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ESKOM HOLDINGS SOC LIMITED - Moody's Ratings Outlook

Release Date: 18/12/2015 12:18
Wrap Text
Moody's Ratings Outlook

ESKOM HOLDINGS SOC Ltd
18 December 2015

Rating Action: Moody's changes outlook on Eskom's Ba1 rating to negative from
stable; affirms rating
Global Credit Research - 17 Dec 2015
London, 17 December 2015 -- Moody's Investors Service ("Moody's") has today changed the outlook on Eskom
Holdings SOC Limited's ("Eskom") Ba1 senior unsecured ratings to negative from stable. At the same time,
Moody's has affirmed the ratings.
Today's rating action was driven by the weakening of the South African government's credit profile, as captured by
Moody's change in South Africa's sovereign rating (Baa2) outlook to negative from stable on 15 December 2015.
For details, please refer to: https://www.moodys.com/research/Moodys-changes-South-Africas-rating-outlook-to-
negative-from-stable--PR_340947.
Outlook Actions:
Issuer: Eskom Holdings SOC Limited
Outlook, Changed To Negative From Stable
Affirmations:
Issuer: Eskom Holdings SOC Limited
Senior Unsecured Medium-Term Note Program, Affirmed (P)Ba1
Senior Unsecured Regular Bond/Debenture, Affirmed Ba1
RATINGS RATIONALE
Eskom's senior unsecured bond rating is primarily driven by Moody's estimate of a high level of potential
government support in case of financial distress. Given Eskom's strong linkage with the South African government
and its high sensitivity to changes in the sovereign credit profile, the change of outlook on its Ba1 senior
unsecured ratings to negative from stable reflects the weakening of the South African government's credit profile
captured in the outlook change on South Africa's Baa2 ratings to negative from stable on 15 December 2015.
Moody's estimate of a high level of government support in the event of financial distress is underpinned by
Eskom's strategic importance to the government's social and economic policy as the country's dominant
electricity supplier. Moody's expectation of government support being provided in the event of need is evidenced
by the direct financial support provided in the form of (1) a ZAR350 billion Guarantee Framework Agreement, (2) a
ZAR60 billion shareholder loan which was recently converted into equity, and (3) a planned ZAR23 billion equity
injection, of which the first ZAR10 billion tranche was provided in July 2015.
Eskom's Ba1 rating continues to reflect (1) an expectation of high probability of government support for Eskom,
reflecting the company's critical role as supplier of nearly all electricity used within South Africa; (2) a challenging
regulatory framework relative to operating costs in the context of a very stretched electricity system until new
generation comes on stream; (3) the risks associated with the execution of a large capital investment programme,
which has been subject to some delays and cost overruns; and (4) Eskom's weak financial and liquidity profiles.
OUTLOOK
The outlook is negative, reflecting the negative outlook on the government of South Africa's ratings.
WHAT COULD MOVE THE RATING UP/DOWN
Upwards rating pressure is unlikely given the current negative outlook. The outlook could be returned to stable if
(1) Moody's were to stabilize the outlook on the government's rating; and (2) the company's operational profile
continued to stabilize.
Conversely, Eskom's ratings could be downgraded if (1) Moody's were to downgrade the government's rating; (2)
Moody's assessment of high government support for the company were to change; (3) Eskom's operational profile
failed to stabilize; (4) its liquidity were to deteriorate significantly; or (5) over the longer term, the government failed
to improve Eskom's liquidity and financial profile and ultimately ensure its sustainability.
The methodologies used in these ratings were Regulated Electric and Gas Utilities published in December 2013,
and Government-Related Issuers published in October 2014. Please see the Credit Policy page on
www.moodys.com for a copy of these methodologies.
Headquartered in Johannesburg, Eskom is the dominant, vertically integrated utility in South Africa, generating
95% of the country's electricity. It is fully owned by the government of South Africa through the department of
Public Enterprises. In 2014/15, Eskom reported revenues of ZAR147.7 billion.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory
disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class
of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance
with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating
action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in
relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where
the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner
that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for
the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating
action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will
be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to
jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating
outlook or rating review.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal
entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for
each credit rating.
Paul Marty
Vice President - Senior Analyst
Infrastructure Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Monica Merli
MD - Infrastructure Finance
Infrastructure Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454




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Date: 18/12/2015 12:18:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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