K-Electric Limited - Retail Utility Sukuk - PKR 3bln - TBI

CREDIT RATING REPORT | Nov-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
21-Nov-25 AA A1+ Stable Initial -
19-May-25 AA A1+ Stable Preliminary -
19-Nov-24 AA A1+ Stable Preliminary -
About the Instrument

K-Electric (KE) successfully issued a Retail Sukuk of PKR 3,000 million. The Initial Public Offering phase was oversubscribed by 2.2 times, reflecting strong investor confidence. The one-year Sukuk offers a profit rate of 20 bps over the 3-month KIBOR. A unique feature allows investors to receive profit payments via bank transfer or as an adjustment to their KE electricity bills. The principal will be repaid at maturity.

Rating Rationale

K-Electric Limited (“KE” or “the Company”) is a strategic national asset and only vertically integrated power utility of the Country, dedicated to ensure power supply across its licensed areas, which include Karachi, surrounding regions of Sindh, and parts of Balochistan. On the regulatory front, NEPRA notified the decision of Generation tariff on December 4, 2024 and decisions of Transmission, Distribution and Supply tariffs on July 18, 2025. Following the regulatory approvals, the financial results for financial year 2024 were prepared and notified to PSX upon approval of the Board of Directors of KE on September 23, 2025. Upon conclusion of review proceedings, NEPRA issued a decision on review motions (“review decision”) and revised the KE’s MYT issued earlier. The review decision issued by NEPRA carries implications for KE’s financial position. In this context, KE is engaging with the relevant authorities, and discussions are ongoing to address the matters arising from the decision. KE has approached the High Court of Sindh through a Constitutional Petition regarding the review decision, where the Court has granted a stay order restricting NEPRA from taking any action against KE until the next date of hearing. Moreover, KE manages its working capital requirements through a mix of internally generated cash and short-term borrowings. As per management, the actual position of cashflows and the debt profile of the Company is in a comfortable position, and it's expected that the same trend will continue going forward. In parallel with these operational and regulatory developments, KE achieved a milestone with the issuance of Pakistan’s first ever retail-listed Sukuk in September 2025. The issuance was structured in two phases: an initial placement for high-net-worth individuals and institutional investors, followed by an IPO for retail participants. The IPO phase was divided into two periods: an exclusive retail offering period for individuals (including both KE customers and non-customers), followed by a priority allocation period to ensure orderly participation. This sukuk supported KE’s short-term liquidity, and broadened engagement with its customer base. The instrument, amounting to PKR 3,000 million, is scheduled for redemption in Sep 2026, with monthly profit payments distributed to Sukuk holders throughout its term.

Key Rating Drivers

Going forward, KE’s long-term outlook will depend majorly on the resolution of regulatory matters. The related developments are being monitored to evaluate their potential impact on the Company’s profile. Continued progress on operational efficiencies, the Company’s gradual transition to cleaner and more diversified energy sources, and a strengthened funding position supported by the successful Sukuk issuance will also be critical.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

K-Electric Limited - Retail Utility Sukuk - PKR 3bln - TBI

rating analysis

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Issuer Profile
Profile

K-Electric Limited (KE) is a public listed company incorporated in Pakistan in 1913 as KESC. Privatized in 2005, KE is the only vertically integrated power utility in Pakistan, supplying electricity to Karachi and its adjoining areas. KE has been powering Karachi for over 100 years. Covering an area of 6,500 square kilometers, we serve power to more than 3.8 million customers across residential, commercial, industrial, and agricultural sectors in Karachi, Dhabeji, Gharo (Sindh), and Uthal, Vinder, and Bela (Balochistan). KE is Pakistan’s only vertically integrated power utility, managing the entire energy value chain, Generation, Transmission, and Distribution,  to ensure efficient and reliable power supply. KE’s current installed power generation capacity is 2,182 MW. In addition to its own generation capacity, KE has arrangements with several IPPs & CPPA-G of 1,600+ MW. KE’s transmission network capacity is 7,096 MVAs comprises of 500kV, 220kV, 132kV, and 66kV transmission lines including multiple interconnections with NTDC and 78 grid stations, and 184 power transformers.


