PACRA Maintains the Entity Ratings of K-Electric Limited

The ratings reflect the strategic significance of K-Electric Limited ("the Company" or "KE") as a vertically integrated power utility company responsible for the generation, transmission, and distribution of electricity in Karachi and adjacent areas of Sindh and Balochistan. KE's Investment Plan of PKR 392 billion for FY24 to FY30 and the Power Acquisition Programme (PAP) for FY24 to FY28 have been approved by the Authority on April 24, 2024, and May 20, 2024, respectively. However, KE's Multi Year Tariff (MYT), which expired in June’23, has been filed and the KE management is actively in discussion with NEPRA for its early finalization. Drawing from previous MYT experiences, KE has filed separate tariff petitions for its business segments (Generation, Transmission, Distribution and Supply). The Generation Tariff is at more advance stage with a decision expected by early July’24. Transmission and Distribution tariffs have been admitted by NEPRA and the public hearing for these is scheduled for June 27, 2024. The management expects the entire procedure to be completed by the first quarter of FY25. Consequently, due to non-availability of approved tariff determinations, the financial reports for the first three quarters of FY24 remain unavailable. In the absence of these financial statements, forecasted figures for FY24 based on actualized operational results and new MYT considerations were analyzed along with projections incorporating the approved investment plan, actual cash flows, and debt profile. According to projections, the Company's debt profile is expected to rise, mainly to enhance the transmission and distribution network. The cash flow position provides comfort in timely debt servicing. Additional support drawn from fact that KE has marked its funds in Master Collection Accounts (MCA) for repaying its long-term debt, ensuring timely obligations. KE reduced its Transmission and Distribution (T&D) loss to 15.3% in FY23 and is actively working to reduce these losses, moving forward.
The Rating Watch reflects ongoing developments concerning tariff approvals by NEPRA, as requested by KE. The outcome of the tariff determination exercise and its subsequent impact on KE remain pivotal in determining and maintaining the validity of the assigned ratings. Timely completion of the process is imperative for ratings as well as assessment of KE's financial stability and operational performance.

About the Entity
K-Electric, a vertically-integrated power utility, has been in operation for more than a century. The total installed capacity of K-Electric is 2,817MW, having an arrangement with National Grids and IPPs for 1,650+ MW. KES Power Limited held 66.4% share in K-Electric, while the Government of Pakistan owned 24.4%. KES Power is a consortium of Al-Jomaih Group of KSA, NIG of Kuwait and IGCF (a private equity fund). Mr. Moonis Alvi, CEO is associated with the Company since 2008. He is supported by an experienced team.