WAPDA highly dependent on govt extraordinary support: Moody’s

Moody's Investment Service (Moody’s) has assigned a B3 corporate family rating to Pakistan’s Water and Power Development Authority (WAPDA).

Moody's on Thursday in a statement said that it has completed a periodic review of the ratings of WAPDA and other ratings that are associated with the same analytical unit.

The review was conducted through a portfolio review discussion held on 12 May 2021 in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers.

As per details, WAPDA's B3 corporate family rating is primarily driven by the issuer's Baseline Credit Assessment (BCA) of b3 and Moody's expectation of a very high level of dependence and extraordinary support from the Government of Pakistan (B3) in times of need.

Moody’s said that the BCA of b3 reflects WAPDA's dominant position in supplying hydropower and developing water resource infrastructure in the nation, and the recurring financial support from the Pakistani government, which is closely linked to the government's fiscal budget.

However, the BCA is challenged by WAPDA's weak financial profile because of sizable capital spending on hydropower capacity expansion and delay in collecting electricity tariffs. As a result, the issuer has limited financial flexibility after servicing interest payments, without considering the support from the government.