Ownership

The majority shares (66.4%) of the Company are owned by KES Power, a consortium of investors including Al-Jomaih Power Limited of Saudi Arabia, Denham Investment Limited (Holding) of Kuwait, and KE Holdings (Formerly: Infrastructure and Growth Capital Fund or IGCF). The Government of Pakistan is also a shareholder (24.36%) in the Company while the remaining are listed as free float shares.


Governance

The overall control of KE vests in 13-member Board of Directors (BoD), including the CEO, where majority is nominated by KES Power Limited (KESP), KE’s holding company. In addition to KESP’s nominees, the Board also comprises of the directors nominated by Government of Pakistan (GoP) and an independent director. However, in October 2022, resignation of 3 directors nominated by KESP resulted in casual vacancies on the Board which cannot be filled by the Company as it is restricted from making change in its current Board composition in view of the following: i)An ad-interim order of the High Court of Sindh was passed on 21 October 2022, in the suit filed by Al Jomaih Power Limited & Denham Investments Limited against KE Holdings (Formerly: Infrastructure and Growth Capital Fund or IGCF) and others whereby no change shall be affected in the present Board of the Company. ii) A directive under section 125 of the Securities Act, 2017 was issued by Securities and Exchange Commission of Pakistan on 08 November 2022 according to which the composition of the current BoD of KE shall not be changed, till further orders of the Commission. Further, Mark Gerard Skelton was appointed by the BOD as its Chairman in August 2022. Despite this restriction on appointment of directors, KE’s board is smoothly operating matters of the company. At present, there are four committees at the board level namely, (i) Audit; (ii) Finance; (iii) Human Resource & Remuneration; and (iv) Board Strategy & Project for ensuring the smooth flow of the Board’s functions.


Management

KE’s core business operations are divided into three segments: Generation, Transmission, and Distribution, managed through a well-defined hierarchical structure of qualified professionals. KE is guided by four core pillars: i) Thought Leadership, ii) Knowledge-based Learning, iii) Values, and iv) Social Responsibility. The Company upholds values of integrity, accountability, and continuous improvement, striving to balance economic growth with environmental sustainability. This commitment to its core values drives KE's journey toward becoming a growth-oriented, sustainable organization. KE has now transitioned to SAP S4HANA, deploying these technology solutions to enhance efficiency, transparency, and customer-centricity across its business processes.


Business Risk

In FY25, Pakistan’s total electricity generation showed signs of stabilization after a period of decline: hydropower accounted for 31.44%, RLNG for 17.48%, local coal 12.23%, imported coal 7.13%, nuclear contributed 17.66%, gas 8.82%, with the remaining generation comprising furnace oil, wind and solar. KE, as the only vertically integrated utility in Karachi and parts of Sindh and Balochistan, serves approximately 3.8 million customers (end‑June 2025), with 84.6% residential, 14.7% commercial, 0.6% industrial, and the rest agricultural/public. The Company reduced its T&D (transmission & distribution) losses to 15.3% in FY23. On the regulatory front, NEPRA notified the decision of Generation tariff on December 4, 2024 and decisions of Transmission, Distribution and Supply tariffs on July 18, 2025. Following the regulatory approvals, the financial results for financial year 2024 were prepared and notified to PSX upon approval of the Board of Directors of KE on September 23, 2025. Upon conclusion of review proceedings, NEPRA issued a decision on review motions (“review decision”) and revised the KE’s MYT issued earlier. The review decision issued by NEPRA carries implications for KE’s financial position. In this context, KE is engaging with the relevant authorities, and discussions are ongoing to address the matters arising from the decision. KE has approached the High Court of Sindh through a Constitutional Petition regarding the review decision, where the Court has granted a stay order restricting NEPRA from taking any action against KE until the next date of hearing.


