Monday, September 28, 2020

WUC looks to the market for P 400 million bond to meet challenges

In a bid to finance its expansion programme, the Water Utilities Corporation (WUC) sounded warning bells to the markets Friday about its intentions to raise P 400 million through the issuance of a bond in the coming year.

The company said it had appointed Barclays Bank of Botswana as its advisors to raise P 400 million.
“It is anticipated that the bond will be issued during the course of 2007 and will be used to fund the corporation’s expansion plans,” the WUC said without details.

Attempts by The Sunday Standard to get details on the bond pricing were unsuccessful, as Barclays Bank’s head of Corporate Affairs, Batho Motubudi, could not give more details except to say more details would be made available “in a short period of time.”

“I think more details would be released at the beginning of the year,” he said.

However, according to the WUC website “the demand for water is expected to rise over the years” and the corporation is under pressure to meet the increasing demand, especially in peri-urban areas.

“The rapid growth of the Corporation supply areas and the increasing demand for water has reached a point where supply from local resources are no longer adequate,” said the WUC in the website. “The corporation is continuously undergoing change in its effort to respond to and meet the challenges of an increased responsibility in water supply.”

Some of the major developments that are envisaged include the development of the North/South Carrier Water Project by expanding the treatment at Shashe Dam and the development of the Dikgathong Dam in the Bobirwa area. The move will increase the number of dams to six.

The already existing dams are the Gaborone Dam, which has a capacity of 141.4 mm3, the Booka Dam with a capacity of 18.5mm3, the Notwane Dam with a capacity of 2.2mm3, the Shashe Dam with a capacity of 85mm3 and the Letsibogo Dam with 100 mm3.

It further warned that the developments at the BCL Mine are likely to result in an upsurge in water demand in Selebi-Phikwe and its new strategy of supplying water in undesignated areas with a view of increasing customer base will have an impact on its future expenses.

“Other issues including tie land servicing programme and implementation of Selebi-Phikwe Development Plan Programme have become a pre-requisite to qualify for funding by key financial institutions.

“The increase in the number of applications for water connection by individuals in non-designated areas poses a serious challenge for the corporation. A policy and procedure statement has been developed by the corporation in an attempt to address this matter. The corporation will adopt a policy of supplying water to areas outside its statutory area of supply so as to advance its social responsibility and expansion of customer base,” WUC said.

Analysts praised WUC’s move on Friday, saying that its decision signals a new development aimed at helping to develop capital markets and a shift from being over reliant on government funding.
“Our view is that WUC is now looking to the market to raise money and that will assist in the development of the capital markets. And it also lifts the burden from government,” a chartered financial analyst at Allan Gray, Tapologo Motshubi said.
His views were shared by Leutlwetse Tumelo of Capital Securities.

“I think they are trying to develop the North/South water carrier and it is good that they are looking at the private sector to raise funds,” said Tumelo.
“It is a good thing that they are looking at the capital market to meet their long term funding requirement. That will help to deepen the market and the other thing in their favour is that there is a great appetite for bonds and all those which are listed were over subscribed.”

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