Namibia: Fitch Affirms Nampower Rating At BB+, Negative Outlook

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FITCH ratings agency has affirmed NamPower to BB+, also retaining its negative outlook.

The rating, revealed on the agency's website last Wednesday, reflects the stand-alone credit profile of its monopolistic position in energy trading and transmission in Namibia, with a cost-reflective tariff framework and strong financial profile. The ratings agency further expects NamPower to remain reliant on imported electricity, as opposed to its own generation, for the next four years.

"The level of energy imports marginally increased in the financial year 2018 to 69% from 63% in the financial year 2017, as the hydro-power plant produced about 450 gigawatt hours (GWh) less electricity in 2018, compared to 2017," the agency said.

NamPower's financial profile is the strongest in terms of funds from operation net adjusted leverage in the regional peer sector group, which includes South African power utility Eskom, mainly due to cash generated by operations supported by cost-reflective tariffs.

"This is balanced against a business profile with weaker market trends, volatility of cash flows and reliance on imported electricity," the ratings agency added.

NamPower had N$565 million cash in the 2018 financial year, supported by a liquid investment portfolio of N$7,2 billion. This, the agency said, could be assessed at short notice to bolster its liquidity position and investment needs. An upgrade of Namibia's sovereign ratings or revision of the sovereign outlook from negative to stable would lead to positive ratings action.

In contrast, a downgrade of Namibia's sovereign ratings and significant changes in market trends could lead to negative ratings action. The agency said in a peer comparison NamPower's ratings are the same as the Namibia Water Corporation and Telecom Namibia, both at BB+ with a negative outlook. - Nampa

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