Sanral faces significant losses

A toll gate on the N1 North just before the Beyers Naude offramp in Gauteng. Photo: Dumisani Sibeko

A toll gate on the N1 North just before the Beyers Naude offramp in Gauteng. Photo: Dumisani Sibeko

Published May 7, 2012

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Sanral’s losses as a result of the e-tolling disaster will grow by an estimated R100 million each month that the delay continues and will gradually erode the company’s cash buffer.

This was what motivated a leading credit ratings agency, Moody’s, to downgrade Sanral’s financial rating last week. In doing so, the agency said Sanral’s financial standing remained negative.

Financial ratings are assessments of creditworthiness, enabling investors to better differentiate between investment risks.

According to Kenneth Morare, Moody’s lead analyst on Sanral, the rating action followed the Pretoria High Court’s decision on April 28 to block the implementation of e-tolling on the Gauteng Freeway Improvement Project pending a final court resolution on the matter. This interdict, he said, superseded the government’s April 26 decision to postpone e-toll collections by a month, and added uncertainty on the future of the controversial toll road project.

“The delay in e-toll collection adds pressure on Sanral’s finances and raises concerns over its medium-term financial sustainability,” he said.

More recently, the government agreed on a significant reduction in e-toll rates, in return for which the authorities extended Sanral’s R5.8 billion budget allocation.

Thus far, the delayed implementation of e-tolls had resulted in revenue losses of about R2.7bn for Sanral, which was a sizeable 40 percent of its estimated 2012 annual budget, said Morare.

These losses would grow by an estimated R100m each month that the delay continued.

Moody’s further notes that Sanral incurred R20bn in debt, of which approximately 50 percent is guaranteed by the South African government, to finance the freeway project and that the e-toll revenues are essential to it servicing this debt and absorbing the concomitant operating costs,” said Morare.

He added that the negative outlook on Sanral reflected its weakening financial conditions over the medium term, the inherent operational risks associated with the e-tolling system, and concerns over SA’s deteriorating operating environment.

A positive resolution of the issue could lead to a stabilisation of Sanral’s financial position and prospects.

Conversely, Sanral’s ratings could come under pressure in the event of an unfavourable resolution of the tolling issue, resulting in a further deterioration of its financial metrics and cash flows, and a downgrade of SA’s government bond rating. - The Star

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