Moody’s Investors Service has affirmed Eskom’s credit rating with a negative outlook, following the affirmation of the country’s sovereign credit rating.
The power utility was placed on review for a potential downgrade in March.
“The confirmation of Eskom’s Ba1 senior unsecured ratings reflects the expected stabilisation of the South African government’s credit profile”, Moody’s said.
The rating agency said Eskom’s senior unsecured bond ratings are primarily driven by Moody’s estimate of a high level of potential government support in case of financial distress.
Moody’s noted that Eskom was already benefiting from a R350bn Government Guarantee Framework Agreement, as well as a R60bn shareholder loan, which was converted into equity in 2015 and the recent R23bn equity injection received by the company during the the 2015/2016 financial year.
It added that Eskom’s outlook could be revised to stable if the company continued to improve and stabilise its operational and financial performance.
Eskom said on Tuesday that it was pleased with Moody’s decision.
“Removing Eskom from a review for downgrade status demonstrate the commitment by Eskom and the government to stabilise the company’s operational and financial profile,” said chief financial officer Anoj Singh in a statement.
“Eskom will continue to implement initiatives that will ensure that the company achieves long-term financial sustainability while moving towards an improved credit profile.”
