VIS assigns rating to Islamic Commercial Paper of K-Electric Limited

Karachi, March 24, 2020 (PPI-OT): VIS Credit Rating Company Limited (VIS) has assigned preliminary rating of A-1+ (Single A One Plus) to K-Electric Limited’s (KE) proposed Islamic Commercial Paper (ICP-8) issue of up to Rs. 3.5billion. The ICP-8 will have a tenor of 6 months which will be utilized for funding KE’s working capital requirements.

KE has been assigned entity rating of AA/A-1+ (Double A/A-One Plus). The assigned rating recognize 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 Sind and Baluchistan. Business risk profile draws support from growing demand for electricity and continuous improvement across various operational metrics including reduction in transmission and distribution and aggregate technical and commercial losses. Overall financial profile is expected to remain adequate during the rating horizon. With the NEPRA’s determination of monthly FCA for the period July 2016 to June 2019 and quarterly tariff variations for the period July 2016 to March 2019, working capital cycle of the Company is expected to improve. Audited financial statements of the Company are expected to be finalized in the ongoing month.

Given the decline in tariff, EBITDA is expected to be lower vis-a-vis historical levels in the earlier years. However, EBITDA is projected to depict healthy growth over the MYT period on the back of higher units sent out and continuous reduction in T and D losses which is expected to beat NEPRA benchmark in later years. Quantum of improvement in EBITDA and profitability will depend on growth in units sent out, extent of reduction in T and D losses vis-à-vis NEPRA benchmark, amount of write-off claims and upward revision in MYT during mid-term review. While remaining within manageable levels, leverage indicators have continued to trend upwards. Debt servicing coverage ratio is expected to decline but remain comfortable over the rating horizon.

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/

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