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The Pakistan Credit Rating Agency Limited
Press Release

Date
18-Nov-22

Analyst
Madiha Sohail
madiha.sohail@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 Maintained the Rating of WAPDA Dasu TFC-B | PKR 4,235.3 Mln

Rating Type Debt Instrument
Current
(18-Nov-22 )
Previous
(18-Nov-21 )
Action Maintain Initial
Long Term AAA AAA
Short Term - -
Outlook Stable Stable
Rating Watch - -

The Water and Power Development Authority of Pakistan ("WAPDA") has issued the second tranche of the Term Finance Certificate ("TFC"). WAPDA utilized this amount to partially finance the construction of the Dasu hydropower project ("The project" or "Dasu"). Dasu, once completed would become the second-largest hydel project in Pakistan. Dasu is a run of river project on the Indus river located in Dasu Kohistan, Khyber Pakhtunkhwa about 350 KM from Islamabad. The project started in 2017 and is expected to be completed in May'27. The project is expected to be completed in two stages, the installed capacity would be 4,320MW (stage-I 2,160MW) and the annual energy which would be produced is 21,485 GWh (Stage-I 12,220 GWh). Stage -I project includes the construction of a hydraulic structure on the Indus River and underground power generation facilities, out of the total land required (5005 acres) for the project 4630 acres have been acquired. The Project would be financed through a mix of WAPDA internally generated cash (15%) and borrowing (85%) i) Long-term (local & foreign) ii) Bonds Issuance (Islamic & Conventional).
The assigned rating of TFC incorporates an unconditional and irrevocable guarantee by the Government of Pakistan (GoP). The guarantee is covering the payment of the total outstanding amount of the TFC and the related profit component. GoP would pay the entire called amount immediately upon receiving a demand notice from the issue agent. Additionally, WAPDA has maintained a debt payment account (DPA) under the exclusive lien of the issue agent. Within the first fifteen days of each month commencing from the Musharaka Contribution Date (as defined in the Musharaka Agreement dated March 29, 2017), WAPDA is depositing 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. WAPDA generated 32,073GWh electricity in FY21. WAPDA expects to generate an additional ~8,070MW by the completion of new hydel projects in the next four years.
WAPDA's financial profile draws comfort from strong cash flows. However, it remains dependent on the repayment behavior of the power purchaser. Continued compliance with the predefined covenants of TFC, including maintenance of DPA would remain critical.

About the Entity
The Pakistan Water and Power Development Authority (WAPDA), was established through an act of parliament in February 1958 (WAPDA Act 1958) for the development and maintenance of water and power resources. WAPDA has 22 projects with a total hydel generation capacity of 9,359MW.

About the Instrument
WAPDA has issued a rated, secured, privately placed WAPDA Dasu TFC-B ("TFC") of PKR 4,235.3mln on 29-Jul-21 to partially finance stage-1 of Dasu Hydropower Project, a 2,160MW run-of-river project. Stage -I project includes the construction of a hydraulic structure on the Indus River and underground power generation facilities. The TFC has a tenor of 11 years and carries a profit rate of 6MK + 1.45% p.a paid semi-annually in arrears, calculated on a 365 days basis on the outstanding principal amount. TFC will redeem after twenty equal semi-annual installments amounting to PKR 211.77mln which commenced from 8-Nov-22.

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.