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The Pakistan Credit Rating Agency Limited
Press Release

Date
28-Aug-20

Analyst
Sana Shameen
sana.shameen@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Assigns Initial Entity Ratings to National Transmission and Despatch Company Limited

Rating Type Entity
Current
(28-Aug-20)
Action Initial
Long Term AA+
Short Term A1+
Outlook Stable
Rating Watch -

The ratings also take support from National Transmission and Despatch Company’s (NTDC) ownership structure-dominantly owned by the Government of Pakistan (GoP) holds strategic importance to the authorities, as being a semi-autonomous power transmission utility; it is mandated to construct, maintain and operate an integrated network of 500 kV, 220 kV transmission lines and grid stations to evacuate power from an installed generation capacity of over 36,000 MW. NTDC’s low business risk emanates from its leading market position, strong uphold on transmission system in terms of its technical and business expertise; moreover, company’s operational expenses being part of tariff determination mechanism reflect positively on the company’s risk profile and its business and growth prospects; the Company maintains that transmission losses are aligned with the globally accepted parameters. Ratings also take into account Company’s moderate financial risk emanating from sizable equity, sound capital structure comprising mainly of local financing as foreign loans are provided under relent policy with inherent protection against currency and foreign exchange risk. Furthermore, working capital management is reflective of strong internal cash generation and effective management of circular debt by adjusting receivables with loans repayments on foreign relent loans. The ratings also incorporate NTDC’s strengthened position resulting through completion of 31 expansion projects. Market share, is expected to remain strong as NTDC is planning of enhancing its transmission capacity from 53,410MVA to 62,355MVA by Jun'21. Power evacuation from Neelum Jhelum, Diamer Basha Dam are some of Company’s huge and magnificent in pipeline projects.
Effective management of upcoming projects, in addition to ERP system installation, consistency in financial profile and risk matrixes remains critical for the ratings. Meanwhile, reconciliation of outstanding adjustments regarding Business Transfer Agreements and sustained competitive positioning is also imperative.

About the Entity
National Transmission and Despatch Company was incorporated as a Public Limited Company in Nov 06, 1998 under the Companies Ordinance 1984 (now Companies Act 2017), with its Head Office in Lahore. After having Certificate for Commencement of Business, NTDC started its commercial operations from March 01, 1999. NEPRA granted Transmission License to NTDC in December 2002 to engage in the exclusive transmission business for a term of thirty (30) years. NTDC 1st tariff was determinate by NEPRA in April, 2004.

Board comprises of ten experienced professionals: six independent directors and each member is a provincial nominee, three members being non-executive directors are representatives from Ministry of Energy, Power Division. Eng.Dr.Khawaja Riffat Hassan is the acting Managing Director of the company and a member of Board as well.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.