Press Release
VIS assigns final rating to the Short Term Sukuk (STS-20) of K-Electric Limited
KKarachi, October 05, 2023: Upon review of executed legal documents, VIS Credit Rating Company Limited (VIS) has finalized the rating of A-1+ (Single A One Plus) to KE’s Short Term Sukuk (STS-20) issue. Short-term rating of A-1+ reflects highest certainty of timely payment; short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding and safety is just below risk-free Government of Pakistan’s short-term obligations. Previous rating action was announced on September 20, 2023.
Issue size amounting Rs. 5 billion was issued on September 22, 2023. The tenor of STS-20 is up to 6 months from the date of drawdown and will be redeemed in bullet at maturity; maturity date falling on March 22, 2024. The proceeds of the issue will be utilized for KE’s working capital requirements.
The assigned rating to the issuer recognizes the strategic importance of KE, a vertically integrated utility Company, that has distribution rights in Karachi and adjoining areas of Sindh and Baluchistan. KE remains engaged with NEPRA for timely issuance and finalization of its submitted license applications. In the backdrop of rising socio-political instability, devastating floods and macroeconomic challenges, including rising interest rates, revenues and profitability indicators of the company were impacted during 9MFY23. In addition, the Company had to book sizeable provisioning against doubtful trade debts as all-time high inflation continuous to impact the consumers’ capacity to pay. Meanwhile, the Company remains committed to tackle these challenges via actively pursuing to expedite the determination of pending quarterly tariff variations and focusing extensively on further operational improvements which is reflected in improvement in various operational metrices over time. However, with sufficient working capital lines, the Company is strongly positioned to service its short-term sukuk obligations. The company has been issuing short-term sukuk instruments since February 2022, and to date, they have successfully issued 20 instruments. Out of these, 15 instruments have been redeemed promptly upon maturity and 5 are currently outstanding. The STS rating is contingent on the Company's favorable outcome of operational improvements, license extension and tariff petition as expected; to support liquidity.
For further information on this rating announcement, please contact the undersigned at 021-35311861-64 (Ext. 207) or email at info@vis.com.pk.
Javed Callea
Advisor
Applicable Rating Criteria: Industrial Corporate (May 2023)
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
Rating The Issue (August 2023)
https://docs.vis.com.pk/docs/Rating-the-Issue-Aug-2023.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf