On Thursday, Eskom stated that Fitch Ratings has affirmed it’s ‘BBB-‘ long-term local currency Issuer Default Rating (IDR) on Eskom and revised the company’s outlook to negative from stable.
The revision of Eskom’s outlook reflects the change in outlook on South Africa’s long-term IDR to negative from stable as announced by Fitch on Friday, 25 November 2016.
In an earlier statement, the parastatal: “The rating agency cites the increased financial pressure faced by Eskom due to the uncertain tariff path resulting from the ongoing court case against NERSA; they also expressed concern over uncertainty around Government’s decision to extend the current R350 billion ($25 billion) Government Framework Agreement (GFA) availability period extension.”
Fitch long-term credit rating
In their assessment, Fitch acknowledges Eskom’s continued access to funding supported by the GFA; addition of new capacity to the grid; and improved operational performance which resulted in an improvement of the company’s Energy Availability Factor (EAF) as some of the elements that are yielding positive results for Eskom’s business profile.
The rating agency does however signal the challenges that the company may have to contend with in the event that the GFA expires, the Power Company expressed.
“Eskom welcomes Fitch’s decision to affirm our credit rating at ‘BBB-‘. We view Fitch’s and Moody’s (published earlier this week) rating affirmations as an indication of the positive financial and operational results achieved by the business. We are acutely aware of the concerns raised by the rating agency and continue to engage with the relevant stakeholders to expediently resolve these issues”, said Anoj Singh, Eskom chief financial officer.
Eskom earlier credit rating
In August, the Fitch Ratings agency had downgraded the utility’s Long-term local currency Issuer Default Rating (IDR) to ‘BBB’.
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.
At the time, the utility said that it’s National long-term and short-term ratings remain unchanged.