Johannesburg - Moody’s has on Friday simultaneously affirmed Eskom’s long-term foreign currency rating with a negative outlook and downgraded the company’s standalone credit quality by one notch.
In their statement, Moody’s states that the affirmation of Eskom’s Baa3 rating with a negative outlook reflects that the state-owned group continues to be of critical strategic and economic importance to South Africa as the country’s dominant electric utility.
This view is reflected in the “high” level of government support factored in the rating under Moody’s rating methodology for government-related issuers.
Moody’s also points out that Eskom’s Baa3 senior unsecured debt ratings relate to bonds and a note programme that are not supported by the government guarantee.
Moody’s attributes the downgrade of Eskom’s standalone credit quality to uncertainty over the evolution of Eskom’s investment programme and financial profile over the medium term.
It sees limited potential for improvement in the company’s weak financial metrics based on the National Energy Regulator of South Africa’s (Nersa’s) multi-year price determination decision.
Eskom is, furthermore, facing significant challenges in relation to the
management of operating costs in the context of a stretched electricity system until new generation comes on stream.
“Eskom notes Moody’s affirmation of our credit rating. Although the downgrade of our standalone credit quality is a challenge, we remain focused on developing a satisfactory response to Nersa’s decision,” said Caroline Henry, Eskom’s acting chief
financial officer in a statement.
Eskom Chief Executive Brian Dames said Eskom is comfortable with the measures it is taking, with the continued support of its shareholder, to move towards a more sustainable financial profile over the
long-term.
In addition, the Reserve Bank governor, Gill Marcus has warned that South Africa’s economy may not grow as expected due to electricity supply shortages.
This is one of the reasons leading to the International Monetary Fund lowering its growth forecast from 2.8% to 2%.
According Arthur Chien, CEO of Talesun Energy, a supplier of solar energy, said in reaction to Moody's affirmation that it highlights the need to reduce South Africa’s dependence on energy sources such as coal fired power stations.
These power stations are currently under strain and the use of renewable sources into its energy mix is needed.
Chien said that as the need for electricity increases, the nation needs to look for alternate energy sources, to avoid widespread power shortages from occurring.
"South Africa is a country that has the potential to produce abundant amounts of solar energy due to the magnitude of sunshine it receives," he said.
"In addition, the beauty of solar energy is that it is renewable and therefore sustainable for the environment."
In their statement, Moody’s states that the affirmation of Eskom’s Baa3 rating with a negative outlook reflects that the state-owned group continues to be of critical strategic and economic importance to South Africa as the country’s dominant electric utility.
This view is reflected in the “high” level of government support factored in the rating under Moody’s rating methodology for government-related issuers.
Moody’s also points out that Eskom’s Baa3 senior unsecured debt ratings relate to bonds and a note programme that are not supported by the government guarantee.
Moody’s attributes the downgrade of Eskom’s standalone credit quality to uncertainty over the evolution of Eskom’s investment programme and financial profile over the medium term.
It sees limited potential for improvement in the company’s weak financial metrics based on the National Energy Regulator of South Africa’s (Nersa’s) multi-year price determination decision.
Eskom is, furthermore, facing significant challenges in relation to the
management of operating costs in the context of a stretched electricity system until new generation comes on stream.
“Eskom notes Moody’s affirmation of our credit rating. Although the downgrade of our standalone credit quality is a challenge, we remain focused on developing a satisfactory response to Nersa’s decision,” said Caroline Henry, Eskom’s acting chief
financial officer in a statement.
Eskom Chief Executive Brian Dames said Eskom is comfortable with the measures it is taking, with the continued support of its shareholder, to move towards a more sustainable financial profile over the
long-term.
In addition, the Reserve Bank governor, Gill Marcus has warned that South Africa’s economy may not grow as expected due to electricity supply shortages.
This is one of the reasons leading to the International Monetary Fund lowering its growth forecast from 2.8% to 2%.
According Arthur Chien, CEO of Talesun Energy, a supplier of solar energy, said in reaction to Moody's affirmation that it highlights the need to reduce South Africa’s dependence on energy sources such as coal fired power stations.
These power stations are currently under strain and the use of renewable sources into its energy mix is needed.
Chien said that as the need for electricity increases, the nation needs to look for alternate energy sources, to avoid widespread power shortages from occurring.
"South Africa is a country that has the potential to produce abundant amounts of solar energy due to the magnitude of sunshine it receives," he said.
"In addition, the beauty of solar energy is that it is renewable and therefore sustainable for the environment."