/ 14 January 2013

Eskom must be financialy sustainable, says chief executive

Eskom Must Be Financialy Sustainable, Says Chief Executive

"We have taken note of the rating agency's analysis of the challenges facing Eskom," chief executive Brian Dames.

"Their comments highlight the electricity industry's need for regulatory and policy certainty, as well as the need for Eskom to be financially sustainable."

On Friday, Fitch adjusted the ratings and outlooks of the country's two most significant state-owned enterprises, Eskom and Transnet. It downgraded Eskom and Transnet after also cutting the country's sovereign debt outlook.

Earlier, Fitch downgraded South Africa's sovereign debt by one notch to "BBB" and added that the outlook was stable. Fitch said Eskom and Transnet's ratings remain linked to that of the country's sovereign debt.

Eskom's long-term local currency IDR (Issuer Default Rating) was lowered to "BBB+" from "A" with a stable outlook. An IDR is an opinion on an entity's vulnerability to default on its financial obligations.

The agency said future developments which could lead to positive rating actions for Eskom included an upgrade of South Africa's sovereign rating, provided the strength of Eskom's links with the sovereign did not weaken.

Ratings by credit rating agencies influence Eskom's ability to raise funding, and the interest it pays on this debt. – Sapa