Is Wapda a Company Or a Government Entity?

Is Wapda a company or a government entity? Is it worth investing in? Read on to find out! This Pakistani company focuses on developing water and hydropower resources, and relies on government funding to finance its projects.

 It has a solid credit rating and is dependent on the government for financial support. What are the risks of investing in Wapda? And what is its future outlook?

Wapda is a company

Located in Seattle, WA, the WAPDA building is reminiscent of a pagoda. The roof of the WAPDA building has curved lines and an upturned edge. It was designed by Edward Durell Stone, an architect renowned for his decorative buildings in the 1950s and 1960s. Construction was completed in 1967, and the building is still in use today. Listed on the National Register of Historic Places, it was the first building of its kind in the world.

The Water and Power Department Authority is responsible for the country's water and electricity supply. Its employment opportunities are available to eligible applicants. Interested applicants can register on the company's website and attach the required documents. Afterwards, they must go to the company's office, pass a written exam, and be accepted for an interview. Applicants should note that WAPDA may ask for proofs of education and experience.

The WAPDA was established by an act of parliament in 1958. It was created to coordinate and give unified direction to various schemes in the Water and Power Divisions. Its Chairmen were outstanding civil servants such as the President of Pakistan, the Minister of Commerce, and the Economic Adviser. The organization was later split into two separate organisations. The WAPDA was charged with the development of hydropower and water resources while the WAPCO was given responsibility for thermal power generation.

While WAPDA's mission is to harness water resources in Pakistan to generate affordable electricity, the PEPCO division is responsible for thermal power generation, distribution, and sale. Currently, the organization supervises nine generation companies, four distribution companies, and a National Transmission Dispatch Company (NTDC). PEPCO's duties include the establishment and operation of a network of transmission lines and grid stations throughout the country.

It develops hydropower and water resources in Pakistan

WAPDA is a state-owned company that develops hydroelectric power in Pakistan. It was established to integrate the development of water and power resources. As of June 2021, WAPDA is responsible for 95% of the country's hydroelectric installed capacity and 24% of its total capacity. WAPDA's ratings are tied to Pakistan's sovereign credit ratings, which are determined through a top-down approach.

WAPDA was established in 1958 and is the primary agency for developing water and power in Pakistan. It was Pakistan's biggest civilian institution, and it played a key role in a variety of sectors. From waterlogging and drainage to flood control, it served as the ultimate authority for power generation, transmission, and distribution. In addition to this, WAPDA has plans to increase its water storage capacity to 28 million acre-feet in the medium and long-term, and to generate 828 MW of hydropower.

Currently, Pakistan has a significant amount of untapped water resources and hydropower potential. The Indus River alone provides 60,000 megawatts of potential hydropower. Many of these sites lie in the mountainous north and along the Indus River. Several major hydroelectric power stations have already been developed, including Tarbela, Mangla, and Kulgara. Developing these resources is crucial to Pakistan's economy, as the country currently struggles with an energy crisis. According to recent estimates, around 51 million people do not have access to electricity or are forced to endure daily load-shedding.

As of January 2019, the fifth hydropower extension is under construction. The powerhouse and intake work are scheduled to be completed in early 2027. The project will cost 80 percent less than the average hydropower project. It will supply additional renewable energy at a competitive price, alleviate outages, and support socioeconomic development for generations to come. If successful, it will benefit tens of millions of people in rural Pakistan.

It depends on the government for financial support

The government provides the majority of the financing for Wapda, but if it doesn't, the organization may face bankruptcy. This situation is not uncommon in Pakistan. The country's financial crisis has left many businesses struggling to stay afloat. Despite a string of successful projects, the economy has not recovered from the recession. With weak economic indicators, many entrepreneurs are looking to alternative sources of financing. In addition to the private sector, the government is also a major partner of public sector enterprises.

While the company has an overall weak financial profile, its reliance on government aid has been limited in the last year. While spending large amounts on hydropower capacity expansions has reduced its liquidity, it has limited financial flexibility after servicing interest payments. Furthermore, there are no plans to address the shortfall in the next year. Government support has therefore become an issue of public interest. But, before considering government support, investors should take a look at the financial profile of the corporation.

The rating of Wapda is driven by its B3 baseline credit assessment, which Moody's says reflects the company's high dependence on the Government of Pakistan. The BCA also reflects the company's dominant position in water infrastructure development in Pakistan and its dependence on government support, which is closely tied to the government's fiscal budget. A B3 corporate family rating is an indication of strong government support for a Pakistani water utility.

It has a high credit rating

The state-owned Wapda has a high credit ratings, owing to its role as a major hydroelectric power producer in Pakistan. It generated 32,295GWh of electricity in FY20. It plans to generate a further 8,070MW from new hydel projects in the next four years. The company is expected to maintain its stable credit rating despite the recent decline in the country's foreign exchange reserves.

However, the company does face physical climate risks in the form of extreme weather patterns. Additionally, the company has a weak track record in tariff adjustments, a factor Moody's considers socially. The company's highly leveraged capital structure resulting from its aggressive capital spending plan and concentration of ownership contribute to the company's high credit rating. Therefore, investors should consider this before investing in WAPDA.

Currently, WAPDA holds PKR141 billion in cash and PKR189 billion in its current portion of long-term debt. Eighty-seven percent of WAPDA's long-term debt is secured by the government. The remaining debt is short-term and non-interest bearing. The cash on hand at WAPDA's current balance is sufficient for the company to meet its obligations. The company's credit rating also reflects the government's supportive loan policy.

Its ratings are credit linked to the Pakistan sovereign ratings

In the coming years, a moderate weakening in the BCA of Wapda is expected, but it is unlikely to result in a rating downgrade. While the government of Pakistan's strong support for the water utility is likely to prevent a rating downgrade, changes in the regulatory environment may lead to a rating downgrade. Wapda is expected to continue its aggressive debt-funded investments and face delays in collecting hydropower tariffs.

Earlier, Moody's Investors Service had affirmed a B3 corporate family rating for the Water and Power Development Authority (WAPDA). The B3 CFR is based on the baseline credit assessment of B3, with an expectation of high future support from the government of Pakistan. The B3 BCA of Wapda reflects its dominant position in the supply of hydropower services in Pakistan, as well as its recurring financial support from the Pakistan government.

For example, Moody's rated Pakistan as B3 in August 2020. Previously, Pakistan's credit rating was Caa1, but it jumped to B3 in 2007. In 2006, Moody's revised Pakistan's credit rating from B2 to B1 because of Pakistan's improving economy. While this increase may be temporary, the overall rating is still a warning sign for investors.

While Moody's said that upward pressure on Pakistan's bank credit ratings will be limited by the negative outlook on the government, downward pressure would likely develop after a downgrade of the sovereign rating, as it signals a weakening in the government's ability to support banks in times of trouble. Further, Moody's said that the negative outlook on Wapda's credit rating is a "cautionary measure".