Press Release

JCR-VIS Assigns Preliminary Rating of AA+ to Sukuk issue of K-Electric

Karachi January, 29, 2015: JCR-VIS Credit Rating Company Limited has assigned preliminary rating of ‘AA+’ (Double A Plus) to the proposed Sukuk issue of K-Electric Limited (KE). Outlook on the assigned rating is ‘Stable’.

As an integrated utility company providing electricity to the key metropolitan city of Pakistan, KE enjoys strategic importance. KE is planning to issue Sukuk of Rs. 22b (inclusive of a green shoe option of Rs. 2b). Proceeds of the Sukuk issue will largely be utilized towards repayment of the Company’s existing long term debt. The Company expects to be able to raise fresh funding at improved pricing, given the improvement in risk profile of the entity itself over time. The proposed Sukuk issue will have a tenor of 7 years including grace period of two years. Principal repayment will be made in 20 equal quarterly installments.

The entire Sukuk issue will have repayment linked to specific receivables from 495 identified industrial customers, which have an extended history of timely payments with the Company and have priority of electricity supply over other consumers. Additional long term debt of slightly over Rs. 9b also enjoys similar charge over these receivables. The receivables from the earmarked customers provide sufficient margin over the repayments to be made from the same. Other structural features of the Sukuk include retention of amount equivalent to one-third of the quarterly installment by the collection agent from the revenues of these 495 customers to meet the upcoming installment while excess proceeds after meeting the retention requirement will be released to KE each month. The ratings are supported by additional cushion whereby a cash collection mechanism will be triggered if overall entity level debt service coverage falls below a pre-defined threshold.

For further information on this rating announcement, please contact Ms. Sobia Maqbool, CFA (Ext: 506) or Mr. Javed Callea (Ext: 501) at 92-21-35311861-70 or fax to 92-21-35311873.

Jamal Abbas Zaidi
Deputy CEO

Applicable Rating Criteria:

Industrial Corporates (Oct. 2003)
Rating the Issue (Sept 2014)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited VIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2015 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited