Part 1 Revenue Application: Multi-Year Price Determination ... - Eskom

Overview of Multi-Year Price Determination
2013/14–2017/18 (MYPD 3)
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from the government. Without the government‟s support, however, Eskom has a sub-
investment-grade standalone rating of B and Ba3 from Standard & Poor‟s and Moody‟s,
respectively. This is not a sustainable situation for Eskom or the sovereign in the longer
term.
Table 35: Eskom’s credit ratings
Investment Grade
Sub-Investment
Grade
Headline Rating
Standalone Rating
Quality of Credit Moody's S & P
Gilt Edged Aaa AAA
Aa1 AA+
Very High
Aa2 AA
Aa3 AA-
A1 A+
Upper-Medium A2 A
A3 A-
Baa1 BBB+
Medium Grade Baa2 BBB
Baa3 BBB-
Ba1 BB+
Questionable
Ba2 BB
Ba3 BB-
B1 B+
Poor
B2 B
B3 B-
In October 2012, the rating agency Moody‟s has revised Eskom‟s headline rating downward
to Baa3 from Baa2 and confirmed its negative outlook on this rating. This rating agency also
highlighted the factors that could further negatively impact on this rating, (1) governments
rating to be further downgraded, or (2) Eskom‟s liquidity profile deteriorates, or (3) regulatory
and investment environment remains challenging. This was followed by a downgrading from
S&P from BBB+ to BBB due to their similar downgrading of the sovereign credit rating. They
did, however, earlier in October 2012 confirm Eskom‟s standalone rating at B. The key
strengths and weaknesses of Eskom‟s credit rating are as follows:
Strengths:
o Dominant market position for the next few years