In a recent assessment, Fitch Ratings has sustained the Pakistan Water and Power Development Authority’s (WAPDA) Long-Term Issuer Default Ratings at ‘CCC’. This rating reflects the challenges and volatility associated with such a level, leading to the absence of a specific outlook assignment for WAPDA by Fitch.
Key highlights from Fitch’s evaluation include:
- Government Support: WAPDA is deemed ‘Virtually Certain’ to receive extraordinary support from the Pakistani government if necessary, reflecting a strong safety net provided by the state.
- Strategic Importance: WAPDA’s critical role in Pakistan’s water and power sectors underlines its significance, with every major initiative requiring government nod and financial backing.
- Financial Backing History: The government’s historical financial support, including debt guarantees and facilitating debt financing, underscores its commitment to WAPDA.
Despite facing a 24% drop in revenue in FY23 due to tariff adjustments and an increase in debt levels, WAPDA is supported by its strategic importance to Pakistan’s infrastructure. The entity is a major hydropower supplier and is expected to play a crucial role in increasing the nation’s hydroelectricity capacity by 2030.
Fitch highlights the continuous support from multilateral agencies and the government’s motivation to prevent any defaults by WAPDA, indicating a ‘Very Strong’ contagion risk.
Factors that could lead to a downgrade include a sovereign rating downgrade or a reduction in government support. Conversely, an upgrade in the sovereign’s credit rating could result in positive rating action for WAPDA.
