JOHANNESBURG-- South African power utility Eskom has expressed disappointment at the decision by international rating agency Moody's Investor Service to downgrade its long-term credit rating from B1 to B2 but says it is optimistic that its credit profile will improve.

The rating agency said Wednesday that altought there had been sweeping changes made at Eskom, "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 it took into consideration that the State-owned enterprise's board was replaced in January, and that it had sufficient short-term funding to address its liquidity crisis, reducing the threat of a default. Nevertheless, it believes that the conditions at Eskom remained challenging.

While we are disappointed with Moody's decision at this stage, the future looks promising. We have addressed the liquidity issue and other key challenges. The new Board and Eskom leadership are swiftly moving into the second intervention stage by formulating an integrated strategy that will yield favourable results," Eskom's Interim Group Chief Executive, Phakamani Hadebe, said here Thursday.

The positive sentiments expressed by Moody's encourage us to work even harder to ensure the execution of this strategy. I am confident that we will stabilise the credit profile of Eskom and improve its credit rating."

The rating agency had acknowledged the positive strides that the new Board and Hadebe had made in the two months that they have led the organization.

The three issues of concern raised by the rating agency centred around the inadequate tariff increases in the face of flat demand, no tangible government support and a lack of a resilient business strategy that will ensure Eskom's sustainability.

Hadebe said the board is investing a considerable amount of time in formulating a comprehensive long-term strategy and plan that will place Eskom's business on a firmer footing.

In February the power utility noted Standard and Poor's Global Ratings (S&P)'s decision to downgrade its rating to 'CCC ' largely due to its liquidity challenges. S&P's downgrade followed a Fitch Ratings downgrade of the utility in January.


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