VIS assigns a preliminary rating to KE’s proposed Islamic Commercial Paper

April 06, 2021: VIS Credit Rating Company Limited (VIS) has assigned a preliminary rating of A-1+ (Single A-One Plus) to K-Electric Limited’s (KE) proposed Islamic Commercial Paper (ICP 17) issue of up to Rs. 3.5billion. The ICP-17 will have bullet repayment at maturity and will have a tenor of 6 months. The proceeds of the issue will be utilized for KE’s working capital requirements.

VIS has assigned an entity rating of ‘AA/A-1+’ (Double A/A One Plus) to KE. The assigned ratings 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 interior Sind and Baluchistan.

Business risk profile draws support from growing demand for electricity and continuous improvement across various operational metrics; however, Covid-19 has resulted in various challenges, with additional directives from the Government for power companies, aimed at consumer facilitation.

In FY20, the improving trajectory of T&D losses has been affected while growth in a unit sent out was also lower than projected. However, later with economic activity revival post-Covid-19 lockdown, units billed in H1’FY2021 increased by 5.5% vis-à-vis the corresponding period last year.

Going forward, based on the planned initiatives, the company remains resolute in recuperating the operational improvements, wherein some improvement has already been noted, with KE posting a net profit in H1’FY2021. Continuity in improvement in various operational performance metrics is considered important from a rating perspective.

VIS

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