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Pakistan Credit Rating Agency Limited maintains rating of TFCs (Azm Certificates III) issued by K-Electric Limited

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by March 30, 2016 General

Lahore, March 30, 2016 (PPI-OT):The Pakistan Credit Rating Agency Limited (PACRA) has maintained the rating of outstanding rated and listed TFC III of PRK 500mln issued by K-Electric Limited (KE) at ‘AA+’ (Double A Plus). The rating denotes a very low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments.

The ratings reflect demonstrated history of timely repayments of outstanding retail TFCs – Azm – issued by KE. Strong security structure of instrument outline that TFC holders have a first pari passu charge on bills receivable from two sets (core and additional) of carved out consumers. The bill collection ratio of these sets is strong. A minimum throughput of 1.2x is to be maintained from receivables of carved out consumers – 250 specific entities (core) and 495 specific entities (additional).

The amounts received are directly deposited into Debt Payment Account (DPA), which is gradually built over a period prior to each repayment date to avoid pressure on any single month. Historical pattern of collections is robust and hence, cash flow coverages are expected to remain strong. Meanwhile, coverages since the issuance of the instrument have been stronger than expected.

This is attributable to good collection pattern, and increase in underlying revenues. Out of the series of TFCs issue, KE has successfully redeemed TFC (I) and TFC (II) in Sep13 and Aug15 as per agreed timelines. Volatile domestic socio-political environment may exert some pressure on the issuer though its impact on TFCs performance is expected to remain limited.

The ratings are dependent on the continued compliance with the predefined security structure of the instrument. Moreover, any significant deterioration in the performance of KE, impacting the projected collection stream, would have negative implications for the rating though the likelihood of this is remote.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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