The Pakistan Credit Rating Agency Limited
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Uswa Sikandar

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PACRA Maintains Entity Ratings of Kohinoor Energy Limited

Rating Type Entity
(24-Mar-23 )
(25-Mar-22 )
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 Power Purchaser 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 has shown improvement in recent past, 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 reducing its reliance on funding from banking lines. During 6MCY23 the Company has dispatched 168,042 MWH of electricity as compared with 229,118 MWH dispatched during the corresponding period of the previous year. Business risk is considered low exhibited by demand risk coverage under the Power Purchase Agreement signed between power purchaser and the company. Going forward, we expect the profitability to improve slightly due to increase in capacity payments dictated by corresponding increase in Rupee-dollar parity. However, stress can be witnessed on coverages side driven by hike in exchange rate. The long-term project debt was completely paid off in 2008; thus, company’s debt position mainly reflects current borrowings secured to bridge the working capital requirements. 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 shareholder 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 is the Chief Executive Officer who has also 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.