Rating review: Eskom to engage with Moody’s

Eskom says it remains committed to delivering SA’s much-needed capacity, while maintaining its own financial sustainability.

Johannesburg - Eskom on Thursday said it would be engaging Moody’s Investor Services, following concerns raised by the ratings agency about the power utility’s funding risk after Futuregrowth withdrew new funding to the state-owned company.

Moody's said in a statement it was putting Eskom's Ba1 rating on review for downgrade on the grounds that its funding needs were exacerbated by the rising cost of buying power from independent producers, as well as its spending to revamp and build new power stations.

Asset manager Futuregrowth earlier this month announced its intention to suspend additional debt finance to state-owned companies, including Eskom, because of its concerns about their governance and oversight issues.

Moody’s said it placed the power utility on this review based on the “rising funding challenges faced by Eskom in the context of an adverse regulatory framework and an evolving political environment”.

Moody’s also cited last month’s North Gauteng High Court ruling that the National Energy Regulator of South Africa (Nersa) should review its decision to allow the power utility to increase electricity tariffs by 9.4 percent from April.

Moody’s said Eskom would likely continue to see a material growth in debt levels because cost-reflective tariffs were yet to be implemented.

Eskom’s chief financial officer, Anoj Singh, in a statement on Thursday described the Moody’s credit review as “unfortunate”.

“The review by Moody’s is unfortunate given the progress made towards improving the company’s financial profile, successful implementation of the operations turnaround plan and Eskom’s healthy liquidity position,” Singh said.

“We will however continue to engage with the rating agency to resolve the concerns that resulted in this decision. We remain confident that continued engagements with all relevant stakeholders and government will contribute towards a positive outcome for Eskom and the country.”

Singh said Eskom remained committed to delivering the much-needed capacity while maintaining the financial sustainability of the company.

Eskom is building new plants and transmission lines to augment a power grid that nearly collapsed in 2008 and forced the company to implement controlled blackouts, or load shedding, early last year that dented economic growth.

Meanwhile, Moody’s also placed South African National Roads Agency Limited (Sanral) on review for downgrade based on ongoing cash flows pressure, despite a number of interventions by the national government to encourage e-toll payments.

AFRICAN NEWS AGENCY & REUTERS