PACRA forecasts ‘developing’ outlook for K-Electric Ltd’s ICP

August 30, 2019 (MLN): Pakistan Credit Rating Agency (PACRA) has assigned initial entity ratings to K-Electric Limited’s Islamic Commercial paper of PKR 8 billion at ‘AA’ for long-term and ‘A1+” for short-term with a ‘developing’ outlook forecast.

According to the rating agency, K-Electric has lately published the annual report for the year ended 30th June, 2017. The company’s net profit took dip during FY17 as compared to last year owing to significant reduction in tariff level along with the change in tariff structure.

The challenge faced by the industry is prevailing circular debt. As of May, 2019, the Company’s gross receivables from various Federal and Provincial public sector entities stand at PKR 177bln and are nearly two times the Company’s payables which total PKR 99bln.

The company has not accrued mark-up on its payable to government-controlled entities. The management view is that the mark-up on these outstanding liabilities will be payable only when it receives mark-up on its own outstanding receivable balance on account of tariff differential claims and energy dues of the company’s public sector consumers.

This has resulted in an increase in the company’s borrowings. The overall leverage indicators reflect manageable position.

The external settlement of the pending issues is important, going forward. The company is creating different avenues to fund its enhanced needs of its working capital, the recent leg of which is ICP-A (amounting to PKR 8bln).