Fitch Ratings downgrades Eskom’s IDR to B+

first_imgCoronavirus to impact operations UNDP China, CCIEE launch report to facilitate low-carbon development Fitch has also downgraded the senior unsecured debt to ‘B+’/’RR4’ from ‘BB-‘ and the senior unsecured guaranteed debt to ‘BB’ from ‘BB+’. Read more about:EskomCorporate governance BRICS The credit ratings agency will review Eskom’s national ratings following the re-calibration of its national ratings scale as a result of the sovereign downgrade. Generation Eskom has so far ensured the continuation of all its operations because electricity and the supply of coal are classified as essential services by the South African government. Sign up for the ESI Africa newsletter Finance and Policy The credit ratings company stated that the continuing equity support, together with the implicit support afforded by a 10-year government budget framework, highlights the strong links between the government and Eskom. However, Fitch expects revenue, volume and receivable collections to be adversely affected by the coronavirus pandemic, partly mitigated by decreasing primary energy costs related to lower use of expensive open-cycle gas turbine (OCGT) generation capacity and lower legacy maintenance capex. Eskom management estimates the adverse impact on revenues and collections to be totally about R5 billion for the initial 21-day lockdown.center_img AFD and Eskom commit to a competitive electricity sector The ratings agency stated: “While we have not changed the assessment of Eskom’s Standalone Credit Profile (SCP) of ‘ccc-‘, we believe that higher liquidity, in addition to the agreed state equity support and planned external debt financing, would be needed should the lockdown persist longer than that currently defined by the government. TAGScorporate governanceEskomSouth Africa Previous articleFinanciers appointed for 15MW Kaptis hydropower projectNext articleAfrica Energy Forum relocates to Amsterdam from 20-22 October 2020 Babalwa BunganeBabalwa Bungane is the content producer for ESI Africa – Clarion Events Africa. Babalwa has been writing for the publication for over five years. She also contributes to sister publications; Smart Energy International and Power Engineering International. Babalwa is a social media enthusiast. “Eskom management could also need to look into internal measures such as cost saving initiatives or capex reduction in order to preserve cash. We understand that Eskom remains in regular discussions with the South Africa Treasury regarding its operational and financial situation. Low carbon, solar future could increase jobs in the future – SAPVIA Image source: Waldo Swiegers. Bloomberg “We will continue to monitor the situation, incorporating Eskom’s ongoing mitigation efforts and formal guidance from the government related to the duration of the shutdown, which has been recently prolonged by additional two weeks,” stated Fitch Ratings. The downgrade and subsequent negative outlook for Eskom follows that of the sovereign, South Africa (BB/Negative). RELATED ARTICLESMORE FROM AUTHOR Fitch Ratings has downgraded Eskom’s Long-Term Local-Currency Issuer Default Rating (IDR) to ‘B+’ from ‘BB-‘ with a negative outlook. “Eskom’s rating is driven by that of the sovereign (top-down -2 notches) due to our view of the strength of the links between Eskom and the state under our Government-Related Entities Rating Criteria, Fitch explained.last_img read more