(The following statement was released by the rating agency)
LONDON/JOHANNESBURG, May 15 (Fitch) Fitch Ratings has revised the Outlook on
Namibian Ports Authority's (NamPort) National Long-Term rating to Positive from
Stable. The agency has affirmed NamPort's National Long-term rating at 'A-(zaf)'
and National Short-Term rating at 'F2(zaf)'.
The revision of the Outlook to Positive reflects the expected strengthening of
the links between NamPort and its sole shareholder - the Namibian sovereign
('BBB-'/'BBB'/'AA-(zaf)'/Stable), given that the state plans to provide
guarantees for the debt-funded portion of the capacity expansion project and
maintain other forms of financial support.
NamPort's rating continues to benefit from strong parental support as Fitch
considers the legal, operational and strategic ties between the company and its
sole shareholder to be strong. The company is rated on a top-down basis from its
shareholder, and Fitch assesses that NamPort's standalone rating would be
significantly below the support-driven rating level. NamPort remains a strategic
asset to the Namibian economy - operating the country's two ports at Walvis Bay
and Luderitz. Fitch believes NamPort is likely to play a critical role in
infrastructure development given its planned port expansion project of NAD3bn in
the next three years.
KEY RATING DRIVERS
Strong Government Support
The rating continues to be notched down from Namibia's sovereign ratings (Local
currency Issuer Default Rating of 'BBB'/Stable and National Long-term rating of
'AA-(zaf)'/Stable) reflecting Fitch's view on the company's links with the
government, including implicit and explicit government support that remains
strong given NamPort's strategic importance to the Namibian economy. In addition
to the previous state guarantee for NamPort's loan received from the European
Investment Bank in 2002 (4% of total debt in FY12), the Namibian Government has
confirmed NAD250 million equity injection in the 2013 budget speech for NamPort
and a state guarantee for about ZAR2.64 billion, which is the debt-funded
portion of the estimated capex for its Walvis Bay port expansion. Further, the
capital expenditure associated with the relocation of the tanker jetty at a cost
of NAD650 million will be paid from the budget of Ministry of Mines and Energy.
Port Expansion Project
The project will cost approximately NAD3 billion with a construction period of
three years and is set to increase container capacity from the current 355,000
twenty-foot equivalent units (TEU's) to an estimated 955,000 TEU capacity. The
scale of the port expansion is, in Fitch's view, an ambitious project with
minimal 'phasing-in' to limit the downside risks in a scenario of weaker traffic
volumes. However, Fitch believes the expansion is required as NamPort is
operating at 337,000 TEU's which is close to its current optimal utilization
capacity of 355,000 TEU's. Without the additional capacity NamPort is unlikely
to be able to attract new business and sustain growth.
The strategic importance of the company is underpinned by the fact that the fuel
for Namibian consumption is imported through NamPort and it is also used for
transportation of sulphuric acid, which is used in the mining sector, a
significant contributor to the national economy. 51% of NamPort's volume (in
tonnes) relates to landed cargo, which consists of petroleum, bulk and break
bulk, containerized cargo and sulphuric acid. The remaining 49% of volumes are
approximately equally split between shipped cargo (exports) (25%), which
compromises mainly salt (largest contributor 47%), fish products, manganese ore,
copper and lead, and transhipped cargo (24%), which either combines small
shipments into a large shipment (consolidation) or divides the large shipment
into smaller shipments (deconsolidation) mainly on the Asia-Pacific route.
Higher Capex to Increase Leverage
The investment growth will place strain on NamPort's standalone credit metrics
and Fitch forecast funds from operations (FFO) adjusted net leverage to increase
to around 7x by FY16 from 1.1x in FY12. Fitch expects FFO interest coverage to
decline to about 2x in FY16 from 5.6x in FY12. At the same time, we anticipate
timely financial support from the Namibian sovereign, namely in the form of debt
guarantees (88% of total estimated project costs), additional equity (8% of NAD3
billion) and direct state funding of some capex projects. NamPort is currently
building up the cash reserves to finance a portion of the capex (NAD110 million
or 4%). The company does not plan to pay any dividends in the medium-to-long
term to support the build-up in cash reserve.
LIQUIDITY & DEBT STRUCTURE
Liquidity as of FY12 was NAD516 million compared to short-term debt of NAD238
million and expected negative free cash flow (FCF) of NAD262 million in 2013. In
addition NamPort has NAD868 million of investments with fixed maturity dates.
Fitch expects the company to generate negative FCF over 2013 - 2016 due to the
intensive capex programme that is planned to be mostly externally funded. In
addition, we forecast that the company may test its financial covenant under the
Standard Bank's loan facility in 2014 but believe that, in this case, the loan
is likely to be repaid or its terms to be re-negotiated.
Positive: Future developments that could lead to positive rating actions
--Materialisation of the planned state guarantees for NamPort's additional debt
to fund its expansion project along with the announced equity injections and
other forms of state financial support would be positive for the rating.
--A positive rating action on Namibia's sovereign rating would result in a
positive rating action for NamPort, providing that the strength of the
parent-subsidiary linkage does not weaken.
Negative: The current Rating Outlook is Positive. As a result, Fitch's
sensitivities do not currently anticipate developments with a material
likelihood, individually or collectively, of leading to a rating downgrade.
--However, the Positive Outlook may be stabilised if the expected strengthening
of the links between NamPort and the state does not materialise.
--The downgrade of Namibia's sovereign rating by several notches may also be
negative for the company's ratings.
Fitch Southern Africa (PTY) Ltd
+27 11 290 9401
23 Impala Road, Sandton
+27 11 290 9407
+44 (0) 20 3530 1314
Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email:
Additional information is available on www.fitchratings.com
Applicable criteria, 'Corporate Rating Methodology' and 'Parent and Subsidiary
Rating Linkage (Fitch's Approach to Rating Entities within a Corporate Group
Structure)', dated 08 August 2012 are available at www.fitchratings.com.
Applicable Criteria and Related Research
Corporate Rating Methodology
Parent and Subsidiary Rating Linkage
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