The credit rating company S&P Maalot approved for Ashdod Port Company a debt rating of AA+ with a stable outlook, and as such this leaves the company's rating as it was, despite the significant reform that is coming to Israel's ports. In S&P Maalot's justifications for the rating, it says that pertaining to 2018, Ashdod Port showed improvement in the current year, and the market share of the company reached about 52% in the container sector, and about 49% in the vehicle sector. This is despite an environment that is becoming increasingly competitive.
In the framework of the expected reform in Israel's ports, in 2021 the Southern Port is expected to open next to Ashdod Port, and will directly compete with it in the container sector. In 2022 an additional port is expected to open near Haifa Port, and it will also compete with the two large existing ports. As part of Ashdod Port's preparation for competition, the company launched a multiyear investment plan with a scope of about 2.3 billion shekels. This plan will include an upgrade of some of the platforms of Ashdod Port, so that they can handle large cargo ships, and conveyor will be built in order to transport grain to the silo. Ashdod Port already signed the primary agreements for these investments, and they are expected to be implemented in the coming years.
Despite the competition and the future investments, the company is not expected to require external debt at this stage, since the main existing debt is a result of adjustments for registering the leasehold obligation towards the Israel Port Authority, as well as a pension obligation for employees for whom the company holds financial reserves. In addition, the rating company assesses that the likelihood of extraordinary government support is extremely high.
The stable rating forecast reflects the rating company's assessment that no changes are expected in the company's business and financial risk during the rating outlook. In their assessment, in the coming years, the company will continue to present an adjusted FFO to debt ratio exceeding 66%, while maintaining strong liquidity and continuing to implement the planned investment plan.