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Hope springs but not so much for Eskom as Moody’s slashes its credit rating

JOHANNESBURG — Moody’s may have salvaged South Africa last weekend and even upgraded its outlook for the country to ‘stable’, but the rating agency is not holding back on Eskom. The state power utility’s debt is getting more expensive as Moody’s downgraded the company yet again. It seems hope still springs, but the country’s burning problems won’t be fixed overnight. – Gareth van Zyl

By Liezel Hill

(Bloomberg) – Eskom Holdings SOC Ltd. had its credit rating downgraded by Moody’s Investors Service, which cited a lack of clarity regarding the South African power utility’s plans to stabilize its finances.

An electricity pylon stands beyond an Eskom sign at the entrance to the Grootvlei power station, operated by Eskom Holdings SOC Ltd., in Grootvlei, South Africa, on Monday, Nov. 3, 2014. Eskom said South Africa's power supply remains strained as it investigates what caused a silo storing coal to collapse, forcing the state-owned utility to cut electricity to customers.
An electricity pylon stands beyond an Eskom sign at the entrance to the Grootvlei power station. Photographer: Dean Hutton/Bloomberg

Eskom’s long-term corporate family rating was downgraded to B2, the fifth-highest junk rating, from B1.

“Despite a number of improvements at the company in relation to its corporate governance and liquidity, there is limited visibility at this juncture as to Eskom’s plans for placing its longer term business and financial position on a sustainable footing,” Moody’s said in a statement.

The rating also accounts for “the lack of any tangible financial support for the company in the February state budget, and the liquidity and funding challenges Eskom may continue to face.”

Eskom is addressing the liquidity issues, interim Group Chief Executive Officer Phakamani Hadebe said.

“While we are disappointed with Moody’s decision at this stage, the future looks promising,” he said in a statement.

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