Fitch upgrades Namport ratings

By Hilary Mare

Ratings agency, Fitch has upgraded the national long-term rating of Namibian Ports Authority (Namport) to ‘AAA (zaf)’/stable outlook from ‘AA-(zaf)’/stable outlook.

Namport’s national short term rating has been affirmed at ‘F1+’.

The rating actions follow the upgrade of Namibia’s National Long-Term ratings to ‘AAA(zaf)’/stable outlook from ‘AA-(zaf)’/stable outlook.

“The ratings of Namport are equalised with those of the Namibian sovereign (BB/AA-(zaf)/Stable), due to strong linkages with its sole shareholder, the government of Namibia. The Namibian government unconditionally guarantees the punctual debt service of Namport’s African Development Bank (AfDB) loan, which represented more than 90 percent of Namport’s debt as of end-September 2019. The Namibian government has made direct contributions to Namport’s on-going capacity expansion. The Fitch rating case (FRC) forecasts a five-year average net debt / EBITDAR of 9.6x, due to Namport’s recently completed, debt-funded capex plan,” the ratings agency said earlier.

In its report leading to the affirmation of Namport’s ratings, Fitch said: “We view Namport’s status, ownership and control as strong due to the 100 percent government ownership and broad operational and financial oversight by the sovereign. We view the government’s support track record as very strong due to the historical financial contribution to Namport’s expansion plan as well as the government guarantee.

“We view the socio-political implications of default as strong as the port could continue to operate even after a financial or technical default. The financial implications of default would be strong, due in part to the guarantee.”

Namport remains a strategic asset for the Namibian economy as it operates the country’s two ports at Walvis Bay and Luderitz. It forms a critical part of the Namibian government’s vision for the country’s infrastructure development.

“The facilities of Namport serve as a secondary port of call for its region, with some regional competition from the ports of Pointe Noire and Durban, though Namport’s facilities have competitive services, are efficient and linked to the hinterland. There is some cargo concentration in fuel and mining. Regional economic uncertainty has led to historical volatility in volumes,” further stated Fitch.

Namport has recently completed a new container terminal to give it an overall capacity of about 750,000 TEU by end-2019, giving the port significant excess capacity and new, modern facilities. The project was undertaken with significant government support including a guarantee of the debt funding the project and an additional equity contribution.

Historically, Namport has maintained revenue growth through tariff increases. There is no specific regulatory mechanism to limit tariff increases or to recover capex through tariff hikes. However, Fitch expects limited ability to modify tariffs above inflation due to constraints on customer affordability and regional competitive factors.

“Fitch expects Namport’s adjusted net debt-to-EBITDA to remain high, averaging 9.6x in the FRC and remaining above 9.0x between financial years to March 2020 and 2024. Fitch assumes that volume growth will continue to be organic, with no sudden ramp-up after the completion of the capacity expansion.

“Fitch equalises Namport’s ratings with the sovereign’s due to the high proportion of guaranteed debt, in accordance with GRE Criteria. In comparison to peers, Fitch assesses Namibia Power Corporation and Namibia Water Corporation standalone credit profile (SCP) as stronger than the Namibian sovereign, however this capped at ‘AA-(zaf)’ for both issuers in accordance with Fitch’s GRE Criteria. For the ratings of Telecom Namibia ‘A-(zaf)’/Stable, we apply a top-down minus one notch approach under our GRE criteria,” said the ratings agency recently.