Moody’s might drop Eskom

Moody's Investors Service said it placed the Ba1 senior unsecured and provisional Ba1 senior unsecured medium-term note ratings of Eskom Holdings SOC Ltd. on review for downgrade.

The review reflects the rising funding challenges faced by Eskom in the context of an adverse regulatory framework and an evolving political environment.

In August, the North Gauteng High Court ruled that the National Energy Regulator of South Africa should review its electricity tariff decision of March 2016. Notwithstanding an ongoing appeal process, Moody’s said future tariffs might be affected, which could in turn further exacerbate the funding needs of Eskom against a backdrop of rising costs, notably due to the ongoing growth in power purchase agreements with independent power producers, and a very significant capex program to upgrade and expand the country's electricity infrastructure.

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