The Pakistan Credit Rating Agency Limited
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Madiha Sohail

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PACRA Assigns Preliminary Ratings to K-Electric Limited | Sukuk PPSTS-6 | upto PKR 5,000mln

Rating Type Debt Instrument
(26-Apr-22 )
Action Preliminary
Long Term AA
Short Term A1+
Outlook Stable
Rating Watch -

The ratings reflect sustained performance metrics of the company. Amid COVID-19 Pandemic despite unfavorable circumstances the Company maintained stability in its turnover. During FY21, units sent out grew by 9.6%, owing to improved macroeconomic factors, along with substantial investment across the power value chain. Further, with targeted loss reduction initiatives, the performance levels showed improvement in 3MFY22 when, T&D losses decreased by 3.1% while units billed increased by 3.2%, though units sent out showed a marginal decrease of 0.7%. With economic revival, the Company's performance took a notable upsurge in its performance, and reported a net profit of ~PKR 2.9bln in 3MFY22, against a profit of ~PKR 1.1bln in 3MFY21 (FY21: PKR 12bln, FY20: -PKR 3bln). Business risk profile draws support from growing demand for electricity and continuous improvement across various operational metrics. The company continued to add to its asset base: expansion was noted in plants, distribution and transmission. The Company is pursuing its 900 MW RLNG project on fast-track basis. In addition to this, additional supply of 450-600 MW from National Grid has also been achieved through successful completion of rehabilitation works at KDA-Jamshoro lines
The performance metrics in the ongoing financial year has shown similar trends with more focus on the production and sale of power units. At the same time, upholding business and financial metrics is of utmost importance.

About the Entity
K-Electric, a vertically-integrated power utility, has been in operations for more than a century. Total installed capacity of K-Electric is 2,000+MW, having an arrangement with National Grids for 1,400 MW. At end-June 21, KES Power Limited (KESP) held 66.4% share in K-Electric, while Government of Pakistan owned 24.4%. KES Power Limited is the major shareholder of the Company. KES Power is a consortium of Al-Jomaih Group of KSA, NIG of Kuwait and IGCF, a private equity fund formerly managed by Abraaj comprised of several Middle East institutional investors. KES Power has entered into a share purchase agreement with Shanghai Electric Power Company Limited (SEP) for sale of up to 66.4% shares of K-Electric against a consideration of US$ 1.77bln. The transaction is in process and will close once customary closing conditions and requisite regulatory approvals are obtained. K-Electric has thirteen member board. Mr. Moonis Alvi, CEO is associated with the company since 2008. He is supported by an experienced team

About the Instrument
K-Electric is in the process of issuing privately placed, short term, unsecured Sukuk of PKR 5,000mln in April 2022, to finance the company’s working capital requirements. The tenor of PPSTS-6 is up to 6 months and carries a profit rate of 6 months KIBOR+70bps. Profit will be realized at the time of maturity.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.