Fitch downgrades Eskom’s default rating to ‘BBB’
Ratings agency Fitch has downgraded South African utility Eskom’s long-term local currency issuer default rating (IDR) to 'BBB' from 'BBB+', reflecting the recent downgrade of South Africa's long-term local currency IDR to 'BBB.'
This as the company said it continued to consider the links between Eskom and the South African government of as strong, as evidenced by the Guarantee Framework Agreement (GFA) and, most recently, by the equity conversion of the government's subordinated loan to Eskom.
Fitch's expectation of additional equity contributions in the 2016 financial year also supported the alignment of Eskom's IDR with that of the sovereign.
Fitch, meanwhile, viewed Eskom's standalone creditworthiness as 'B-', reflecting its high leverage, negative free cash flow and weak liquidity position.
While operating profitability has improved, increased debt had resulted in a slight deterioration in both the leverage and coverage metrics for the 2015 financial year.
“Fitch expects Eskom's standalone credit metrics to worsen in 2016. However, [we] forecast the combination of the announced sovereign support and improved trading expectations – largely driven by tariff increases – to result in relatively stable leverage for the year,” it said in a statement on Monday.
Meanwhile, the agency viewed positively the permanent appointment of Brian Molefe as CEO and Anoj Singh as CFO, delivering clarity to the group's executive management and addressing near-term uncertainty over governance and strategic direction.
Commenting on rating sensitivities, Fitch said future developments that could lead to a downgrade included a decline in government support or a downgrade of South Africa's sovereign rating, as well as the failure to achieve more cost-reflective tariffs in the absence of increased government support.
Comments
The
content
you are trying to access is only available to subscribers.
If you are already a subscriber, you can Login Here.
If you are not a subscriber, you can subscribe now, by selecting one of the below options.
For more information or assistance, please contact us at subscriptions@creamermedia.co.za.
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?
Receive 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)
➕
Recieve 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
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation