VIS assigns instrument rating to the proposed Short Term Sukuk (STS-20) of K-Electric Limited

Karachi, September 20, 2023 (PPI-OT): VIS Credit Rating Company Limited (VIS) has outstanding entity ratings of ‘AA/A-1+’ (Double A/A One Plus) to K-Electric Limited (KE). In lieu of the same, VIS has assigned preliminary rating of A-1+ (Single A One Plus) to KE’s proposed Short Term Sukuk (STS-20). Short-term rating of A-1+ reflects highest certainty of timely payment; short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding and safety is just below risk-free Government of Pakistan’s short-term obligations.

KE plans to issue an unsecured, privately placed STS (STS-20) issue of up to Rs. 5 billion (inclusive of green shoe option of Rs. 2b). The tenor of STS-20 is up to 6 months from the date of drawdown and will be redeemed in bullet at maturity. The proceeds of the issue will be utilized for KE’s working capital requirements.

The assigned rating incorporates the strategic importance of KE, a vertically integrated utility Company, that has exclusive distribution rights in its service area i.e., Karachi and adjoining areas of Sindh and Baluchistan. In the backdrop of rising socio-political instability, devastating floods and macroeconomic challenges, revenues and profitability indicators of the company were impacted during 9MFY23. In addition, the Company had to book sizeable provisioning against doubtful trade debts as all-time high inflation continuous to impact the consumers’ capacity to pay. Meanwhile, the Company remains committed to tackle these challenges via actively pursuing to expedite the determination of pending quarterly tariff variations and focusing extensively on further operational improvements which is reflected in improvement in various operational metrices over time. However, with sufficient working capital lines, the Company is strongly positioned to service its short-term sukuk obligations.

For more information, contact:

Director Compliance and Rating Analytics,

VIS Credit Rating Company Limited

VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,

Phase VII, DHA, Karachi, Pakistan

Tel: +92-21-35311861-72

Fax: +92-21-35311873

Email: bilal@jcrvis.com.pk

Website: https://www.vis.com.pk/