Despite having its long term credit rating downgraded by two international ratings agencies, Eskom on Wednesday said it remains positive that its funding plan will succeed.

Standard and Poor’s Global Ratings (S&P) lowered the state power utility’s long-term foreign and local currency corporate credit rating to ‘B-’ from ‘B+’, with a negative outlook. S&P simultaneously revised Eskom stand-alone credit profile (SACP) to ‘ccc-‘ from ‘ccc+’.

From bad to worse

At the same time, Moody’s Investor Services (Moody’s) also downgraded Eskom’s long-term corporate family rating (CFR) to ‘Ba3’ from ‘Ba2’. The zero coupon eurobonds rating has similarly been revised to ‘Ba3 from ‘Ba2’ in line with the CFR and the global medium term note (GMTN) programme. The senior unsecured GMTNs of Eskom has been downgraded to ‘(P)B1/B1’ from ‘(P)Ba3/Ba3’. All of Moody’s ratings remain under review for further downgrades.

Eskom said that while the rating decisions by both rating agencies are largely driven by the downgrade of the sovereign credit rating, the rating agencies also cited the utility’s deteriorating liquidity levels and continued constraint access to funding as some of the drivers for the actions.

S&P and Moody’s have also highlighted their assessment of the assumed likelihood of timeous government support for Eskom from ‘extremely high’ to ‘very high’ and from ‘high to strong’, respectively.

Working towards financial sustainability

Eskom’s Acting Chief Financial Officer, Calib Cassim, said the utility remains committed to ensuring an improvement of our liquidity levels and restoring the positive lender and investor sentiment to unlock access to the markets.

“We remain positive that with the co-operation of the relevant participants, the funding plan can still be executed, albeit under challenging conditions. This will strengthen our liquidity and propel us towards positive cash flows”.

Interim Group Chief Executive, Sean Maritz, said Eskom will continue to engage with the relevant key stakeholders to ensure that current governance-related issues are expeditiously resolved.

“We believe that the resolution of the governance-related issues will move Eskom towards improved financial sustainability and ensure security of power supply to continue aiding the country’s economic growth path.”