Moody’s maintained a negative outlook for Sanral, having been placed under review for a downgrade in September.
“The rating action has been prompted by the implementation of electronic tolling (e-tolling) on Sanral’s largest toll road, the Gauteng Freeway Improvement Project, on 3 December 2013,” Moody’s said.
Moody’s said that e-tolls will enable Sanral to realize the additional toll revenue necessary to absorb cash-flow pressures emanating from its high operating costs (including debt service) and to reduce its borrowing needs.
According to Sanral, GFIP e-tolls will increase its total toll revenue to R2.8 billion for the financial year ending 31 March 2014, from R2.1 billion at FYE2013.
Sanral expects toll revenue to accelerate to R4.8 billion by FYE2015, Moody’s said.
The implementation of e-tolling follows the Supreme Court of Appeal’s dismissed opposition to e-tolling on 9 October 2013.
The court ruling was preceded by the signing into law of the Transport and Related Matters Amendment Bill, by President Jacob Zuma on 25 September 2013.
The ratings firm said that its negative outlook for Sanral incorporates the operational risks associated with e-toll collection.
This, given the limited track record of the newly established method of collection, enshrined in the Transport and Related Matters Amendment Bill which is aimed at enhancing Sanral’s capacity to enforce payment of e-tolling fees.
An upgrade or stabilisation of the outlook will require evidence of Sanral’s capacity to realize adequate cash flows from its e-tolling operations, Moody’s said.
A structural improvement in the company’s financial position, leading to lower than anticipated borrowing needs, could also apply upward pressure, it stressed.
Moody’s warned that Sanral’s failure to maintain sufficient e-toll revenue collection, leading to deteriorating budgetary performance and growing borrowing needs, would apply downward rating pressure.