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25 Nov 2016
7:33 pm

S&P’s downgrades Eskom’s long-term corporate credit rating


The ratings agency cited the increased financial pressure faced by Eskom.

Eskom on Friday said it noted with regret the rating action announced by Standard and Poor’s to lower the company’s long-term corporate credit rating to ‘BB’ from ‘BB+’, though the outlook remained negative.

Standard and Poor’s cited the increased financial pressure faced by Eskom due to the uncertain tariff path resulting from the ongoing court case against the National Energy Regulator of South Africa (Nersa).

The ratings agency also expressed concern over uncertainty around government’s decision to extend the current R350 billion Government Framework Agreement (GFA) availability period extension which would expire at the end of March next year.

READ MORE: Fitch revises South Africa’s outlook to negative; affirms at ‘BBB-‘ rating

But Eskom chief financial officer Anoj Singh said the power utility was confident that the current process to extend the GFA availability period would be achieved to address the rating agency’s concern.

Singh said Eskom had secured funding of 86% for this period and thus believed that this would mitigate possible liquidity risks.

“It is clear from this ratings announcement that regulatory and tariff certainty is critical for Eskom’s financial sustainability; therefore the conclusion of the ongoing court case against Nersa is imperative for the determination of an appropriate tariff regime,” Singh said.

“Importantly, this 1- notch ratings downgrade will not have a material impact on Eskom’s funding plans for the financial year ending 31 March 2017.”

Meanwhile, Fitch Ratings revised South Africa’s outlook to negative from stable due to political risks and policy uncertainty within government, in-fighting within the ruling African National Congress, and weak economic growth.

– African News Agency