VIS Maintains Ratings Of KAPCO

KARACHI, (UrduPoint / Pakistan Point News - 14th Dec, 2020 ) :VIS Credit Rating Company Limited has maintained the entity ratings of Kot Addu Power Company Limited (KAPCO) at double A plus/A-one plus. The outlook on the assigned ratings have been revised from stable to rating watch-developing.

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. The previous rating action was announced on Dec. 2, 2019, said press release on Monday.

Revision in rating outlook is on account of PPA expiry in June 2021 and depends on the company's negotiation regarding operational terms and conditions with the government.

The assigned rating takes into account its strong ownership profile of KAPCO being majority owned by Government of Pakistan through its representative Water and Power Development Authority.

The ratings draw strength from the company's strong business profile with demand risk mitigated under Power Purchase Agreement signed with WAPDA. The ratings also draw comfort from government guaranteed cash flow stream under the agreement upon meeting certain performance benchmarks. Moreover, upholding operational performance in line with agreed performance levels would remain a key rating driver. Ratings also take into account the impact of recent memorandum of understanding signed with the Government of Pakistan, impact of which is considered minimal given PPA expiring in seven months.