Fitch revises Eskom outlook to negative
Fitch Ratings on Thursday revised the outlook on Eskom to negative from stable and affirmed its long-term local-currency issuer default rating at BBB-.
Fitch said the revision followed the change in outlook on South Africa’s long-term local-currency issuer default rating to negative from stable late November.
The uncertainty around the approval for the guarantee framework agreement (GFA) also contributed to the negative outlook on the issuer default rating and national long-term ratings, Fitch said.
The GFA is due to expire in March 2017 and in the event this agreement is not renewed, Fitch said the share of guaranteed debt would likely be lower and it may notch down Eskom’s rating from the sovereign leading to a one-notch downgrade.
Fitch said it continued to assess the links between Eskom and the government.
Earlier this week, Moody’s Investor Services affirmed Eskom’s medium-term notes at junk, and assigned it a national scale rating of upper medium grade but gave it a negative outlook on both ratings.
Eskom welcomed Fitch’s decision to affirm the power supplier’s credit rating at ‘BBB-‘.
Eskom CFO Anoj Singh said Fitch acknowledged Eskom’s continued access to funding supported by the GFA; addition of new capacity to the grid; and improved operational performance.
“We view Fitch’s and Moody’s rating affirmations as an indication of the positive financial and operational results achieved by the business,” Singh said.
“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.”
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