Financial Risk

KE manages its working capital requirements through a mix of internally generated cash and short-term borrowings. Post signing of the power purchase agreement with CPPA-G, whereby KE is now authorized to procure up to 2,000 MW of electricity from NTDC, KE has also signed another agreement with GoP for Tariff Differential Subsidy, whereby GoP is obligated to pay TDS to KE, and in case of non-payment within 60 days, KE has the right to net off the NTDC invoices with the subsidy and accruing markup amount. The arrangement has been secured via a master collection account dedicated for payments to CPPA-G. As per management, the actual position of cashflows and the debt profile of the Company is in a comfortable position, and it's expected that the same trend will continue going forward.


Instrument Rating Considerations
About the Instrument

KE issued a Retail Sukuk of PKR 3,000 million, which included a green shoe option of PKR 1,000 million. The issuance took place in two phases. The first phase, the Pre-IPO placement, was successfully concluded in April 2025, with KE raising PKR 1,000 million. The second phase is the IPO stage, with a target issuance of PKR 2,000 Mn, received an overwhelming response from investors, attracting total subscriptions amounting to PKR 4,424 Mn. This reflects an oversubscription of approximately 2.2 times the offered amount, underscoring strong market confidence in the issue. In addition to the standard profit payment method of payments via bank transfers, this sukuk has a unique feature where investors have the option to receive their profit payments as adjustments to their monthly KE electricity bills, given that they are KE consumers. The profit rate is set at a spread of 20 basis points over the 3-month KIBOR. The instrument has a tenor of one year, with principal repayment at maturity.


Relative Seniority/Subordination of Instrument

The sukuk is unsecured, and in the hierarchy of creditors, the investors shall rank after the secured lenders/investors of the Company.


Credit Enhancement

The instrument is unsecured.
 
 

Nov-25

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K-Electric Limited - Retail Utility Sukuk - PKR 3bln - TBI

financial summary

(PKR mln)

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Jun-24
12M		 Jun-23
12M		 Jun-22
12M
A. BALANCE SHEET
1. Non-Current Assets 473,501 442,538 391,669
2. Investments 23,361 26,232 19,249
3. Related Party Exposure 0 0 0
4. Current Assets 220,149 412,933 551,034
a. Inventories 0 0 0
b. Trade Receivables 118,351 104,452 136,963
5. Total Assets 717,010 881,703 961,953
6. Current Liabilities 252,365 385,977 465,047
a. Trade Payables 200,387 355,830 435,539
7. Borrowings 266,967 309,822 283,109
8. Related Party Exposure 0 0 0
9. Non-Current Liabilities 81,855 73,770 61,885
10. Net Assets 115,823 112,134 151,911
11. Shareholders' Equity 115,823 112,134 151,911
B. INCOME STATEMENT
1. Sales 615,875 519,732 518,777
a. Cost of Good Sold (484,469) (460,907) (450,241)
2. Gross Profit 131,405 58,825 68,536
a. Operating Expenses (34,455) (27,561) (23,719)
3. Operating Profit 96,951 31,264 44,817
a. Non Operating Income or (Expense) (14,331) (33,025) (24,049)
4. Profit or (Loss) before Interest and Tax 82,620 (1,761) 20,769
a. Total Finance Cost (56,784) (34,573) (15,120)
b. Taxation (21,591) (3,143) 2,875
6. Net Income Or (Loss) 4,244 (39,476) 8,524
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 132,587 63,130 68,380
b. Net Cash from Operating Activities before Working Capital Changes 81,051 16,453 48,261
c. Changes in Working Capital (2,734) 44,192 (75,117)
1. Net Cash provided by Operating Activities 78,317 60,645 (26,857)
2. Net Cash (Used in) or Available From Investing Activities (40,687) (49,503) (63,843)
3. Net Cash (Used in) or Available From Financing Activities (33,797) (222) 84,804
4. Net Cash generated or (Used) during the period 3,833 10,920 (5,896)
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 18.5% 0.2% 59.6%
b. Gross Profit Margin 21.3% 11.3% 13.2%
c. Net Profit Margin 0.7% -7.6% 1.6%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 21.1% 20.6% -1.3%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 3.7% -29.9% 4.5%
2. Working Capital Management
a. Gross Working Capital (Average Days) 66 85 87
b. Net Working Capital (Average Days) -99 -193 -171
c. Current Ratio (Current Assets / Current Liabilities) 0.9 1.1 1.2
3. Coverages
a. EBITDA / Finance Cost 2.3 1.6 5.9
b. FCFO / Finance Cost+CMLTB+Excess STB 0.7 0.6 1.7
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 3.7 9.1 3.2
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 69.7% 73.4% 65.1%
b. Interest or Markup Payable (Days) 121.3 150.7 341.8
c. Entity Average Borrowing Rate 20.8% 11.4% 5.2%

