Transnet’s credit rating has been upgraded to ‘BBB’, with the upgrade affirming the state utility’s ability to raise funds without a government guarantee.
The state owned ports and rail operator’s credit rating was upgraded by two notches from a previous “BB+” to “BBB” by Fitch Ratings on Wednesday.
The utility will be spending R307 billion over a period of seven years on improving port and rail infrastructure. It plans to raise a third of the money from a variety of funding sources, including domestic and international bond markets, with the rest being generated through cash generated from its operations.
“The stable outlook incorporates our expectations that Transnet’s operations will remain strong, despite possible weakening in improving export markets, and that management would scale back its capex in case of weaker demand expectations to maintain the company’s financial profile in line with stated targets,” Fitch said in a statement announcing the upgrade.
The agency also stated that Transnet’s credit profile benefits from its position in the country’s rail, port and pipeline services, with a long-term contract base and business diversification underpinning its strong operating cash flows.
“This upgrade by Fitch Ratings confirms that Transnet has appropriate processes and controls to execute the Market Demand Strategy. It also confirms that Transnet is in a position to raise funds in the market on the strength of its balance sheet without government guarantees, allowing the fiscus to channel its resources towards the country’s other pressing needs,” said Transnet. – SAnews.gov.za
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