Fitch upgrades Pakistan WAPDA to 'CCC' from 'CCC-'

July 14, 2023 (MLN): 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.

Key rating drivers

The upgrade follows the upgrade of the Pakistan sovereign on 10 July 2023 as WAPDA's ratings are equalised with that of the Pakistan sovereign, and sensitive to any rating action on the sovereign.

Derivation summary

WAPDA's ratings reflect our assessment of government linkage and support incentives, resulting in a weighted score of 50, based on our Government-Related Entities Rating Criteria. We equalise WAPDA's ratings with those of Pakistan, regardless of WAPDA's Standalone Credit Profile.

The senior unsecured bond rating is equalised with the entity's IDR. The bonds were issued at 7.5% per year for 10 years and are due June 2031.

Rating sensitives

Factors that could, individually or collectively, lead to positive rating action/upgrade:

An upgrade of Fitch's credit view on the sovereign may trigger positive rating action on WAPDA.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

A sovereign rating downgrade, weaker government links or lower socio-political and financial implications of a default may lead to negative rating action.

Best/ Worst case scenario

International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years.

The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. 

Issue Profile

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 89% of the nation's hydroelectric power capacity and 22% of installed capacity in FY22.

References for substantial material source cited as key drivers of rating

The principal sources of information used in the analysis are described in the Applicable Criteria.

Public ratings with credit linkage to other ratings

WAPDA's ratings are linked to those of the Pakistan sovereign.

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