Moody's affirms Eskom

Moody's Investors Service said it affirmed the A1 ratings of Eskom Holdings Ltd. but lowered the baseline credit assessment to 8 from 7. The South African government, which is Eskom's shareholder, is currently rated A2.

Moody's said the change reflects its view that Eskom's credit profile is likely to deteriorate as a result of increased leverage and a regulatory settlement that puts pressure on operating cashflow, the agency said.

The agency said the perceived financial risks are offset by Eskom's dominant position as the only substantial electric power generator and distributor in South Africa, with 100% government ownership.

Moody's said it expects Eskom to maintain a retained cash flow-to-net debt ratio of between 20% and 25%.

The rating affirmation reflects the lack of change in the A2 local-currency rating of South Africa, the medium level of default dependence and the high level of support from the South African government, Moody's said. Eskom's senior unsecured local-currency rating of A1 is not sensitive to changes in the baseline credit assessment, the agency said.

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