Fitch Ratings on Wednesday upgraded the national ratings of State-owned utilities Eskom and Rand Water, adding that the outlook on the long-term ratings of both organisations was stable.
Eskom’s national long-term rating was upgraded from 'AA+(zaf)' to 'AAA(zaf)', while Rand Water’s national long-term rating was upgraded from 'AA(zaf)' to 'AA+(zaf)'.
Fitch stated that the upgrades reflected a recalibration of the higher end of the South African national rating scale, while Fitch's assessment of fundamental issuer-specific credit considerations, including the strong links between the companies and the State, remained unchanged.
Meanwhile, Eskom’s national short-term rating was affirmed at 'F1+(zaf)'.
Fitch explained that Eskom's ratings were aligned with the sovereign ratings and continued to reflect its strong links with the State, including direct government guarantees for a large part of the company's debt.
In 2011 the South African government increased guarantees awarded to Eskom from R176-billion to R350-billion, of which R138-billion had been used to date.
Eskom welcomed the upgrade by Fitch, including the affirmation of the stable outlook.
“The positive rating action is very helpful at this critical time as Eskom continues to execute the current build programme. A positive rating adjustment will assist Eskom in accessing funding in capital markets and it will improve investor confidence,” Eskom CEO Brian Dames said.
Further, Rand Water’s national short-term rating was affirmed at 'F1+(zaf)' and its national senior unsecured rating was upgraded to 'AA+(zaf)' from 'AA(zaf)'.
The ratings agency said Rand Water's ratings were one notch below the sovereign ratings and continued to reflect its strong links with the State.
“The one notch differential reflects the lack of direct government guarantees for a large part of the company's debt,” Fitch explained.