The credit profile of East Rand Water Care Company (ERWAT, Ba1 stable) reflects the company’s close financial and operational links with its support provider, the City of Ekurhuleni (Baa3 stable), which guaranteed 91% of the company’s debt as of 30 June 2017, as well as its legal status as a public-sector entity. ERWAT operates under a clear public policy mandate from City of Ekurhuleni. The company’s credit profile also reflects its good financial
performance and history of strong budgetary results.
ERWAT Credit Strengths
- High degree of support and supervision from City of Ekurhuleni
- Public legal status and close integration with City of Ekurhuleni
- Strong financial performance and conservative governance and management
- Strong liquidity profile
ERWAT Credit Challenges
- Very high debt, though this is projected to decline in the next three years
- Limited prospects for business diversification and expansion
ERWAT Rating Outlook
The stable rating outlook reflects our expectation that ERWAT’s debt will gradually decrease in the next three years as its capital expansion plan will be largely financed by capital transfers from its support provider, the City of Ekurhuleni.