Nov-25

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K-Electric Limited - Retail Utility Sukuk - PKR 3bln - TBI

rating scale

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Nov-25

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K-Electric Limited - Retail Utility Sukuk - PKR 3bln - TBI

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
    1. No director, officer, or employee of PACRA communicates the information acquired by him for use for rating purposes to any other person, except where required under law to do so. (Chapter III; 10-(5))
    2. PACRA does not disclose or discuss with outside parties or make improper use of the non-public information which has come to its knowledge during a business relationship with the customer. (Chapter III; 10-7-(d))
    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
    1. PACRA fulfills its obligations in a fair, efficient, transparent, and ethical manner and renders high standards of services in performing its functions and obligations. (Chapter III; 11-A-(a))
    2. PACRA uses due care in the preparation of this Rating Report. Our information has been obtained from sources we consider to be reliable, but its accuracy or completeness is not guaranteed. PACRA does not, in every instance, independently verify or validate information received in the rating process or in preparing this Rating Report. (Clause 11-(A)(p))
    3. PACRA prohibits its employees and analysts from soliciting money, gifts, or favors from anyone with whom PACRA conducts business. (Chapter III; 11-A-(q))
    4. PACRA ensures before the commencement of the rating process that an analyst or employee has not had a recent employment or other significant business or personal relationship with the rated entity that may cause or may be perceived as causing a conflict of interest. (Chapter III; 11-A-(r))
    5. PACRA maintains the principle of integrity in seeking rating business. (Chapter III; 11-A-(u))
    6. PACRA promptly investigates in the event of misconduct or a breach of the policies, procedures, and controls, and takes appropriate steps to rectify any weaknesses to prevent any recurrence, along with suitable punitive action against the responsible employee(s). (Chapter III; 11-B-(m))
  4. Independence & Conflict of Interest
    1. PACRA receives compensation from the entity being rated or any third party for the rating services it offers. The receipt of this compensation has no influence on PACRA’s opinions or other analytical processes. In all instances, PACRA is committed to preserving the objectivity, integrity, and independence of its ratings. Our relationship is governed by two distinct mandates: i) rating mandate - signed with the entity being rated or issuer of the debt instrument, and ii) fee mandate - signed with the payer, which can be different from the entity.
    2. PACRA does not provide consultancy/advisory services or other services to any of its customers or their associated companies and associated undertakings that are being rated or have been rated by it during the preceding three years, unless it has an adequate mechanism in place ensuring that the provision of such services does not lead to a conflict of interest situation with its rating activities. (Chapter III; 12-2-(d))
    3. PACRA discloses that no shareholder directly or indirectly holding 10% or more of the share capital of PACRA also holds directly or indirectly 10% or more of the share capital of the entity which is subject to rating or the entity which issued the instrument subject to rating by PACRA. (Chapter III; 12-2-(f))
    4. PACRA ensures that the rating assigned to an entity or instrument is not affected by the existence of a business relationship between PACRA and the entity or any other party, or the non-existence of such a relationship. (Chapter III; 12-2-(i))
    5. PACRA ensures that the analysts or any of their family members shall not buy, sell, or engage in any transaction in any security which falls in the analyst’s area of primary analytical responsibility. This clause, however, does not apply to investments in securities through collective investment schemes. (Chapter III; 12-2-(l))
    6. PACRA has established policies and procedures governing investments and trading in securities by its employees and for monitoring the same to prevent insider trading, market manipulation, or any other market abuse. (Chapter III; 11-B-(g))
  5. Monitoring and Review
    1. PACRA monitors all the outstanding ratings continuously, and any potential change therein due to any event associated with the issuer, the security arrangement, the industry, etc., is disseminated to the market immediately and in an effective manner after appropriate consultation with the entity/issuer. (Chapter III; 17-(a))
    2. PACRA reviews all the outstanding ratings periodically on an annual basis. Provided that public dissemination of annual review and in an instance of change in rating will be made. (Chapter III; 17-(b))
    3. PACRA initiates an immediate review of the outstanding rating upon becoming aware of any information that may reasonably be expected to result in downgrading of the rating. (Chapter III; 17-(c))
    4. PACRA engages with the issuer and the debt securities trustee to remain updated on all information pertaining to the rating of the entity/instrument. (Chapter III; 17-(d))
  6. Probability of Default
    1. PACRA’s Rating Scale reflects the expectation of credit risk. The highest rating has the lowest relative likelihood of default (i.e., probability). PACRA’s transition studies capture the historical performance behavior of a specific rating notch. Transition behavior of the assigned rating can be obtained from PACRA’s Transition Study available at our website. (www.pacra.com) However, the actual transition of rating may not follow the pattern observed in the past. (Chapter III; 14-3(f)(vii))
  7. Proprietary Information
    1. All information contained herein is considered proprietary by PACRA. Hence, none of the information in this document can be copied or otherwise reproduced, stored, or disseminated in whole or in part in any form or by any means whatsoever by any person without PACRA’s prior written consent.

