Sanral’s credit rating affirmed by Moody’s

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BR Sanral 865[1]

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Cars pass under the e-toll gantries on the N3 between Beyers Naude and Linksfield. The Opposition to Urban Tolling Alliance says its research has found that no more than 20 percent of cars on the freeways have e-tags. Picture: Karen Sandison

Johannesburg - The credit rating of the SA National Roads Agency Limited (Sanral), which has been downgraded three times since February last year and placed under review for a downgrade in September, has been confirmed by rating agency Moody’s Investors Service.

This follows the implementation this month of e-tolling on the Gauteng Freeway Improvement Project (GFIP).

Moody’s said on Friday that it had confirmed Sanral’s rating with “a negative outlook”.

The negative outlook incorporated the operational risks associated with e-toll collection, given the limited track record of the newly established method of collection, it said. The method was enshrined in the Transport and Related Matters Amendment Act, which was aimed at enhancing Sanral’s capacity to enforce the payment of e-tolling fees.

The ratings agency said Sanral’s outlook mirrored the negative outlook on South Africa’s sovereign rating.

Vusi Mona, Sanral’s general manager of communications, said on Friday that the roads agency had taken the first small but positive step in the right direction towards improving its credit rating from Moody’s.

Despite Moody’s negative outlook, Sanral was no longer under review for a downgrade, which had been lifted following the implementation of e-tolling on the GFIP network. He added that Sanral aimed to slowly but steadily regain good credit ratings through the successful operation of the GFIP e-toll system and the stabilisation of its debt portfolio.

Wayne Duvenage, the chairman of the Opposition to Urban Tolling Alliance, said the alliance believed Moody’s had very good reason to be concerned about Sanral’s ability to collect revenues because of low e-tag take-up and therefore retaining a negative outlook was justified.

Duvenage said the alliance continued to warn of downgrades and other unintended consequences. He stressed that the success of any e-tolling system and collection relied on very high compliance levels, saying there was a correlation between high compliance and a high percentage of e-tag usage.

Moody’s said that e-tolls would enable Sanral to realise the additional toll revenue necessary to absorb cash flow pressures resulting from its high operating costs, including debt service, and to reduce its borrowing needs.

It said Sanral had indicated that GFIP e-tolls would increase its total toll revenue to R2.8 billion for the financial year to the end of March next year from R2.1bn at the end of its financial year this year. It also expected this toll revenue to accelerate to R4.8bn by the end of its 2015 financial year.

Moody’s said an upgrade or stabilisation of the outlook would require evidence of Sanral’s capacity to realise adequate cash flows from its e-tolling operations.

“A structural improvement in the company’s financial position, leading to lower than anticipated borrowing needs, could also apply upward pressure” on the rating

However, Sanral’s failure to maintain sufficient e-toll revenue collection, leading to deteriorating budgetary performance and growing borrowing needs, would apply downward rating pressure.

Duvenage said preliminary findings of research being conducted by the alliance on the number of e-tags fitted to vehicles using freeways indicated the e-tag penetration rate was significantly lower than Sanral had indicated in its recent statements at “no more than 20 percent of vehicles currently travelling on the freeways”.

“If indeed the penetration rate is as low as it appears, this would indicate the number of e-tags sold and in use is no more than 450 000, almost half that indicated by Sanral,” Duvenage said.

This would also indicate that Sanral would experience significant difficulties in the collection of tolls. - Business Report


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