South Africa’s State-owned power utility, Eskom, has expressed regret at the decision of international rating agency Standard and Poor’s to downgrade its long-term corporate credit rating.
“Eskom Holdings SOC Ltd. notes with regret the rating action announced by Standard and Poor’s to lower the company’s long-term corporate credit rating to ‘BB’ from ‘BB ‘, with outlook remaining negative,” said the power utility in a statement.
The rating agency had cited the increased financial pressure faced by Eskom as a result of the uncertain tariff path resulting from the ongoing court case against the National Energy Regulator of South Africa (Nersa).
The S&P had also expressed concern over uncertainty around the government’s decision to extend the current 350 billion Rand (about 25 billion US dollars) Government Framework Agreement (GFA) availability period extension. As it currently stands, the GFA will expire on March 31, 2017.
The Eskom statement said the power utility was confident that the current process to extend the GFA availability period would be achieved to address the rating agency’s concern.
“It is clear from this ratings announcement that regulatory and tariff certainty is critical for Eskom’s financial sustainability; therefore the conclusion of the ongoing court case against NERSA is imperative for the determination of an appropriate tariff regime,” the statement quoted Eskom’s Chief Financial Officer, Anoj Singh, as saying.
“Importantly, this 1-notch ratings downgrade will not have a material impact on Eskom’s funding plans for the financial year ending 31 March 2017. Eskom has secured funding of 86 per cent for this period and this we believe will mitigate possible liquidity risks.”
Source: NAM NEWS NETWORK