Eskom 'disappointed' by Moody’s decision to downgrade unsecured debt

The cash-strapped utility’s unsecured debt was downgraded from B3 to B2.

FILE: Eskom board chairperson Jabu Mabuza at a press briefing at Lethabo power station. Picture: Abigail Javier/EWN

JOHANNESBURG - Eskom on Tuesday said it was disappointed by the decision from ratings agency Moody’s to downgrade its unsecured debt.

The cash-strapped utility’s unsecured debt was downgraded from B3 to B2.

This means Eskom’s ability to borrow money from international investors would be difficult and if they were able to borrow money, they would have to pay higher interest.

This also puts the state-owned enterprise six levels below investment grade.

Moody's has changed the power utility's credit rating outlook from stable to negative.

This means Moody’s next move could be another downgrade.

While Eskom’s government-guaranteed debt remained unchanged at Baa3, the downgrade comes days after a decision by Moody’s to leave SA's long term rating at Baa3.

Moody’s said the decision was due to increasing debt, bad governance and poor growth at Eskom.

Eskom said it noted with disappointment the ratings downgrade it received as the current board and management were working hard to try to get the parastatal back on track.

Board chairperson Jabu Mabuza said they acknowledged the concerns by Moody's and they were working with government to address them.

Eskom said it was hopeful that the unbundling process would ensure that creditors were not compromised, and electricity supply was not interrupted.

A poor credit rating means Eskom will also have a hard time attracting investment.