Eskom avoids downgrade following Moody’s review

State-owned electricity producer Eskom announced on Tuesday that Moody’s Investors Service (Moody’s) had affirmed the utility’s credit rating of Ba1, with a negative outlook, following an earlier affirmation of South Africa’s sovereign rating by the same agency.

In March 2016, Moody’s placed Eskom on review for a potential downgrade.

The downgrade, Eskom said, had been averted, with an indication from Moody’s of a possible revision in its outlook to “stable” if the company continued to improve and stabilise its operational and financial performance.

“Removing Eskom from a review for downgrade status demonstrates the commitment by Eskom and the government to stabilise the company’s operational and financial profile,” CFO Anoj Singh said in a statement.

Moody’s cited Eskom's strategic importance to the government's social and economic policy, as well as the prospect of a high level of government support in the event of financial distress, as a basis for its decision to affirm Eskom’s credit rating.

Eskom was already benefiting from a R350-billion Government Guarantee Framework Agreement, as well as a R60-billion shareholder loan, which was converted into equity in 2015 and the recent R23-billion equity injection received by the company during the the 2015/16 financial year.