Fitch Ratings last week affirmed the ratings of NamPower at long-term foreign currency Issuer Default (IDR) 'BBB-' (BBB minus) with a Stable Outlook, Short-term IDR 'F3', National Long-term 'A-(minus)(zaf)' with a Stable Outlook and National Short-term 'F2(zaf)'. Fitch said the ratings reflect NamPower's position as a fully government-owned monopoly electricity generation and transmission company in Namibia, with installed generation capacity of 393MW, split between hydro (63%) and thermal (37%) technologies.

Fitch said it assested NamPower on an assessment of legal, operational and strategic ties as per the agency's 19 June 2007.
Factors underlining strong linkage include evidence of financial support. Fitch also notes that the government guarantees the bulk of NamPower's existing debt and acknowledges its strategic importance to the development of the Namibian economy,” said Fitch.
Despite its dominant market positions and strong state support, Fitch will monitor NamPower's progress in dealing with key challenges, including supply shortages and reliance on imported electricity, which accounted for 51% of electricity usage last year.
NamPower is rolling out a N$9 billion investment programme aimed at increasing generation capacity, and expanding and upgrading the transmission network to circumvent existing bottlenecks.
Fitch said the implementation of the investment programme would put pressure on the financial profile, which is currently strong with large net balances of cash and short-term investments. “Despite anticipated ratio weakening, Fitch expects that a combination of tariff increases and improved access to cost effective electricity, increasingly from own generation sources, will prevent the debt service coverage ratio from breaching the covenanted level of 1.5x.
“While tariffs are currently not fully cost-reflective, Fitch understands that Namibia's Electricity Control Board is committed to address this issue in the medium-term. NamPower's ratings could come under pressure if the company is unable to maintain a sustainable financial profile and/or if there is a weakening of Fitch's assessment of government support,” Fitch said.