Nov-25

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K-Electric Limited - Retail Utility Sukuk - PKR 3bln - TBI

Regulatory and Supplementary Disclosure

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Nature of Instrument Size of Issue (PKR) Tenor Security Quantum of Security Trustee Book Value of Total Assets (PKR)
Rated, Unsecured, Short Term Retail Listed Sukuk 3,000 million 12 months Unsecured N/A Habib Bank Limited (HBL) N/A
Name of Issuer K-Electric Limited
Issue Date Sep, 2025
Maturity Aug, 2026
Option 3M KIBOR + 20bps p.a.
Due Date Opening Principal Principal Repayment* Due Date Markup/ Profit* Markup/Profit rate 3M Kibor Plus 20bps Markup/Profit Payment Installment Payable Principal Outstanding

PKR in mlnPKR in mln

Sep, 2025 3,000 0 End of every month 3M KIBOR + 20bps 12.30% 30.75 30.75 3,000
Oct, 2025 3,000 0 12.30% 30.75 30.75 3,000
Nov, 2025 3,000 0 12.30% 30.75 30.75 3,000
Dec, 2025 3,000 0 12.30% 30.75 30.75 3,000
Jan, 2025 3,000 0 12.30% 30.75 30.75 3,000
feb, 2025 3,000 0 12.30% 30.75 30.75 3,000
March, 2025 3,000 0 12.30% 30.75 30.75 3,000
Apr, 2025 3,000 0 12.30% 30.75 30.75 3,000
May, 2025 3,000 0 12.30% 30.75 30.75 3,000
June, 2025 3,000 0 12.30% 30.75 30.75 3,000
July, 2025 3,000 0 12.30% 30.75 30.75 3,000
Aug, 2025 3,000 3,000 12.30% 30.75 3,030.75 0
3,000 369.00 3,369.00
Note: The first profit payment will be due at the end of the first month from the Issue Date, with subsequent payments to be made monthly thereafter. Profit will be calculated based on the applicable Profit Benchmark, using a 365-day year (or 366 days in a leap year) for the outstanding balance of the Facility Amount. The base rate will be adjusted in line with the prevailing KIBOR rate on the monthly profit payment date.

Nov-25

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