Wrap Text
Moody's Rating Review
ESKOM HOLDINGS SOC LIMITED
11 March 2016
Rating Action: Moody's places Eskom's Ba1 ratings on review for
downgrade
Global Credit Research - 09 Mar 2016
London, 09 March 2016 -- Moody's Investors Service (Moody's) has today placed the Ba1 senior
unsecured and the (P)Ba1 senior unsecured MTN ratings of Eskom Holdings SOC Limited (Eskom) on
review for downgrade.
Today's rating action was driven by the weakening of the South African government's credit profile,
as captured by Moody's review for downgrade of South Africa's Baa2 bond and issuer ratings
initiated on 8 March 2016. For details, please refer to:
https://www.moodys.com/research/--PR_344855.
RATINGS RATIONALE
Eskom's senior unsecured bond ratings are 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
review for downgrade on Eskom's Ba1 senior unsecured ratings reflects the weakening of the South
African government's credit profile captured in the review for downgrade on South Africa's Baa2
ratings initiated on 8 March 2016.
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 direct financial support in the form of (1) a ZAR350 billion
Guarantee Framework Agreement, (2) a ZAR60 billion shareholder loan which was converted into
equity in 2015, and (3) a planned ZAR23 billion equity injection, of which ZAR18 billion have already
been provided.
In its review, Moody's will consider the evolution of Eskom's standalone credit profile as well as the
willingness and ability of the government of South Africa to continue to provide support to Eskom
given its deteriorating credit profile, and will factor in the outcome of the sovereign rating review.
Moody's will endeavour to conclude the rating review within 90 days.
WHAT COULD CHANGE THE RATING UP/DOWN
Eskom's ratings could be confirmed if (1) South Africa's Baa2 ratings are confirmed; (2) Moody's
assessment of high government support for the company remains unchanged; and (3) the company's
operational and liquidity profile were to continue to stabilize.
Conversely, Eskom's ratings could be downgraded if (1) Moody's were to downgrade the
government's ratings;
(2) Moody's assessment of high government support for the company were to change; or (3)
Eskom's operational and liquidity profile failed to stabilize.
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 Ratings
Methodologies page on www.moodys.com for a copy of these methodologies.
Headquartered in Johannesburg, Eskom Holdings SOC Limited 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 the last twelve months
to September 2015, it reported revenues of ZAR154.2 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 credit
rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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
END
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