PACRA Assigns Preliminary Ratings to K-Electric Limited | PPSTS-29 | PKR 6bln | TBI

The ratings incorporate the strategic importance of K-Electric Limited (the “KE” or the “Company”) as the only vertically integrated power utility company in Pakistan which means it is responsible for generation, transmission, as well as distribution of electricity in Karachi and other adjoining areas of Sindh and Balochistan. KE’s Investment Plan of PKR 392bln has been approved for FY 2024 to FY 2030, which is aimed for 30% growth in customers, 20% increase in KE’s share of renewables and another 30% reduction in power outages. KE's Power Acquisition Programme (PAP) for the period FY 2024 to FY 2028 has been approved by NEPRA on May 20, 2024 to develop a long-term capacity expansion plan to meet the energy demand in a reliable, sustainable and cost-effective manner as the Supplier of Last Resort (SoLR) for its licensed service territory. However, KE's Multi Year Tariff (MYT), which expired in June’23, has been filed and the KE management is actively pursuing NEPRA for timely conclusion of its petitions for award of MYT post June'23. 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 end of Sep’24. For the Transmission, Distribution and Supply tariff petition, public hearing was held on 27th June 2024 and the subsequent deliberations are expected to be concluded soon. Accordingly, in the absence of approved MYT, the financial statements for all the quarters of FY24 remain unavailable. It may be further noted that the Company has already apprised its apex regulators that is NEPRA, SECP and PSX on the subject matter. Moreover, KE is advancing its commitment to diversifying its fuel mix and generating power from greener sources by initiating renewable power projects. A key milestone in this effort has been reached with receiving 15 bids for its 150 MW solar projects in Winder and Bela, Balochistan. This progress brings the Company closer to its goal of achieving 30% renewable energy in its generation mix by 2030. Additionally, the planned 270 MW GOS Solar and 220 MW Site Neutral Hybrid Renewable Projects will further support this objective, integrating wind, solar, and hydel power into KE fleet.
The outcome of the tariff determination exercise and its subsequent impact on KE remains 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
KE, a vertically integrated power utility, has been in operation for more than a century. KE’s power generation capacity is 2,817MW. In addition to its own generation capacity, KE has arrangements with several IPPs & CPPA-G for 1,600+MW capacity. KES Power Limited, a company incorporated in Cayman Islands and owned in parts by Al-Jomaih Group of KSA, NIG of Kuwait and IGCF of Cayman Islands respectively, presently holds 66.40% shareholding in K-Electric Limited while the GoP maintains a 24.36% stake.

About the Instrument
KE is in process to issue rated, privately placed, unsecured, debt instrument in the nature of Short Term Sukuk (STS) PPSTS-29 of PKR 6,000mln in September, 2024 to support its working capital requirements. The tenor of PPSTS-29 will be 6 months and is carrying a profit rate of 3MK+ (up to) 15bps. Profit and principal will be realized at the time of maturity.