Fitch downgrades South Africa’s Eskom

McKinsey

Another South African company has come under fire from Fitch Ratings. This time around, Eskom, the country’s struggling power provider has been downgraded.

Fitch Ratings said in its statement that it has downgraded Eskom’s Long-term local currency Issuer Default Rating (IDR) and the Senior unsecured local currency rating to ‘BB+’ from ‘BBB-’.

The ratings agency has also affirmed Eskom’s National long-term and short-term ratings at ‘AAA’ and ‘F1+’, respectively. On a positive side, Fitch said the outlook is stable.

In terms of Fitch’s rating methodology for ‘Parent and Subsidiary Rating Linkage’ criteria; Eskom’s rating downgrade follows the agency’s decision to downgrade South Africa’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to ‘BB+’ from ‘BBB’ announced on Friday, 07 April 2017.

Eskom said that given its significant link and support from the South African government and the company’s high sensitivity to changes in the sovereign credit profile, Eskom’s downgrade reflects the downgrading of South Africa’s rating.

Anoj Singh, Eskom’s Chief Financial Officer said: “We note the decision by Fitch to downgrade Eskom’s credit ratings as largely driven by the downgrade of the sovereign credit rating. We also note Fitch’s revision of Eskom’s outlook to ‘Stable’ from ‘Negative’ and remain resolute in responsibly executing Eskom’s funding plan for the completion of the
current build programme and ensuring continued security of supply for the country.”