16 January 2013 – Credit rating agency Fitch on Friday 11 January 2013 downgraded Eskom’s local currency rating by one notch, following the downgrade by Fitch of South Africa’s sovereign rating on 10 January 2013. Fitch has, however, revised its outlook on Eskom from negative to stable.
Fitch conducts only local currency and national ratings for Eskom, in contrast to Moody’s and Standard & Poor’s which do both local and foreign currency ratings. Fitch has downgraded Eskom’s long-term local currency issuer default rating (IDR) and its senior unsecured local currency rating to BBB+ from A, with the outlook revised to stable from negative.
In its statement Fitch affirmed that Eskom’s ratings remain linked to the sovereign ratings of South Africa, in line with the agency’s parent and subsidiary rating linkage criteria, and the agency’s assessment of the critical role of Eskom in the South African economy.’
Fitch also stated that future developments which could lead to positive rating actions for Eskom included an upgrade of South Africa’s sovereign rating, provided that the strength of Eskom’s links with the sovereign do not weaken.
Eskom has noted the action by Fitch, which follows recent downgrades by Standard & Poor’s and Moody’s. The Fitch local currency rating remains the highest of the three agencies and carries a stable outlook. Credit ratings by rating agencies influence the cost and availability of Eskom’s debt.
“We have taken note of the rating agencies’ analysis of the challenges facing Eskom. Their comments highlight the electricity industry’s need for regulatory and policy certainty, as well as the need for Eskom to be financially sustainable,” Eskom chief executive Brian Dames says.
Paul O’Flaherty, Eskom finance director says, “We note the ratings review and action announced by Fitch and agree that the current support from the government remains strong and Eskom continues to move towards more sustainable credit parameters.”