Watercare now ‘integral’ to council, says S&P

Ratings agency Standard & Poor’s has raised the credit rating of Auckland’s water utility Watercare, noting it is virtually inseparable from its owner Auckland Council.

S&P said today it now rates Watercare at AA, from a previous rating of AA-, with a stable outlook.

“We have raised the rating on Watercare following our view that the company's link with its sole owner, Auckland Council, has strengthened,” it said.

The change means Watercare is rated the same as the council, reflecting the virtual certainty of council support, S&P said.

The utility’s remaining debt issued in its own right will mature in late 2018 and subsequent financing would all be done through the council.

“Also, we understand that the council has no plans to privatise or reduce its ownership in Watercare in the coming years,” S&P said.

“We consider that Watercare functions as an arm of the council although it has an independent board to manage day-to-day activities. As a result, we consider the link between Watercare and the council is now integral, from previously very strong.”

As of June 30 Watercare had debt of $1.6 billion, of which $275 million was in commercial paper and medium-term notes.

Revenue for the year was $631 million, generating a net surplus of $124.7 million.

Watercare is a council-controlled organisation but is prohibited by law from paying a dividend to the council.

S&P said Watercare’s operations were stable and it was planning $5.4 billion of capital investment over the next 10 years.  

“Infrastructure charges on growth investment and a modest increase in water and wastewater charges are likely to help recover part of the cost of capital works, given Watercare's role as a not-for-profit organisation,” it said.