Press Release

JCR-VIS Reaffirms Ratings of KotAddu Power Company Limited

Karachi, December 31, 2018: JCR-VIS Credit Rating Company Limited (JCR-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 18, 2017.

The ratings assigned to KAPCO take into account its strong ownership profile being majority owned by Government of Pakistan (GoP) through their representative Water and Power Development Authority (WAPDA). The ratings draw strength from the company’s strong business risk profile with demand risk mitigated under Power Purchase Agreement (PPA) signed with WAPDA. The company has a distinct advantage of having sovereign as the major shareholder, power purchaser and supplier. The ratings also draw comfort from government guaranteed cash flow stream under the agreement upon meeting certain performance benchmarks. However, the mounting inter-corporate debt is a challenge for maintaining the financial risk profile of the company. Given the expiry of PPA in June, 2021, the ratings will depend upon on the company’s negotiation regarding operational terms and conditions with the government.

For further information on this rating announcement, please contact the undersigned at 021-35311861-70 or Mr. Maimoon Rasheed at 042-35723411-13.


Javed Callea
Advisor

Applicable rating criterion: Industrial Corporate (May, 2016)
http://jcrvis.com.pk/docs/Corporate-Methodology-201605.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright December 31, 2018 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.