K-Electric to raise Rs25b through Sukuk

Funds raised will be spent on ongoing power generation, transmission and distribution projects

KARACHI: K-Electric has decided to raise debt worth up to Rs25 billion to finance ongoing projects in the areas of power generation, transmission and distribution and to finance day-to-day expenditure.

"K-Electric has been facing certain cash-flow constraints since its multi-year power tariff was revised downwards (by the regulatory authority)," the company spokesperson told The Express Tribune.

Company Secretary Muhammad Rizwan Dalia reported to the Pakistan Stock Exchange (PSX) "the board of directors of the company, at a meeting held on February 8 (Friday), …approved the issue of KE-rated and listed Sukuk of up to Rs25 billion, including a green shoe option of up to Rs5 billion."

"The proceeds of Sukuk will be primarily utilised to meet permanent working capital requirements of the company and ongoing routine capital expenditures on generation, transmission and distribution," he said.

K-Electric's stock price fell Rs0.11 and closed at Rs6.38 with trading in 23.24 million shares at the PSX.



The spokesperson added that details regarding the issuance of Sukuk, like what would be the duration for which the Islamic bond would be issued and what were the timelines for the issuance, were yet to be finalised.

As of now, "we have requested the board to allow the issuance of Sukuk and the board has given the go-ahead. We are yet to apply for the issuance."

To recall, the National Electric Power Regulatory Authority (Nepra) has awarded K-Electric a new multi-year tariff of Rs12.82 per unit for the period July 2016 to June 2023 compared to the previous tariff of Rs15.57. The utility had demanded an upward revision in the tariff to Rs16.10.

Any upward or downward revision remains neutral for end-consumers, but it may impact the company's earnings, it is learnt.

Recently, China's state-owned Shanghai Electric Power got a nine-month extension to acquire K-Electric's majority stake from Dubai-based Abraaj Group, but it is uncertain at what price the long pending deal will be finalised.

It is for the fourth time the Chinese firm has made a public announcement of intention (PAI) to acquire the Karachi-based integrated power firm since October 2016. It is required to take approval from a few regulatory authorities.

In October 2016, the Abraaj Group announced that the stake sale deal was struck at $1.77 billion.

Several quarters speculated a downward revision in the final deal price after the regulator revised down the multi-year tariff.

"The deal may be executed at a 15-20% discount compared to the price ($1.77 billion) agreed in October 2016," said an official involved in proceedings for the deal.

Published in The Express Tribune, February 9^th, 2019.

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