The Pakistan Credit Rating Agency Limited
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Bazah Tul Qamar

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PACRA Maintains Entity Ratings of Kohinoor Energy Limited

Rating Type Entity
(25-Mar-22 )
(26-Mar-21 )
Action Maintain Maintain
Long Term AA AA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect the strong business profile of Kohinoor Energy Limited (Kohinoor Energy), emanating from the demand risk coverage under the Power Purchase Agreement signed between CPPA-G (Central Power Purchasing Agency) and the Company. Meanwhile, the Implementation Agreement provides a sovereign guarantee for cashflows, given adherence to agreed performance benchmarks. Kohinoor Energy continues to meet its availability and efficiency benchmarks - an outcome of technically sound O&M team, robust systems and controls. The company's financial risk profile, that showed improvement in 6MFY22, is largely dependent on repayment behavior of the power purchaser. As the receivables declined due to payments received from Government under master agreement, the Company's working capital cycle improved, eventually subsiding the reliance on funding from banking lines, now there is a considerable cushion available in working capital facilities as it has been less utilized (i.e. 16%) as at Dec’21. Business risk is considered low exhibited by demand risk coverage under the Power Purchase Agreement signed between WAPDA and the company. However going forward the profitability will be restrained due to reduction in tariff as per the agreement. Meanwhile, the coverages of the company have also improved due to decreased usage of short term borrowings. The ratings continue to take comfort from Kohinoor Energy's association with Saigol Group.
Although well-managed, in-house O&M activities expose the company to operational risk; thus upholding strong operational performance in line with agreed performance levels would remain a key driver of the ratings. Meanwhile, sustained profitability and performance levels will also remain critical.

About the Entity
Kohinoor Energy Limited, an independent power producer (IPP) – commissioned its plant under Power Policy 1994. With a total cost of US$ 138.8mln and capacity of ~131MW (Dependable capacity of 124MW), the company started its Commercial Operations in June 1997. Kohinoor Energy is listed on Pakistan Stock Exchange. The principal shareholders of the company is Saigol family (62%). The remaining shareholding (~38%) is widely dispersed. BoD comprises of seven members including the Chief Executive Officer. The board members are professionals with experience in managing the business affairs of companies in different sectors. The chairman, Mr. Naseem Saigol is a renowned businessman. He also chairs the Board of Pak-Elektron Limited, an established appliances company. The board has been actively involved in providing strategic guidance to the company and implementing strong internal control framework. Mr. Muhammad Zeid Yousaf Saigol - Kohinoor Energy Limited, has joined as Chief Executive Officer in place of Mr. Shakeel. He has been associated as Executive Director with Pak Elektron Limited since 2011 and is leading the Company's Power Division Operations.

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.