PACRA Maintains Rating of WAPDA | PPTFC | May-17

The Water and Power Development Authority of Pakistan is in the process of the construction of DASU hydro power project (Dasu). Dasu, once completed would become second largest hydel project in Pakistan. Dasu is a run of the river project on Indus River located in Dasu Kohistan, Khyber Pakhtunkhwa about 345 KM from Islamabad. Stage 1 (2,160 MW) is expected to complete by 2023 with cost of USD ~4.247bln. For partial financing of the project, WAPDA is issuing debt instruments worth PKR 88bln (TFCs: 35.2bln, Sukuks: 52.8bln) in multiple tranches. For this purpose in May 2017 first tranche of debt instruments has been issued and WAPDA is planning to issue second tranche in late 2020.
The ratings of PPTFCs (Tranche 1: PKR 10bln, Tranche 2: PKR 4.235bln) and Sukuks (Tranche 1: PKR 15bln, Tranche 2: PKR 6.353bln) reflects an unconditional and irrevocable guarantee by the Government of Pakistan (GoP). The guarantee covers the payment of total outstanding amount of the instruments and related profit component. GoP would pay the entire called amount immediately upon receiving a demand notice from the trustee. Additionally, WHE is maintaining a debt payment account (DPA) under the exclusive lien of the trustee. Within first fifteen days of each month, WHE deposits an amount equal to 1/6th of the upcoming installment in the DPA. The rating apart from a debt payment and guarantee mechanism recognizes WAPDA's strategic importance as the major hydroelectric power supplier to the country (18% in overall electricity generation in FY19). WAPDA generated 27,196Gwh electricity in FY19. WAPDA expects to generate additional ~7,000Gwh by completion of new hydel projects in next five years.
WHE's financial profile draws comfort from strong cash flows. However, it remains dependent on repayment behavior of power purchaser. Continued compliance with the predefined covenants of PPTFC, including maintenance of DPA would remain critical.The watch captures that the financial statements of the issuer for FY19 are being audited and will be approved in the next month. This will be followed by the process for the approval of financial statements for the ongoing financial year.

About the Entity
The Pakistan Water and Power Development Authority (WAPDA), WHE was established through an act of parliament in February 1958 (WAPDA Act 1958) for development and maintenance of water and power resources. WHE has 19 projects with total hydel generation capacity of 8,420MW.

About the Instrument
WAPDA has issued privately placed Term Finance Certificates of PKR 10bln in May-17 as first tranche. Second tranche of PKR 4.235bln will be issued in 2020. The instrument, having a tenor of 15 years, shall be redeemed in 20 equal semi-annual installments starting from May-23. Profit will be paid semiannually in arrears at 6M Kibor + 145bps. Till date WAPDA has made six profit payments on TFC and the profit paid to the TFC certificate holders as of May-20 is PKR 737mln.