Moody’s Ratings has upgraded the Pakistan Water and Power Development Authority’s (Wapda) corporate family rating (CFR) to Caa1 from Caa2, along with raising its Baseline Credit Assessment (BCA) to caa1 from caa2.
The outlook has been changed to stable from positive, with Moody’s highlighting concerns over Wapda’s weak financial position and ongoing operational challenges at the Neelum-Jhelum Hydropower Project (NJHP).
The upgrade aligns Wapda’s rating with Pakistan’s sovereign rating (Caa1 stable), reflecting the close credit link between Wapda and the government, given the full ownership and oversight by the state. The rating action is also influenced by Wapda’s critical role in Pakistan’s power sector as a dominant hydropower supplier.
Despite the upgrade, Moody’s noted that Wapda’s BCA remains affected by persistent operational issues at the 969 MW Neelum-Jhelum power station, a lengthy receivables cycle, and delayed tariff decisions. The company’s financial profile is further strained by a large hydropower expansion plan and an unpredictable regulatory environment.
Moody’s warned that Wapda’s funds from operations (FFO) are expected to remain weak over the next 12-18 months, with a recovery dependent on tariff approvals and the resumption of NJHP operations.
Operations at NJHP have been suspended since May 2024 due to structural issues in the project’s tailrace tunnel. While there is uncertainty about when the project will resume, Wapda is relying on the recovery of outstanding receivables to cover operating costs and repair expenses.
Moody’s highlighted that Wapda continues to receive financial support from the government, given its strategic importance in supplying affordable electricity and addressing water challenges in Pakistan. However, the risks posed by the government’s financial constraints and low policy predictability offset this support.
The stable outlook reflects Moody’s expectation that the government-Wapda relationship will remain intact in the near term.
