S&P; Global Ratings has joined Fitch Ratings in placing the operator of Victoria's troubled desalination plant on negative ratings watch while it repairs a damaged cable so it can deliver its maiden water order to the state.
S&P; put the question mark over its BBB+ rating on $3.65 billion of debt issued by Aquasure -– the operator of the $3.5 billion desalination plant dismissed as a "white elephant" by the state opposition – on Wednesday.
The firm said the damaged power cable had left Aquasure with only a week or two of wriggle room to deliver the 50-gigalitre order to the Victorian government by the June 30 deadline, placing the company at risk of "substantial financial damage".
"We consider that any additional delays, either due to prolonged repair works or operational issues in water production, would likely prevent Aquasure from fulfilling its contract by the deadline. Such a failure would result in potentially substantial financial consequences for Aquasure," it said.
Fitch said on Monday it had put its A- rating on Aquasure's debts on negative watch because of the uncertainty over its ability to deliver the order.
In the worst case, further delays – due to Aquasure being unable to procure a spare part, for example – could result in the company failing to deliver the minimum 70 per cent of the order and triggering a default in the public-private partnership project deed, or defaulting on financial agreements.
S&P; analyst Thomas Jacquot said these were low probabilities and if the spares were readily available and everything went to plan, the plant could deliver the water order with a week or two to spare.
He said the range of possible outcomes was wide because "the big unknown is do they have everything they need to do the repairs"?
If the spares were not readily available, for example, they might have to be manufactured from scratch, and Aquasure could face termination risk.
"It's a low probability but no one knows how fast they can get it," Mr Jacquot said.
The Andrews Labor government placed the order last March when Victoria's dams were nearly three-quarters full, and the state opposition said this was designed to help Aquasure refinance $830 million of debt.
Aquasure is owned by UniSuper, French utility Suez Environnement, Korean bank Kookmin, Japanese trading house Itochu and other shareholders including CIMIC Group (the former Leighton Holdings).
