ESKDY.PK (The following statement was released by the rating agency)
Jan 19 – Fitch Ratings has assigned TCTA Mokolo Crocodile Water Augmentation Project phase
1’s (MCWAP-1) debt instruments ratings, as follows:
Term Loans ZAR2.3bn, rated ‘AA+(ZAF)’ with Stable Outlook
Commercial Paper ZAR250m, rated ‘F1+ (ZAF)’
Liquidity Facility ZAR200m, rated ‘F1+(ZAF)’
The ratings primarily reflect the role of the flexible tariff. TCTA projects,
including MCWAP-1, achieve high ratings (on the National Rating scale) notably
because the major risks (construction cost overrun, delay, volume and supply,
financial) are covered by the flexible tariff mechanism, which is designed to
pass through these risks to the end-users (Eskom, rated ‘AAA(zaf)’ and Exxaro,
through the Department of Water Affairs). This means the rating is close to that
of the sovereign, as it helps mitigate most of the risks in the project.
There is effectively a high level of government involvement and commitment
through the inclusion of Department of Water Affairs (DWA) in the tariff payment
and debt service arrangement.
–Revenue risks (demand, supply) are fully mitigated through the tariff
adjustments.
–Operation maintenance (OM) risks are passed through to DWA, which provides
better protection than an unlimited pass-through.
Continued…
