JOHANNESBURG, January 31 – South Africa’s power utility Eskom on Wednesday said that it “noted” the decision by Fitch Ratings Agency to downgrade its long-term local currency Issuer Default Rating (IDR) and unguaranteed local currency senior unsecured ratings to ‘BB-‘ from of ‘BB+’ and maintained the ratings on Rating Watch Negative (RWN).
Eskom interim group chief executive, Phakamani Hadebe said they firmly believe that the measures being implemented to turn the company around were yielding the favourable results.
“We have seen renewed enthusiasm from financial markets to support Eskom’s funding plan and the preliminary engagements with market participants have had positive outcomes,” Hadebe said.
“We are cognisant of the challenges that the company is dealing with and we are geared to effectively resolving these challenges and improve Eskom’s operational and financial sustainability in the interest of the South African economy.”
Fitch also affirmed the government-guaranteed local currency senior unsecured debt ratings at ‘BB+’.
In their statement, Fitch cited weakening liquidity of Eskom and the company’s uncertain capacity to fulfil its short-term financial commitments as the underpinning rationale for their decision.
On Tuesday, Eskom released its long-awaited interim results for six months ending 30 September 2017 which showed that the utility was taking “significant financial challenges”.
Eskom has a level of debt over R300 billion with its revenue falling short by two percent to R96 billion and cash from operating activities had dropped 30 percent to R22 billion.
Eskom’s liquid assets also declined to R9 billion from R30 billion a year previously. But more worrying was the group’s inability at the moment to raise capital as investors are concerned about allegations of corruption against some of its executive.
At the time, Eskom’s acting chief financial officer, Calib Cassim, said that the next few months will be difficult for the power utility.
“But we need to work speedily and with a level of urgency in order to resolve our financial challenge. We are making progress in expediently resolving Eskom’s financial challenges,” Cassim said.
“We will also continue engaging the rating agencies and the financial markets to address their concerns and improve investor sentiment and ultimately restore Eskom’s healthy liquidity position.”
On Friday, Moody’s Credit Rating agency downgraded Eskom’s long-term corporate family rating (CFR) from ‘Ba3 to B1″.
– African News Agency (ANA),