Standard and Poor’s on Wednesday upgraded its long-term issuer credit rating on Halifax Port Authority to A+ from A, saying the upgrade reflects its view that the agency has a "consistently strong financial profile and healthy operating profile."
It continued, "The stable outlook reflects our view of the HPA's prudent management of its capital program to date and our expectation that it will not issue significantly more debt in the next two years than it assumes in its capital plan."
S&P also noted the rating reflects a "moderately high likelihood that the federal government would provide extraordinary support in the event of financial distress," as Canadian ports are "strategically important to Canada's international trade and effectively hold a monopoly position in their respective regions."
Among the factors cited by S&P as positives for Halifax are:
Its location as a first-in and last-out port for Southeast Asia container traffic traveling through the Suez Canal, deep harbor, and supporting infrastructure, which give it a competitive advantage.
- Its ice-free harbor.
- Its ability to attract and service very large ships.
- the port's status as a landlord port, which S&P said gives the authority “a fairly stable revenue stream compared with that of some peers”.
S&P said in 2013, total revenues rose by 10.3 percent, compared with a modest 2.3 percent the previous year. It said “drivers of revenue growth included an increase rental income and a noteworthy increase in TEU” to 442,173 TEU in 2013 compared to 416,572 TEU. Container volumes remain below 2007 levels, when the port handled 590,072 TEU.
Results this year have been “somewhat muted,” said S&P. Container volume of 206,125 TEU in the first half is down 8.1 percent from the first half of last year, and total cargo volume — including container, bulk and other general cargo — was 2,892,522 tons, down 14.1 percent from the first half of last year.
S&P attributed the downturn to “the harsh winter in North America, Europe and the North Atlantic. We believe mitigating this risk is the relative stability from the HPA's diversified revenue sources, such as rental revenues from land holdings and other lines of business as well as its strategic plan to enhance relationships with the end users of shipping lines.”
While the agency’s debt is expected to increase in the near term as a result of moderate capital spending, it says it is “relatively low compared with that of peers.”
It said the port does face risks “inherent in a cyclically driven sector” and sees stiff competition from the ports of Montreal and New York.