S&P raises Eskom

Standard & Poor's said it raised its long-term foreign currency rating on Eskom Holdings Ltd. to BBB+ from BBB.

The outlook is stable.

S&P said the action follows the raising of the long-term foreign currency ratings on the Republic of South Africa to BBB+ from BBB due to improved macroeconomic stability.

Eskom will benefit from the improving macroeconomic environment in South Africa. This is in addition to the company's continued support from and key importance to the Republic of South Africa, the agency noted.

The ratings on Eskom reflect its critical role in the development of the Republic of South Africa's economy through its successful electrification program. They also factor in the government's intention to remain supportive of Eskom's credit quality, strong electricity demand growth and a supportive regulatory regime, S&P said.

These strengths are offset by a relatively weak financial structure, the requirement to maintain a supply and demand balance in a time of rapidly increasing demand, an annual tariff-setting cycle, exposure to cyclical industries and longer-term exposure to the restructuring of the electricity industry in general, the agency added.

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