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The Pakistan Credit Rating Agency Limited

Date
03-Feb-2017
Analysts
Amara Gondal
amara.gondal@pacra.com

Muneeb Rashid
muneeb.rashid@pacra.com

+92-42-35869504
www.pacra.com
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PACRA takes note of developments at K-Electric Limited
 Rating Type Entity
Current
(03-Feb-2017-)
Previous
(03-Feb-2017)
 Action  Maintain
 Long Term  AA
 Short Term  A1+
 Outlook  Stable
 Rating Watch - -

K-Electric is majority (66.4%) owned by KES Power, which is owned (52%) by Abraaj Group. KES Power has lately entered into a share purchase agreement with Shanghai Electric Power Company Limited (SEP) for sale of 66.4% shares of K-Electric Limited (KE) against a consideration of US$ 1.77bln. The transaction is in process of relevant regulatory approvals.

PACRA believes that financial profile and ownership structure of SEP along with expected synergies in various business and operational areas will have positive implications for KE. PACRA is closely monitoring the ongoing process.

About the Entity
K-Electric Limited: KE, a vertically-integrated power utility, has been in operations for more than a century. At end-Mar15, KES Power Limited (KESP) held 66.4% share in KE, while Government of Pakistan owned 24.4%. KES power is majority owned (~52%) by Abraaj Capital (Private Equity Group) with the balance held by a group of investors (Al Jomiah, Saudi Arabia and NIG, Kuwait).

Shanghai Electric Power: SEP, a subsidiary of the State Power Investment Corporation of China – a fortune 500 company – with an installed capacity of 9,363 MW, is engaged in the generation and transmission of electricity in Shanghai. SEP also provides operational and maintenance services in the energy sector. The company for the year 2015 posted annual revenue and total profit of ~US$ 2.6bln and ~US$ 400mln respectively. The total asset base of the company stands at ~US$ 8bln. SEP carries “AAA” rating by domestic credit rating agency China Chengxin Credit Rating (CCXR), while it is rated “BBB+” by Fitch, “Baa2” by Moody’s and “BBB” by S&P.
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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