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Business Recorder
3 days ago
- Business
- Business Recorder
Moody's upgrades Wapda's CFR, BCA ratings
ISLAMABAD: Moody's Ratings (Moody's) has upgraded Pakistan Water and Power Development Authority's corporate family rating (CFR) to Caa1 from Caa2 and Baseline Credit Assessment (BCA) to caa1 from caa2. Concurrently, it changed the outlook to stable from positive. But at the same time expressed concern over its weak financial position and persistent operational challenges in Neelam-Jhelum power project. 'The upgrade of Wapda's CFR and the revision of outlook reflect the recent rating action taken on the government of Pakistan. This alignment underscores the strong credit linkage between Wapda and the sovereign, driven by the government's full ownership and direct oversight of the company, as well as Wapda's exclusive focus on domestic operations,' said Erman Zhang, a Moody's Ratings analyst. BCA also pushed up: Moody's upgrades Wapda's CFR to Caa2 This rating action follows the rating action on the government of Pakistan (Caa1 stable) on 13 August 2025. Wapda'sCaa1 CFR incorporates its caa1 BCA and Moody's assessment of a high likelihood of extraordinary support from, and the company's very high dependence on, the government of Pakistan when needed, under its Joint Default Analysis (JDA) for government-related issuers. Wapda'scaa1 BCA reflects its exposure to persistent operating challenges at its 969 megawatt (MW) Neelum-Jhelum power station (NJHP) and its weak financial profile due to its sizeable hydropower capacity expansion plan, its long receivables cycle and delayed tariff decisions. The BCA also considers Wapda's position in Pakistan's power sector as a dominant hydropower supplier, as well as the recurring financial support it receives from the government. The rating agency noted that the company's weak financial profile is the result of an unpredictable regulatory framework and its inability to sufficiently recover costs in a timely manner, leading to delayed tariff decisions and a long receivables cycle. Moody's projected that the Wapda's funds from operations (FFO) will remain very weak over the next 12-18 months, and a sustained recovery will depend on the regulator approving an increase in its tariffs as well as the operational resumption of NJHP. Moody's said that its assessment of Wapda's financial metrics is based on the combined financials of Wapda's power segment and Neelum Jhelum. The report said for the same reasons, WAPDA's liquidity will remain strained because of its substantial current borrowings and large capital spending. The company did not repay certain government loans as per the agreed repayment schedule, in part due to the delays in its recovery of outstanding receivables from its government-owned off-taker. Moody's expect this situation will continue. Operations at NJHP have been suspended since May 2024 because of weak pressure in the hydro project's tailrace tunnel. It is unclear when the project could resume operations or the repair cost required at present. During this period, NJHP will likely rely on recovery of outstanding receivables to meet its operating cash requirement, fund the repair cost and service its external debt. NJHP had previously shut down for 13 months after major cracks were discovered in its tunnel and had just resumed operations in September 2023. Moody's said expectation of a high likelihood of government support for Wapda considers the Pakistani government's full ownership and direct supervision of the company. It also reflects the company's strategic importance to the government as it is an important platform that (1) constructs and operates hydropower assets to supply affordable electricity in Pakistan, and (2) builds water storage facilities to help address the country's acute water challenges. However, such considerations are offset by the risks stemming from the government's low policy predictability and transparency. In addition, the financial challenges faced by the government, reflected in its Caa1 ratings, indicate its limited capacity to provide support to Wapda. The stable outlook on the rating mirrors the stable outlook on Pakistan's sovereign ratings, based on Moody's expectation that the relationship between Wapda and the government will remain intact at least over the next 12-18 months. Copyright Business Recorder, 2025
Express Tribune
11-07-2025
- Politics
- Express Tribune
Govt sets up probe into NJHP tunnel collapse
Listen to article Planning Minister Ahsan Iqbal said on Thursday that Prime Minister Shehbaz Sharif has constituted an inquiry commission to take legal action against those responsible for the collapse of the tunnel at the Rs500 billion Neelum-Jhelum Hydropower Project (NJHP). Speaking at a press conference, Iqbal said the commission, headed by a retired judge, was formed on the basis of findings from two separate committees. He added that the commission will hear those involved before initiating legal proceedings. According to the terms of reference (ToRs), the commission will recommend legal, administrative, and financial actions against those responsible. It will categorise accountability as gross negligence, procedural misconduct, or potential criminal liability as the case may be, reads a notification. Iqbal termed the failure of the NJHP an "expensive and glaring mistake". He said that the restoration of the 969 megawatts project that is closed since May last year, was still not in sight as the Water and Power Development Authority (Wapda) had not yet submitted the PC-I for the revival. In May this year, Water Resources Minister Muhammad Moeen had informed the National Assembly that the restoration process of the NJHRP was expected to take an additional two years to complete. A few months ago, Wapda had proposed to the government that either the tunnel should be rebuilt with an estimated cost of Rs250-300 billion or it should be repaired by spending around Rs20 billion. The government had also engaged an international panel of experts (IPOE) to investigate the structural issues affecting the project's Head Race Tunnel (HRT). The panel was tasked with identifying the causes of recent challenges. The report highlighted areas of the tunnel floor that required attention, alongside recommendations for enhanced ventilation, lighting, and worker safety measures. In May this year, the federal