logo
The Pakistan Credit Rating Agency Limited
Press Release

Date
28-Dec-19

Analyst
Kanwal Ejaz
kanwal.ejaz@pacra.com
+92-42-35869504
www.pacra.com

Applicable Criteria

Related Research

Disclaimer
This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of K-Electric Limited

Rating Type Entity
Current
(28-Dec-19)
Previous
(28-Jun-19)
Action Maintain Maintain
Long Term AA AA
Short Term A1+ A1+
Outlook Stable Developing
Rating Watch Yes Yes

The ratings reflect the operational parameters and the related data reflect improved performance going forward. The number of consumers grew by ~9% during FY19 as compared to FY18. The recovery ratio of the company, which reflect, amount received against amount billed, has taken almost 1.6% points improvement during FY19 as compared to the preceding year. Hence, the profitability and cashflow position of the company are expected to take a positive impact. A key challenge faced by the industry is the prevailing circular debt. As of July, 2019 Company’s gross receivables from various Federal and Provincial Public sector entities stood at around Rs. 196 Billion, nearly twice the company’s payable of Rs. 109 Billion. In this regard, the Company is in continuous engagement with relevant stakeholders for the resolution to the issue of receivables and payables. Further, the Company is of the view that the settlement of receivables and payables related to various Federal and Provincial government entities / departments will be made on net basis and any markup will be payable by the Company only when it will reciprocally receive markup on outstanding receivables. While the growing receivables from various government entities and departments has impacted the working capital position of the company and resultantly increased the company’s borrowing levels, overall leverage indicators reflect manageable position.
On 23rd December 2019, the company has applied to SECP to issue directions under Section 147 of the Companies Act, 2017 to hold AGM for laying therein annual audited financial statements of the Company for the year ended 30 June 2019 for approval of the shareholders, latest by 15 May 2020.

About the Entity
K-Electric, a vertically-integrated power utility, has been in operations for more than a century. At end-Jun19, KES Power Limited (KESP) held 66.4% share in K-Electric, 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 entered into a share purchase agreement with Shanghai Electric Power Company Limited (SEP) for sale of up to 66.4% shares of K-Electric against a consideration of US$ 1.77bln. The transaction is in process and will close once customary closing conditions and requisite regulatory approvals are obtained. K-Electric has thirteen member board. Mr. Moonis Alvi, CEO 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.