Moody’s Investor Services (Moody’s) has downgraded to B2 from B1 Eskom’s long-term corporate family rating (CFR). The zero coupon eurobonds rating has similarly been revised to ‘B2’ from ‘B1’ in line with the CFR and the global medium term note (GMTN) programme and the senior unsecured GMTNs of Eskom were also downgraded to ‘(P)B3/B3 from (P)B2/B2’.
The outlook is negative.
While the downgrade is disappointing, it is worth noting that in its decision, Moody’s acknowledges the positive strides that the new Board and the new Interim Group Chief Executive have made in the two-month period that they have led the organisation.
The three issues of concern raised by the rating agency centre around the inadequate tariff increases in the face of flat demand, no tangible government support and a lack of a resilient business strategy that will ensure Eskom’s sustainability.
The new Eskom Board is investing a considerable amount of time in formulating a comprehensive long-term strategy and plan that will place Eskom’s business on a firmer footing.
We are confident that the execution of the turnaround strategy will be accompanied by positive gains.
“While we are disappointed with Moody’s decision at this stage, the future looks promising. We have addressed the liquidity issue and other key challenges. The new Board and Eskom leadership are swiftly moving into the second intervention stage by formulating an integrated strategy that will yield favourable results. The positive sentiments expressed by Moody’s encourage us to work even harder to ensure the execution of this strategy. I am confident that we will stabilise the credit profile of Eskom and improve its credit rating,” says Phakamani Hadebe, Eskom Interim Group Chief Executive Officer.