cabinet approved to setup a commission of inquiry under the Pakistan Commission of Inquiry Act 2017, to investigate the NJHP. Justice (retd) Tariq Abbasi is the chairman of the inquiry commission, which has time till August 20 to finalise its report, according to the notification. Other members include Shahid Khan and the secretaries of Establishment Division, Water Resources Division and the Engineer-in-Chief of Pak Army. The ToRs of the commission entail a sequential analysis of all key decisions in planning, design, execution, and monitoring; establishing clear accountability for omissions, delays, and misjudgements that led to the tunnel collapse. The commission has been tasked to verify compliance with engineering standards, project management protocols, and directives from Executive Committee of the National Economic Council (ECNEC) and the Central Development Working Party (CDWP) and other regulatory bodies. It is required to identify the responsible individuals and determine whether failures in geological assessments, tunnel lining, and water pressure management resulted from negligence, incompetence, or deliberate misconduct, linking specific lapses to responsible officials. The commission is assessing the role of oversight bodies, consultants, and contractors to identify failures in risk mitigation, contractual obligations, or misleading assurances, and fixing responsibility accordingly. At the press conference, Iqbal also spoke about the prevailing economic conditions and the achievements of this government in the past one year. He said that the government successfully brought inflation down to an average of 4.5% — the lowest since 2016. "Effective fiscal consolidation and external sector stability underscore Pakistan's stronger-than-expected recovery trajectory, he said, adding that the economic performance reflected prudent economic management and signals growing confidence in Pakistan's ability to navigate external shocks and sustain a path towards stability and inclusive growth. To a question about the government's inability to meet investment targets, the minister said that the investors were worried about Pakistan's macroeconomic stability and judicial challenges. He added that after bringing political and economic stability and making constitutional changes through the 26th amendment, the investors' confidence has been restored. He expressed the hope that the foreign investment would start picking up from this fiscal year. Pakistan's macroeconomic performance in FY2025 demonstrated resilience despite global headwinds, with GDP growth rising to 2.7% and inflation dropping sharply to an average of 4.5%, reads the development update report that the Planning Ministry released on Thursday. It added that the government's strategic focus on high-impact, inclusive, and export-led projects under the PSDP aligns with "Uraan Pakistan" priorities, emphasising exports, digitalisation, green growth, energy security, and social equity.
Express Tribune
09-05-2025
- Business
- Express Tribune
Work on Neelum-Jhelum not to resume anytime soon
A partially damaged wall of the Neelum Jhelum Hydropower Project is pictured following an Indian missile strike in Nausari, about 40km from Muzaffarabad. Photo: AFP The work on the 969 megaWatt Neelum-Jhelum Hydropower Plant (NJHP) in Azad Jammu and Kashmjir (AJK), which has been stopped for over a year because of technical faults, is unlikely to resume in the next financial year 2025-26, according to a report submitted to the power regulator. In the report submitted to the National Electric Power Regulatory Authority (Nepra), the Central Power Purchasing Agency (CPPA-G) has said that two power plants — Jamshoro Coal Power Plant and Shahtaj — have been considered for commissioning prior to the start of the fiscal year. However, due to ongoing technical issues, the NJHP has not been included within the forecast horizon, it says. It is learnt that the government has already spent Rs500 billion to set up this plant. Because of the fault, the work shut down on May 1, 2024. Furthermore, the NJHP — located at Nauseri near Line of Control (LoC) was damaged in Indian shelling on Wednesday. On Thursday, Water and Power Development Authority (Wapda) Chairman Sajjad Ghani visited the site to assess the damage to the structures and installations, and meet the staff. Speaking on the occasion, the Wapda chief said that Indian attack that damaged the hydraulic power unit 1 of intake gates, structure at de-sander units and residential camp, was in violation of the international laws including the Geneva Conventions. Electricity demand Meanwhile, the CPPA-G has also submitted a forecast of electricity demand in upcoming financial year — a key determinant in setting the end-consumer tariffs, with any fluctuation having a direct impact on tariff adjustments. It forecast the increase of 2.8 to 5 % in the electricity demand based on historical elasticity estimates, and GDP projections by the International Monetary Fund (IMF). The projections form the basis for the normal and high demand scenarios used in this analysis. The report outlines seven scenarios, specifically demand, hydrology, fuel prices, and exchange rates. Across the analysed scenarios, indigenous fuels constitute between 55 to 58% of the overall energy mix, while clean fuels contribute between 52 and 56%. To account for potential variability, two distinct demand scenarios have been developed based on extensive consultations with relevant stakeholders. The normal demand scenario reflects a projected 2.8% increase over Jan-Dec 2024, while the high demand scenario reflects a projected 5% increase. Power tariffs Fuel prices are a key driver of the fuel cost component within the Power Purchase Price (PPP). Accordingly, the forecast incorporates assumptions for normal fuel prices based on reputable data sources to ensure accuracy and relevance. The CPPA-G has projected the PPP at Rs26.70 per unit based on a high exchange rate of Rs300 per dollar, low hydrology, standard fuel prices, and normal demand. Another scenario, which assumes normal demand and an exchange rate of Rs280 per dollar, results in a low PPP at Rs24.75 per kWh. For imported fuels, price assumptions are based on market data from Argus Media and Plans, while local fuel prices are informed by inputs from NEPRA, the Oil and Gas Regulatory Authority (OGRA), and the Thar Coal and Energy Board (TCEB).
