uMngeni-uThukela Water (UUW) received a stable outlook AA+ rating from Fitch Ratings.
Fitch Ratings said in September, it expects weaker credit metrics over the medium term, due to a deteriorating financial profile and weaker profits before interest and tax ( EBITDA) margins.
Fitch also said the Outlook could be dropped to to Negative, if significant water losses and delays in infrastructure investments continue.
Fitch also said it expects water losses into 2028, from Municipal revenue, as well as supply capacity constraints.
“Worsening water losses could further strain supply. However, UUW’s capex for FY23 was sharply higher at ZAR1.8 billion versus previous years, increasing further in FY24 to about ZAR2.7 billion. We expect total capex of about ZAR13 billion across FY25-FY28 to help address some of the supply constraints.”
Fitch said it assessed decision-making and oversight as ‘Very Strong’, precedent of support and preservation of government policy role as ‘Strong’ and contagion risk as ‘Not Strong Enough’ for incentives to support under our GRE Criteria.
Water and Sanitation, Pemmy Majodina, said “along with Rand Water in Gauteng, which had also received an AA+ rating from Fitch’s, uMngeni-uThukela had shown that with the right discipline and adherence to sound governance principles, state-owned entities can balance their developmental mandates with prudent financial management.”
The Minister however expressed concern at the high levels of water losses and infrastructure implementation delays, which pose a risk for uMngeni-uThukela Water’s long term credit rating.
“While we welcome the positive credit rating of uMngeni-uThukela Water by Fitch Ratings, it is extremely concerning that among the risks that could pose a risk for the future sustainability of the organization is high water losses at municipal levels. This is one area that continues to be a major concern for us as the Department of Water and Sanitation and which is receiving our immediate attention” said Minister Majodina.
Picture: UUW Annual Report