Fitch downgrades S. Africa's power utility

JOHANNESBURG, Jan. 31 (Xinhua) -- South Africa's power utility, Eskom, was on Wednesday downgraded by the ratings agency Fitch on its long-term local currency Issuer Default Rating (IDR) and unguaranteed local currency senior unsecured ratings.

The rating was posted on the rating agency's website. Fitch downgraded Eskom's long-term local currency issuer default rating (IDR) and unguaranteed local currency senior unsecured ratings to 'BB-' from 'BB+'. They also affirmed the government-guaranteed local currency senior unsecured debt ratings at 'BB+'.

"The downgrade reflects the weakening liquidity of Eskom and uncertainty about its ability to meet its financial obligations in the short term. The RWN reflects the potential for further downgrade in case of lack of government's tangible support or improved liquidity," said Fitch in a statement.

The rating agency warned that there could be a further downgrade if it fails to implement credible fiscal consolidation to arrest the upward trajectory of the government debt/gross domestic product ratio.

They also said if the country economic growth does not improve it might negatively affect Eskom in future. Fitch said the situation would be better at Eskom if there is "an improvement in governance standards, including for state owned enterprises that is supportive of public finances and investment. A substantial strengthening in trend gross domestic product growth."

The power utility also issued a statement noting the downgrade.

Eskom's interim group CEO Phakamani Hadebe said they are in the process of addressing the issues raised by Fitch. Enditem