ISLAMABAD: The Baseline Credit Assessment (BCA) of Water and Power Development Authority (Wapda) is challenged by its weak financial profile because of sizable capital spending on hydropower capacity expansion and delay in collecting electricity tariffs, says Moody’s Investors Service (Moody’s).
Moody’s 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. The review did not involve a rating committee.
This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement.
Mood’s stated that 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.
The BCA of b3 reflects (1) Wapda’s dominant position in supplying hydropower and developing water resource infrastructure in the nation, and (2) 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.
This document summarises Moody’s view as of the publication date and will not be updated until the next periodic review announcement, which will incorporate material changes in credit circumstances (if any) during the intervening period.
Copyright Business Recorder, 2021