https://www.engineeringnews.co.za

S&P's downgrades Eskom further into junk territory

CFO Anoj Singh

CFO Anoj Singh

Photo by Duane Daws

25th November 2016

By: Reuters

  

Font size: - +

Standard & Poor's Global Ratings on Friday cut South African power utility Eskom's credit rating a further notch into subinvestment, raising concerns the country's sovereign rating would also be dragged into junk status.

S&P's, which has South Africa's debt on the lowest investment level with a negative outlook, cut Eskom's long-term corporate credit rating to BB from BB+, two steps below the investment threshold.

Eskom's 2026 bond weakened on the news, with the yield adding 2.5 basis points by close of trade.

The ratings firm flagged financial pressures faced by Eskom due to the uncertain tariff path resulting from the utility's ongoing court case against the national energy regulator as a reason for the downgrade.

In August a South African court struck down some of the tariff increases granted to Eskom in 2016.

S&P's is due to publish its decision on South Africa's sovereign rating next Friday on December 2.

Some analysts say the move to cut the utility's rating could be a precursor to a downgrade of the sovereign.

"Seems like a major move ahead of next week. Maybe it increases the chances of a downgrade end next week given the interdependence of parastatal ratings with the sovereign," said London-based Africa analyst at Nomura Peter Attard Montalto.

Eskom said it was disappointed by the decision by S&P's, but was confident that its balance sheet put it good stead.

"This one notch ratings downgrade will not have a material impact on Eskom’s funding plans for the financial year ending 31 March 201," the utility's CFO Anoj Singh said in a statement.

Eskom, South Africa's sole power supplier, is keen to build new nuclear stations to generate an additional 9.6 gigawatts of nuclear power, but has faced mounting opposition to the plan, with critics saying that it would be unaffordable at an estimated price of up to 1 trillion rand ($71 billion).

Ratings agency Fitch on Friday affirmed South Africa's investment-grade credit rating at one notch above 'junk' on Friday but changed its outlook to negative from stable, warning that political risks could hurt growth.

Edited by Creamer Media Reporter

Comments

Showroom

Aqs image
AQS Liquid Transfer

AxFlow AQS Liquid Transfer (Pty) Ltd is an Importer and Distributor of Pumps in Southern Africa

VISIT SHOWROOM 
WearCheck
WearCheck

Leading condition monitoring specialists, WearCheck, help boost machinery lifespan and reduce catastrophic component failure through the scientific...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.074 0.123s - 137pq - 2rq
Subscribe Now