Ba1 in line with the CFR. It said this ac­tion on Eskom re­flected the weak­en­ing of South Africa’s sov­er­eign rat­ing’s credit pro­file fol­low­ing the down­grade of the coun­try’s gov­ern­ment bond rat­ings to Baa3 from Baa2, neg­a­tive out­look.

The rat­ings agency said given Eskom’s weak stand­alone credit qual­ity, its rat­ings re­lied on the sup­port that Moody’s con­sid­ered would be pro­vided by the gov­ern­ment of South Africa. “The neg­a­tive out­look re­flects the neg­a­tive out­look on the gov­ern­ment of South Africa,” Moody’s said.

Eskom’s chief fi­nan­cial of­fi­cer, Anoj Singh, said: “We note the Moody’s rat­ing ac­tion as pri­mar­ily driven by the down­grade of the sov­er­eign credit rat­ing.” Be­ing down­graded is known to im­pact the abil­ity to bor­row money as in­vestors see it as a riskier bet and de­mand higher re­turns.

“Eskom has se­cured 53 per­cent 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,” Singh said.

Could sta­bilise

Ac­cord­ing to Moody’s the out­look on the rat­ings could sta­bilise if: the rat­ings out­look was changed to sta­ble; Moody’s as­sess­ment of high gov­ern­ment sup­port for the com­pany re­mained un­changed, and the com­pany’s op­er­a­tional and liq­uid­ity pro­file were to con­tinue to sta­bilise.

“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 fi­nan­cial year fund­ing re­quire­ment,” said Singh.


An Eskom coal fired power sta­tions near Jo­han­nes­burg. The na­tional power sup­ply com­pany has been slapped with a down­grade by Moody’s with a neg­a­tive out­look.

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