2011年-世界发展银行全球_Financing_Urban_Water_Services_in_Kenya___Utility_Shadow_Credit_Ratings_66页_3mb

Summary of Financing Urban Water Services in Kenya: Utility Shadow Credit Ratings

Core Content

This report, published by the Water Services Regulatory Board (WASREB) in collaboration with the Water and Sanitation Program (WSP), presents the results of a credit assessment and shadow rating exercise for 43 urban water service providers (WSPs) in Kenya. The objective is to evaluate the creditworthiness of WSPs to support their access to local currency finance from the domestic financial market, which is crucial for financing infrastructure development in the water sector.

The report outlines the current state of urban water services in Kenya, noting that 8.1 million people are served by 62 WSPs, representing 40% of the urban population. The urban population is expected to grow significantly, necessitating faster investment in water supply and sewerage infrastructure. However, most capital investments are currently funded by public sources, including the government budget and development partner support, with the private sector playing a minimal role in financing.

Main Viewpoints

• Creditworthiness and Financial Sustainability: The credit assessment reveals that 13 WSPs are rated A or BBB, indicating they are creditworthy and capable of accessing debt. Another 16 WSPs are rated BB, which are potentially creditworthy. The remaining 14 WSPs are in the 'No Rating' category, suggesting they are not financially viable and require substantial reforms before they can access loan finance.

• Shadow Credit Ratings: These are used as a diagnostic tool to evaluate how financiers might rate WSPs if they were to undergo a formal credit rating process. The ratings are based on internal and external criteria, including financial and credit management, operational performance, and external economic factors.

• Role of WSPs in Infrastructure Financing: WSPs are encouraged to take the lead in identifying and financing viable projects, especially those that can generate sufficient revenue to service debt. These include network densification, metering, and nonrevenue water (NRW) reduction initiatives.

• Public-Private Partnerships (PPPs): The report emphasizes the need for blending commercial debt with public sector support. Tariff reforms and indexation are necessary to ensure that WSPs can generate enough cash flow to access market finance, especially in a high inflation environment.

• Governance and Autonomy: The report highlights the importance of strong governance structures and the autonomy of WSPs in accessing finance. WSPs, as limited liability companies, can borrow directly with board approval, unlike WSBs, which require Treasury approval.

• Need for Reforms: There is a call for WSPs to improve their financial and operational performance, including better billing and collection efficiency, to enhance their creditworthiness and attract private investment.

Key Information

• Financial Indicators: The credit assessment evaluates several key financial and operating performance indicators such as the current ratio, annual surplus, debt service coverage ratio (DSCR), operating cost coverage ratio (OCCR), net debtor days, billing and collection efficiency, and metering ratio.

• Tariff Reforms: Tariff adjustments have been initiated to move towards full cost recovery, which includes operating, capital, administrative, and debt service costs. However, WSPs still face challenges in generating enough surplus to service debt.

• Lender Perspective: Lenders are advised to consider both past performance and projected revenues when assessing the viability of WSP projects. The use of a security structure based on cash flows from water sales is recommended to provide lenders with comfort regarding debt repayment.

• Sector Growth and Challenges: The urban water coverage rate has been growing at 5% annually, but this growth is not sufficient to meet the sector's expansion needs. The report suggests that the private sector can play a more active role in financing urban water services through strategic partnerships and improved financial viability.

• Policy Context: The 2010 Kenyan Constitution recognizes the human right to water and sanitation, which influences the sector's development. The review of the 2002 Water Act aims to harmonize it with the new constitution, potentially encouraging more private sector participation.

Way Forward

• Project Development: WSPs must lead in identifying and developing financially viable projects that can generate sufficient revenue to service debt.

• Debt Sizing: Investments should be sized according to the debt capacity of WSPs to ensure sustainability and avoid over-leveraging.

• Tariff Adjustments: Tariff reforms and indexation are essential to ensure that WSPs can generate the necessary cash flows to access market finance.

• Public-Private Blending: Commercial finance should be combined with public sector support to leverage private investment into the water sector.

• Sector-Wide Planning: The information from the credit assessment can be used to improve sector-wide capital planning by directing concessional finance into non-commercially viable projects.

Conclusion

The credit assessment and shadow rating exercise provides a critical insight into the financial health of urban WSPs in Kenya. It highlights the potential for private sector financing and the need for WSPs to improve their financial and operational performance to attract investment. The report also underscores the importance of a robust regulatory framework and the role of the private sector in bridging the finance gap in the water sector.