The Pakistan Credit Rating Agency Limited
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Muneeb Rashid

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PACRA Maintains Rating Watch on Entity Ratings of K-Electric Limited

Rating Type Entity
Action Maintain Maintain
Long Term AA AA
Short Term A1+ A1+
Outlook Developing Developing
Rating Watch Yes Yes

K-Electric Limited (KE) from time to time has obtained extension from SECP for holding AGM for 2017 on the basis that a reconsideration application had been filed with NEPRA by Ministry of Energy, GOP to review MYT for KE. In a letter sent to PSX dated 23 May, 2018, it was informed that SECP has now directed the company to hold AGM latest by 25 July 2018. The only critical element in this is determination of MYT by NEPRA.

Given extension in holding of AGM for FY17 and subsequent delay in quarterly accounts, PACRA maintains the assigned Rating Watch (Developing Status) to the rating of KE. PACRA would continue to monitor the developments and will update its rating opinions accordingly.

About the Entity
K-Electric, a vertically-integrated power utility, has been in operations for more than a century. At end-Mar18, KES Power Limited (KESP) held 66.4% share in KE, while Government of Pakistan owned 24.4%. KES Power majority is owned (53.8%) by Abraaj Capital (Private Equity Group) with the balance held by a group of investors (Al Jomaih, Saudi Arabia and NIG, Kuwait). KES Power has lately entered into a share purchase agreement with Shanghai Electric Power Company Limited (SEP) for sale of up to 66.4% shares of KE against a consideration of US$ 1.77bln. The transaction will close once customary closing conditions and requisite regulatory approvals are obtained.

KE has a thirteen-member board that comprises nine representatives of KES Power, three GoP members and one independent member. Mr. Tayyab Tareen has been recently appointed as the chairman of the board; he was previously serving as the CEO. The newly appointed CEO - Mr. Moonis Alvi is associated with the company since 2008. He is supported by an experienced team.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.