Lahore, March 28, 2022 (PPI-OT):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 and M team, robust systems and controls.

The company’s financial risk profile, that showed improvement in 6MFY22, is largely dependent on repayment behaviour 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 and 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.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com