The South African National Roads Agency Limited (SANRAL) will experience significant financial pressure post October 2013 in the event that e-toll revenues are still not earned by the entity\u201a Moody’s Investors Service said on Tuesday (31 July 2012).<\/p>\n
This is notwithstanding SANRAL\u2019s current strong cash reserves of R7.1 billion which should absorb operating costs\u201a including debt service in the short-term\u201a the rating agency said in its annual report on the roads agency.<\/p>\n
It said that SANRAL’s Baa2\/A2.za and Prime -3\/Prime -2.za global scale (local & foreign currency)\/national scale issuer ratings (negative outlook) were underpinned by its close financial and operational linkages with the South African government\u201a and SANRAL’s good historical financial management.<\/p>\n
“Notwithstanding its current strong cash reserves of R7.1 billion which should absorb operating costs\u201a including debt service in the short-term\u201a SANRAL will experience significant financial pressure post October 2013 in the event that e-toll revenues are still not earned by the entity\u201a” said Kenneth Morare\u201a Moody’s lead analyst for SANRAL.<\/p>\n
Moody’s noted that\u201a as a consequence of the financial injection of R5.8 billion received recently from the National Treasury\u201a SANRAL’s liquidity profile had increased to 1.5x in FYE2012 (preliminary results)\u201a from 1.2x in FY2011.<\/p>\n
The credit rating agency further noted that SANRAL had incurred R20 billion in debt (of which approximately 57% is guaranteed by the South African government) to finance the GFIP project and that the e-toll revenues were essential to it servicing this debt and absorbing the concomitant operating costs.<\/p>\n
The GFIP was responsible for most of the rapid increase in SANRAL’s debt stock to its current level of R37.5 billion\u201a or a high 5x its 2012 annual revenues.<\/p>\n
“We believe that SANRAL’s high gearing and uncertainties over e-tolling issues could make it difficult for the company in medium-term to debt-finance the operating deficits resulting from its loss of e-toll revenue” added Morare.<\/p>\n
SANRAL is a public company\u201a wholly owned by the Republic of South Africa\u201a with the Minister of Transport representing the government as the sole shareholder. The company remains a key strategic asset to the central government which has determined SANRAL’s mandate to develop and maintain the national road infrastructure in South Africa.<\/p>\n
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