Eskom escapes Fitch downgrade ratings cut but stays on negative watch

Cape Town – Global ratings agency Fitch on Wednesday affirmed Eskom’s ‘BB-‘ credit rating, despite its liquidity challenges. This announcement comes as South Africans are waiting to hear if load shedding will become a reality this winter.

The power utility was dealt a setback earlier this year when Fitch Ratings and S&P Global Ratings downgraded its bonds to junk.

Fitch affirmed Eskom’s long-term local currency issuer default rating (IDR) and unguaranteed local currency senior unsecured ratings at speculative grade of ‘BB-‘.

Eskom acting CEO Phakamani Hadbe said, “We are encouraged by Fitch Ratings’ decision to affirm Eskom’s credit ratings.”

Fitch also maintained the national long-term rating at ‘A(zaf)’ and the national short-term rating at ‘F1(zaf)’.

The rating agency affirmed the government-guaranteed local currency senior unsecured debt ratings at ‘BB+’, in line with the rating of South Africa.

However, Eskom’s credit ratings, except for the government guaranteed debt, remain on rating watch negative (RWN) as instituted by Fitch in January 2018.

The power utility acknowledges the continuing RWN status, said Hadebe, who is set to brief the public on the state of the system from Megawatt Park on Thursday.

“To ensure Eskom’s future sustainability the Eskom board has embarked on a turnaround business strategy with a core focus on financial viability, continued strong operational performance and the complete resolution of governance related challenges,” he explained in a statement.

Although Fitch noted Eskom’s positive strides in addressing its liquidity challenges, it maintains that these challenges remain the main rationale for its RWN position on the company’s rating.

“The rating agency is cognisant of the positive measures that have been implemented by the new board and management to turn the company around in their short tenure at Eskom,” Fitch said in a statement.

Eskom raised R57bn from the financial markets for the year ending March 31 2018, R43bn of which was raised between January and March 2018. This occurred after a new board was appointed to rescue the ailing state-owned entity.

“We are reassured by the rating agency’s acknowledgement of the progress made to date and we are confident that the positive trajectory will continue to a point where the company attains acceptable operational and financial sustainability,” Hadebe said.

Article sourced from Fin24

Photo Credit- Al Bawaba

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