South Africa:Moody’s Downgrades Eskom CFR To B3

Moody’s Investor Services (Moody’s) has downgraded to ‘B3’ from ‘B2’ the long-term corporate family rating (CFR) of South African power utility 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 and the senior unsecured GMTNs of Eskom were downgraded to ‘(P)Caa1/Caa1 from (P)B3/B3.

The outlook remains 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.

In a statement, the utility noted that it continues to implement the Generation recovery 9-point plan to stabilise the plant and the security of supply; while the system has been constraint, they have endeavoured to provide a secure and stable electricity supply.

“The company’s liquidity levels remain at low levels, we have, however; seen a considerable amount of support for Eskom paper from the local markets and coupled with the financial support announced by government, we are cautiously confident that our debt obligations are not at risk,” the parastatal noted.

Eskom’s Acting Group Chief Executive and Interim Executive Chairman, Jabu Mabuza said: “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 constraint; but we are doing everything we can to make sure that the supply is not compromised.”