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The Pakistan Credit Rating Agency Limited

Date
12-Jun-2017
Analysts
Jhangeer Hanif
jhangeer@pacra.com

Muneeb Rashid
muneeb.rashid@pacra.com

+92-42-35869504
www.pacra.com
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PACRA Places Entity Ratings of K-Electric Limited on Rating Watch with Developing Status
 Rating Type Entity
Current
(12-Jun-2017)
Previous
(03-Feb-2017)
 Action Rating Watch Maintain
 Long Term AA AA
 Short Term A1+ A1+
 Outlook Developing Stable
 Rating Watch RatingWatch -

K-Electric's Multi Year Tariff (MYT) expired at end-FY16. The company had submitted a MYT petition to NEPRA, as a result a new MYT was determined by NEPRA on 21-Mar-2017. The company has filed review petition with NEPRA on the MYT determination and NEPRA's final decision on review petition is expected in July, 2017. Therefore, the company has notified Pakistan Stock Exchange via letter dated 8-June-2017 that it has requested SECP for extension to convene the AGM for FY16 by 31-Aug-2017. KE has also requested SECP to condone the inevitable delay in releasing the quarterly accounts for the period ended 30-Sep-2016, 31-Dec-2016 and 31-Mar-2017.

Given extension in holding of AGM for FY16 and subsequent delay in quarterly accounts, PACRA assigned Rating Watch (Developing Status) to the rating of KE. PACRA would continue to monitor the developments and will update its rating opinions accordingly.
About the Entity
K-Electric, a vertically-integrated power utility, has been in operations for more than a century. At end-Mar17, KES Power Limited (KESP) held 66.4% share in KE, while Government of Pakistan owned 24.4%. KES Power majority is owned (52.3%) by Abraaj Capital (Private Equity Group) with the balance held by a group of investors (Al Jomaih, Saudi Arabia and NIG, Kuwait). KES Power has lately entered into a share purchase agreement with Shanghai Electric Power Company Limited (SEP) for sale of up to 66.4% shares of KE against a consideration of US$ 1.77bln. The transaction will close once customary closing conditions and requisite regulatory approvals are obtained.

KE has a thirteen-member board that comprises nine representatives of KES Power, three GoP members and one independent member. The CEO - Mr. Tayyab Tareen is supported by an experienced team.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
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