NSW Ports Finance Co. Pty. Ltd

The stable outlook reflects our view that economic conditions in New South Wales and the port's index-linked tariffs will have a key influence on the port's earnings growth. The port's resilient business model will manage the likely decline in trade volumes, supported by stable cash flows from its property segment. We expect the port to continue maintaining a capital structure that is consistent with a 'BBB' rating. We also expect the port to maintain its FFO-to-debt ratio at 8%-8.5% over the next two to three years. Although a low probability scenario, a downgrade could occur if the port's shareholder distributions were substantially higher than our expectations and poor economic conditions in the state significantly reduced container volume growth. This scenario

...Broader economic conditions and local demand will affect trade revenue in the next one to two years. We expect NSW Ports' container volumes to decline by 8% to 12% in the year ending June 30, 2021 before recovering thereafter. The likely economic slowdown in the aftermath of COVID-19 will reduce demand over the next year at least. In addition, a recovery in motor vehicle volumes may also be 12 to 18 months' away. Bulk volumes recovery are likely to hinge on local demand, with a fall over the next year at least driven by reduced jet fuel and transport fuel demand. Despite the likely decline in trade, we believe that the port will continue to benefit from its strong market position and landlord business model. NSW Ports (rated finance entity NSW Ports Finance Pty Ltd.) is the second-largest container port in Australia and the sole car terminal and common-user bulk liquid port in the State of New South Wales. Its landlord business model and diversity of revenue from a relatively stable property...

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