VIS assigns final rating to Short Term Sukuk of K-Electric Limited

June 07, 2023: The VIS Credit Rating Company Limited (VIS) has finalized the rating of A-1+ (Single A-One Plus) to KE’s Short Term Sukuk (STS-17) issue, latest press release issued by VIS showed.

The ratings reflect the highest certainty of timely payment; short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding and safety is just below the risk-free Government of Pakistan’s short-term obligations.

The previous rating action was announced on May 11, 2023.

VIS has outstanding entity ratings of ‘AA/A-1+’ (Double A/A-One Plus) assigned to K-Electric Limited (KE).

The assigned rating to the issuer recognizes 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 Sindh and Baluchistan.

In the backdrop of rising socio-political instability, devastating floods and macroeconomic challenges, revenues and profitability indicators of the Company were impacted during 1HFY23.

This, along with conservative recording of impairment loss on receivables and delay in adjustments of fuel adjustment surcharge stressed the bottom line.

Further, the increase in effective borrowing rate to 17% with regard to 9.4% in the preceding period, has escalated the finance cost.

Consequently, the company has suffered losses on a net basis in 1HFY23. The Company is focusing on improvements on operational fronts to curtail losses.

In addition, the Company is actively pursuing to expedite the determination of pending quarterly tariff variations.

Meanwhile, with a negative cash conversion cycle backed by many extended days of payables, and sufficient working capital lines, the Company is strongly positioned to service its short-term sukuk obligations.

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