NTDC's credit ratings held steady at ‘AA+’ by PACRA

August 15, 2024 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of National Transmission & Despatch Company Limited (NTDC) at "AA+" for long term and "A1+" for short term with a stable outlook forecast, latest press release issued by PACRA showed.

The ratings reflect NTDC’s ownership structure dominantly owned by the Government of Pakistan.

The company is of strategic importance to Pakistan as being an autonomous power transmission utility.

It is mandated to construct, maintain and operate an integrated network of 220 kV, 500 kV, and above transmission lines and grid stations to evacuate power from an installed generation capacity of over 45,885 MW.

NTDC’s low business risk emanates from its leading market position and strong hold on the transmission system in terms of its technical and business expertise.

Moreover, the company’s operational expenses being part of its tariff reflect positively on its performance and business risk profile.

During FY 2023-24, NTDC received a total of 133,815 GWh of energy and delivered 130,438 GWh of energy through CDPs all over Pakistan. T&T losses expressed as a percentage of energy received by NTDC were 2.524% for FY 2023-24.

The company's transmission losses are within the limits allowed by NEPRA which is 2.639%.

NTDC has undertaken and completed multiple projects in FY 2023-24 that will improve transmission efficiency by managing the load.

The Multi-Year Tariff (MYT) for Use of System charges by NTDC expired in FY22. On October 28, 2022, Authority permitted NTDC to implement a fixed rate of Rs235/kW/month for FY23 and beyond.

NTDC subsequently submitted a new MYT proposal for the next three years starting from FY23, which will be applied retroactively once approved by the Authority.

As MYT is in approval stage, NTDC's topline has decreased slightly compared to the previous year (9MFY24: Rs52.435bn; 9MFY23: Rs54.135bn).

Additionally, operating costs have surged significantly without a corresponding increase in revenue along with the escalation in finance cost and taxation, leading to a substantial decline in net income which reduced to Rs458m in 9MFY24 from Rs11.702bn in the same period of previous year.

With its extensive transmission network spread all over Pakistan, NTDC dominates the electricity transmission industry.

Ratings also take into account the company’s moderate financial risk emanating from sizable equity, an adequate capital structure that comprises mainly of foreign loans relent in Pak Rupee to NTDC and borrowing from the local banks.

Furthermore, company’s in-house working capital management is reflected in strong internal cash generation and constructive management of circular debt by adjusting its receivables with repayments due against foreign loans relent to NTDC by GoP.

The company is in the process of implementing ERP System that aims at achieving business automation in the Company.

Effective management, timely completion of ongoing and upcoming projects and consistency in financial profile and risk matrices as well as approval of MYT remains critical for the ratings.

Meanwhile, reconciliation of outstanding adjustments regarding Business Transfer Agreements and sustained competitive positioning are also imperative for ratings.

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