PACRA Maintains Entity Ratings of Kohinoor Energy Limited

The ratings reflect the strong business profile of Kohinoor Energy Limited (Kohinoor Energy), emanating from the demand risk coverage under the Power Purchase Agreement (PPA) signed between the Power Purchaser and the Company. Meanwhile, the Implementation Agreement provides a sovereign guarantee for cash flows, given adherence to agreed performance benchmarks. Recently, the Company has agreed to the amendments in the PPA as proposed by the task force to convert the existing tariff to a “Hybrid Take and Pay” model. Under the new amendments, the task force has aimed at reducing the capacity tariff of the plant while extending the PPA by another 161 days from the original expiry date. Furthermore, the Company has also agreed to waive the outstanding delayed payment interest charged to CPPAG till October 31, 2024. Due to the plant's location and its importance to the surrounding industrial area and the national grid, the task force has decided not to terminate the PPA as in other cases, to keep the plant operational to manage the load. The generation from the plant depends on the overall demand from the power purchaser from the specific plant. During FY24, the dispatch of electricity was lower than that of the previous financial year. Therefore, the power plant, by operating at 19.06%, delivered 207,615 MWh of electricity as compared to the 30.30% capacity factor (329,160 MWh) delivered during the previous financial year. This decrease in generation is mainly attributed to the shift of electricity demand towards a less expensive source of generation, i.e., Hydro, local coal, Solar, Wind, and Biogas from the power purchaser in the wake of a cost-effective energy basket. Kohinoor Energy continues to meet its availability and efficiency benchmarks—an outcome of a technically sound O&M team, robust systems, and controls. As of the end of September 2024, leveraging stood at 43%, representing short-term borrowing only. There is adequate cushion available to the company to meet its working capital requirement in its approved STB limits. The ratings stemmed from the fact that the long-term debt of the company was fully paid successfully in June 2008.
The ratings continue to take comfort from Kohinoor Energy's association with Saigol Group. Furthermore, the plant's successful operations while meeting its required benchmarks contribute towards the assigned ratings. Although the amended PPA is proposed to provide a tariff discount, the explicit guarantees provided by the government against outstanding payments provide comfort. Going forward, the ratings remain susceptible to the expiry of the PPA and future of the plant operations.

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 a capacity of ~131 MW (dependable capacity of 124 MW), the company started its commercial operations in June 1997. Kohinoor Energy is listed on the Pakistan Stock Exchange. The principal shareholder of the company is the Saigol family (62%). The remaining shareholding (~38%) is widely dispersed. The BoD comprises seven members, including the Chief Executive Officer. The chairman, Mr. Naseem Saigol, is a renowned businessman with diverse experience in various sectors. The board has been actively involved in providing strategic guidance to the company and implementing a strong internal control framework. Mr. Muhammad Zeid Yousaf Saigol is the Chief Executive Officer who is leading the Company's Power Division Operations.