WUC Set To Pay Off P195m Bond
Cavin Kanoko | Monday June 11, 2018 13:07
The cash-strapped utility will pay off its P195 million bond on June 26, 2018, when it matures. WUC has another P205 million bond due to mature in 2026.
WUC acting CEO, Thapelo Kalake told Business Monitor on Thursday that no plans had yet been made to issue a new bond for funding.
Financials shared at the briefing indicate that WUC’s expenses for the year ended March 2018 were pegged at P1.9 billion compared to revenue of P1.6 billion. The numbers continue six years of losses at the corporation stemming expenses associated with the Water Sector Reform Programme.
The WUC last year finalised a P1.5 billion loan from the World Bank, which will be utilised for infrastructure development and working capital.
Kalake said that the corporation’s infrastructure has naturally aged, which hinders production.
He said that the implication is that in some areas, water sources would have water that cannot be distributed.
“Other implications are high water losses, which goes against our conservation efforts and inability to supply despite water availability in water sources. Other implications are increased operational costs hence the need to do more with less,” he said.
The acting CEO said WUC has encountered challenges ranging from non-bill payment due to negative perception on water and billing, inability to fully engage water users individually save to address residents, as well as key to understand that water challenges are peculiar to a group. By March 2017, the corporation’s debt book stood at P409 million.
WUC board member Godfey Molefe explained that the bonds were issued to finance existing loans that were initially issued for infrastructure development, but carried very high interest rates.
The expanded mandate resulting from the 2009 Water Sector Reforms Project, which came immediately after the corporation issued a bond, required significantly increased financing for infrastructure and operations, which the corporation initially provided from its cash reserves.
According to Molefe, prior to the Reforms, WUC’s balance sheet was healthy to the extent that even investors could appreciate the corporation’s low financial risks and higher return prospects.
“It has proven financially beneficial for the corporation to have issued bonds, which allow payment of interest only until the bond matures,” he said.