Moody’s credit rating a boost for Transnet

Transnet has received a major boost from credit rating agency Moody's‚ confirming the company’s solid financial standing and attractiveness of its portfolio of projects‚ the transport parastatal says.

Encouragingly‚ the ratings agency said it had changed Transnet’s outlook from being on review for downgrade.

Moody’s said the outlook for the state-owned company was negative and this was in line with its assessment of South Africa’s sovereign rating. Transnet’s rating is linked to that of the sovereign.

Confirming Transnet’s global and long-term local currency investment grade credit rating of Baa2‚ Moody’s praised the company’s management track record of executing its capital investment strategy.

Transnet recently appointed long-serving executive Siyabonga Gama as Group Chief Executive. He is globally regarded as South Africa’s leading expert in railways and ports operations.

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Further‚ Moody’s noted and recognised Transnet’s:

- Consistent record in operating its railways infrastructure and freight services at a profit;

- Oversight of the strategically important fuel pipelines;

- Ownership of South Africa's eight commercial ports and operation of a large part of the country’s stevedoring services;

- Significant medium-term capital expenditure programme‚ which is required to maintain and upgrade its infrastructure assets; and

- Profitability despite credit metrics being under pressure due to the weak economic environment.

“The move by Moody’s confirms both the success and vigour of management efforts and interventions to ensure the integrity of the company’s finances. These include a strict cost management regime‚ focus on volumes‚ especially high-yielding lines‚ and the record-breaking capital investment programme‚” said Transnet spokesperson Mboniso Sigonyela.

“Transnet plans to invest R340 billion-R380 billion over the next 10 years. This is likely to take its infrastructure investment programme‚ the Market Demand Strategy‚ to a record half a trillion rand‚” Sigonyela added.

Moody's said it expects Transnet to commit to capital expenditure that will earn the company a sufficient return on assets to support its funding requirements.

Transnet raises funds on the strength of its own balance sheet and receives no funding or guarantees from the fiscus‚ according to the parastatal.