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Friday 19 April 2019
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Parastatals remain positive despite revised Fitch ratings

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• NamPower: “Ratings downgrade will increase electricity cost”
• Telecom: “Revised ratings have no direct effect on Telecom Namibia’s operations”
• NamPort: “The rating has no negative bearing on Namport’s operations”
• NamWater: “We will meet on Monday to discuss revised ratings”
 
By Rakkel Andreas
 
With the Namibian economic outlook recently rated as negative by Fitch, state owned enterprises namely Telecom, Namwater, Nampower and Namport were also pegged onto to the negative ratings bandwagon-but at least three of the companies are not pressing the panic button just yet.
 
Telecom however maintained that the revised ratings will not affect its operational activities.
 
“The ratings have no direct effect on Telecom Namibia’s operations and that the parastatal is currently not having any registered bonds on the money market. Our Net Operating Cash Flow over the next four years will be N$ 1 billion, which will cover our capital investment program of N$ 792 million and the surplus from that will be able to cover the remaining commercial debt we have,” responding Telecom’s acting managing director Theo Klein while reacting to the ‘Parent and Subsidiary Rating linkage’.
The ratings agency recently revised the outlook for the state firms on the basis of long term issuer default ratings (IDR) as well as the national long-term ratings which moved from stable to negative. The agency rated the four parastatals in alignment to the national outlook in accordance with its ‘Parent and Subsidiary Rating Linkage’ criteria. However, it stated that the lack of strong legal links means that it views the links as supporting the utility’s rating at one notch below the sovereign rating.
 
Klein stated that “Telecom Namibia, not being a monopoly any more will always be notched two levels lower than Namibia’s Long Term Local Currency Issuer Default Rating, applying a parent subsidiary criterion as a state owned enterprise, however we are still waiting for our individual ratings due in October and our strategic focus hence forth is to retain our previous stable outlook”.
 
This the parastatal claims can be accomplished by ensuring operational efficiency, improvement of the network quality as well as customer service whilst Focussing on our fixed line services and Exiting our foreign ventures.
 
As for NamPort, its chief executive officer Bisey Uirab shared similar sentiments by stating that the rating has no negative bearing on Namport’s operations and that Fitch’s decision to revise the outlook on Namport is in direct correlation with the recent national negative outlook rating.
 
This, Uirab qualifies is due to the current tough economic environment which is prevalent within the country, the region as well as across the globe.
 
“Namport remains on track with its drive to position Namibia strongly as the logistics hub for the region, suffice to say the current economic challenges have also a direct bearing on the volumes throughput across our ports.
 
Importantly, the Fitch revision statement does confirm that there are no changes in the Namport specific fundamentals that relate to its capacity to meet its obligations to its creditors and stakeholders” he added.
 
NamPower’s managing director Simson Haulofu cautioned that if there happens to be a downgrade on Government’s rating, then automatically NamPower will be downgraded as well given the fact that it is a wholly owned Government entity.
 
“This means that funding will become more expensive, putting pressure on the cost of new projects. This will in turn result in increased costs of electricity,” he said.
 
NamWater yesterday said it is set to hold a meeting on Monday to discuss the revised ratings.
 
Future developments that could result in a downgrade for the parastatals include a failure to narrow the fiscal deficit leading to continued rise in the government debt/GDP ratio as well as failure to narrow the current account deficit or significant drawdown in international reserves.
 
Deterioration in economic growth has also been cited as a development that could result in a downgrade.
 
Future developments that could result in the outlook being revised to stable include a narrowing of the budget deficit consistent with a stabilisation of the government debt/GDP ratio and a marked improvement in the current account balance and increase in foreign exchange reserves.
 
Key rating drivers
The rating actions follow the revision of the Outlook on Namibia’s Long-Term IDRs and National Long-Term ratings to Negative from Stable. Fitch’s assessment of fundamental issuer-specific credit considerations remains unchanged.
 
Namwater
 
Long-Term Foreign Currency IDR affirmed at ‘BBB-’; Outlook revised to Negative from Stable.
NamWater’s linkage with the Namibian remains strong in accordance with the agency’s ‘Parent and Subsidiary Rating Linkage’ criteria. “However, the lack of strong legal links means that we would view the links as supporting the utility’s rating at one notch below the sovereign rating. As such, NamWater’s standalone profile drives the ratings.”
 
The Outlook on NamWater’s ratings is now constrained by the Outlook on Namibia’s ratings, said the rating agency.
 
Namibian Ports Authority
 
National Long-Term rating affirmed at ‘AA+(zaf)’; Outlook revised to Negative from Stable and National Short-Term rating affirmed at ‘F1+(zaf)’
 
NamPort’s ratings remain aligned to those of the Namibian sovereign, based on Fitch’s assessment of its legal, operational and strategic ties with the state as strong in accordance with the agency’s ‘Parent and Subsidiary Rating Linkage’ criteria.
 
NamPower
Namibia Power Corporation (Proprietary) Limited Long-Term Foreign Currency IDR affirmed at ‘BBB-’; Outlook revised to Negative from Stable
Short-Term Foreign Currency IDR: affirmed at ‘F3’
National Long-Term rating affirmed at ‘AA+(zaf)’; Outlook revised to Negative from Stable and National Short-Term rating affirmed at ‘F1+(zaf)’.
 
Telecom Namibia Limited
 
Long-Term Local Currency IDR: affirmed at ‘BB’; Outlook revised to Negative from Stable and the National Long-Term rating affirmed at ‘A-(zaf)’; Outlook revised to Negative from Stable.



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