Press Release

VIS assigns final rating to the Short Term Sukuk (STS-27) of K-Electric Limited (KE)

Karachi, October 10, 2024: VIS Credit Rating Company Limited (VIS) has finalized the rating of A-1+ (A One Plus) assigned to KE’s Short Term Sukuk (STS-27). Short-term rating of A-1+ reflects strongest likelihood of timely repayment of short-term obligations with outstanding liquidity factors. Previous rating action was announced on July 02, 2024.

The STS-27 amounting to PKR 5 billion was issued on July 5, 2024. The tenor of STS-27 is up to 6 months from the date of drawdown and will be redeemed in bullet at maturity on January 05, 2025. The proceeds of the issue will be utilized for KE’s working capital requirements.

The assigned rating to the issue recognizes the strategic importance of KE, a vertically integrated utility Company having electricity distribution rights in Karachi and adjoining areas of Sindh and Baluchistan. The Company is still pursing NEPRA for timely conclusion of its petitions for award of MYT post June 2023. Accordingly, in the absence of approved MYT, the financial statements of the Company for the year ended June 30, 2024would not be finalized within stipulated timeline. . However, KE’s Distribution & Supply Licenses have been renewed by NEPRA for the next 20 years, effective from 19th January 2024. In addition, KE’s investment plan of PKR 392b has been approved by the regulator, and KE has also executed several agreements with the government to resolve long-standing disputes. The assigned rating also takes into consideration approval of the KE’s Power Acquisition Program (PAP) by NEPRA for the period FY 2024-2028 i.e. to develop a long-term capacity expansion plan to meet the energy demand in a sustainable and cost-effective manner as the Supplier of Last Resort (SoLR) for its licensed service territory. Moreover, KE continues to diversify its fuel mix and generating power from greener sources by initiating renewable power projects and has received bids for its solar projects in Winder and Bela, Balochistan, and Site Neutral Hybrid project in Dhabeji, Sindh. The company intends to achieve it’s target of30% renewable energy in its generation mix by 2030. Additionally, the planned GOS Solar Projects will further support this objective, integrating wind, solar, and hydel power into KE fleet.

During FY23, in the backdrop of rising socio-political instability and macroeconomic challenges including policy rate hike; revenues and profitability indicators of the Company were severely impacted. However, the liquidity position remains adequate to meet short term debt obligations. Improvement in Company's operational performance and early securing of the Multi-Year Tariff (MYT) are important consideration for the assigned rating going forward.

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
Rating The Issue
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

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