Lahore, May 27, 2023 (PPI-OT): The ratings incorporate the strategic importance of K-Electric Limited, (“the Company” or “KE”) being a vertically integrated power utility, responsible for the generation, transmission, and distribution of electricity in Karachi and adjoining areas of Sindh and Balochistan. The Company’s board of directors comprises of ten directors currently. Three vacancies are to be filled soon. However, the quorum of all board committees is complete.
Support has been drawn from the sustained rather improved performance metrics of the Company, owing to the growing demand for electricity and continuous improvement across various operational metrics including a reduction in T and D losses and a better recovery ratio. KE reported a net loss of PKR (39.39) bln during 9MFY23 (9MFY22: Profit of PKR 1.49bln). However, the loss of the Company was observed on the back of a significant increase in fuel prices, exponential finance cost, increase in significant rupee devaluation, and increase in Tariff differential.
Working Capital also remains a challenge because the delayed payments from the government resulted in enhanced borrowings ultimately curtailing profitability because of increased finance cost. The comfort for the rating has been drawn from the Company's express intention to achieve improvements on operational fronts to curtail losses. In addition, the Company is actively pursuing to expedite the determination of pending quarterly tariff variation for cost which have been determined by authority. KE has also applied separate tariff for each business segment for the next control period from FY24 to FY30 (tariff expiring on June 2023), under the proposed tariff, KE has proposed an indexation mechanism to account for changes in the macroeconomic factors.
KE expects a sustainable cost-reflective tariff with a robust adjustments mechanism which will have a positive impact on its profitability going forward. The Company is also pursuing its 900 MW RLNG project on a fast-track basis in Unit-I and II of 450 MW each. KE has witnessed the synchronization of the 900MW RLNG-fired power project (BQPS-III). Both Units have achieved base load operations. The generation capacity of the Company will increase and being an efficient plant, electricity will be produced at a lower rate which would have a positive impact on the working capital of the Company.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com