VIS Reaffirms Ratings of KotAddu Power Company Limited

Karachi, December 02, 2019 (PPI-OT): VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of KotAddu Power Company Limited (KAPCO) at ‘AA+/A-1+’ (Double A Plus/A-One Plus). The medium to long-term rating of ‘AA+’ denotes high credit quality coupled with strong protection factors. Moreover, risk factors may vary slightly with possible changes in the economy. The short-term rating of ‘A-1+’ denotes highest certainty of timely payment, liquidity factors are excellent and just below risk free Government of Pakistan’s short-term obligations. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on December 31, 2018.

The ratings assigned to KAPCO take into account its strong ownership profile being majority owned by Government of Pakistan (GoP) through its representative Water and Power Development Authority (WAPDA). The ratings draw strength from the company’s strong business profile with demand risk mitigated under Power Purchase Agreement (PPA) signed with WAPDA. The ratings also draw comfort from government guaranteed cash flow stream under the agreement upon meeting certain performance benchmarks.

However, the escalating inter-corporate debt is a challenge for maintaining the financial risk profile of the company. Moreover, upholding operational performance in line with agreed performance levels would remain a key rating driver. Given the expiry of PPA in June, 2021, further renewal of the ratings will depend upon outcome of the company’s negotiation with the government regarding the renewal of PPA.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/