The Pakistan Credit Rating Agency Limited
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Sana Shameen

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PACRA Maintains Entity Ratings of K-Electric Limited

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

The ratings reflect improved performance metrics of the company. There was significant improvement in the turnover as reflected in the published financial statements for FY19. This led to decent growth in the net profit as well though EBITDA slightly took a dip. Units generated, sent out and sold all of these indicators witnessed rise. T&D losses have also shown improvement. There was rationalization in the trade debts. A significant jump has been noted in the other receivables, primarily due to outstanding balances and tariff differential claims. The company continued to add to its asset base: expansion was noted in plants, distribution and transmission. There has been increased in payable side that is mainly due to power purchase from CPPA-G/NTDC (650 MW) which as per the agreed mechanism are to be adjusted with TDC.
The performance metrics in the ongoing financial year has shown similar trends with more focus on the production and sale of power units. At the same time, upholding business and financial metrics is of utmost importance. The company has bridged its gap in regulatory timeline for the publication of financial statements. The remaining gap, as represented by the management, will be covered in the due course of time. The 109th Annual General meeting of K-Electric was held through video conferencing on June 03, 2020.

About the Entity
K-Electric, a vertically-integrated power utility, has been in operations for more than a century.Total installed capacity of K-Electric is 2,267MW, having an arrangement with external power producers for 1,400 MW including 650 MW from the National Grids. 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.