The affirmation of the 'BB-' rating is based on completion of the expansion project on a timely basis and financial performance generally consistent with base case expectations. Flat growth in container volumes in 2013 appears to be rebounding in the first quarter 2014 (1Q'14). Volume and price risk remain the primary risk exposures and are mitigated by the high average coverage ratios, liquidity, and structural protections.
KEY RATING DRIVERS
Concentrated and Volatile Traffic - Volume Risk: Weaker
Limited Tariff Flexibility -
The port revenues are determined under the concession contract with limited flexibility to adjust for increasing costs. A minimum revenue guarantee granted by the government is insufficient to cover debt service payments. Tariffs and fees that are initially established in the concession agreement may be subject to regulatory modifications beginning 2019.
Reliable Facilities Renovation Program -
The project expansion (Phase I of IV) required under the concession agreement was completed on time in June and is expected to begin operations in September following acceptance by the grantor. The project has a well-defined capital improvement planning and funding process, and the bulk of investments required by the operator have been met. Additional investments to infrastructure facilities required under the concession agreement are contingent on future growth and budgeted in the financial projections.
Adequate Structural Protections - Debt Structure: Stronger
The project's financial flexibility is mainly sustained by the existence of adequate liquidity reserves available for debt service and/or for construction costs of Phase II and III. The structure includes a five-year principal grace period which incorporates a strong provision to trap cash to prefund investment costs of Phase II and III, and includes a dividend distribution test.
Projected Fitch Rating Case average debt service coverage ratio (DSCR) is 1.67x through 2037 with significant variability arising from mandatory investments under the concession contract. The minimum DSCR of 0.19x projected to occur in 2026 is mitigated by mandatory reserving and cash traps. The credit quality is commensurate with the rating despite the low minimum as illustrated by the 1.47x minimum DSCR including reserves and the rating case loan-life coverage ratio (LLCR) of 1.32x.
The closest rated peer to Paita in terms of size and regional importance is
Negative - Sustained failure to meet volume growth estimates could place additional pressure on coverage ratios and limit capacity to make necessary investments and result in a downgrade.
Positive - Sustained multi-year traffic increases and further development of special services revenue providing consistent base-line revenues could lead to an upgrade.
The bonds are secured by the pledge of all capital stock of the issuer, a mortgage between the issuer and sub-collateral agent, and a perfected security interest in all of the issuer's assets.
In 2013, the port operated 166,016 of 20-foot equivalent units (TEUs), an increase of 0.3% over the prior year and 7.8% below Fitch's base case projections. The variance was primarily driven by the declines in the local fishing industry and the agricultural production of grapes and mango. The port's revenues, however, grew 11.8% in 2013 over the previous year, and surpassed Fitch's base case projections by 6.4%. Revenue growth at the port reflects an increase of activities in energy connections and on-board reefers, which generate a large portion of the special services revenues. The operator expects these revenues to continue to grow with the additional storage capacity available with the expansion. This will allow the port to compete with off-site storage facilities that maintain a large market share.
Operating expenses increased to
Construction works have advanced in line with the initial schedule with completion of Phase I of IV being declared in
The port is located in the region of Piura, a small city with low economic activity, 1,030 km northwest of
Additional information is available at 'www.fitchratings.com'
--'Rating Criteria for Infrastructure and Project Finance'
--'Rating Criteria for Ports'
Rating Criteria for Ports
Rating Criteria for Infrastructure and Project Finance
Source: Fitch Ratings
Most Popular Stories
- Doctor Who Christmas Episode Begins Production
- HCL America Adding 1,200 IT Jobs
- Medical Mfg. Jobs Coming to Dayton
- Michael Jackson, Freddie Mercury on Previously Unreleased Queen Cut
- Longtime Unemployed to Get Help in Las Vegas
- SpaceX Aims for Predawn Launch on Saturday
- Women Key to Democratic Party: Clinton
- U.S. Chamber Caught Up in Tax Inversion Question
- Feds Won't Say How Many Border Crossers Jailed
- Christie Didn't Order Bridge Shut Down, Feds Say