Fitch affirms Umgeni Water

Fitch Ratings said it affirmed South Africa-based Umgeni Water's AA(zaf) national long-term rating and F1+(zaf) short-term rating. The outlook is stable.

The agency said the ratings are supported by Umgeni's good trading performance in 2005, which was underscored by its first bottom-line profit (ZAR 54.9 million) since 2000. This was achieved with increased volume sales and lower financing costs and despite a ZAR 70 million write-off for impaired assets. In addition, a net cash inflow before financing allowed the utility to reduce net debt by about 13% to ZAR 2.019 billion.

The ratings are further supported by Fitch's opinion that Umgeni's activities are of an essential and strategic nature and that in the event of financial distress, the government should ensure that Umgeni continues to operate and to meet its financial obligations.

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