Karachi: VIS Credit Rating Company Limited (VIS) has assigned a final rating of A-1+ to K-Electric Limited’s (KE) Short Term Sukuk (STS-27), indicating the strongest likelihood of timely repayment given the utility’s outstanding liquidity factors.
According to VIS Credit Rating Company Limited, the A-1+ rating reflects the financial stability and strategic importance of KE, which operates as a vertically integrated utility with exclusive electricity distribution rights in Karachi and the surrounding regions of Sindh and Baluchistan. The STS-27, valued at PKR 5 billion and issued on July 5, 2024, has a six-month tenor, with full redemption scheduled for January 5, 2025. The funds raised from this issuance are earmarked for addressing KE’s working capital requirements.
The favorable rating also considers the ongoing regulatory engagements of KE, including its efforts to secure approval from NEPRA for its Multi-Year Tariff (MYT) post-June 2023. Despite delays in finalizing financial statements due to the absence of an approved MYT, KE has had its Distribution and Supply Licenses renewed for the next 20 years starting January 19, 2024. Moreover, the company’s ambitious PKR 392 billion investment plan has been greenlit by regulators, supporting long-term capacity expansion to meet growing energy demands efficiently and sustainably.
KE is also advancing its commitment to renewable energy, aiming to incorporate 30% renewables into its generation mix by 2030. It is actively pursuing projects in wind, solar, and hybrid technologies, with significant initiatives underway in Balochistan and Sindh. These efforts are complemented by bids received for solar projects in Winder and Bela, Balochistan, and a Site Neutral Hybrid project in Dhabeji, Sindh, further bolstered by the planned GOS Solar Projects.
Despite facing revenue and profitability challenges due to socio-political instability and macroeconomic pressures in FY23, KE’s liquidity remains robust, enabling it to meet short-term debt obligations effectively. The future stability of KE’s ratings will hinge on the improvement of operational performance and the timely approval of the MYT.