Press Release

VIS Assigns Initial Entity Ratings to Gujranwala Electric Power Company Limited

Karachi, November 07, 2024: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings to Gujranwala Electric Power Company Limited (‘GEPCO’ or ‘the Company’) at ‘AA-/A1’ (Double A Minus/Single A One). Medium to long term rating of 'AA-' indicates high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Short-term rating of 'A1' suggests strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned ratings has been assigned to ‘Stable’.

GEPCO is an unlisted public limited entity incorporated in Pakistan. Established on April 2, 1998, and commencing commercial operations on July 1, 1998, GEPCO took over the assets, liabilities, and obligations of the Gujranwala Area Electricity Board, previously owned by Water and Development Authority (‘WAPDA’). The Company's primary function is electricity distribution within its defined geographical territory, including Gujranwala, Sialkot, Narowal, Gujrat, Mandi Bahauddin, and Hafiz Abad. The registered office is located at Model Town, GT Road, Gujranwala. GEPCO is primarily sponsored by the Government of Pakistan (‘GoP’), with 99.6% of the shares held by the President of the Islamic Republic of Pakistan.

Assigned ratings incorporate the business risk profile of the company, which benefits from strong sponsor support due to Government of Pakistan (GoP) ownership. The Company’s rating is supported by its sponsor's financial backing and the absence of long-term market borrowing. The only long-term debt comprises Relent loans from the GoP, with debt servicing remaining suspended under an arrangement with the government. Additionally, the strategic importance of the Company as a utility with exclusive distribution rights in a key economic region underpins its market position.

Assigned ratings also consider the Company’s profitability profile, which is affected by time lag in tariff adjustments and subsidy releases despite a growth in demand. The liquidity profile remains sound, supported by short-term investments and cash, while the coverage profile weakened due to lower funds flow from operations (FFO) for reasons explained above and impacted the conventional debt service coverage ratio (DSCR). The capitalization profile shows improvement driven by an increased equity base, while the Company’s leverage and gearing ratios remain within manageable limits despite fluctuations caused by delays in tariff determinations.

Going forward the assigned ratings would remain sensitive to the timely availability of tariff adjustments and the determination of debt servicing by the government to be commensurate with the cash flows of the company.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk










Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .