Fitch Ratings has raised Eskom’s credit ratings across three categories, following a recent improvement in South Africa’s sovereign credit rating.

The power utility said it viewed the decision as continued recognition of its central role in the country’s energy system.

What the upgrade covers

The following are the ratings for the utility:

• Long-term issuer default ratings: raised to B+ from B, with a stable outlook
• Senior unsecured debt: raised to B+ from B, with the recovery rating of RR4 unchanged
• Guaranteed senior unsecured debt: raised to BB from BB-

Linked to South Africa’s sovereign rating

The upgrade follows the improvement in South Africa’s sovereign credit rating and is based on Eskom’s close ties to the government under Fitch’s Government-related Entities rating framework.

It assessed the relationship between Eskom and the South African government as “strong across key support factors, including oversight, policy role, and the precedent of support, with Eskom’s rating positioned below the sovereign in line with this framework.”

Turnaround plan on track

The rating action also comes as Eskom continues to steady its operations and strengthen financial management under its ongoing turnaround plan.

Eskom Group Chief Executive Dan Marokane said the utility’s focus remained on delivery.

“We continue to implement our turnaround strategy at pace to restore operational and financial stability, maintain energy security, and position Eskom for sustainable long-term growth that supports the economy. Eskom, and in turn South Africa, now has a stable electricity platform to operate and grow from, advancing grid stability, market liberalisation and the integration of renewable energy.”

The group remained focused on strengthening operational performance, improving liquidity and access to funding, and delivering on its turnaround plan in support of long-term financial sustainability.

A positive signal

Eskom said it viewed the upgrade as “a positive signal of improving macroeconomic conditions and continued recognition of the utility’s central role in South Africa’s energy system.”

Earlier this month Fitch upgraded South Africa’s long-term foreign and local currency credit ratings to BB from BB- and maintained the stable outlook.

It said the upgrade reflected South Africa’s record of sound fiscal management and progress on fiscal consolidation, despite weak economic growth and domestic and external shocks.

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