Electricity Supply Corporation of Malawi (Escom) has been removed from credit rating list because it cannot continue paying after World Bank sponsorship expired, Global Credit Ratings show.
World Bank took the initiative to bankroll Escom’s rating to enable the financial markets to gauge the power utility firm’s financial condition and make it easier to access capital for meeting financing requirements, as it maintains and expands its capacity to deliver electricity to users.
However, a year down the line Global Credit Ratings (GCR) withdrew Escom from the rating for 2017 after rating it as stable in 2016.
GCR primary analyst and sector head for corporate and public sector ratings Eyal Shevel told Business News that the World Bank Group sponsored Escom in 2015 and 2016 and the intention was for Escom to approach the capital markets at some stage for bond funding for capital expenditure projects.
“However, the contract has since come to an end which is why the credit rating was withdrawn. I am sure we will begin again in the next year or two once Escom makes some progress on its initiatives,” he said in an e-mail response to our questionnaire.
In an interview, World Bank country manager Greg Toulmin confirmed that World Bank sponsored Escom to enable it access commercial bank financing and capital markets for meeting its capital expenditure requirements.
He said: “As with any entity undergoing a financial strengthening exercise, a credit rating, following a financial restructuring, enables the financial markets to gauge the entity’s financial condition, and makes it easier for that entity [in this case Escom] to access capital for meeting its financing requirements, as it maintains and expands its capacity to deliver electricity to users.”
But Toulmin was quick to point out that World Bank did not decide to withdraw Escom from Global Credit Ratings saying the bank supported Escom in obtaining two credit ratings as part of a financial strengthening exercise.
“No further ratings were ever envisaged as part of that exercise. The World Bank has had no role in Escom’s decision not to pursue an update to the credit rating,” he explained, adding that a withdrawal does not mean the rating has changed but that the rating agency has not been contracted to provide any further assessment.
He further said a United States Government-funded initiative, Power Africa, is currently providing assistance to Escom for preparing their financial statements, a financial model and projections, and a financing plan.
“In the event that the World Bank is requested to provide further support for a credit rating, we would be happy to explore that proposal with Escom management,” Toulmin said.
Escom public relations officer George Mituka would not say whether Escom utilised the rating in the said period and what could be the implications on the parastatal’s development plans now that the firm is not rated.