Press Release

Ratings of K-Electric Limited

Karachi, December 29, 2022: Upon review of executed legal documents, VIS Credit Rating Company Limited (VIS) has finalized the rating of AA+ (Double A Plus) to KE’s (Sukuk 6) issue amounting Rs. 6.7b against proposed quantum of Rs. 12b. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on April 29, 2022.

KE has issued a privately placed DSLR listed Sukuk on November 23, 2022 to the tune of Rs. 6.7b against proposed amount of Rs. 12b. The purpose of the Sukuk is to meet permanent working capital needs and to fund routine capital and operating expenditures of the Company and shall reduce short-term debt post issuance. Tenor of the instrument is seven years (inclusive of a grace period of two years). The instrument carries profit rate of 3 month KIBOR plus 1.7%. Ratings to the proposed Sukuk draw strength from the structural features of the instrument supported by a separate Master Collection Account (MCA) through which consumer collections are trapped and retained to service the debt first before releasing the funds to the Company for other operational uses.

VIS has an outstanding entity rating of ‘AA/A-1+’ (Double A/A One Plus) assigned to KE. The assigned rating to the issuer recognize the strategic importance of KE, a vertically integrated power utility Company, that has exclusive distribution rights in its service area i.e. Karachi and adjoining areas of Sindh and Balochistan. Business risk profile draws support from growing demand for electricity and continuous improvement across various operational metrics. Ratings factor in weakening in financial risk profile in the ongoing year with net losses incurred due to lower units sent out, impairment loss on trade debts, foreign exchange loss and elevated finance costs. However, comfort to the financial risk profile is garnered from positive cash flow coverages and MCA. Capitalization indicators of the Company have continued to swell due to higher working capital needs along with capex to finance planned investments for enhancing capacity and operational efficiencies, indicating higher debt utilization. Ratings are underpinned on planned improvement in financial risk profile over the rating horizon.

For further information on this rating announcement, please contact Ms. Asfia Aziz (Ext: 213) or the undersigned (Ext: 201) at 92-21-35311861-70 or fax to 92-21-35311873.

Javed Callea

Applicable Rating Criteria: Industrial Corporate (August 2021)

Rating The Issue (July 2020)

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