PACRA Assigns Initial Ratings to Reon Energy Limited - PPSTS - PKR 1.5bln - Oct-26

The ratings reflect Reon Energy Limited's (“Reon” or “the Company”) strong position in smart energy solutions, specializing in renewable microgrids for energy-intensive industries. Operating under an EPC model, Reon offerings also include REFLEX™ (lithium-ion battery platform), SPARK™ (energy management system), and Asset Performance Management for efficiency and lifecycle optimization of solar assets. The Company's revenues are primarily driven by the Commercial & Industrial and Telecom sectors, reinforced through collaborations with leading business groups. Revenue for CY25 declined, reflecting normalization after the prior year's sharp growth; margins remained broadly stable, supported by a healthy project pipeline. Working capital requirements continue to be met through a mix of internal cash generation and short-term borrowings, with the Company having successfully raised and subsequently redeemed, in full and on schedule, a PKR 400mn short-term Sukuk during the period. To further support liquidity and diversify its funding base, the Company raised funds through a rated, privately placed, secured short-term Sukuk of PKR 1,500mn, inclusive of a PKR 500mn green shoe option. Proceeds will be utilized to meet the Company's working capital requirements. PACRA has assessed the Company's projected cash flows over the six-month Sukuk tenor under two scenarios: collections from existing (in-hand) projects alone, and collections inclusive of the identified pipeline of prospective project awards. Under both scenarios, projected gross inflows provide sound coverage of the Sukuk issue size. Cash inflows are expected to be well distributed across the tenor, and the Company's projected liquidity under the base case is expected to remain adequate through to maturity. In contrast, successful execution of the projected pipeline is expected to provide a comfortable residual cash cushion at maturity. Accordingly, timely realization of cash flows from both existing and newly secured projects remains a key rating consideration. Management has represented that the project pipeline is expected to materialize as anticipated; however, should delays arise, cash flows from related and associated undertakings, including the PPA-based business of Reon 1 and business routed through the parent, RMH International FZCO, are expected to support timely repayment. Additionally, a Debt Payment Account (DPA), under the lien of the Investment Agent, will be established and funded ahead of the Sukuk maturity, providing an additional layer of repayment discipline.
Adherence to the repayment schedule demonstrated on the Company's prior short-term Sukuk, together with continued execution of its project pipeline and timely realization of related cash flows, remain key considerations for the ratings assigned.

About the Entity
Incorporated in 2014, the Company became a wholly owned subsidiary of RMH International FZCO following the divestment by Dawood Lawrencepur Limited in October 2024. RMH International FZCO is owned by Reon Energy Limited (UK), with approximately 53% ownership held by the Company's management. The Company is led by CEO Mujtaba Haider Khan.

About the Instrument
The Company issued a Rated, Privately Placed, Secured Short-Term Sukuk of PKR 1,500mln (including a PKR 500mln green shoe option) on 1st October 2026, with a tenor of 6 months to meet its working capital requirements. The profit, priced at 3-month KIBOR plus 175 bps, will be paid at maturity. The principal will be repaid as a bullet payment at maturity. The instrument is secured by a ranking charge over the Company's current assets and a Debt Payment Account (DPA) under lien of the Investment Agent. Additional credit enhancement includes post-dated cheques and a pre-default letter of support from RMH International FZCO.