Moody’s downgrades Eskom
The rating agency cut the embattled utility’s credit rating to the second rung of junk status
Moody’s lowered Eskom’s credit rating to the second rung of junk status on Tuesday night.
Moody’s reduced Eskom’s rating from Ba1 to Ba2, which equates to BB in the nomenclature of S&P Global Ratings and Fitch Ratings.
Moody’s follows S&P’s move on April 7 when it cut the power utility’s credit rating to B+, four rungs into junk and into the "highly speculative" band of single Bs from the "noninvestment grade" of double Bs.
"Given Eskom’s very weak standalone credit quality, its ratings rely on the support that Moody’s considers would be provided by the government if necessary," Moody’s said in its statement.
If not for government’s R350bn guarantee framework agreement with Eskom, Moody’s said it would rate Eskom as b3, which equates to B- in the other rating agencies’ nomenclature.
"We note the Moody’s rating action as primarily driven by the downgrade of the sovereign credit rating. Eskom has secured 53% of this fiscal year’s funding requirement and we remain resolute that we will fully execute the required funding for the year, albeit under challenging market conditions," Eskom chief financial officer Anoj Singh said in a statement on Wednesday morning.
Moody’s downgrade of Eskom came on the same day the power utility’s chairman Ben Ngubane resigned.
The Organisation Undoing Tax Abuse (Outa) said on Tuesday it had laid a criminal complaint against Ngubane for, among other things, allegedly defrauding a state-owned financier of R50m.
Ngubane and his wife Sheila, via a company called Huntrex, loaned R50m from a KwaZulu-Natal state-owned company, Ithala Development Finance Corporation. Huntrex in turn owned mining companies Zululand Quarries and Natal Sands.
When Huntrex defaulted on the loan, the liquidators discovered the underlying assets could not be sold.
"Based on the investigation and evidence obtained by Outa, it is clear that the share certificates produced by Dr Ngubane were fraudulent as there are several blatant mistakes made on them," Outa’s portfolio director for energy, Ted Blom, said.
"We [have confidence] in the evidence laid by Outa before the authorities and we will keep a close eye on the investigation and prosecution process. We trust that the police and the National Prosecuting Authority will take up this matter with the urgency and sincerity it deserves."