Lahore, September 01, 2022 (PPI-OT):The ratings incorporate the strategic importance of K-Electric Limited, (“The Company” or “K-Electric”) being a vertically integrated power utility, responsible for the generation, transmission, and distribution of electricity in Karachi and adjoining areas of Sindh and Balochistan. Support has been drawn from the sustained rather improved performance metrics of the Company, owing to growing demand for electricity and continuous improvement across various operational metrics including reduction in T and D losses and better recovery ratio.
The financial risk profile and profitability indicators showed improvement in FY21 (gross profit increased by 35% as compared to last year) driven by these operational improvements. However, in 3QFY22 a decline in net profit of the Company was observed on back of negative adjustment in Mid-term review by NEPRA, severe devaluation of Pak Rupee, and increase in effective rate of borrowing. Working Capital also remains a challenge because of the delayed payments from the government resulted in enhanced borrowings ultimately curtailing the profitability because of increased finance cost.
To steer from this turbulent situation the Company is in a continuous process to add to its asset base: expansion was noted in plants, distribution and transmission. The Company is pursuing its 900 MW RLNG project on fast-track basis, of which 1st unit of 450 MW has been installed and will be commissioned soon, the generation capacity of company will increase and being efficient plant electricity will be produced at lower rate having positive impact on working capital of the Company. And the management is confident to close the bottom line on the positive note.
Further, the Company is also engaged with GoP for direct release of net TDS to ease working capital requirements considering recent increase in fuel prices, which the management is hopeful to receive. The expected increase in consumer tariff, generation fleet efficiency and additional power purchase from GoP, are imperative for the ratings, going forward. At the same time, upholding business and financial metrics is of utmost importance.
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