On Thursday, South Africa’s state-owned power utility, Eskom, announced that the Fitch Ratings agency has downgraded the utility’s Long-term local currency Issuer Default Rating (IDR) to ‘BBB’.
This follows the change in methodology and rating criteria used by the rating agency to rate sovereign and government entities.
Fitch Ratings shows stable outlook
Fitch Ratings has also affirmed the power company’s National long-term and short-term ratings at ‘AAA’ and ‘F1+’, respectively. The outlook is stable, the parastatal added in a statement.
[quote]The utility further explained that in terms of Fitch’s rating methodology for Government Related Issuers, Eskom’s rating revision is primarily driven by Fitch’s downgrade of South Africa’s Long-term local currency IDR to ‘BBB-’ from ‘BBB’.
“This decision was as a result of Fitch’s recalibration of the sovereign rating criteria; it is important to note that the revision of the rating was not because of any fundamental changes on the sovereign credit,” Eskom said.
Given Eskom’s strong link and support from the South African government and its high sensitivity to changes in the sovereign credit profile, Eskom’s downgrade reflects the downgrading of South Africa’s rating.
According to the utility, it’s National long-term and short-term ratings remain unchanged.
Anoj Singh, Eskom’s chief financial officer, said: “We note the decision by Fitch to downgrade Eskom on the back of the Sovereign downgrade; in the interests of the economy we will continue to focus on stabilising the security of supply without compromising Eskom’s financial sustainability.”