LAHORE: The Water and Power Development Authority (Wapda) has secured international credit rating of ‘B-’ with a stable outlook from international rating agencies, Fitch and Standard & Poor’s (S&P) -- a pre-requisite for green eurobond issuance that is a core point of the policy for foreign currency component of both Diamer Basha and Mohmand dam projects.

This was revealed in a letter written by the Wapda chairman to the federal water resources secretary on Friday.

Wapda had initiated the process to raise a portion of the requisite foreign currency financing from international market through issuance of green eurobond with a debut benchmark size of $500 million. The authority engaged three major credit rating agencies -- Fitch, S&P and Moody’s. JP Morgan and HBL provided financial advisory services for the process on pro-bono basis and meetings with these agencies were conducted on Feb 19 and 20 at Wapda House in Lahore.

“A great feat that Wapda has been equalised with the federal government on Long-Term Foreign Currency Issuer Default Rating of ‘B-’ with Stable Outlook by both Fitch and S&P Ratings. Moody’s are yet to communicate the outcome and we expect it to be in line with the other two agencies,” the letter stated.

During the meetings, the rating agencies were apprised of Wapda’s autonomous status, business model, financial profile and its importance in realising the government’s goal of minimising dependence on imported fuel for energy generation. This was followed by a rigorous exercise from credit quality perspective, including evaluation of financial position, financial forecasts, impact of socio-political factors, and the authority’s corporate governance and regulatory framework in order to gauge its strengths and quantify potential risks.

“The outcome of this credit rating exercise would greatly help to raise foreign financing at the best possible rates when Wapda approaches the international capital market for its Green Eurobond issuance. It will also bolster our credibility with a direct bearing on the pricing when we raise foreign financing from other avenues like Syndicate loans and Export Credit Agencies,” the letter added.

Wapda chief retired Lt General Muzammil Hussain told Dawn that the authority required $1.2 billion during the first two years of executing the Diamer Basha and Mohmand dam projects. “And now after getting this international rating… we will be able to secure foreign financing for the aforementioned mega projects. For this, we will be launching green eurobond, each of $500 million, in the international market soon. This way, the international donors will agree on fulfilment of the foreign currency component of these two projects,” he explained.

Pakistan had also recently secured the ‘B-’ rating with a stable outlook.

Published in Dawn, March 30th, 2020