Press Release

VIS Revises Rating of Kot Addu Power Company Limited (KAPCO)

Lahore, January 08, 2024: VIS Credit Rating Company Limited (VIS) has revised the medium to long-term rating of Kot Addu Power Company Limited (KAPCO) from ‘AA’ (Double A) to ‘A+’ (Single A Plus). The short-term rating has been maintained at ‘A-1’ (A-One). The medium to long term rating of ‘A+’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ indicates high certainty of timely payment; Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. The outlook on the assigned rating has also been revised from ‘Stable’ to ‘Rating Watch - Developing’. Previous rating action was announced on January 12, 2023.

The ratings take into account ownership profile of the Company, with majority shareholding being held by the Government of Pakistan (GoP) through WAPDA. The ratings revision also takes into account the change in business risk profile of the Company as its Power Purchase Agreement (PPA) with the GoP expired in Oct’22. The Company’s Power Plant is included in NEPRA’s approved Indicative Generation Capacity Expansion Plan (IGCEP) 2022-31 till 2026 for 500 MW Capacity. KAPCO applied for Reference Tariff as well as Provisional Tariff before NEPRA. In line with IGCEP, NEPRA gave the provisional tariff for 500MW which will be applicable till determination of final tariff. The Company accepted the Provisional Tariff with certain reservations which were filed with NEPRA through review petition. The public hearing for Final Tariff was held on October 03, 2023 and the Company is expecting the issuance of Final Tariff determination soon. Accordingly, given pending renewal of PPA, demand risk has been incorporated in the assigned ratings.

Net sales declined during FY23 on account of significantly lower offtake from the power purchaser. KAPCO has not recorded any net sales during the ongoing year. Profitability is primarily based on investment income and interest on late payment that declined considerably on a timeline basis. While trade debts declined in absolute terms, credit risk emanating from these receivables is considered low, given that these are sovereign guaranteed. Current ratio improved on account of higher inventory and lower trade payables at end-FY23. The ratings also incorporate sizable liquid assets on KAPCO’s balance sheet, therefore, net debt of the Company is nil, while these liquid assets also generate notable secondary income for the Company. With high dividend payout ratio, equity base remained range bound.

The business and financial risk profile of the Company has materially changed as it has neither the guaranteed power offtake nor the full capacity available for the interim demand risk-based tariff, therefore, the Power Plant remained non-operational in the ongoing year. VIS has placed KAPCO on ‘Rating Watch-Developing’ status pending issuance of Final Tariff by NEPRA and signing of revised PPA with Central Power Purchasing Agency (CPPA-G). The signing of the said agreement is a critical event which may have an impact on the Company's business and financial risk profile. VIS will continue to monitor developments in this regard.

For further information on this rating announcement, please contact the undersigned at 042-35723411-12 (8008) or email at

Maimoon Rasheed

Applicable Rating Criteria: Industrial Corporates (May 2023)

Government Supported Entities (July 2020)

VIS Issue/Issuer Rating Scale

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