Fitch Ratings has upgraded Pakistan Water and Power Development Authority’s (WAPDA) Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC+’, from ‘CCC’.
Fitch typically does not assign Outlooks to issuers with a rating of ‘CCC+’ or below due to the high volatility of these ratings, the Ratings Agency added.
The entity’s IDR reflects Fitch’s rating definition of a low margin for safety, given its reliance on government funding.
The upgrade follows the upgrade of the Pakistan sovereign on 29 July 2024, as WAPDA’s ratings are equalized with those of the sovereign and are sensitive to any rating action on the sovereign.
“We believe extraordinary support from Pakistan to WAPDA would be ‘Virtually Certain’ in case of need, reflecting a maximum support score of 60 under our Government-Related Entities (GRE) Rating Criteria, even though the government’s capacity to support the entity is likely to be impaired amid its high funding requirements as well as the government’s weak credit quality. Hence, we derive the entity’s ratings based on our rating definitions in addition to the support factors under our GRE criteria”, Fitch Ratings added.
The senior unsecured bond rating is equalized with the entity’s IDR.
Factors that could, individually or collectively, lead to positive rating action/upgrade: An upgrade of the sovereign may trigger positive rating action on WAPDA.
Factors that could, individually or collectively, lead to negative rating action/downgrade: A sovereign downgrade or a lower government responsibility or incentive to provide support may lead to negative rating action.
The rating action on WAPDA’s IDR would lead to similar rating action on its senior unsecured notes.
WAPDA is a hydroelectric power generation company that is wholly owned by the state. It was set up to integrate the development of Pakistan’s water and power resources. It made up 88% of the nation’s hydroelectric power capacity and 20% of installed capacity in 2023.
