In its Weekly Credit Watch this morning (19 March 2012), Moody’s described the news as “credit negative for Eskom”.
It should be noted that the ratings agency’s update does not constitute a formal credit opinion on Eskom, and will thus not affect Eskom’s rating.
It does, however, highlight the need for electricity prices to continue moving up towards cost-reflective levels.
“Our financial position is much improved. But we need certainty on a longer term price path for electricity which will ensure that Eskom, and the electricity industry, are financially viable and sustainable,” said Eskom Chief Executive Brian Dames.
Dames and Eskom Finance Director Paul O’Flaherty visited credit rating agencies in London last week, accompanying the Deputy Minister of Public Enterprises Benedict Martens, and officials from the Department of Public Enterprises and National Treasury, to explain the 9 March 2012 reduction in the tariff increase.